Buying a house is a dream that thousands of young Brits have. While it is a great investment opportunity, stepping on the property ladder can prove to be stressful for first-time buyers. If the long documentation process that buying a house entails wasn’t bad enough, all the legal jargon around it makes it even more tiring. First-time buyers also have trouble deciding things like...
- What kind of a house would be a good investment?
- What neighbourhoods should I look to move into?
- Will this house be convenient and spacious enough to raise my children (or future children) in?
- Is the property worth the dent it’ll make in my savings?
Property prices in the country are currently at an all-time high. This means that you could have to pay a bigger than expected deposit on your dream house. Mortgages, too, are harder to come by in the current economy. So what do you need to be sure of before buying your first house?
Saving up for your first house 💷
Most first time buyers find it easier to get a mortgage once they’ve put down a larger deposit. Saving up for the deposit can help you reduce your mortgage by a considerable amount.
- This helps you get better interest rates compared to what you’d end up paying for a larger mortgage.
- And can help you find mortgages with less stringent credit score requirements.
The first step towards saving for a house is budgeting. It is a good idea to arrive at an estimate for the deposit you might have to put down for the house. You can then calculate how much you need to save each month to reach this figure within a year or two. Avoiding any large purchases during this time can help you get there faster!
Note: Putting aside some money aside for miscellaneous expenses and contents for your new place (upholstery, interior work, a couch etc) helps prepare you for all the little added things.
Investing for your first house
The British government is currently partnering with leading banks to provide young homeowners with several sustainable investment options. Help to Buy Individual Savings Accounts (or ISAs) are special savings accounts available to first-time homeowners. No tax is deducted on the interest that your savings generate from an ISA. You are even offered an additional £3,000 bonus when you reach the maximum possible account balance for these accounts. Systematic Investment Plans (SIPs) and mutual funds are other low-risk options worth exploring if you are looking to invest your savings.
Managing your credit score
We recommend first-time homeowners to be virtually debt-free (minor credit card debt shouldn’t be a problem) when applying for a mortgage. Your credit score single-handedly decides if you find a mortgage and what interest rates you pay on it. Try to make smaller, easy-to-repay purchases from your credit card, and be sure to never miss a payment (or your credit score will plummet 😕). You can even consider paying your debts off (or down, by a sizable amount) if you have the finances to do so.
Conduct thorough market research 📓
While it is certainly tempting to spend a little extra to get a house in one of Architecture Digest's Top 10 Hottest Neighbourhoods, it might not always be the best investment. In-depth market research can help you understand more about the property rates in different neighbourhoods around your city.
You can then cross-reference them against other important factors such as living conditions, amenities present within a one-kilometre radius of the neighbourhood and rental vacancies. It is generally recommended to buy houses with low rental vacancy rates. It might also be worth consulting a mortgage broker to understand the current property market better and understand prices.
Buying a house consists of a lot of legal and financial technicalities. Consulting professionals (mortgage brokers, financial advisors, etc.) to get accurate estimates on your deposit and mortgage rates could be a good idea! That’s exactly what we suggest with life insurance. Make sure you find the best policy for you and your loved ones, because it’s meant to cover YOU! 👉