Helpful Tips and Advice for First-Time Buyers
Establish Affordability and Save Money When Buying a House
Jul 15, 2009
The barriers to entry for first-time buyers can seem overwhelming. According to the June 2009 Halifax House Price index, property values have fallen by 15% in the past 12 months. However, the lending criteria applied by financial institutions remains very tight. Raising a sufficient house deposit and minimising monthly repayments is fundamental to anyone considering buying a house.
House Deposits for First-Time Buyers
In a July 2009 report, the Council of Mortgage Lenders (CML) stated that the average house deposit provided by first-time buyers had increased from 11% in May 2008 to 25% in just 12 months. Below are a few suggestions that may be of assistance:
- Ask a parent to see if they are prepared to help with the cost of buying a house.
- Save a regular amount each month into a cash ISA. This is a tax-efficient way of saving money whilst maintaining instant access to any savings.
- Consider shared-ownership as it will mean that a lower house deposit is required. Owning 50% of a property is better than renting as it still offers scope for capital appreciation.
How First-Time Buyers Can Benefit from Lower Monthly Repayments
- A mortgage comparison site, such as moneysupermarket.com, can help a first-time buyer to reduce monthly repayments. It works by trawling the market for the best deal in-line with the criteria initially specified. An online mortgage calculator can then be used to determine whether repayments are affordable and how an increase in rates will affect affordability.
- Others may wish to utilise the services of a mortgage broker. An intermediary will perform the same service as a mortgage comparison site, but will offer a more comprehensive range of assistance. This includes the completion of paperwork, negotiating with lenders and accessing useful industry contacts.
Ways to Save Money When Buying a House
- Use an online mortgage comparison service rather than a mortgage broker. A fee of 1% is normally charged for utilising the services of an intermediary.
- Some loan providers offer free legal services to new customers.
- Make an offer that is below the ask price and negotiate a better deal.
- First-time buyers should consider buying a house at a property auction as there are a number of foreclosed properties available. Be sure to perform sufficient checks prior to bidding for a property.
- Off-plan properties are available at up to 15% below the current market price. Whilst most properties tend to be apartments, there are some houses available as well.
A first-time buyer should avoid signing-up for a mortgage at the first bank they go into. This may seem more convenient, but a number of banks are tied-agents and can only offer a very limited range of loan products. For example, Lloyds TSB only offers the mortgage products of the Cheltenham and Gloucester. Always trawl the market and raise a sufficient house deposit as this will provide access to the best and most affordable loan deals.
Sources
Osborne, Hilary. (9 July, 2009). "More first-time buyers reliant on parental help." The Guardian.
Halifax House Price Index - June 2009
Disclaimer: This article in no way attempts to give legal or tax advice. One should consult a licensed attorney, tax advisor, or other qualified professional.
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