Guidance for First-Time Buyers
We work a lot with first-time buyers helping them to buy their first ever property and over the years, we’ve been able to gain an in-depth understanding of their needs, desires and aspirations as well as their fears, worries and anxieties.
Don’t worry, we’re here to help and guide you throughout the process of buying your first home, ensuring that the process is as hassle-free and smooth as it can be.
Buying your own place is exciting and daunting in equal measures. At Barrows & Forrester we help first-time buyers just like you, find the ideal property that meets all your expectations and gives you the ideal stepping stone on to the housing market.
We’ve put together an easy to understand guide about what you can expect as a first-time buyer so please explore the guide and if you’ve got any questions, please do not hesitate to get in touch.
House Hunting Tips
So, you’ve decided that you want to buy your first home and now you need to decide what kind of property you really want and will serve you for the immediate future. The choice here will clearly be governed by your budget and the style of property you prefer. Whether you’re interested in modern properties, period properties, flats, apartments, barn conversions or whatever, there is a lot of thinking to be done, especially if you intend to start a family.
So, where on earth do you start? Well, the first thing has got to be your budget…
Do you have a clear idea of what you can afford and what a mortgage lender will lend you? Initially, it’s worth looking at a few lender websites and using their online calculators to see what is on offer. We can also put you in touch with our specialist mortgage broker who can show you all the latest deals and walk you through the process of how you can get a mortgage agreed in principle.
Once you know what you can afford then you will have a much clearer view of the locations that are open to you. If you intend to start a family then clearly good schools are going to be towards the top of your agenda. Access to amenities, public transport, nice parks etc are also usually important factors. Depending on your budget, there is usually a compromise to be made somewhere so it’s a case of deciding what’s more important to you – location, size of property or condition of property?
Once you’ve settled on a location, it’s always worth investigating the area to see what it’s like during the day and at night. See what the daily commute is like and what the general vibe of the area feels like.
What are the priorities?
You need to decide what’s important to you in a property. How many bedrooms do you need? Is a garden important? Are you prepared to do some work on the property or do you want something that’s going to be low maintenance?
Once you’ve decided what’s nice to have versus need to have, you can start to shortlist properties for viewing.
Using portals like Rightmove and Zoopla, you can start to pinpoint those properties that meet the criteria you are looking for. It’s always worth keeping a list of the key things you want to check and have some questions prepared for the vendors. Expensive items such as boilers and windows are worth playing close attention to, as well as looking for cracks or evidence of damp. Any important issues should be picked up in a survey should you decide to proceed with a purchase but it’s worth getting a general idea upfront so that you know what you can expect.
Home Buying Costs
Buying a home, especially your first, can be a real eye-opener with regards to costs. We don’t want to put you off, but it will seem that you are constantly dipping into your pocket when buying a property. Having said that, it’s all worth it in the end when you can get the keys to your first ever home. Here’s a quick guide to the costs that you will need to budget for:
When you buy a home you will need to put down a deposit. In a nutshell, the more you can put down, the less you will need to borrow and the lower your mortgage repayments will be.
Check out the ‘Help to Buy ISA’ if you’re currently saving for a deposit. For every £200 you save the government will give you a £50 bonus, so it’s definitely worth looking into.
You have no doubt heard a lot about stamp duty in the media. The good news is that if it’s your first home, and less than £300,000 to buy, then there’s no stamp duty to pay.
When you decide upon a property and want to take out a mortgage to buy it, then your mortgage lender will need to value the home for themselves before they lend you any money. Some will offer free valuations whereas others will charge. Budget for somewhere between £150 and £200 to meet these costs.
You will need to engage the services of a solicitor to carry out all the legal activities involved in purchasing your new home. This will include carrying out local council searches, dealing with the Land Registry, handling contracts, and transferring the funds to pay for your property. Budget somewhere between £500 and £1500 to meet these costs.
The price for this can vary quite dramatically depending on how much stuff you intend to take with you. It can range anywhere from £300 to £1500+. Usually, first-time buyers don’t have loads of furniture to bring with them as this tends to be bought once in the property. Therefore, costs for moving should be at the lower end of this spectrum. It pays to shop around to get the best deal or you may even consider hiring a van yourself and enlisting a few family and friends if you’ve not got too much to move.
Your mortgage lender will insist on you having adequate cover in place before lending you the money, so this is not something you will forget to do. However, it still pays to shop around and get the best price you can for your buildings and contents policy.
Mortgages – The Basics
Taking out your first mortgage can seem a bit daunting with lots of things to consider. One of the main decisions is deciding whether you want to go for a fixed rate or variable rate mortgage.
With fixed rate mortgages you will be charged a set rate for an agreed period of time – for example you may get charged 2% interest for 3 years. Fixed rate mortgages are ideal for people who like to know what they are being charged every month for a sustained period of time so that it can be budgeted for appropriately. In the UK, most fixed rate deals tend to last between two and five years, however, some lenders will offer fixed mortgages for the full 25-year term.
At the end of the fixed term, you will usually revert to your lender’s reversionary rate or, alternatively, you can re-mortgage to another deal.
Variable rate mortgages, on the other hand, will move up and down in line with wider interest rates, so your rate of interest and monthly repayments will change accordingly. This takes away the certainty of what you will pay each month but, because they tend to be cheaper than fixed rates, many people prefer to take the calculated risk.
Other types of Variable Rate
There are different types of variable rate mortgages available on the market. Here are some of the main ones:
With a tracker rate, the interest you pay will usually track the Bank of England Base Rate or a lender-specific variable rate. For example, a typical tracker rate might be the Bank of England base rate plus 1.99%. So, if the Bank of England rate falls, so will your repayments and, of course, vice-versa.
With a capped rate mortgage, the interest you pay will move up and down with the lender’s variable rate but there will be a maximum cap put in place that the interest rate cannot go past.
Discounted variable rate
This will be discounted from the lender’s Variable Rate for a specific period of time. For example, 2% discount on the variable rate for 2 years. As with any variable rate mortgage, the interest rate will go up and down with the lender’s variable rate. After the discount period has ended, the rate will go back to lender’s variable rate or alternatively, you can look into remortgaging.
Have you considered buying a new-build?
Finding an affordable dream home
Our sister company, Stripe Homes ,is renowned for building affordable, high quality homes in great locations so we’re sure to have a new-build that will get you excited. Give us a call or better still, come and see us at our offices in the Jewellery Quarter, Birmingham and we can take you through our various developments. We have some fantastic incentives for buying off-plan and we we’d be happy to walk you through the options available. And remember, ‘Help to Buy’ may be available on some of our properties so getting your first home may be more affordable than you think.
Getting a mortgage
Once you’ve found a property that you love, and you can afford, then it’s time to get the right mortgage. We can help you with this by putting you in touch with one of our mortgage broker partners. They will research the whole market for you to find a mortgage deal that matches your needs.
Reserving your home
Once your mortgage is in place, then you can reserve your home by placing down a deposit. If your dream home is still in the process of being built, then our dedicated sales consultant will keep you informed of progress and advise on a date that you can move in. Rest assured you will be given plenty of notice about a moving date so that you can get geared up for it.
Why buy a new-build?
For first-time buyers, a new-build can be the ideal way of getting on to the property ladder. Everything will be new, so you don’t have to deal with loads of decorating or any dodgy DIY that the previous owner may have done.
Buying a new property can be a big time and money saver. Here are just some of the advantages:
Blank canvas – From day one, you have a brand-new home and the knowledge that you are the first person ever to live there. Essentially, you have a blank canvas that you can shape to you own style and personality, avoiding any previous occupant’s décor mishaps!
Low Maintenance – There’s no doubting that new homes are much easier to look after than old ones. Because everything is new and freshly painted, there is no need to spend time and money on decorating and your shiny new appliances are less likely to break-down as well.
Energy Efficient – New homes are built with energy saving in mind and include the latest energy-saving technology, ultimately saving you money on your fuel bills.
No Chain – With a new-build you will not be caught up in any dreaded sales chain which can be the downfall of many a house-move. Once contracts are exchanged and you’ve completed on the sale, you can move-in with no hitches.
Exciting New Community – One of the great things about moving into a new build on a new development is that there is a collective experience that you can share with other people who are moving in. Your new neighbours will be just as excited as you are, and it’s a great time for making new friends and building a sense of community.
Offers and Incentives – With many new builds there are often great offers and incentives, especially if you’re buying off-plan and you get in early. You can often enjoy discounts and get your pick on the best location and spec of your home. If you’re a first-time buyer you may also benefit from the ‘help to buy’ scheme.
Top tips for buying a new build
Buying a new-build is proving more and more popular these days but it’s certainly a venture that you need to go into with your eyes fully wide open. Here are a few tips to make sure that you don’t miss a trick:
Negotiation – as with buying an older property, there’s always room to negotiate on price. Buying off-plan means that you should be getting the property below market value anyway but nothing is set in stone on the price. Be prepared to negotiate by doing your homework about the development you’re interested in – how it compares to similar developments in the area, the level of interest etc. The more knowledge you can build, the stronger your negotiation position could be.
What do you get for your money? – Buying off-plan obviously means there’s nothing to see yet apart from the show home. Establish exactly what you will be getting for your money. For example, will all the white goods be included? Will you have a parking space? What do they plan to do with the garden? Make sure you get plenty of bang for your buck.
Don’t be dazzled by the show home – It’s easy to be lured into buying a property because of the appeal of the show home. Remember that the development you buy may well be on a different plot, with a different layout and this could affect the way you feel about the property. Get as much info from the developer as possible about the specifics of the property you intend to buy so that you don’t get disappointed.
What’s selling? – Find out how well the rest of the development is selling. The last thing you want is to be the only resident on the block or be surrounded by a building site for months to come.
Warranty Scheme – Make sure the builder is signed up to a warranty scheme such as NHBC’s Buildmark. This will give you protection in the unlikely event that the builder goes bust after you’ve paid the deposit. Never proceed with a sale if there isn’t a recognised warranty in place and it also makes sense to gain an understanding of what this covers you for.
Consumer Code – Do your homework on the consumer code for home builders. If the developers offer a warranty they also need to adhere to the consumer code for home builders. This means that if there is an unreasonable delay to the completion date stated in the Contract of Sale ( 6 months for a house and 12 months for an apartment), the builder/developer is duty-bound to refund your money and any fees in full.
Don’t change jobs – Because mortgage offers only tend to last for 3 months or 6 months at best, if yours runs out before you complete then you will need to reapply. There is a risk in this because the lender could refuse if your circumstances have changed. In light of this, you shouldn’t move jobs in between mortgage applications or take on any new financial commitments until you are in your new home.
Snagging Survey – make sure that between exchange and completion that you conduct a snagging survey of your new build property to ensure that any issues or teething problems are sorted out before you move in. It’s not uncommon for new builds to experience problems such as cracks in settling walls or guttering to become loose. Make a list of all the issues and get assurance from the developer that they will be resolved before you move in.
Extras – when you’re buying any new build it’s always worth being cheeky and asking what extras they could throw in for what you’re paying. This could include additional light fittings, extra plug sockets, choosing flooring. If you don’t ask, you don’t get so it’s worth asking before contracts are exchanged.
The legal stuff
Of course, buying a home is not without its legal requirements and obligations so you will need a solicitor to handle the purchase for you. Once again, we can help you with this. We can put you in touch with one of our legal partners who can handle all aspects of the conveyancing process for you.
You’re very nearly there now. When your new home is ready, and everything is done with regards to mortgage and legal checks, then it’s time to exchange contracts. This is the point that it all becomes legally binding. Completion normally happens about two weeks after exchanging contracts, and then you’re ready to move in.
The day has finally arrived and it’s time to move in. This is an exciting time so enjoy it, and remember, we’re always here to speak to if you need any last-minute advice or information about your move.
Help to Buy Equity Loan
Help to buy equity loans are available for first-time buyers as well as homeowners looking to move. To qualify, the home has to be a new-build and can be up to £600,000 in value. The major benefit of help to buy is that you can purchase a new home with just a 5% deposit, whilst the government fits the bill for another 20% which is payable later, after you decide to sell your home.
England and Wales
Help to buy equity loans make it less risky for mortgage lenders to lend money to borrowers who only have a 5% deposit to put down. For buyers it should also mean that you get a more favourable interest rate than you might have previously received with a small deposit.
To a large extent, help to buy works like any other mortgage. The lender will still check your ability to afford the mortgage and do all the necessary credit checks.
Detailed below is the criteria that has to be met in England and Wales to qualify for a help to buy equity loan:
- The property you’re buying must be a new-build and up to £600,000 in value.
- You can only have a repayment mortgage. Interest-only, offset and guarantor mortgages are not allowed.
- You can’t own a second property while you’re under the scheme.
- You can’t buy the property to let out to others. Help to buy is not for investors.
- A mortgage cannot be taken out under a company.
- The mortgage you take out for the remaining 75% of the property price must be less than 4.5 times your income.
The Help to Buy scheme works slightly different in Scotland. Here’s how it works:
- You provide a minimum 5% deposit for your new home.
- The Scottish Government will provide an equity loan for up to 15% of the property value.
- You will need to secure a repayment mortgage for the remaining 80% of the property value.
- The maximum property value that help to but is eligible for in Scotland is £200,000. This is subject to change in future years.
The remaining criteria is the same as England and Wales but because of the restriction on the home value, the scheme is definitely focused more towards first-time buyers than people moving up the ladder.
What happens when you sell your home?
The Help to Buy equity loan must be paid in full when you sell your home. Therefore, if you received a loan of 20% of the value when you bought the home, you will need to pay back 20% of the value when you sell. This means that if your home has increased in value, you will have to pay back a bit more than you borrowed. In the unlikely event that your property has reduced in value, you will still need to back the original 20% that was borrowed.
An independent valuer will determine the value of your home and your property will need to be sold on the open market.
Help to Buy ISA
For first-time buyers, saving for a deposit can be one of the hardest things to do. However, there is help out there and with a Help to Buy ISA, you can get a valuable contribution from the government. Essentially, with a Help to Buy ISA, for every £200 you save towards your new home, the government will add another £50. This is a great way of saving an extra 25% on your savings and, as with any ISA, you won’t pay any tax on the interest that you earn. This is how it works:
Stage 1 – open a Help to Buy ISA account
If you approach any leading bank or building society and ask about a Help to Buy ISA account, then they will be able to help you open one. This ISA is specifically designed for first-time buyers so if you happen to be saving to buy a house and you have a partner who is saving as well, then you can both open an ISA and receive a 25% savings boost.
Stage 2 – start saving regularly
The minimum government bonus is £400 so you will need to save at least £1600 in your Help to Buy ISA before you can claim your bonus. How much you save after that is entirely up to you.
The maximum bonus you can claim is £3000 so to achieve this you’ll need to save £12000.
Stage 3 – obtain your bonus
Once you’ve chosen your new home, the solicitor or conveyancer you’re working with will apply for your government bonus. This will be based on how much is in your ISA account when you close it including any interest accrued. The bonus is then paid when you buy your home (Please consult with your bank for more information)