Four Tips for First-Time Buyers

UK Housing Market

First-time home ownership may be an exciting experience, but it can also be a time-consuming and stressful one. This brief article may assist you to understand the main factors of purchasing a property and help you determine whether now is the appropriate moment to make the leap. We’ve compiled a list of five tips for first-time homebuyers should keep in mind before making a purchase in 2022.

Make sure you have saved an adequate deposit

Rising property prices in 2021 haven’t helped first-time buyers in their quest to save an adequate deposit for a mortgage. First time buyers can now again access mortgages with a down payment of just five percent, which had almost disappeared during the early phases of the COVID-19 pandemic.

The amount of money you’ll need to put down on a home depends on the price of the property you’re interested in. For a 5% or 10% deposit on an average-priced first-time buyer house in England, Scotland, and Wales, here is what you will be looking at:

England – Average first-time buyer price is £239,659 and with:

5% deposit is £11,983
10 % deposit is £23,966

Scotland – Average first-time buyer price is £144,492 and with:

5% deposit is £7,225
10 % deposit is £14,449

Wales – Average first-time buyer price is £168,657 and with:

5% deposit is £8,433
10 % deposit is £16,866

The amount you may be able to borrow

Banks will take a close look at your financial situation in order to determine whether or not you are eligible for a mortgage. As a general rule, banks will lend you up to 4.5 times your yearly family income (the sum of your own income and the income of anybody else with whom you are purchasing).

However, some banks may only provide you with four times your annual salary, while others may offer five times or more if you satisfy additional requirements. In the near future, however, the Bank of England (BoE) plans to consult on changes to several of the affordability criteria lenders employ.

Depending on your financial situation, you may want to consult with a broker to see which institutions might be able to provide you with the best possible deal. For those who work for themselves, this might be very beneficial because you may need to offer additional proof to support your application.

Combined family/household income of £40,000:

4x income: £160,000
5x income: £180,000
5X income: £200,000

Combined family/household income of £60,000:

4x income: £240,000
5x income: £270,000
5X income: £300,00

Combined family/household income of £80,000:

4x income: £320,000
5x income: £360,000
5X income: £400,000

Be prepared for the additional costs of buying a home

A house isn’t merely a financial transaction involving the purchase price of a property. Additional relocation expenses, such as taxes, legal fees, and the cost of packing and moving, must be taken into account so you can make sure you have saved enough to cover the costs and avoid having to borrow.

Most first-time homebuyers don’t have to pay stamp duty, which is one of the major additional costs of relocating. This saving is a big advantage that first-time buyers enjoy.

There is no tax if you purchase a property in England or Northern Ireland for up to £300,000 (and if it is between £301,000 and £500,000, you will get a reduction). For Scottish residents, the tax-free purchase limit is £175,000, and for Wales it is £180,000.

As a rough guide, relocation charges, legal fees, and property surveys will come to about £2,082 on average for first-time homebuyers.

Research house prices in your area

First-time purchasers were hit hard by the stamp duty break, which led to a surge in property prices in 2021.

While certain places saw a 10 percent gain in 2021, Savills and Zoopla both expect a 3-3.5 percent increase by the end 2022.

To get a sense of what’s going on in your neighbourhood, it’s a good idea to conduct some research on property websites and in local real estate offices. There are also property portals you can use that are often the first port of call for many first-time buyers.

Using the Land Registry’s interactive home price index and price paid tool, you may look for recent property transactions in specific neighbourhoods and municipalities.

A lot may happen in the real estate market, but analysts believe it will be strong in 2022, with prices growing modestly and a wide range of borrowing alternatives available for first time buyers.