Getting on the property ladder — what does this mean in simple English? It means taking the steps required to own your first properly.
Why is it called a ladder? Because eventually you can “upgrade” by purchasing a more expensive house, moving up the ladder.
But taking hold of that first rung is the hardest. You’ve got no property to sell to help fund the next purchase. Buying that first house requires some dedication, some planning, and a bit of know-how from the experts.
Thankfully, we’re here to help.
The five steps
As a first time buyer, the information you require can be split roughly into these categories:
Saving
Planning
Loan
Viewing
Purchase
Let’s get started.
The Saving Phase
A mortgage will pay for most of your house, but you need to save because the deposit and the purchase fees need to be paid upfront.
A deposit is usually a minimum 5% of the purchase price. If the home you want costs £200k, you will need to save at least £10k for the deposit. If you save more, you may be able to pay a larger deposit to secure a mortgage with better terms.
If you’re not already saving money from your pay-cheque each month, now is the time to start. If you need to cut down on spending to achieve your savings target, sit down and work out what your unnecessary expenses are. Is it clothing, food, subscriptions, transport?
Put that money into a high-interest savings account or a stocks and shares ISA with a low risk investment fund.
Add to your savings with Government help schemes
Schemes such as LISA and Help To Buy are designed to get first-time buyers onto the property ladder. Find out more here: Affordable home ownership schemes.
Getting a Loan: Explained Quickly
That’s right: you want to start talking to a lender before you even view your first house. After all, if you find you can’t afford the house you were viewing, then you wasted your time.
Financial products can be complex and we don’t want to overwhelm you, especially when there are only a few key concepts you need to understand.
You tend to get a loan from your bank, so give them a ring and set up an appointment. You can also use a mortgage broker.
At this stage, you are looking for a “mortgage in principle”, also known as an AIP or “decision in principle”. This isn’t a guaranteed mortgage but is your lender expressing how much they might be willing to lend you based on your job, your credit score, and other circumstances.
They will check your credit score with Experian, Equifax and/or Credit Karma, so you may want to request your credit report from these agencies before you talk to a lender and make sure the information is correct.
Some lenders are more generous than others so it is highly recommended that you shop around. Moreover, different mortgages have different terms, so you should consider the following factors carefully:
Interest rate: In a percentage, how much more per year you will have to pay back than what you have borrowed
Initial rate: Some mortgages will have a lower interest rate at the start, often for the first 24 months.
Set-up fees: Don’t ignore these. Some lenders might offer an attractive interest rate but exorbitant fees cancel out the benefit.
Mortgage term: How long you will be paying off the mortgage.
The Fun Bit: Viewing The Properties
Now you’re ready to start the search for your dream house. I call this the fun bit, but in truth it can be a little exhausting, and even emotional when you set your heart on a property only to lose out for some reason or another.
You can use an estate agent to help you find a house, but as a first-time buyer without a house to sell this isn’t a requirement, just an option if you want to take some of the work out of the search.
Some things to consider when viewing a house:
If it has problems, are they superficial? Don’t let a little work scare you off.
Does the location have everything you need nearby?
Does the house have enough space?
You will probably want to arrange a house survey to check for deeper and hidden issues relating to the structure and condition, behind-the-wall issues such as electrics, and other problems you might not be able to identify yourself.
However, you don’t need to worry about a survey until you have made an initial offer that has been accepted.
Solicitors and Estate Agents
“Conveyancing” is the legal term for transferring ownership of a property from one person to another. This needs to be handled by a qualified professional, so if you don’t have the necessary legal background to perform your own conveyancing then you will need to take help from a solicitor or a licenced conveyor.
You don’t need this solicitor/conveyer until you are ready to put an offer on a property. But it is better to be prepared, which is why you should find a qualified professional and inform them you are undergoing a property search earlier in this process.
Stamp Duty? Annoying first of all because it has a name that doesn’t tell you anything about what it is.
Climbing property ladder
When the sale of your first property is finally complete, take some time to revel in your success and enjoy your new home (or second house).
Before long, you might start to get that itch. Could we do with an extra bedroom? Wouldn’t it be nice if our bathroom was larger? Or perhaps you are looking for a way to earn a second revenue stream.
It’s time for you to look ahead for your next purchase. In other words, “climb the ladder”.
In some ways, the cycle starts again, but with one big difference: you now have a property to sell to fund your next purchase. This changes the game significantly. But now you have the experience, we know you can handle any new challenges that arise.
Climbing the property ladder likely involves a removals company at some stage in the process. When the time comes for you to talk to a reliable, personable removal company, remember BlueSky.
Please also read about Moving house tips and How to get rid of your boxes after moving house
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