Buying property in London can be a daunting prospect. According to many mainstream media outlets, the property market in our capital is a nightmarish landscape of empty townhouses owned by Russian oligarchs, malicious estate agents who act like James Bond villains, and desperate young buyers resorting to the likes of canal boats and garden sheds. But luckily for you, this is simply not the case.
While house prices are undeniably high, and first-time buyers are faced with many new challenges, putting down roots in the old smoke doesn’t have to be a difficult process. If you’re looking to purchase your first proper home in London, here are some quick and easy tips to help you get on the fabled property ladder.
Start saving effectively
With some basic financial planning, you’ll begin to see that perfect London home turn from a pipe dream into a very imminent reality. Create a monthly direct debit that takes some of your pay check from your current account and plugs it straight into your savings account – you won’t even notice the difference when it comes to your day-to-day spending. If you don’t have a savings account already, perhaps you could consider setting up a Help to Buy ISA, which ensures an extra £50 in your account for every £200 you save.
Ultimately, you’ll have a higher chance of having your mortgage application accepted if you can afford a bigger deposit. Yes, saving can be difficult when you consider those living costs and monthly bill payments (and that amazing takeaway down the road), but buying a house requires a lot of planning and prioritising. Which brings us to our next point…
Create a detailed budget
While you save up, make a list of all the possible expenses you expect to incur throughout the buying process and those first few months of moving in. Make sure you cover all the bases: from mortgage and insurance payments, to utility bills and furniture costs. This way, you will have an accurate idea of how (and how not) to spend your money in the months before you move, as well as a sense of comfort from knowing what to expect in terms of monthly payments.
You may even want to consult a trained financial advisor to help you organise your savings and project the costs of your new purchase. If you’re feeling a bit in the dark and don’t know where to start, please, fear not: we’ve just written an in-depth blog post on budgeting for a new house!
Use government schemes to your advantage
The government’s Help to Buy programme, though not limited to first-time buyers, certainly makes things a lot easier for those looking to make that first crucial step on the property ladder. Indeed, with London house prices being as high as they are, the government provides larger equity loans of 20% to 40% for buyers in the capital. This will greatly reduce the cost of your mortgage, making those monthly repayments a little bit easier. Plus, since these loans aren’t charged within the first five years of purchasing the property, your initial living experience is guaranteed to be a lot less stressful.
In addition, any prospective buyers in London with a household income of less than £90,000 are eligible to buy a home through the shared ownership scheme. With shared ownership, you purchase a share of your home and pay a reduced rent on those shares you do not yet own. These shares are bought back gradually in chunks until the home is (finally!) completely yours.
Research plenty of mortgages
There is just so much to consider when shopping for mortgage deals – interest rates, borrowing periods, fees, exit penalties – that it can be difficult to know where to start. We all know that the mortgage market is a jungle, but it only takes a bit of homework to clear the fog.
Without knowing the ins-and-outs of mortgages, a deal that seems too good to be true could end up being a nightmare in years to come. So narrow things down by deciding what general type of mortgage you should be seeking out, including:
- Standard variable rate (SVR) mortgages – payments change alongside interest rates
- Fixed rate mortgages – payments don’t change alongside interest rates
- Discount mortgages – lender takes a certain amount off the SVR for smaller payments
- Tracker mortgages – payments change according to the Bank of England’s base rate
- Capped rate mortgages – the SVR cannot rise above a certain level
- First-time buyer mortgages – loans are easier and cheaper to pay for the first few years
… to name a few! Once you combine your preferred kind of mortgage with your price range and deposit, the research process should become a lot simpler. Most online mortgage calculators will help you find deals that are suited to your specific needs. As stated above, you might want to consider applying for a first-time buyer mortgage through the government’s help-to-buy programme; you have an option catered specifically to you, so why not take it up?
Think about the future
Buying a house for the first time can be a busy and stressful process, riddled with financial concerns about SVRs and LTVs. Amidst all this, it’s necessary to take a step back and pay mind to just how important the process is in the long-term. After all, these are decisions that will impact your life for years and years to come, and you don’t want to set yourself up for loss or disappointment in the future.
And it’s not just about the money! You’ll be looking at properties not merely with a view to affording them, but with a view to living in them and making them your own. Despite the hair-pulling nature of shopping for mortgages, you can still take pleasure in the fun decisions. Where in London will you be living? What type of property are you looking for? How will you design the interiors? Is there room for exciting renovations? You will relish that moment when you fall in love with a potential property – trust us, we’re estate agents, we see it all the time!
Speaking of which… if you’re looking to purchase a house in South West London, feel free to take a look at the beautiful properties we have for sale here at James Anderson.