Helpful Hints For First Home Buyers
Whether you’re on the hunt for your dream home or looking to take your first step on the property ladder as a buy-to-let landlord, your first property purchase will likely be one you’ll never forget. If you’re searching for your perfect property but not sure where to start, help is at hand – here’s a complete guide to buying your first home.
Freehold or Leasehold
First things first: freehold or leasehold? Here’s a quick breakdown of both to help you decide:
What’s the Difference?
- Freehold: You have complete ownership of the property and the land it’s built on, indefinitely – until you decide to sell it on.
- Leasehold: You own the property, but not the land it’s built on, for only a set period of time.
Freehold
Advantages
- Freehold gives you full ownership – you own the property and the land it sits on. This means you have complete control, and can make changes as you see fit (important to note: you might need to request planning permission for certain activities).
- With a freehold, you won’t have to pay fees such as service charges or ground rent to a landlord or freeholder.
- When it comes time to move on to your next home, things will often be much easier for you as a seller. Freehold properties tend to attract more buyers, as they involve less complications and ongoing costs.
Disadvantages
- As there are more upfront costs with a freehold than with a leasehold, you’ll have to factor in higher spending costs into your initial budget.
- Freehold properties give you complete control, but with that comes greater financial responsibility. It’s down to you to cover all maintenance and repairs, which have the potential to prove costly.
Leasehold
Advantages
- Leasehold properties tend to be cheaper to purchase than freehold homes, especially if you’re looking for a flat or apartment.
- If you purchase a leasehold property, there will be a freeholder who owns the land it sits on. This means that any maintenance or repair costs for communal living areas have the potential to be shared among all leaseholders, reducing your expenses.
- Some leasehold properties will come with extra amenities for everyone to enjoy, such as a gym or added security.
Disadvantages
- With a leasehold, there will be some extra costs to cover. Ground rent, service charges, and other fees will need to be paid to the freeholder, and can even increase over time.
- A leasehold only covers a set amount of time – anything from 40 years to 999 years – which can significantly affect the property value and mortgage availability. While there is the option of extending a lease, this can often be complex and costly.
- There are often certain restrictions placed on leasehold properties, such as limitations on pets, subletting, and renovations.
First Homes Scheme
If you’re a first-time buyer, the good news is that there is actually a first-time buyer’s discount that you’ll be eligible for if you live in the UK. The First Homes scheme is an initiative launched by the government in a bid to support first-time buyers who purchase property at a discount of 30% compared to market prices.
In line with the First Home initiative:
- A 30% discount for first-time buyers is applied to the property (as well as key workers).
- There is a chance for this discount to increase to 50% if local authorities deem it necessary.
- The initiative receives its funding through contributions from housing developers.
Who Is Eligible For the First Homes Scheme?
The First Homes scheme is, of course, aimed at those who are buying property for the first time, but it is also available to key workers, such as nurses, teachers, and police officers, as well as military veterans and their families. It was first introduced as a means of boosting the accessibility and affordability of property, particularly for those on lower incomes.
Homebuyer Survey
Something you’ll need to be familiar with if you’re navigating your first property purchase: the Homebuyer Survey. Also known as the Homebuyer Report, this is a detailed inspection of a property conducted by a qualified surveyor, which assesses the general condition of the property you’re wanting to purchase. It’s used to identify any potential issues or areas for concern, as these could affect the price of the property down the line.
There are several different types of survey, from basic reports to more involved comprehensive site surveys. For most standard homes in the UK, a regular Homebuyer Report will be sufficient. It’s important to note that when you’re selecting your surveyor, you make sure to choose someone who is certified by the Royal Institution of Chartered Surveyors (RICS).
If the survey ends up uncovering any significant issues, you then have the basis to address these prior to handing over any money or making the move. You can either choose to negotiate a different price based on the problems with the property, or you can request that they be sorted by the current property owner themselves.
Navigating Mortgages
What exactly is a mortgage? Simply put, it’s a loan taken out specifically for purchasing a property. If you’re a first-time buyer, you might be looking for a mortgage to cover a large majority of the overall asking price for your new home. While this might seem a daunting prospect, there are lenders willing to offer all sorts of mortgages to help you out, such as fixed-rate (where the interest remains fixed) and variable-rate (where the rate is subject to change).
When you’re on the hunt for a mortgage that’s right for you, make sure to look around and compare rates and take into account the length of the mortgage term. Here’s where a mortgage broker comes in handy, as they can help you navigate this and find the best deal for your unique situation.
Deposits
Once you’ve found a mortgage that’s right for you, you’ll need to put down a deposit. This is an upfront payment that goes towards the total property purchase; a lender will usually require anywhere from 5-10% of the property’s overall value, but a larger deposit might mean you get a better deal in terms of mortgage rates and monthly instalments.
There are several avenues you can take to help you along the way if you’re struggling to secure the necessary funds, such as the UK’s Lifetime ISA, which offers government bonuses on your savings.
Your Credit Score
Before you apply for a mortgage, it’s a good idea to check your credit score and take care of any outstanding debts in order to boost your financial profile. This will come in handy down the line in the eyes of lenders, upping your chances of securing the loan you want.
Choosing the Right Solicitor
When it comes to buying a house for the first time, choosing the right solicitor is paramount to getting the confidence needed to support you through the process. Here are our top tips for making sure you find the best person for the job.
Reviews & Recommendations
When you’re shopping around, make sure to focus on any reviews you can find that detail the experiences of working with your potential solicitor. A good solicitor will be able to show ample experience of working with residential property transactions – make sure they are also registered with the Law Society or another professional body.
Recommendations will be handy here, as these will give you a first-hand review of what a solicitor is like from people you already know and trust.
Transparent Fees
Solicitor’s fees can vary widely, so it’s important to look around and obtain quotes from several firms before you make a decision. When you enquire about quotes, ensure you request a full breakdown of fees so you know exactly what it will cover, including searches, registration, and any other costs involved.
Knowledge of the Local Area
If you know the exact area you want to live in, it’s a good idea to source a solicitor who’s local to that area. They will be able to provide extensive knowledge of the regional property market, and will be familiar with the local procedures that you’ll come across during the buying process.
Are you on the hunt for your first dream home? Our team of professional lettings and estate agents is here to help. Our in-depth knowledge of the local property market and combined years of experience in real estate means we’re fully equipped to guide you every step of the way, whether you’re looking for your perfect property or you want to get on the first rung of the property ladder. Get in touch today to find out more about how we can help you in your property journey.
