It is notoriously difficult to get on the property ladder and has been for some time now. However, growing economic difficulties have made it even harder for people to buy that first home, as even those on median incomes struggle to make the numbers work. The result has been a precipitous fall in the number of first-time buyers. Still, buying a property is not impossible; what tips could help you make your way onto that first rung of the property ladder?
Manage Your Credit Score
Buying a property is likely the biggest single investment you will make as an individual. It is highly unlikely that you will be able to do this without borrowing money in some capacity. The vast majority of domestic purchases involve the use of a mortgage to front the money for the home – and there are some key stipulations that buyers need to meet in order to be eligible.
For one, lenders typically only lend around four times the salary of the applicant or applicants. This will have budget implications. More importantly, though, mortgages are extremely high-value loans that come with risk; banks mitigate this risk by considering the credit history of applicants. If your credit score is low, you might struggle to get a favourable mortgage. As such, you may need to work to improve your credit score, through settling debts and closing lines of credit in a timely manner.
Budget Carefully
When thinking about buying a house, it can be difficult to get away from thinking about the one, big, central number in the equation – the cost of the house itself. It is undeniably important that you ensure you are not overextending your financial reach when viewing properties, but it is also important to remember that the asking price is not the only price.
Indeed, there are multiple additional costs to consider when budgeting for a new home, with stamp duty being the key cost that often trips up first-time buyers. No house sale can be completed without hiring the services of a conveyancing solicitor, who conducts the legal aspects of the sale from investigating land registry entries to handling the release of mortgage funds. There are separate fees incurred through organising property surveys, and then the ancillary costs relating to the act of moving home.
Use a LISA
There are financial instruments you can use to your benefit, whether to boost the size of your budget or to reduce the cost of mortgage repayments over time. One of the most powerful of these instruments is the LISA, or Lifetime ISA.
LISAs work like any other limited-access ISA, enabling you to put in a certain amount of savings tax-free each year. Specifically, LISAs allow you to put in up to £4,000 each tax year – the catch being you cannot re-access this money for any reason other than to buy a home or to retire. However, each year a government-backed 25% bonus is added to your balance – essentially boosting the value of your saved deposit by 25%.
