If I could give you some basic tips to help you get on the property ladder, would you take them?
I remember when I was trying to buy my first house, people were so inquisitive about whether I was sure I wanted to, and most of all if I knew how difficult it would be. At the time I was actually a mortgage adviser so I had quite a good idea of the process and the options that would be available to me. I was lucky to be in that position at such a young age. One Friday afternoon I decided to run a decision in principle (credit and affordability check) to see what I could borrow, which in turn, would enable me to set a goal to save and reserve a new shiny house. I used the help to buy scheme, which I still think is a great option now. It has helped so many people get onto the property ladder for so much less, in terms of upfront cash and interest rates.
As a general rule of thumb, a mortgage lender will let you borrow 4.5 times your annual earnings. This is of course subject to affordability, credit scoring and underwriting assessments, but this gives you an outlined generalised idea...depending on your circumstances there are sometimes lenders that would even be able to look at your earnings more favourably. You should always take full advice here because sometimes borrowing so much, isn’t appropriate for everybody. There are so many online calculators around, why not have a play around and see what they say for you?
So, how can we be more effective to efficiently save more pounds to help ourselves get onto the property ladder?
I know when I was saving for my first house it was so easy to dip in and out of the ‘pot’ but once I finally got there it was the best feeling in the world. Independence and somewhere, where I made all of the decisions and everything I had was mine.
No way am I saying it’s an easy road, but it’s a well worth it journey and hopefully I can offer you some great tips here...
Shoparound for the best savings account that there is, don’t leave your savings in your current account because firstly this is too easy to treat yourself and secondly I can almost guarantee that it will be earning you zero interest. Even a few pounds here and there in a cash savings account is better than nothing, right? Depending on how long you anticipate saving for, there could be some better alternatives to cash based savings, these would also take into consideration your appetite to investment risk. I would say for these types of investments that you would need to be saving for a minimum of 5 years, if this might suit you then you should take advice.
Set a realistic objective, I’m all for saving every penny towards your next financial goal but you are more likely to achieve it if you don’t feel skint all the time. Leave yourself that hundred odd pound buffer each month that can be spent on YOU. I know for me that if I allocate every piece of income to a specific budget and savings amount that I feel like I haven’t got any money and that in itself creates it’s own worries and anxieties...why not start easy and cut out all of the take out coffee and shop bought lunches. The average Nespresso machine costs around £100, if you had one of those at home instead of £7+ per day on shop bought coffee and lunches it would be pretty much paid for after a month! Whenever I feel like I’ve been spending too many pounds, I print off 3 months bank statements and highlight all of the ad hoc expenditure. Sometimes I get super lazy and buy lunch too many times in a month, this easily adds up to well over £100 of wasted money and added calories that I definitely don’t need! (sometimes from what I spend, I obviously eat a lot!) I think this is a really good way to get a handle on what I am actually spending my money on. If you think you’re bank account will benefit from this, why not give it a try? I would love to know your results...
Take advice from a broker, a bank can only offer you their criteria guidelines and their affordability structure. A broker is able to research every type of deal available and has access to hundreds of lenders that are able to offer different affordability structures, depending on your circumstances, with differing lending rules.
Consider all of your purchasing options, there are so many now; Shared-Ownership, Help to Buy, Standard Purchase with varying amounts of deposit, Guarantor mortgages, Joint Borrower - Sole Owner, the list is almost endless. Not all types of purchasing options are appropriate for everybody, take advice and do what works best for you. Personally I think that the Shared-Ownership and Help to Buy schemes are such good ways to get that easier step into the property world. They can help you achieve more buying power for your £’s! Some shared ownerships could cost you as little as £50,000 with only needing a 5% deposit...if you only knew it could be as easy as that, how many of you would be able to save £2,500 in a short period of time? *additional costs would be needed for solicitor fees and potential associated mortgage fees.
Check your credit file, I always find it daunting that there is a big 6 year log about all of my financial movements that I never actually check. There’s nothing worse than applying for your first agreement in principle to a mortgage lender and finding out that there’s something lurking in the background making things more difficult! There are many out there, from my past experiences the majority of lenders work from using Experian and Equifax. Having as much evidence upfront gives you added power to put you in the best possible position to get that credit check done in readiness to go and view those potential new homes!
I actually found that when the pounds started to build up that it was so much easier to save and stop spending on unnecessary things. I guess it became a bit of a game and the bigger the number got, and the closer I could see myself to reaching that goal it didn’t feel like a sacrifice anymore but rather, an achievement.
Just remember that everybody does everything at their own pace and to not believe everything that we see in this such social media based world. Set your goal within your own achievable limits because let’s be honest, becoming a home owner at any age is a massive achievement. I used to get sucked into other people’s idyllic worlds, but just remember that we all have different paths and I’m a true believer that, as cheesy as it sounds, we end up where we desire to be.
I would love to hear how you get on and I’m also happy to answer any questions should you need any further clarification on the points above...