9 Top Tips for First Time Buyers

Buying your first property is an exciting time but can also be a daunting experience. We’ve put together nine helpful tips to demystify the process for first time buyers and help you along the road to a smooth and stress-free purchase.

First and most importantly, avoid setting yourself up for disappointment, get your sums straight. As well as raising a deposit, you will also need enough money to cover legal fees and expenses, surveys and moving costs. It may seem obvious, but you also need to ensure that you can afford your future mortgage payments as failure to do so can lead to repossession of the property. So, make sure you do your sums and nail down that budget before you do anything else!

To obtain a mortgage you will typically need to put down a deposit of between 5% and 10% of the property value. These are subject to the usual lending criteria, affordability and credit rating checks, and will generally be more expensive the higher the percentage you borrow, as they are considered higher risk for the lender.

You may be eligible for one of the many shared ownership schemes available across the country, usually operated by Housing Associations. As the name suggests, here you aren’t buying the whole property outright but a share of it. You will typically buy between 25% and 75% of the property and pay rent on the rest to the Housing Association who buy the remainder. Later on, if you can afford it, you have a right to increase your share of the property (known as “staircasing”) by buying it from the Housing Association at the current market value.

Before applying for a mortgage, make sure you review your detailed credit report. You can normally obtain this from an online instant credit report agency such as Equifax, free of charge during a free initial trial period.  You should check that nothing is adversely affecting your credit rating. The report usually provides tips on how to boost your credit score which will increase your chance of obtaining the mortgage you want. We recommend that you shop around when considering which lender to use for your first mortgage as interest rates, terms and conditions can vary.

Once you have found a property that you’d like to make an offer on, check on Rightmove or Zoopla or one of the other comparison websites how the asking price compares against that of other homes that have recently sold in the area. With this helpful information, first time buyers are better able to decide on the right level of offer to make to avoid overpaying for the property. If there is an estate agent involved, they may give you advice on what to offer, but always remember that they are acting for the seller, not for you. They are usually paid a percentage of the sale price, so the more they get you to pay, the higher their commission!

Stamp Duty Land Tax (usually referred to as “Stamp Duty”) is a tax payable by the buyers, based on the purchase price of the property. Fortunately, first time buyers are able to benefit from reliefs introduced back in 2017. If you are a first-time buyer purchasing a residential property below £425,000 you are eligible for first time buyers’ relief, meaning that you do not have to pay any Stamp Duty at all – result!

Be careful though – a first time buyer means a first-time property owner in most cases, meaning those who have previously inherited property or own a share in other property may not be eligible. You must also intend to occupy the purchase property as your main residence, so a first-time purchase of a property with a buy-to-let mortgage does not mean you are entitled to claim first time buyer Stamp Duty relief. Your conveyancer will be able to check your eligibility based on your individual circumstances.

The ‘Bank of Mum and Dad’ is a saving grace for many first-time buyers needing help to raise a deposit and can be a lot cheaper than a traditional loan. There will usually be no problem with your parents contributing money to help you get your foot on the property ladder. However, your main lender will require that they sign a ‘gifted deposit letter’ confirming that the money is a gift, that they will have no legal or other interest in the property and that the money is not repayable.

As you begin your search for your first home, it is important you know the difference between a freehold and a leasehold property. Freehold means that you own the property and the land it sits on outright. Flats will almost always be leasehold with someone else owning the freehold to the building, although sometimes you may buy a share in the freehold at the same time.

When buying a leasehold property, it is important to know how long the lease term is, what the service charge and ground rent liabilities are, how these charges can increase in future years and what restrictions there may be on your use of the property. For example, some leasehold properties do not permit pets and there will also be other restrictions such as only using the property as a residential dwelling. There will likely be requirements to obtain permission from the Landlord (known as the freeholder) for alterations and sometimes for subletting the property.

Buying your first home is a big step and finding the right Conveyancer is a really important part of the process. Their experience and expertise will help you through the transaction giving you the reassurance that you are in safe hands.

We have created a guide that takes you through important considerations and information you need to find the right team. Click the link below to read our article:

How to Find Your Expert: Part 2 – Conveyancer

At Backhouse Solicitors we have an extremely knowledgeable property team who can help you every step of the way to buying your first home.

We offer a No Move – No Legal Fee service and have a free conveyancing quote calculator to avoid any hidden financial surprises. If you would like more information about the moving process, take a look at our useful Moving Home Guide.

To speak to one of our friendly team, contact us today.

Tel:          01245 893400
Email:     info@backhouse-solicitors.co.uk
Visit:       17 Duke Street, Chelmsford, CM1 1JU
Or send us a message through the Contact Us page on this website.