Moving home can be incredibly stressful; in fact, it’s considered one of the biggest stresses that we face throughout our lives. However, it can be worsened by a constant worry about finances. Whether you’re a first time buyer or moving into your fifth property, here are some top tips to help you move onto the next step.
Getting onto the property ladder
If you’re still living in a rented property, you’re probably fed up of hearing people tell you that it’s dead money. While this might be true, when you’re struggling to find your way onto the first rung of the property ladder, it can feel like you’ve got no other choice.
Making that first step can be incredibly difficult, with lenders demanding 20-30% deposits before they’ll agree to mortgages, even for those with squeaky clean credit records. However, it’s important to keep your mind on the task at hand and start looking for other ways to turn your pipe dream into a reality.
Saving for a deposit
It’s also worth thinking about any existing debts. The interest you’re paying out on those could strip out any interest earned on your savings. In general, it’s better to clear debts before saving. Alternatively, you can prevent your debts from increasing by transferring the balance to a 0% deal.
Since the credit crunch, lenders have been pretty strict with who they’ll give mortgages to, so if you’re hoping to land that dream home, make sure you’ve got a sizeable deposit to put down. In order to ensure that your savings are working for you, it’s important to make the most of tax-free allowances and get the best possible interest rate.
However, the main problem with shared ownership is that you won’t own the whole house, although you may get the chance to buy out the other party in the future. You’ll also need to look into whether you’re eligible.
When renting a property, you might be asked to provide a guarantor if your credit score is poor or you’re on a low income. There is a similar option when taking out a mortgage – the lender may ask a guarantor to guarantee the mortgage payments. Therefore, in the event that you fail to pay, your guarantor will.
Moving up the ladder
There’s often a presumption first time buyers face the most difficult step, but research by Lloyds TSB has found that ‘second steppers’ are also struggling to progress up the ladder. The report claims that one in five people already living in their first home don’t have the equity to sell up and move on. Given that the average second home is 32% more expensive than the first, this should come as no real surprise.
So, what are your options?
Keep saving. There’s a lot of emphasis on first time buyers and the huge deposits they need to save for. Unfortunately, that’s not where saving ends. Most people looking for their second homes don’t have enough equity to buy a more expensive property, so you’ll need to dip back into your savings to fund the next step.
Home improvements. What if you could add value to your home? This way you would get more money for your house than you paid, increasing the equity and giving you the funds you need to move onto the next rung. A survey by HSBC found that on average, a loft conversion adds over £16,000 and a new kitchen almost £5,000 to the property value. If you only spend £11,000 on the renovations, that’s £10k in your back pocket.
Even if you don’t want to invest thousands of pounds into the property you’re about to sell, there are some slight adjustments that can make the world of difference. The smell of freshly baked bread is just about the oldest trick in the book, but you can ensure that your home looks as welcoming as possible. Ensure the garden is tidy and all your belongings are neatly stored away.
Low deposit mortgage. While the days of 100% mortgages are firmly in the history books, it seems that slight recovery in the economy means that some providers are willing to offer mortgages with a low deposit.
While this might help get your foot onto the ladder, it’s important to consider how much the borrowing will cost and whether you’ll be faced with a higher interest rate. In some cases it’s often better to wait and save up.