Pooling resources – when you can’t afford to buy on your own Just because you can’t afford to buy on your own and you don’t happen to have a partner (or one you want to buy with at any rate), doesn’t mean you have to give up until this situation changes. More friends and siblings are buying property together than ever before, so consider whether there is someone who you can buy with. Choose carefully, though: Not only must your co-buyer be someone you can live with, he also needs to be someone you can rely on to pay his portion of the mortgage on time every month. If you buy with a sibling or mate, get your solicitor to draw up a legal contract stating each owner’s share in the property – acknowledging their contribution to the deposit and mortgage. Then if you do fall out, you’ll both know where you stand legally. (See Chapter 2 for more on buying with someone else.) Another option is your folks. If they can lend you a few thousand pounds to put towards your deposit, you can buy a bigger place. But even if they can’t afford to lend you some cash, your parents may be able to act as your guarantor. A guarantor agrees to pay your mortgage if you can’t afford to – and lenders let you borrow more than your salary justifies if you use one. (See Chapter 5 for more details on guarantors.)
Getting the government to help you realise your dreamSeveral government-funded schemes help first-time buyers who are struggling to get on the property ladder. If you’re a council tenant of at least two years standing you may be able to purchase your home under the Right to Buy scheme. Housing associations are another good source of aid: You can buy a home 14 Part I: Stepping onto the Property Ladder through shared ownership or the homebuy scheme. And if you’re a key worker, you may qualify for a loan through the key worker living scheme. Find out what you are entitled to – and make sure you claim it. It can make the difference between getting on the property ladder – or not. (In Chapters 16 to 18, I discuss these schemes in more detail.)
Understanding Mortgages Unless you’ve just won the Lottery you’ll need a mortgage. Understanding how they work, how much you can borrow, and the pitfalls to avoid are crucial to finding the right deal.
Getting a grip on rates The mortgage rate – the amount of interest you pay your lender to borrow money to buy your home – depends on your lender’s standard variable rate (SVR), which, in turn, reflects the Bank of England base rate. The decision to lower, raise, or leave the base rate alone depends on several factors, including inflation, consumer confidence, and the state of the housing market. If inflation is rising, the Bank of England’s Monetary Policy Committee (MPC) raises rates in an effort to curb spending, for example. Lenders usually respond to the MPC’s decision by adjusting their SVR accordingly. Your repayments will also change if you’re on a variable rate (see Chapter 4 for more details).
Making sure you don’t overstretch yourself You may be tempted to borrow as much as possible so you can buy a bigger place – this isn’t a good idea. Even if you can afford the repayments now, consider whether this will still be the case if interest rates rise. Even a 1 per cent increase can mean a big rise in your repayments. If you can’t cope, your home will be repossessed. Over-stretching yourself is a bad idea: It is better to wait until you can afford to buy than doing so before you’re ready.
Finding the Right Property without Blowing the Budget As well as getting the financing sorted, you need to ensure you actually find the right property for you. By working out what you want, before you even set foot inside a property, you not only save time and effort, you’re more likely to find what you want. Do you need two bedrooms or will one suffice? Do you want a garden or garage? And consider location: How important is living near work or the shops? What you want and what you can afford are likely to be two different things. Because you are on a budget, you’ll have to compromise: The sooner you accept this, the sooner you’ll find a place to buy. Chapter 3 helps you assess where you are prepared to compromise – and where you aren’t. You can become a homeowner on a budget – it’s just not as easy as it would be if you had cash to burn. Try to avoid cutting corners (by not paying for a survey, for example), but you can still save money (by not opting for the full structural survey and getting a homebuyer’s report instead). Or you can choose a mortgage where the lender refunds your valuation fee, or pays your legal bill (see Chapter 6 for details). Whatever you do, shop around. Use an independent mortgage broker (see Chapter 4 for more on brokers) to make sure you don’t pay over the odds. Use an insurance broker to arrange your cover, and compare premiums to get the best deal (Chapter 4 also has more on insurance). Compare the conveyancing costs of two or three solicitors before you instruct one – but remember that dirt-cheap may mean the service is sub-standard (see Chapter 10 for more details).
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