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Love Life

With so much focus on bad news we thought we'd try and cheer you up by focusing on the good stuff. See our articles below and we hope to cheer up your day.

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Life moments: buying your first home

Thursday 7 January 2016

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Getting onto the property ladder can seem daunting, but many achieve their dream every year. If you’ve set your sights on being a homeowner, this checklist will give you a heads up.

Why let when you can buy? Many of us will ask that question as annual increases in residential rentals continue to outpace inflation. Indeed, in many parts of the country it does work out cheaper to buy rather than let, but you’ll need several important things in place first – not least a deposit and a steady income.

Storage boxes

How much can you borrow?

Depending on your lender and the property you’re buying, a 10% deposit is often considered the starting point (the more you put down, the better rates you can negotiate); with Help to Buy, the figure can be as low as 5%.

If that’s a stretch, look out for part-owning opportunities, usually from housing associations.

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Mortgage criteria these days are based on “affordability”, so any outgoings will be deducted to work out a monthly repayment figure; one the lender feels confident you can afford.

Fixed or variable mortgage, and for how long?

While historically low interest rates have made borrowing more affordable, uppermost in your mind should be “what happens if rates go up?” While variable rates (which will rise or fall with the Bank of England base rate) will tend to be lower than fixed rates (which set a borrowing rate for so many years ahead), you might want to lock in repayments at a rate you are confident you can always afford.

It is always sensible to put a mortgage payment protection policy in place to help you weather any shortfall should you find your income radically reduced for a while, for example if you are unable to work due to an accident or illness, or if you are made redundant.

Many mortgages come with an arrangement fee added on. Others will have discounted rates for the first year or two. Confused? The APR figure you see quoted provides a way to compare overall costs.

You may be paying off your mortgage for a while, so it is also worth looking into a life protection plan to provide your dependants with the money to help pay off some or all of the mortgage should anything happen to you.

How to secure the best deals…

Canny homebuyers line up their funds before house hunting, obtaining a “mortgage in principle” from a lender. This allows you to be confident about the figure you can offer, making your offer far more credible to the vendor and their agent.

Sellers like first time buyers with no “chain”, and your offer may be far more tempting than another of the same amount from someone still with a property to sell.

Looking for your home…

It will pay dividends to “get your eye in” with your house hunting – ideally while you’ve been getting your mortgage in principle lined up. Watch out for properties that drop in price, or have been on the market for a long time. If you have a specific area in mind, go for a walk about at different times to gauge what living there might be like.

The same holds true when you find a property that appeals. Take time to see what the area is like: is it very noisy at night or on a rat run at rush hour?

Houses that stick…

Some properties can be on the market for a very long time, perhaps through a deal falling through or because there are problems with the house. Equally, the asking price can be too high because of an over ambitious vendor or agent. Houses that seem too cheap to be true should also be treated cautiously!

Negotiating the best deal

When you register your interest with the agent, never be afraid to go in with a bid lower than the asking price. You can always go up if the vendor says no. If the vendor is in a hurry to move, or anxious to secure a purchase their end, you might achieve a sharper price.

If you find yourself in a competitive bidding situation, try not to be tempted to go beyond what you originally thought the property was worth. Be led by your head rather than your heart!

Other considerations

It may seem obvious, but many people don’t consider that when they buy their house, they are going to be living there – that they will be using the local shops, walking to the nearest bus stop or train station, putting their bins out on regular days and sending their kids to nearby schools.

Find out when your bins are collected on your local council website – it may not be as regular as you are used to – and what tax they expect. You should also look into local shopping, infrastructure and transport, as well as what schools’ catchment areas you are in. It’s also worth checking on your internet coverage.

The final stages…

Once your offer has been accepted, the waiting (and sometimes the worrying!) begins.

For any property that is not new build, a thorough building survey might seem expensive, but is highly advisable. Yes, your mortgage lender undertakes a valuation, but that’s simply to ensure that – if you default – they’ll have enough equity to get their money back.

An expert identifying faults can sometimes help you renegotiate a better price too.

Your solicitor will conduct searches to identify any unseen issues – such as local flooding risks or mining activity –, and you’ll be sent forms, listing what fixtures and fittings come with the property (or can be purchased separately), and also more in-depth details of guarantees and work carried out in recent years. Scan these carefully!

Once you’ve “exchanged contracts” the deal is essentially sealed (with penalties to pay if one party drops out) and your deposit will need to be with your solicitor (the procedure varies in Scotland).

The completion date is then set by the solicitors – giving you time to start planning what you are going to do to make your first property your ideal home.

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