Help for first time buyers

publication date: Apr 21, 2020
 | 
author/source: Kate Faulkner, Property Expert and Author of Which? Property Books

Below we have listed everything you need to know ‘at a glance’

Here are the top three guides we’ve found:

First time buyer eBook

First time buyer eBook

FirstHomeCoach - free app for
first time buyers

FirstHomeCoach - free app for first time buyers

First Time Buyer Magazine

First Time Buyer Magazine

Have you got a question about buying a first home and want an expert answer?

Visit our
forum

Visit our forum

Contact us
directly

Contact us

Visit the dedicated first time buyer forum on PropertyTribes

Visit the dedicated first time buyer forum on PropertyTribes

Useful Calculators

FirstHomeCoach - How much can you save?

FirstHomeCoach - How much can you save?

Coreco - Mortgage calculator

reallymoving - Moving cost calculator


Want to know what to do in what order? We’ve listed everything you need to know below

When you first start thinking about buying a home you will probably start browsing property portals – this is a bad idea! First you should be sorting your finances!

Jump to:

  1. How do I save for a deposit?
  2. How much can I afford to pay for a home? How do I get a mortgage?
  3. How do I find the right home?
  4. When and how do I choose a legal company?
  5. How do I know how much to offer on a property?
  6. Why do I need a survey? Which one do I choose?
  7. How do I insure my home?
  8. Exchange and completion
  9. How do I move home?

How do I save for a deposit?

One thing that might be playing on your mind is just how to save for that all important deposit. You might have seen headlines in the papers saying you need tens of thousands to get on the ladder but the reality can be quite different. Many first-time buyers need to save less than £10,000 and you can half that if you are buying with a partner or friend.

However, figures like this can still seem a little intimidating:

  1. You’ll need at least 5% of the property price for a deposit
  2. If you can find a home for £125,000 in your area, this will be a minimum deposit of £6,250.
  3. Add buying costs (mortgage fee, legal costs, survey) of up to £2,000
  4. Total amount required: £8,250

These number are lot less frightening when broken down:

  1. If there are two of you saving, the cost is halved to £4,875
  2. Break this down each month for two years, it’s £203.13 a month (each)

Grab the government help!

There are two schemes which will take even more pressure off you:

Help to Buy ISA - not open to new savers

  1. With a Help to Buy ISA you can save up to £200 a month towards your first home
  2. The government will boost your savings by 25%
  3. You can make an initial deposit of up to £1,200
  4. You can receive a maximum bonus of £3,000
  5. The scheme operates across the whole of the United Kingdom

Lifetime ISA

  1. You must be aged 18-40 to open
  2. You can put in up to £4,000 per year up to the age of 50
  3. Government will add 25% to your savings up to a maximum of £1,000 per year

You can use the Lifetime ISA to buy your first home if you meet the following criteria:

  1. The property costs £450,000 or less
  2. You buy the property at least 12 months after you open the ISA
  3. You use a conveyancer or solicitor to act for you in the purchase - the ISA provider will pay the funds directly to them
  4. You’re buying with a mortgage

OK, but how do I actually save money? Everything I get goes on bills

This is all about little sacrifices - do you really need to go abroad on holiday this year? Could you use public transport more? Do you get value for money from your subscription TV? Changes like this soon add up to the amount needed to put a deposit down.

Find out how we help you get saving today for your deposit by visiting our dedicated page.

You can also access our calculators on saving for a deposit and the Help to Buy ISA here:

  1. Saving for a deposit
  2. Help to Buy ISA

But, which scheme is right for me? Find out now with our assessment of the Help to Buy ISA vs Lifetime ISA.

How much can I afford to pay for a home? How do I get a mortgage?

Before you are even ready to buy and search for properties, this is the key question to answer as it’s not just the deposit you need but fees and most importantly how much can you borrow for you mortgage.

Most first-time buyers worry about this the most – but don’t! A good mortgage broker, free of charge initially, will help you budget for your first home purchase (even if it’s years away) You only pay them when they find a mortgage you want and then they’ll help you fill in the paperwork and progress the mortgage for you.

Here’s are our checklists on how to choose a broker, securing the right mortgage and a range of mortgage calculators:

  1. How to secure the right mortgage
  2. How to choose a mortgage broker
  3. Forms to apply for a mortgage
  4. Find your mortgage calculator

What are the other costs I’ll need to pay?

Legal fees can set you back anywhere from around £300 + VAT to over £1,000 + VAT.

A survey may cost you as little as £250 to as much as £1,500.

There is no Stamp Duty on properties up to £300,000 for you as first time buyer and 5% on the portion from £300,001 to £500,000.

Jump to:

  1. Habito guide to Stamp Duty in England, Wales, Scotland and Northern Ireland

You will need to pay buildings insurance before exchanging contracts. You will typically purchase this with contents insurance and it will usually be a few hundred pounds.

If you are using a removals company, monies will be payable before moving day, either as a deposit or in full and usually from £150 to over £1,500.

If you don't have too much stuff you may be able to just hire a van for around £100 or just use your own car for free.

Our dedicated page on first time buyer costs gives you all the information you need – click here to visit it now.

How do I find the right home?

No doubt you will have been thinking about your first home for a while and have a list of things you want but it is important to remember that you will likely need to compromise – even those buying for millions have to!

Read our tips above on how to work out what you can spend on a property.

Here is a quick guide to the three government schemes which will help you get on the ladder for the first time. You need to be aware that there are slight differences to the way each scheme work across the UK, these are listed at the end of this section.

Help to Buy Equity Loan

With this scheme the Government lends you a percentage of the cost of a new build on an interest free loan for five years so you’ll only need a 5% cash deposit and a low loan to value to purchase a property, giving you access to good rates.

The schemes are different for each country and unfortunately Northern Ireland stopped new Help to Buy purchases in December 2016.

  1. Lifetime ISA deposit calculator
  2. Help to Buy a new build checklist
  3. Shared ownership checklist

Barratt London

Barratt London provide opportunities for first time buyers to take advantage of the London Help to Buy Scheme. They also run free Help for Homebuyer events to ensure first time buyers have the right knowledge to get on the ladder.

Shared Ownership

If you are unable to afford 100% of a property in the area you need to live, Shared Ownership offers you the chance to buy a share of your home and pay rent on the rest. You don’t have to ‘share’ with anyone else!

As your finances improve and if you build equity in the property, you can buy bigger shares and in some cases own it outright.

Normally you will purchase a share between 25%-75% apart from Northern Ireland which operates ‘co-ownership’ and shares range from 50% up to 90%.

Right to Buy:

If you are a council tenant and in some cases a housing association tenant Right to Buy allows you to purchase your home at a discount. It has been abolished in Scotland in July 2016 and is being phased out in Wales, with full abolition in January 2019, however is still possible in England and Northern Ireland.

How do the various schemes work in your region?

England:

  1. Help to Buy
  2. Help to Buy London
  3. Right to Buy
  4. Shared Ownership

Wales:

  1. Help to Buy
  2. Shared Ownership

Scotland:

  1. Help to Buy
  2. First Home Fund
  3. First Time Buyers (LIFT) shared equity scheme

Northern Ireland:

  1. Right to Buy
  2. Co-ownership

I am ready to search for properties – what now?

If you know your budget and which schemes you are eligible for you can start searching for properties. You can refine your portal searches to include or exclude things such as shared ownership or you can ask an agent to find properties you love and can afford

Once you've found properties to view, use our:

  1. 10 questions to ask when viewing a property checklist
  2. And we have a great two page viewing checklist in our First Time Buyer eBook

Questions should range from practical things like mobile phone reception and broadband speed to querying why the vendors are selling.

Always do a second or third viewing before making a decision! Bring a parent, family member or friend for another perspective.

Buying a flat: you need to know about leasehold!

Most houses are bought on a freehold basis which means you own the property and the land it sits on and are responsible for all the maintenance and repairs.

Flats are bought on a leasehold basis and effectively you agree to be a ‘tenant’ of the property, owning and being responsible for the inside of the property, paying a ‘freeholder’ for the communal and external areas when they need fixing.

Five ‘must ask’ questions either before or during the viewing:

  1. How long is the lease length – alarm bells should ring if less than 90 years.
  2. What is the service charge?
  3. How much is ground rent?
  4. Is there a ‘sinking fund’ for major repairs?
  5. What are the notice periods and payment terms for repairs?

Here are some more resources to help you out:

  1. How to choose an expert to value your leasehold extension checklist
  2. How to choose a leasehold legal expert checklist
  3. Leasehold extension calculator
  4. Leasehold Advisory Service
  5. ALEP key information for leaseholders

When and how do I choose a legal company?

Ideally choose a legal company before you make an offer – as you will need their details as soon as your offer is accepted.

Everyone will want to ‘recommend’ a legal company: the agent, the broker, your lender, a developer etc.

However, search for a legal company yourself first, find one you like, then see how they compare to others you are ‘offered’.

WARNING: beware of cheap legal or conveyancing offers – they normally miss out key costs you will have to pay and/or offer a rubbish service, so much so you could lose the property you want to purchase.

Read our article on how to choose a legal company

Some key things to ask:

  1. Do they offer fixed-fee conveyancing?
  2. Will they meet you face to face as well as talk over the phone?
  3. Do they have systems that will update you on progress?

Here is what a quote should include:

  1. Legal fees
  2. Searches
  3. Bank or money transfer fees
  4. Stamp Duty
  5. VAT

For more, visit:

Guide to buying and
selling legals

Guide to buying and selling legals checklist

Compare costs of
conveyancing solicitors

Compare costs of conveyancing solicitors

Ways to speed up your buying
and selling legals

Ways to speed up your buying and selling legals checklist

 

How do I make an offer on a house?

Making an offer on a home can be quite stressful particularly if you doing it for the first time. It doesn't have to be though as today it is much easier as there is more information available on what similar properties have sold for.

Here are our top tips for making an offer:

Find out what the seller paid for the property using sold property price data via nethouseprices.com - you will then know if you are buying in a busy or slow market:

  1. Find out what similar properties sold for in the last few months and use this as evidence to support your offer
  2. Work out what you can afford to pay, i.e: deposit, mortgage costs and maintenance as described above
  3. Don't panic - only offer a fair price you can afford
  4. And don’t forget, it’s essential that any offer you do make is made in writing, ‘subject to survey’, so if you need to renegotiate afterwards, you can

Need more help working out what to offer?

  1. Read the rest of our top tips here
  2. Download our FREE First Time Buyer eBook
  3. Contact experts via PropertyTribes
  4. Contact us

Why do I need a property survey and which type should I choose?

A survey is essential in our view – it is NOT the same as a mortgage valuation you pay the lender for as this will not protect you if things go wrong.

They will tell you:

  1. If the property has major issues which are going to cost you a bomb to fix now or in the future
  2. If you are paying a fair price for the property – or should be paying less!

Take a look these resources:

  1. Choosing a surveyor and type of survey checklist
  2. How much should I pay for a survey?
  3. Five things you didn't think of using a surveyor for
  4. Find a local RICS and RPSA surveyor

When do I need to insure the property?

You will need to have buildings insurance in place prior to exchanging contracts but you shouldn't just pick any insurance offer.

Not all insurance companies are the same. Some specialise in certain types of property and if you are next to water or in a flood zone some will not cover you so it is definitely worth checking you are using the right insurance company for your specific property and location.

In addition, remember you have to maintain your property to a certain standard if you want to make a claim on your insurance in the future. If you have problems with your roof and it turns out it’s down to lose tiles you didn’t fix or flashing which has failed, then your claim my fail.

For more tips, read our buildings and contents cover checklist.

Exchange and completion

If you are happy with your survey and the vendor is ready to move forward then your legal company and the sellers' will arrange for you to complete and exchange contracts, meaning the purchase will become legally binding. This is the point where you will be required to pay your deposit to the legal company.

Between the agent and the legal company, a date will be agreed for completion ie when you get your hands on the keys and move in

CHAIN ALERT

If the person selling is waiting on their own purchase then things might be delayed - in this situation, called a chain, make sure you keep a calm head and stay in touch with the agent and legal company.

Want to know more about chains? Visit: ViewMyChain.

Moving home

Once you've got a completion date there are a few things to arrange such as shifting all your belongings, organising your change of address. We have a number of checklists, including the checks to make if you are buying a new-build, to help you work through things so make sure you take a look:

Storing your belongings

Storing your belongings checklist

New build homes snagging

New build homes snagging checklist

How to run in your new build

 




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