Not the most exciting of tasks but before you do anything, you need to see where you stand financially. If you’re super organised, you might already keep a record of all your monthly incomings and outgoings and will be able to see clearly just how much you can afford to save towards a mortgage each month. If, like the rest of us mere mortals, however, your financial records leave a little to be desired, then sit down and map out your monthly income and expenditure comprehensively. Without doing this, you won’t be able to see whether you have any spare cash to save, or how much.
If you discover that your outgoings are exceeding your incomings, then don’t despair. By making a complete record of your finances, you will be able to see where you could save some money, such as cutting down on nights out or shopping, for example. Although the idea of cutting back might not fill you with joy, don’t forget your end goal – eventually, you will have that first home under your belt and it will all have been worthwhile.
Once you have established what you can afford to save, then do it! Set up a monthly standing order into a savings account so that after payday, a proportion of your income will go straight into your deposit fund. That way, you won’t even miss the so-called “extra money” that you are putting away and you will get a pleasant surprise when it accumulates over a few months!
Once you know how much you are saving, you will also be able to plan just how long it might take to save a decent deposit amount. Nowadays, most people will need around a 25% deposit to buy a property so you need to take this into account when working out just what you can afford to spend and how long you will need to save for.
If you’re going to buy a property, then you need to have a good look at the market to see just what is out there and what you can afford. There is no point looking for a 3-bedroom detached house with a garage in the nice part of town if, realistically, you can only afford a 1-bedroom flat in a less expensive area. Here, you need to take into account not only how much money you can save but also how much your mortgage repayments are likely to be, so ideally you need to have a chat with a mortgage adviser. A good adviser will be able to crunch some numbers for you, work out just what price range you can afford to search in and establish how large a deposit you will need as well as what your monthly repayments might cost. Remember, you are looking for your first home, so it might not be the palace that you have always dreamed of but even if you have to start small, you will, in time, be able to move on to bigger and better things.
So you’ve crunched the numbers and taken the mortgage adviser’s comments on board but the sums still aren’t adding up. If it’s going to take you years and years to save anything near a decent deposit, then if your parents are in a good financial position, why not let them help you out? Of course, this is not an option for everyone but you might be surprised at how positively they view the suggestion. Putting some of their money into property whilst house prices remain low could be a good investment for them and they might just be happy to get you out of their house!
Of course, borrowing from your parents doesn’t have to be treated as a gift; you should see you parents’ money as more of a loan that is repayable either when you are more financially stable or if you come to sell your property. Your parents effectively will hold a stake in your property, so make it clear beforehand that you are borrowing the money to finance your home – it’s best to clarify how much input you want them to have to try to avoid arguments further down the line about home improvements etc. – unless you want their opinions, of course!
If your family can’t help you out, then don’t despair. There are other schemes available that can help you to get on the housing ladder.
Why not consider a Shared Ownership scheme? Under these schemes, you buy a percentage of a property from a housing company and pay rent on the portion that you don’t own. This way, you need a much smaller deposit and although the rent money will go straight to the housing company, the mortgage share will provide an investment for you – and at a later date, when you’re more financially secure, you can normally buy the remaining portion of the property so it becomes yours fully.
The government has also introduced the FirstBuy scheme for first-time buyers, where those looking to buy newly built homes are offered special rate loans, repayable in the future, on a percentage of the property’s price. So, for example, you might take out a mortgage for 80% of the property and a FirstBuy loan for the remaining 20%. With FirstBuy, deposits can be as little as 5% of the purchase price.
Or why not join forces with some close friends? They might be people that you’ve already rented with for a while, or friends you’ve known for life who are all dying to get out of their parents’ homes. A deposit and mortgage may be unaffordable for a single person but once you have two, three or even more people in the mix, then suddenly getting a property can seem more achievable. Be careful, though – buying a property with anybody entails entering into a relationship with them. This is not to say that you’ll be cosying up in the same bed at night but it does mean that you will be tied to them during the time in which you live together. You need to be aware that if one person can’t afford their share of the mortgage one month, then this can impact on everybody. In the same way, make sure that you all have shared, equal ownership of the property rather than putting it in one person’s name as this will give you all equal rights on the property. Don’t let the details scare you off, though – sharing with friends can be the ideal solution.
Whatever your property needs, at Julie Twist Properties, we can help you find the home that you have always dreamed of owning!
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