8 Things To Consider For First-Time Home Buyers

Getting on the property ladder is a big milestone in many people’s lives. It represents a sense of stability, independence, and long-term investment. Understanding the importance of saving for your first home is crucial in setting yourself up for success on this exciting journey.

Owning a home provides a sense of financial security. Rather than spending money on rent each month, you are investing in an asset that can be appreciated over time, and in many cases, the cost of paying your mortgage is a lot cheaper than paying rent every month. 

However, with any big decision in life, you should take time to do your homework and make sure you know the ins and outs of what you’re doing and make sure you’re fully prepared.

Here are a few tips to help you understand the process and the necessary steps to take to buy your first home.

Let’s get into it.

1. Determine how much to save

According to Halifax, the average property values in the UK are now around 6.7 times the average UK salary and the average deposit needed to buy a home reached almost £62,500.

It’s important to know where you want to live and determine how much you need to save for a deposit on a property in that area. You can do this type of research on the most popular property websites – Rightmove, Zoopla, and Primelocation. 

Most lenders require a minimum deposit of 5% to 10% of the property’s purchase price, but a larger deposit can secure better mortgage rates. Calculate exactly what you need and then set savings goals accordingly.

2. Open an ISA

Consider opening a dedicated savings account for your property deposit. Look for savings accounts or ISAs (Individual Savings Accounts) that offer low interest. 

You can speak to your usual bank about opening an ISA account, or you can open an ISA account at any bank of your choice. After opening an ISA, you can then set up a standing order to automate regular deposits to your ISA account to ensure consistent savings.

3. Improve your credit score 

Although there is no minimum amount on a credit score to be granted a mortgage, the better your credit score is the better chances you’ll have of securing the best mortgage deal.

It’s worth checking out your credit score and understanding what you need to do in order to improve it.

There are many sites like Clearscore and Experian that have a great platform for checking your score for free and providing some tips on how to improve it. 

4. Budget

Review all your ins and outs and create a spreadsheet. Identify areas where you can cut back to increase your savings. Small lifestyle changes, such as reducing eating out or shopping, can make a significant difference over time.

Make sure you’re consistent with putting into practice those lifestyle changes and also consider taking up a side hustle or selling some of your things to get additional income and speed up getting to your deposit goal. 

5. Explore government schemes

There are a few government-backed schemes designed to help first-time buyers in the UK, such as the First Homes Scheme or the Lifetime ISA. 

The First Home Scheme allows first-time buyers a chance to buy a home for 30% to 50% less than its market value and a Lifetime ISA is a scheme where you can put in up to £4,000 each year until you’re 50 and the government adds a 25% bonus to your savings, up to a maximum of £1,000 per year.

These schemes can provide bonuses or support in accumulating your deposit. However, they aren’t available to just anyone, so it’s important to check the Gov website and see if you’re eligible.

6. Shop around for the best mortgage deals

Research various mortgage lenders and products to find the best deal for your circumstances. A larger deposit can open up access to lower interest rates, potentially saving you thousands of pounds over the life of your mortgage.

Check out sites like Compare The Market or MoneySuperMarket to find a mortgage deal that’s right for you. 

7. Consider a Mortgage Broker

Using the services of a mortgage broker can be a valuable asset in your quest to secure the right mortgage deal. Mortgage brokers have extensive knowledge of the mortgage market and can help you navigate the complex world of mortgage products, terms, and interest rates.

Mortgage brokers are usually paid on a commission basis, or procuration fee of about 0.35 percent of the loan size.

8. Start a Pardna 

Of course, a great way to build towards the costs of purchasing a property without having to take out a high-interest loan is to start a Pardna with your friends, family, or community.

Use the Pardna App to begin your group savings where everyone contributes a certain amount of money each month (the Hand), and one person takes the lump payout (the Draw) until everyone has had a turn. You can continue the cycle until you reach your savings target.

For example: You and 5 other family members contribute £250 each month to raise £1,500 each, and one person takes the payout each month until all 6 of you receive your money. Our platform fee is a fraction of the cost of a short-term loan so you get to retain much more of your savings.

The collective activity where everyone is dedicated and indebted to the group is a great driver that makes saving a lot easier than trying to do it alone. And the knowledge that everyone is helping those close to them is satisfying.

Bonus Tip:

Keep tabs on other property buying costs beyond the deposit, like solicitor fees, survey fees, moving expenses, furniture, and other petty things. It’s worth making a separate spreadsheet just for miscellaneous expenses to avoid any financial surprises.

Remember that the property market in the UK can be competitive, and the cost of getting your dream home is higher than ever.

However, there are plenty of ways to save and take the right steps to get yourself on the property ladder in no time. The sooner you start saving and planning, the closer that dream home becomes a reality.