If you’re thinking of stepping onto the property ladder any time soon, 2019 might just be the best time to do so. Low interest rates and a stamp duty amnesty for first-time buyers are keeping costs down, while uncertainty around an extended Brexit is ‘subduing’ the market - and prices.
According to mortgage lender Halifax, property prices fell by 1.6% in March, with the average cost of a home now standing at £233,181. Since 2017, first-time buyers have paid no stamp duty land tax (SDLT) on homes up to the value of £300,000, while for homes with a value of between £300,000 and £500,000, stamp duty relief keeps the tax at five percent over the £300,000 threshold.
According to banking and finance industry body UK Finance, there were 370,000 new first-time buyer mortgages completed in 2018, up 1.9% from 2017 and the highest number since 2006. So if you’re planning to join the homeowning ranks this year, here’s what you need to know!
What mortgage deposit will I need?
As a rule of thumb, you’ll need a deposit of at least five percent of the value of the mortgage. But the more you can save, the better; a larger deposit can give access to lower interest rates and cheaper deals, and it’s not uncommon for deposits to be 20% of the mortgage value.
When working out what size mortgage you can afford, don’t forget to factor in costs such as surveying and solicitors’ fees, stamp duty, if applicable, moving day costs and a budget for any work required once you move in.
Affordable schemes
You may qualify for an affordable home ownership scheme such as a Help to Buy ISA or a shared ownership scheme in partnership with a housing association. Note that the schemes differ in England, Wales, Scotland and Northern Ireland, with details available on each government’s website.
Choosing a mortgage
There are two main types of mortgage; fixed rate and variable. A fixed rate mortgage can be good because you know exactly how much you will pay each month and payments won’t go up - but, similarly, if interest rates fall, you won’t benefit.
A variable rate mortgage will see your repayments adjust according to interest rates and your monthly payments could come down, but they could also rise sharply if interest
rates go up.
There is a lot to consider when deciding which mortgage to opt for and it can seem a daunting process, so you might want to speak to a mortgage advisor or broker. You can also compare mortgage lenders online. If you’re struggling to lend the amount you want, you could consider asking a parent or a family friend to be a guarantor - but this is a legally binding agreement and not to be taken lightly.
Surveying and conveyancing
Once you’ve found the home of your dreams, it’s a wise idea to get a survey carried out on the property. If you’re buying a new build, it will usually come with a 10-year NHBC guarantee but, for older homes, you will need to commission a survey yourself.
It might seem like an unnecessary expense, but the right survey could save you thousands of pounds down the line if your new pad turns out to be, structurally, a house of horrors. Money Saving Expert has a good guide to home surveys, with approximate costs of each different type. Be aware that a mortgage lender’s valuation is not the same as a home survey, and will not protect you should things go wrong once you’ve moved in.
Exchange and completion
Before you can pick up the keys, you’ll need to exchange contracts and complete the move. The exchange makes legally binding the agreement between you and the seller, while completion is the date set for the parties to physically move and transfer ownership.
Home and protection insurance
Before you move in, it’s a good idea to line up a home insurance policy that starts on the day you get the keys, so you’re covered from the word go. Home insurance comes in the form of a buildings policy, to cover damage to the bricks and mortar of your property, and contents insurance, covering your possessions inside the home. You can often take out both in a combined policy.
There’s no legal requirement to have home insurance, but most mortgage lenders will ask that you have at least buildings cover in place as a condition of the mortgage.
Now is also the time to think about mortgage protection and life insurance. Mortgage payment protection insurance (MPPI) is a type of income protection that gives you peace of mind should you becoming too ill to work or lose your job through involuntary redundancy, while life cover gives your family the financial means to stay in the home and continue to pay the bills in the event of your death.
You might think you’ll never need MPPI and life cover, yet a recent report by our partner Zurich showed that around 17m UK adults wouldn’t be able to recover quickly from a financial shock, possibly losing their home in the meantime. At ActiveQuote.com, we work with a large panel of providers to bring you the best mortgage insurance quotes and life cover price comparisons, with policies often costing less than customers expect.
Moving checklist
After weeks of packing those boxes, the big day is nearly here! With two weeks to go, make a list of everyone you need to tell about the move, such as the bank, utilities companies and insurance firms. Signing up to Royal Mail’s redirection service can make sure important post continues to reach you at your new address.
The day before the move, label all boxes with the room they need to go in, to make things easier for the removal team (and also for you!). Pack an overnight bag for each member of the family, with essentials including toiletries and medication, as well as spare batteries, a torch, books and games for children, bed linen or sleeping bags for the first night and curtains.
You might also want to pack sandwiches and snacks to keep you going during moving day - as well as keeping the kettle and tea bags handy!