Ah, the New Year – the time when best intentions lead us to sign up for expensive gym memberships, or juice fasts. Where we make endless goals and promises to ourselves with no clear plan of how we’re going to succeed. We expect ourselves to jump from the gluttony and excess of the festive period to running marathons and turning down a second slice of cake after the stroke of midnight.
But what if your goal is to finally buy your dream home this year? Perhaps you have promised yourself that 2018 is the year you get on the property ladder, and we think it’s a noble goal. However, just like those promising themselves rippling abs and yogic handstands by summer, you need to start small and slow, and you need
to have a plan.
Step One: What do you have, and what do you want?
Just as you do your pre-programme weigh in, it’s worth knowing what your starting point is. How much do you have saved towards and deposit, how much could you afford to pay each month towards a mortgage, what could be stopping you from buying a home? Consider that the average deposit paid in the UK is £51,821 – does that seem in line with what you have saved? How much can you add this year to your pot? And what is it that you want? A house with a garden, a city centre flat? Are you open to shared ownership, or do you want to buy a freehold property? What do you need in a home, and what are you willing to compromise on? Make a list.
Step Two: Get those finances fighting fit!
Okay, so the assessing part at the beginning of the year can be painful – perhaps you didn’t have as much saved as you thought, or perhaps that dream is starting to seem farther off. Don’t be dismayed! You’ve only just begun! So, start ticking off:
Check your credit rating (the better your rating, the better mortgage deal you’ll get).
Check how to improve your credit rating (disconnect old flatmates/ex-partners, cancel any unused accounts, make sure all your details are correct, update addresses).
Clear any outstanding debts – credit cards, loans, or even always being in your overdraft. These will have a negative effect on your ability to get a mortgage. Under no circumstances should you ever get a pay day loan. These can severely damage your credit rating, and the interest is sky high.
Start saving as much as you can – that means cutting out any additional extras. This could be coffee, dinner out, trips to the cinema, or holidays. Make sure you give yourself a ‘treat’ once a month, but try not to splurge a whole month’s worth. You need something to look forward to and not feel like you’re missing out, but don’t go off the deep end. Just like New Year’s fitness fans – they’re not chomping down on broccoli the whole month only to let themselves loose on the dessert menu. Pick one thing, and thoroughly enjoy it. Then get back to saving!
Get yourself a mortgage in principle – this will let you know how much a bank/lender would be willing to lend you, and will give you a stronger position when you put an offer in on a property.
Step Three: Know your position
There are multiple advantages to being a first time buyer (though it may not feel like it whilst you’re saving). You don’t have to pay Stamp Duty (on properties worth up to £300,000, and will only pay on the difference of properties up to £500,000) you have access to the Help to Buy ISA, which offers a good rate of interest, and you will be chain free. This can be appealing to sellers who don’t want to get caught up waiting for other sales to go through. Which means you have things to bargain with.
It’s important that once the process is underway that you understand it can take much longer than you think – if you’re renting, be careful with ending your tenancy too soon. Many people get caught out with delays on their purchase and end up sofa surfing for months. Make sure you have somewhere you can go, or negotiate a flexible tenancy with your landlord for the last couple of months.
Step Four: Do your research
Knowledge is power. If you don’t know how much people charge for services, how are you going to know which prices are reasonable? Compare services like conveyancing and surveyors, to make sure you get the best deals. Read reviews, and budget for all these costs. Just because you’re not paying Stamp Duty doesn’t mean you’re not going to have to pay for things like removals costs, insurance, mortgage fees, disbursement fees and many other small bits and pieces – it’s tempting to put all of your spare cash into your deposit, but remember that you’ll need furniture to sit on, and you’ll want to be able to pay your bills upon arrival! Savings should be different from your current account – keep some money back for your move.
Similarly, when it comes to picking a property, everyone will have an opinion they want to share. It’s worth taking what they have learnt from the buying process, but they may have different priorities – make sure you find out what’s right for you. Whether that’s a new build in a not-yet-built development, or a fixer upper in need of some TLC, you’ll find the right property for your lifestyle and your bank balance.
Step Five: Appreciate how far you’ve come
Just as you need to measure and check your personal bests when you’re aiming to improve, the same applies in your journey towards home ownership. Stop and appreciate what you’ve achieved, whether that’s improving your credit score, upping your monthly savings or getting a great deal on a conveyancing solicitor. You may not find your perfect home this year, your journey may take a while longer, but if you throw everything you can at it in 2018, you’ll be sure to be ready to jump on the ladder as soon as they dream house appears.
What are your goals for 2018, and how are you planning on getting there?