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Saving for a House
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So you've decided it's about time to stop paying for somebody else's house and get on the first rung of the property ladder! Good luck, it's not easy. More than half of Britain's workforce can't afford to buy their home, this underlines the fact of how hard it is for first time buyers starting out.
The average house in the UK costs £132,000 and the average wage is just £23,000. Assuming that you pay an average deposit of £24,000, this still leaves you with an astounding £108,000 mortgage to pay - 5 times the average wage! The Council for Mortgage Lenders has estimated that you're actually more likely to have to find a deposit of 18% (£28,000) for a first time buy.
High-street mortgage lender, the Halifax, has just released figures which estimate that it will take a minimum of five years to get the cash needed for your deposit - not a cheery thought perhaps but there is good news for a first time buyer. Interest rates are the lowest in over 30 years, lenders are competing strongly for your custom with ever changing products and services, and as a first time buyer you won't be part of a chain which makes you more appealing to the seller.
OK, how do we get on the property ladder with little effort? Firstly you need to know what you can afford. Finding out how much you can borrow will make your search much easier and help to weed out the homes which are too expensive. Approach several lenders and ask them to tell you how much they
would be willing to lend you, then request an 'agreement in principle' from them. That will confirm the amount they will let you borrow and it's great leverage when making an offer on a home.
Of course there are several factors which affect your lending limit. The size of your deposit is a good starting point, next would be how much you earn. As a general rule of thumb, mortgage lenders will be prepared to let you borrow up to three times your annual earnings as a single applicant, or as a couple this can be three times your annual income plus the second income, or two and a half times the joint income.
Now you're at the point of looking for a home it is advisable to collect together and read some specialist magazines such as 'What mortgage & home buyer' and 'Mortgage advisor'. Both of which are available at most newsagents and will be available to order if not on the shelves. Do your research and check what is available from lenders and high street banks.
Let us not forget the associated costs when buying a property. Stamp duty is a government tax which is paid on properties which are worth more than £120,000. A property valuation will need to be carried out by the lender who you are looking to get your mortgage with, this is to check that your prospective new home is worth what the lender is letting you borrow. This is usually priced around the £150 mark. There may also be an arrangement or final/completion fee from the mortgage lender.
Finally your legal fee's - the solicitor. Your solicitor will, among many other things, search the land registry, perform a local search of the property, and perform any contact between you and the sellers solicitor. The solicitor will charge around £400, plus search fee's and on top of that the land registry costs. Any extra contact to the sellers solicitor is also charged for, the final bill also has VAT @ 17.5% on top. You should also take into consideration insurance on your new home, moving expenses and money for furnishing your new place.
Sounds like an impossible task? There are ways to reduce your spending of course. The first is to buy the property with friends. Each with a share in the deposit, fee's and mortgage repayments. You should think about how the house is built first though as two or three people living in the same area is bad news for privacy. For sharers a traditional Victorian house would be better suited as they are well sectioned, affording you more privacy but with good access to shared rooms.
Do you work from home? If you work from home or can make use of an office at home, you can offset some of your mortgage payments as business expenses, which aren't liable for tax provided the 'rent' is under £4,250 per annum. Some lenders will also take into account this income potential when offering you a mortgage.
To conclude, while it sounds difficult and you may feel a little put off, buying a house is one of the most rewarding things you can do. You get satisfaction from knowing it's yours, and when you pay that last sum of money into your lenders account, the feeling you get can't be matched. It doesn't have to be a hardship, you may even make new friends. More importantly your home will never lose it's value if you look after it. It's an investment, an achievement and your OWN home.
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