Getting on the property ladder has long been a notorious challenge, but never more so than today. With house prices seeming to endlessly soar, first time buyers can be forgiven for feeling listless - climbing onto even the bottom rung can feel especially daunting. But if you’re one of the many concluding that you’ll just never own your home, think again. Here, Sarah Lord, Wealth Planning Director at Killik & Co, shares her top tips for getting a foot on the property ladder.
Getting on the property ladder is one of the biggest financial commitments you will ever make in your lifetime; whilst you will finally own the property that you have always dreamed of, you will have no doubt had to make financial sacrifices to get there, and likely invested your life savings into the deposit.
The reality is that in the present day it is harder than ever to get on the property ladder for two main reasons; property prices have increased substantially over the last 10 years, wage inflation, however, has not increased at the same rate, making it harder than ever to not only save for the deposit in the first place, but also secure the level of borrowing required.
There are, however, a number of ways in which you can help yourself to get on the property ladder...
1. Plan for the cost of buying a home
It is not just about saving for the deposit and securing the mortgage borrowing you need; you need to ensure that you can afford the total cost of the buying a property, so do your research on how much things like legal fees and removal costs will be.
Don’t forget that you also need to budget for Stamp Duty, which becomes payable for properties valued at £125,000 and above, at a rate of 2% up to £250,000 and 5% from £250,000 to £925,000. Stamp duty can be a significant cost associated with buying a property and ultimately, can be a factor which influences the value of the property that you buy.
2. Boost your chances of getting a mortgage
If you are thinking of buying a property, one of the most important things to do is ensure that your records are up to date and correct, so that when you come to apply for your mortgage there are no surprises.
Make sure you are on the electoral roll—even if you are renting or living at home with your parents you need to ensure that you are registered on the electoral roll, as this is typically the first port of call for mortgage lenders along with your credit rating.
You should also check your credit score with the main credit agencies such as Experian and Equifax, to ensure that all the details they have on their records are correct. Pay close attention to the address details contained for each of the entries, as an incorrect address can lead to lenders having concern over your mortgage application.
You can also take steps to 'boost your credit score' by ensuring that you pay any credit agreements, such as mobile phone contracts, on time—the easiest way to do this is by having direct debits set up for all credit agreements so that you do not have any late or missed payments.
If you have a low credit score, one way you can potentially increase this is by getting a credit card and spending on it on a monthly basis, then repaying the balance each month. This demonstrates to potential future mortgage lenders that you can borrow responsibly.
3. Avoid Payday Loans
One of the most important things you can do to improve your chances of getting a mortgage, is ensure that you avoid payday loans such as Wonga or Quickquid. The interest rates that such companies charge are astronomical, and many find that a small amount of borrowing can soon become a significant financial burden which could easily jeopardise your chances of getting on the property ladder.
4. Take advantage of government initiatives to assist you
In recent years the government has introduced a number of different initiatives, such as the Help to Buy programme, Starter homes and Shared Ownership. These schemes have helped many to get on to the property ladder, and therefore it is worth looking into each of the options available to see whether you could benefit from one.
It is worth noting that the government has recently announced its intention to close the Help to Buy Mortgage Guarantee scheme at the end of December 2016, and therefore there is a short window of opportunity to make use of this scheme. The Help to Buy Equity Loan scheme and Help to Buy ISA will continue to be available, however.
In summary, getting on the property ladder is achievable if you get your finances in order, and do your research thoroughly as to what is affordable and what schemes you can make use of to make your money go further.
Learn how to get on the property ladder with Sarah Lord at Stylist Live on Thursday 13 October. Get your tickets here.