It’s not too late to be considering New Year’s resolutions for 2022. Maybe you’re looking to give up junk food, or instill a new workout regime? But if you’re looking toward home ownership this year, check out these four things to consider when prepping to buy your first home.
Have you saved a big enough deposit?
Generating a deposit is one of the biggest barriers to home ownership, especially given the significant rise in house prices last year. How much you’ll need depends on the value of the house. Some deposits can be as low as 5%, but typically are closer on average to the 10% mark. The average first time property purchase of 2021 (in England) was £239,659, meaning the 10% deposit amount is £23,966 and the 5% comes in at around £11,983.* You could be closer to your deposit than you think especially if you find a property below the average value.
How much might you be able to borrow?
How much you can borrow is determined by your income combined with your outgoings and financial obligations. Generally, banks will allow you to borrow 4.5 times your income, so your affordability is obviously significantly more if you are buying with another person compared to taking it on alone. Lending criteria varies by lender, so it’s best to seek financial advice from a broker who can carry out research into the product best fitted to your needs.
Rates on the rise; should you worry?
While rates are definitely rising, given that the Bank of England have recently lifted their base rate and inflation is on the rise, the overall rates are still lower than they have been across the last decade. Again, we recommend speaking to a broker for advice, as they can search across the whole of the market’s rates to find what suits your needs closest.
Budget for the additional costs of borrowing.
Buying a home doesn’t consist of just meeting the needs of your mortgage by raising a deposit, you’ll also need to ensure you have funds to cover legal costs, house surveys and moving costs. Research by Reallymoving predicted that first-time buyers spend an average of £2,082 in additional costs, consisting of £1,260 in legal fees, £450 on house surveys and £372 on removals.*
Think carefully before securing other debts against your home. Your home or property may be repossessed if you do not keep up repayments on your mortgage.
* https://www.which.co.uk/news/2021/12/buying-your-first-home-in-2022-five-things-to-consider/ – Which?