We all know its tough for first-time buyers these days. House prices have risen 160 per cent over the last ten years and earnings have risen at under a third of that pace, so many see a move on to the property ladder as little more than an elusive dream.
But at What Mortgage, we decided to canvass a range of industry insiders for some little-mentioned pearls of wisdom for first-time buyers which we could share with you.
Everything counts
Novice housebuyers often forget to save for incidental property-buying costs like legal fees, valuation fees and stamp duty in addition to a deposit. But Tony Jones, managing director of Pink Home Loans, and Paul Fincham at Halifax identify a couple of further costs also often overlooked.
Speak to anyone who has bought a house and they will say some-thing goes wrong in terms of main-tenance in the first few weeks or months of moving in, says Fincham. Be aware of this when you budget. And if the amount youve saved remains frustratingly insufficient, keep going, he encourages. Its not a race.
Many first-timers also have problems meeting the often unexpectedly large first mortgage payment. Monthly payments and moving-in dates rarely tally, so the first payment can sometimes be almost double the original repayment agreed.
With most lenders you pay interest on your loan from the date of completion to the end of that month, plus the following months mortgage payment, Jones explains. After forking out for all other buying and moving costs this could be a stretch too far particularly if you complete at the beginning of the month. So be prepared.
Choosing a mortgage
One tip from Joe Wiggins, of Nationwide Building Society, is to read the key facts illustration (KFI). This is the standard document providing information about the product and service you are being offered by your mortgage broker or lender. This document is intended to make mortgage advice and sales more transparent, but as Wiggins points out, it wont do its job if you dont read it properly.
Managing director of broker Purely Mortgages Mark Chilton offers another tip on arranging your mortgage never be bullied into sorting out your loan through an adviser located at your estate agent. He says any hints from your estate agent that you will receive preferential treatment if you take this route should be dismissed.
Beware of this practice, and if you are threatened with it, your immediate response should be that it is illegal and that you will report them to the FSA, he warns.
When calculating how much you can borrow, Andrew Frankish, managing director of broker Mortgage Talk, recommends you do realistic cost-planning, right down to how much you spend at the pub on a Friday night. Only then will you be able to tell if you can afford a mortgage and still have a life.
Choosing a property
Several of our experts say you must be prepared to move further away from your top location choices to find something affordable. But when it comes to making an offer, a recent Yorkshire Bank survey revealed that growing first- time buyer confidence has meant gazundering (when a buyer puts in a lower offer just before exchange) has increased. Jones suggests that you dont need to resort to this shady thirteenth-hour technique, but can do a good deal up front if youre fair and open from the start.
Sharing the load
Shared home ownership is another avenue to try, says Frankish. Contact your local authority, he says, as the authorities will know about new property schemes offered by housing associations before theyre even advertised. In addition, he suggests you check property developers websites too, as many are beginning to fund similar schemes themselves.
For example, with David Wilson Homes (enquiries: 0800 234 455) you can buy 80 per cent of a property. Theres no rent to pay on the other 20 per cent retained by the developer, but you have to buy this share at market value when you move on.
Helen Adams, managing director of FirstRungNow, adds that for every first-time buyer good legal advice is essential to protect their interests. For example, if you refurbish a shared-ownership property, you should get the return on this investment, so check how this is reflected in the contract
Find out how much you can borrow here
