Going from tenant to buyer
If you’ve been used to renting properties for long periods of time, being in position to buy your own home can seem like a daunting and terrifying process.
The responsibility that comes with owning a property is vast when compared with renting, but the benefits are equally broad.
Now you are in that enviable position, knowing the facts being prepared is hugely important as you take those first steps towards home ownership.
Follow Martin & Co’s six top tips as you prepare to go from tenant to buyer and you’ll be on a smooth pathway towards your dream first home.
The benefits of buying versus renting
The biggest and most obvious benefit of buying your own home is being in control of your own destiny – both financially and in being able to place your own unique stamp on a property you can call your own.
Whether buying or renting, money will leave your bank account each month to pay for the roof over your head. The difference with owning your own home is you are paying towards owning that property outright and, in a settled market, you are gaining equity as an investment in your future, be that a pension pot or money towards your next property.
Moreover, paying off a mortgage usually results in cheaper monthly payments than renting, meaning you could have more of your money to do other things.
Tip one: Make sure your deposit is as big as it can be
Chances are, if you are set on leaving the rental sector and buying your own home, you will have already saved a fair chunk of money towards a deposit.
The deposit is everything in home ownership. The larger it is, the less money you will need to borrow via a mortgage in order to purchase your dream home.
Generally, buyers need at least 5% of the property’s purchase price in order to get a mortgage. So, if you are buying a home worth £200,000, you will need £10,000.
However, that will mean a loan-to-value (LTV) mortgage of 95% and the interest rates available to you will reflect the size of the loan.
With a 10% (£20,000) deposit, a 90% LTV mortgage will be a far safer option for the lender and the interest rates are likely to be more attractive. Clearly, a 15%, 20%, or 25% deposit will see even better interest rates offered by most lenders.
Tip two: Factor in all other costs
Buying your first home is not cheap. But factoring in all the associated costs of a property purchase before taking the plunge can at least prepare you for what’s to come and ensure you have the finance in place to cover everything.
Costs you will need to consider before buying your first home include:
- Stamp Duty (or Land and buildings Transaction Tax in Scotland and Land Transaction Tax in Wales): First-time buyers currently pay no Stamp Duty on the first £300,000 of properties worth up to £500,000.
- Survey costs: Depending on the type of survey you commission (and Martin & Co always recommends buyers undertake a survey), this cost could be between £150 and £1,500 depending on the type of survey and the size of the property being purchased.
- Solicitor’s fees: These are typically between £850 and £1,500, plus VAT, and are payable upon completion of your property purchase.
- Removal costs: The average removal company charges for a two-bedroom flat or house are around £600 and move up to around £900 for a three-bedroom house. Packing charges can be around £250-£300 on top of that.
- Mortgage arrangement and valuation costs: These will vary depending on the lender and can sometimes be added to the loan itself.
- Other costs: You will also need to factor in costs for furnishing and decorating – after all, you’ll want to make the property your own! Also work in costs for buildings and contents insurance. If you’re making the property your own you’ll certainly want to protect it and the contents against damage or theft.
Tip three: Make sure you can afford all repayments
We’ve already established that buying your first home is a huge step. With that in mind, before placing that first foot on the rung of the ladder, be sure that you can afford the mortgage repayments.
Lenders are now very choosy over who they will give money to and will almost certainly perform a ‘stress test’. This means they will work out if you can afford the repayments should your circumstances change or interest rates rise.
Martin & Co recommends you work out your worst-case-scenario budget before completing your mortgage application.
Tip four: Make sure what you're buying is sound
So, you’ve established buying is the right thing for you and your budget is water-tight and a mortgage has been approved in principle.
Now it’s time to start viewing properties!
The most important thing for a first-time buyer with limited experience is not to get carried away on the crest of the property search wave.
Enjoy the experience, of course, but study each property you view with a keen eye.
Here are seven things to look out for when viewing a potential home:
- Missing tiles on the roof
- Rotten wood around the windows
- Noisy neighbours
- Dodgy electrics
- Poor water pressure
- Cracks in the walls or ceiling
If you are unsure of what to look for or where to look, it can pay to take a more experienced family member with you on viewings, or a tradesperson you know and trust.
This is the biggest investment you are ever likely to make, so it needs to be right.
Tip five: Make sure you visit at different times of the day
If you have found a property you think could potentially be ‘the one’, don’t just rely on one visit or multiple visits at the same time of day.
Ask to visit the property in the early evening when neighbours are home from work and take a wander around the area in the evening and at a weekend.
It will give you a wide-ranging feel for the property and postcode before you make a decision on whether to make an offer.
Tip six: Only make an offer you can really afford
It can be easy to get caught up in the house buying bubble when viewing multiple properties and when you find one you really like, the temptation is always to go above your budget to secure it.
Properties on the market are always likely to attract attention from other people as well as yourself, but don’t be tempted to make an unaffordable offer or over stretch yourself in desperation.
Always be sensible and seek advice from others. Your local branch of Martin & Co is always on hand to help and can advise on the current position of the market in the area you are looking to buy in.
If you would like more information on renting or buying a property, you can speak to your local Martin & Co office who will be happy to help.