Buying a home is a dream for many, and for most it can be a reality. But getting a foot on the property ladder can be a difficult task. For a number of Brits, living the dream can take years of saving, pushing the average first time buyer into his or her 30s.
The housing market has taken a hit over the last few years, making it even harder for potential buyers to take their first steps towards property ownership.
Mortgage lenders have become increasingly cautious with their cash, demanding high deposits which many simply cannot raise because rents have hit a record high and saving has become near impossible, due to the cost of living rapidly increasing since the global financial meltdown. Not only that, but the base rate has remained at an all time low of 0.5%, meaning savers are losing out in real terms as interest rates offer very little returns. On top of this, house prices have increased and the typical UK home is now worth £162,638.
If you’re looking to get onto the property ladder here are a few top tips on what you need to know.
House prices vary depending on the region you want to live in. There is a significant North-South divide with prices being more expensive in the South. Prices fluctuate depending on regions, counties and even areas within a town.
When looking for a house you will largely consider the location. For example, the number of loans advanced to first-time buyers in Wales reached its largest annual figure in five years recently. First-time borrowers in Wales also continued to put down a smaller deposit than the rest of the UK (85% loan to value ratio); while lower house prices, on average, meant that more first-time buyers were exempt from paying stamp duty than in the UK.
In the fourth quarter of 2012, 64% of first-time buyers in Wales bought a property for less than £125,000, compared to 39% in the rest of the UK. The average house price increased by 0.2% in February, but was unchanged compared with February 2012, according to the latest Nationwide House Price Index.
Robert Gardner, Nationwide’s Chief Economist, said:
“For the second month in a row UK house prices remained flat in annual terms, maintaining the trend of broad stability that has been evident over the past two years.”
While activity in the housing market remains subdued by historic standards, there have been tentative signs of a pickup in recent months. The Funding for Lending Scheme has achieved some success in bringing down mortgage rates, with encouraging signs of an improvement in credit availability
“While the economic backdrop remains challenging, there are reasons for cautious optimism that activity will gather momentum in the months ahead. In particular, employment is rising at the fastest pace since the late 1990s which, if maintained, should help support demand for homes.”
However, progress is likely to be gradual, as stubbornly high inflation will continue to exert pressure on household budgets. Moreover, buyer confidence is likely to remain fragile until there are signs that the wider economic recovery is firmly entrenched.”
There are a huge number of mortgages to choose from and it is important that you know what type you want. For example, do you want an interest only mortgage which allows you to pay off just the interest rather than the mortgage itself? This could be ideal at the moment as interest rates remain at a record low; or perhaps you want a repayment mortgage where you pay a little each month of the underlying debt as well as interest on the loan. This means that at end of the term, which is typically around 25 years, the mortgage is completely cleared. Then you also have the option of an endowment mortgage. This means you use an endowment policy to provide life insurance and save funds to repay the loan at the end of the term.
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Building insurance is often one of the conditions of getting a mortgage; however, it is highly recommended that homeowners get contents insurance as well.
It’s always good to shop around and find the best deal for you – whether you need building insurance and contents together or just building insurance is dependent on the circumstances.
People often use the terms home insurance or household insurance to generally refer to insurance that covers any aspect of their home and belongings. However, these policies are usually split into separate sections – buildings and contents. Not all policyholders will be covered under both sections.
While many homeowners buy both types of cover, some have only one type. There may be a very good reason for this. For example, people who live in blocks of flats will only need to buy a policy to cover their contents. This is because the landlord will be responsible for arranging buildings insurance to cover the entire block.Remember too, even if you have both contents and buildings insurance, your cover may vary. For example, an accidental damage claim might succeed under one section but not under the other.
Buildings insurance generally covers the structure of the building, plus permanent fixtures and fittings (baths, fitted kitchens and the like). So if it can be removed and taken to another home its invariably contents and it will not generally be covered by your buildings policy.
Buildings policies by contrast usually include immovable parts of your home such as outbuildings such as garages, garden sheds etc. whilst contents insurance covers your possessions – your TV, furniture, clothes etc. In other words, just about everything you would take with you if you moved.