What you need to know as a first time buyer?
If you’re thinking about purchasing a property, it can feel incredibly overwhelming, no matter if you’re a landlord already, or if this is your first home.
In our current economic climate you might have doubts about the sensibility of your decision to purchase property, but allay those fears.
Everyone needs somewhere to live, and if you’ve done the hard work of scrimping and saving to afford a deposit and you’ve found your dream house (hopefully at your dream price given the slow state of the property market), then don’t be afraid of what you’re about to do next. Rejoice that you’re about to set foot on the property ladder for the first time.
But, are all of your ducks in a row?
There are many essential things you need to do as a first time buyer, one of the first is to make sure you can afford it.
Setting your budget (as a first time buyer)
When you think about buying a house for the first time, you might have a figure in mind that you means you can afford the mortgage repayments.
But have you factored into the cost of your dream house all the other miscellaneous bits that soon add up?
Cost such as:
- Deposit. This is ideally 10-20% of the property price, if you want to secure a competitive mortgage.
- Home and contents insurance. You want insurance to cover you from the day you purchase your property, regardless of whether you move in or not. Because as soon as you’re the legal owner, you’re also legally responsible for the property (and for anything that might go wrong with it).
- Moving costs. Expect to pay a removals company upwards of £500 to move your stuff for you. You might want to consider moving yourself if you have limited possessions, or calling on willing friends. But take note, even hiring a van can cost upwards of £200 for a day.
- Stamp Duty. First time buyers have Stamp Duty relief on properties up to £300,000, (everyone else has to pay stamp duty on properties over £125,000), regardless of whether you’re purchasing freehold or leasehold. Other points of note:
- As a first time buyer, if you’re purchasing property under any Shared Ownership scheme, you’re eligible to claim First Time Buyers Stamp Duty relief on property valued up to £500,000.
- You have 14 days from the date of completion to pay your Stamp Duty Land Tax (SDLT) bill.
- You can pay Stamp Duty through your solicitor, however it is your responsibility to ensure it’s paid on time.
Once you know you can afford your property, then take these considerations into account:
- Make sure you’ve looked at enough properties and you aren’t rushing into the first one you see.
- Ensure you’ve carried out enough viewings of the property you want to purchase and you know what you’re getting into, not just with the property but the neighbourhood too.
- Have an agreed mortgage in principle in place
- Enlist the services of a good solicitor
But that isn’t all you need to know as a first time buyer, that is just the tip of the iceberg.
There is so much more to buying property than you might have thought. So, below are 3 more things you might want to consider when buying a property as a first time buyer.
1. Buying at auction
Not every property has to be bought through an estate agent. If you’re after a bargain (or you have a limited budget), there are lots to be found at your local auction house.
Yes, it might seem as if you’re taking advantage of someone else’s misery, but with limited housing stock on the property market at the moment, sniffing out a bargain can be tough. And if you find a house at auction it can be yours in a matter of weeks, not months (the average completion time is 12 weeks).
A few things you need to know when buying a property at auction:
- Do your homework beforehand and be absolutely certain the property you’re bidding on is what you want – once that hammer falls, it’s yours.
- Arrange your mortgage in advance – you have to pay 10% deposit on the day and the rest within 28 days.
- Enlist a solicitor prior to bidding and give them the property pack to look through.
- Set yourself a bid limit and don’t go over it.
2. Freehold or leasehold
Know the difference between freehold and leasehold and what each means for you financially as the property owner.
- Freehold – you own the property including the land the property is built on. You are therefore responsible for the property and its upkeep.
- Leasehold – you own the property for the length of the time remaining on the lease (but not the land the property is built on, you typically pay rent (service charge) for that). Side note – most flats are leasehold. If the lease has less than 70 years on it you could struggle to get a mortgage.
3. Finding unique property
Just because all of your friends have purchased off plan or a new house in a new estate, doesn’t mean you have to. When you buy property you’re limited solely by your budget and your imagination.
Just think, you could live in a former railway station if you wanted, or a converted nuclear bunker, an old listening tower, a windmill, or a reconditioned radome (if you can find one). Just be aware if you want to buck the trend, the chances are you’re going to have to seek planning permission for change of use from the local authority.
Make sure you’re 100% committed before you part with any cash because this could get costly, and stressful.
3 Wise Bears aren’t just an accountant for freelancers and small businesses, we provide accounting services for everyone. So if you’re thinking about purchasing property for the first time, get in touch with one of our team and let us show you how you can afford your dream home.