First things first – funding your dream home – mortgages, loans, first time buyer schemes

You are ready to buy your first home, but how to fund it is the big question.

Affordability

Be realistic! Set the figure you can afford to meet by including in your calculations the costs of council tax, utility bills, and unforeseen repairs so that you don’t overstretch your means to pay for your home. Don’t see this as a lowering of expectations but as an advantage; you will be able to live in your comfort zone free from nagging worries about struggling to meet bills. Remember to include all your costs of living e.g. food, transport, clothes, holidays. And the bigger deposit you can put down, the better. When relocating stick to searching for property within your price range. You are sure to find the right place to meet your needs eventually even if you have to expand your search area by a few miles, but if you do this make sure you are going to be happy with the travel costs and time taken to get to work, school or shops. You will also need to take into account the moving costs e.g. a removal lorry, legal fees, the bill from your estate agent and furnishings if needed. It’s always a good idea to have a little money set aside for unforeseen expenses if you can as this will give you peace of mind.

Cash is a great way of buying your house as you will own it outright from the start. You will not have to pay interest on mortgages, loans or pay fees to mortgage brokers or building societies. Often the process of purchase will be quicker too if you have quick access to your cash from a bank or investment fund. However, the majority of people buying their first property will not be in the happy position of being able to buy with cash.

If you need to borrow money for your purchase then you need to get the best advice you can. You may find that family and friends are a good source of information, but you should also seek advice from your bank or building society, your Good Agent, a mortgage broker and on-line research too.

Mortgages are a common way of funding a new property and these are usually available via building societies and banks. A minimum deposit is required and the amount that can be borrowed will be calculated by the lender who takes account of your income and expenditure; in other words, they will work out with you the affordability of your new home. At this point, if you have done your calculations carefully beforehand, the amount you can borrow should be similar to that of the lender’s mortgage offer and you will not be disappointed.

Loans from Family or Friends may be a possibility, but like all things that involve large personal loans, whether for a mortgage deposit, or for the property purchase price, there is always a risk that a relationship could become toxic if money. It is vital to get a contract drawn up between both parties so that everyone is clear regarding their obligations in respect of the timing of payments and the consequences if there is any default on these. There is often a big benefit though e.g. if the lender is prepared to loan money at a more favourable interest rate than a financial institution or can offer more flexible repayment terms. Instead of a loan a family member or friend can sometimes act as a guarantor for a mortgage and provided you are confident you can meet the regular payments, this is a good way of getting your dream home. As with anything involving large sums of money though, it is imperative that you don’t relax in the knowledge you have a back-up and start to draw down on your guarantor’s goodwill. If there is a crisis, such as a loss of job or critical illness that would stop your ability to meet your obligations then this is a different situation and one that your Guarantor should be fully aware of before entering into such an agreement. As with outright loans, a clear understanding by both parties of their obligations to each other is essential.

Shared Ownership with Partners, Family or Friends

This is a good way of affording a home providing your friend/s or partner/s are clear about the implications if one co-owner wants to move on and the other doesn’t or there is a big disagreement rendering living together a nightmare! Would you be happy to sell up and move too? Or risk losing a home altogether if you were unable to meet the payments on your own? As with any agreement involving large sums of money and property, the consequences of differing opinions or unforeseen changes of plan may mean one party no longer wants to share the property. Obligations to each other, not only on these types of eventualities, but also on repayments and general maintenance responsibilities and running costs of the home will need to be thrashed out and agreed at the outset to avoid any potential upsets. Problems are more likely to be avoided if you have a third party to oversee the legal commitments you make to each other rather than sorting it out between yourselves.

Government and Shared Ownership Housing Schemes

It’s best to take advice from your Good Agent who can advise you on current schemes available. Government and private housing schemes frequently change but to start off you can do initial research yourself by going to some of these useful weblinks:

The Money Advice Service - https://www.moneyadviceservice.org.uk/en/articles/help-to-buy-homebuy-and-other-housing-schemes

Own Your Home - https://www.ownyourhome.gov.uk/schemes-all/

Money Saving Expert - https://www.ownyourhome.gov.uk/schemes-all/

Affordable Home Ownership Schemes - https://www.gov.uk/affordable-home-ownership-schemes

Home Ownership Alliance - https://hoa.org.uk/advice/guides-for-homeowners/i-am-buying/rent-to-buy/

Balancing act – what are your essentials?

It’s obvious that your requirements are personal e.g. some may want a small apartment in a city, others will want a large country house but whatever type of property you want some essentials remain the same for everyone. You need to make sure that you have a survey done by a qualified surveyor. This is always required for mortgages unless it is a new home in which case there should be guarantees as to the property’s structural soundness. You will need to be aware of current plans for roads or buildings that may change the nature of your views or road traffic past your home – or potential ones. Finding out that a major road junction is going to be built next to your tranquil home shortly after your move in to your country residence would be a shock to the system! If you do your research you will have the chance to decide whether or not the changes will bother you. It’s not a bad idea to ask why the house is for sale.

Do you need good local schools? Close doctors’ surgeries or hospitals? How many bedrooms and reception rooms do you need? What about en suite facilities? A garden for your dog? How close are your neighbours? Is it a noisy neighbourhood? Quiet at night or next to a rowdy pub? Some people might like this so they don’t have to drive home after an evening out. To others it would be anathema. These days there are websites providing details on local areas that show the make-up of the age and professional group of people living there, how much crime there has been, what clubs, organizations and religious institutions there are. Make use of the information available on line and of course make sure your local Good Agent knows precisely what your red lines are and things you absolutely cannot do without and what you might forgo if a place is exceptional. This will save you time and much disappointment when making your viewings.

Be open to advice and assistance

Having trusted advice from your Good Agent will be invaluable. Sometimes, despite your own imposed red lines and the suggestions made above, an opportunity may arise to buy a property that overrides all your preconceived ideas either because of its fantastic price and potential, or its charm and even atmosphere. One half of a couple we know was adamant he did not want a semi-detached house even though his wife thought the place (a wing of an Edwardian house) looked beautiful and shouldn’t be discounted. The husband decided to do a ‘drive by’ to convince his wife not to waste everyone’s time; he was blown away by stunning views across the sea and marsh lands as he drove towards the house nestling among the hillside trees; he knocked on the door and made an offer to the owner there and then. The couple bought the house and have been living there happily now for over 35 years!__

SUMMARY

• Affordability – do your calculations right and don’t overestimate what you are able to pay – make sure you stay within your comfort zone.
• Check out all the options for paying for your property – do thorough research and get advice from your Good Agent, bank or building society to find the best method for you.
• If you opt for a property share with partners, friends or family then make sure you get an objective opinion and a contract drawn up by a third party to cover all eventualities in respect of potential disagreements or one party wanting to sell up before the other. Be clear about your obligations and responsibilities to each other.
• Make a list of your essential requirements and stick within your upper affordability limit when searching for a property.

Take advice and keep an open mind when viewing property. Occasionally you may find a perfect property for you that is outside your preconceived ideas.