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Getting on the Property Ladder

Monday, June 22, 2020

Was your mission to get on the property ladder disrupted by the impact of coronavirus lockdown? Kickstarting your house hunting and waving goodbye to renting likely seemed impossible with the market on pause. Now that the English market is back open, it’s time to rethink how best to get on the property ladder.

Here are some helpful tips from Zoopla to help you get there: 

  • Pay down debt

Once you have money coming in, the first priority in order to get on the property ladder is to pay down any debt.  One of the factors that mortgage lenders consider in their affordability assessments is how much you spend every month on unsecured debt repayments such as loans and credit cards. It helps them assess the kind of mortgage payment you can afford.

  • Get into the saving habit

The average first-time buyer puts down a 15% deposit, according to our data. And with average first-time buyer properties costing around £220,000, that equates to a hefty £33,000. Raising that kind of money may sound daunting, but the sooner you start saving, the sooner you'd start to build your deposit fund.

Watching the pennies could also increase your chances of getting onto the property ladder. This is because lenders take into account your spending patterns when assessing affordability.

In other words, if you're buying takeaway coffees every day or blowing money on three nights out a week, it could count as regular expenditure and have a negative impact on the amount you are allowed to borrow.

  • Start loving your credit score

A credit score, which is found in your credit report, details any outstanding credit agreements you have, including credit cards, loans and mobile phone plans and looks at whether you make repayments on time and in full.

Banks and building societies use these reports to determine whether or not they want to lend to you. The two main credit reference agencies are Experian and Equifax.

You can access your credit score and in some cases your entire credit report free of charge. It is worth doing this to see what your credit report looks like and ensure there are no factual errors, which you can correct.

You can improve your score by making sure you do not miss any repayments and repaying more than the minimum each month on outstanding credit card balances.

It is also important to be registered to vote (even if it's at your parents' address) as it is harder to obtain credit if you are not listed on the electoral roll.

If you are renting from a private landlord, you can now opt to have timely and reliable payments recorded in your credit score at Experian, too.

While it may seem counterintuitive, your credit score may be lower if you have never borrowed any money, as it marks an absence of proof that you are a reliable borrower.

If this is the case, it is worth considering taking out a credit card and using it to pay for some of your regular outgoings, such as groceries, to build up a track record with credit.

If you opt to do this, be sure to clear the balance in full each month. Remember, student loans are not factored into your credit report.

  • Research, research, research

If you are keen to get on to the property ladder it's worth spending time doing some research on your housing options and the best place to buy for your budget.

If your job is universal in its location, such as a teacher or doctor, you may want to base yourself in a popular destination where property is cheaper.

You can use Zoopla’s house price tool to explore property costs in different areas and take a look at our interactive first-time buyer affordability map.

Knowing how much your first property is likely to cost will also help you to set a savings goal for your deposit.

  • Consider government 'leg-up' schemes

The government has introduced a raft of schemes to help people get onto the property ladder which are worth looking into.

Its flagship initiative is Help to Buy, which allows you to buy a new-build home with a deposit of just 5%, with the government offering a five-year interest-free loan for a further 20%.

This means you only need qualify for a standard mortgage of 75% of the property value, although the government will keep a 20% equity share of your home.

The loan is higher for buyers in London at up to 40% of the property’s value.

Other initiatives include shared ownership which means you can just buy a share of a home (between 25% and 75%) from a local housing association and pay rent on the proportion you don't own.

But it might not be necessary to use a government scheme at all. If you can show the right income, you can buy a home on the open market with a deposit as little as 5%. Bear in mind that interest rates on 95% mortgage deals are the most expensive on the market.

As a first-time buyer in England and Northern Ireland, you will escape paying stamp duty on the first £300,000 of a home’s purchase price so long as that's under £500,000.

Rules differ for the rest of the UK.

  • See if your parents can help

If your parents are around and are willing and able, they may be able to offer you a loan – and with any luck, repayments to the Bank of Mum & Dad will be more favourable than to a normal lender.

Even if your parents are not able to lend you a lump sum for a deposit, there are other ways they may be able to assist.

A number of lenders, for example, will accept parents as guarantors on your mortgage. As guarantors, they become liable for the repayment of the loan, which means the bank or building society will lend you more than you would have got otherwise.

Other schemes work by setting your parents' savings against your borrowing, reducing the amount of interest you pay overall, or reducing the amount you need to borrow in the first place.

  • Be creative

A bit of creative thinking can help speed up the rate at which you are able to save money. For example, some people opt to be property guardians while they are saving for their first home as a means of spending less on rent.

Being a property guardian involves living in an empty building, such as a disused school, and keeping an eye on it for the owners. And, in return, six out of 10 property guardians pay less than £500 a month in rent.

Others tap into the 'gig economy' to secure a second income stream, so think about any hobbies you have that could help you make money.

  • Start small

No small is too small when it comes to getting on the property ladder. In fact, it's very likely your first home will not be your dream property.

Starting small – even just a one bedroom apartment – will mean getting a foothold on the property ladder quicker. This will enable you to start building up some equity, which will help you to trade up at a later stage.

Very few people regret buying a home and everyone has to start somewhere.

  • Remain realistic

Finally, when trying to get on to the property ladder, it is important to be realistic. The average age of a first-time buyer is 33, according to the most recent English Housing Survey.

So if you manage to buy your first home before that age, you're doing exceptionally well.

Article taken in part from - to read the article in full why not visit their website where you will also find for handy guides and additional information or enrol on one of their web-chats to get up to the minute news about the property industry.

Important Information
All property sales and the financial advice that surrounds them are as unique as the people engaging in the transaction. It is important to not make a decision without seeking professional advice. If you want to sell your home and are considering redecorating before marketing, speak to one of our Property Professionals to get the best advice for presenting your home for sale before making any investment. This article is for the purpose of information only and should not be seen as financial advice.

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