How to buy a home
The prospect of buying your first home can be as daunting as it is exciting, but with some good advice and careful planning you can take away the stress and uncertainty and just look forward to getting the keys. Nigel Pascoe, Director of Lending at Skipton International, shares his advice.
It makes sense to buy your own property, high rents and the historic price inflation of property, means owning the roof over your head is an investment for your future. It also makes a big difference knowing that your home is truly your own.
The key to getting on the property ladder, however, is affordability. Both islands have average property prices which can seem beyond reach - and the Channel Islands aren't alone in this. In the UK around 48% of rental households are aged 25 to 34; renting for the younger generation has become the norm as house prices rise beyond wages.
Often it's getting the deposit which is a struggle, especially if you are spending a good chunk of your wages on rent. If you do manage to get the deposit then the current record low interest rates provide for an attractive mortgage, but what you must remember is future affordability. Interest rates are going to have to go up and although this may not be until 2016 at the earliest, and the likelihood is it will be small incremental rises, you must still factor that in so that you can comfortably afford the monthly repayments. It may be tempting to push yourself financially, but the last thing you want is to not enjoy your home because you're struggling to make the payments each month.
If you have been living with parents or in a shared house, you also need to make sure you're aware of utility costs. Electricity, water and possibly gas or oil bills all need to be paid and you might also want a land line and/or broadband. Look into the costs of these and add to your budget.
Cost of buying
Another thing to take into consideration is the cost of completing your purchase.
- Conveyancing fees: These are the legal costs to complete the contract. It's worth shopping around as fees will vary, but ensure you feel comfortable with your legal advisor as this is a major life transaction and you don't want corners cut.
- Stamp Duty: As a first time buyer there are concessions, but generally you will pay a scaled percentage of the purchase and loan value.
- Surveys: The mortgage company will conduct a valuation survey, but it is often advisable to get a Home Buyers Report on your property to ensure there are no defects. Sometimes this is useful in negotiating the price as if remedial works are needed the vendors could be persuaded to give you a discount to cover the costs. Seek out a reputable local building surveyor who can provide you with a full report on your property.
Loan to value is important, this is how much you can borrow against the purchase price of the property and obviously determines how much of a deposit you will need to put down. Standard loans to value vary from 65% to 90%, and there are a very few select products which will allow 100% loan and no deposit.
Type of Mortgage product
There are several different types of mortgage product available each with different criteria.
Fixed rate: As it says, this type of mortgage fixes the interest rates for a specified period of time. The plus sides are that you will know exactly how much your mortgage repayment is going to be during the fixed period, regardless of whether interest rates rise. You need to look at the individual product information, but duration of the fixes will vary, as too will any upfront fees and they might carry an early repayment charge.
Discounted: Again fairly self explanatory in that these are a discount of the variable interest rate. These will be for a set period and provide you with a cheaper mortgage relative to the standard rate. Some mortgage providers might have an early repayment charge and a product fee up front.
Variable: What it says on the tin, the standard mortgage that will go up or down depending on what interest rates are doing. This is the mortgage you will be transferred on to once any promotional products, such as discounts or fixes, are over.
Individual products: Skipton International offers a 'Next Generation mortgage'. This is a 100% loan to value product which is aimed at first time buyers or those looking to upgrade their home. It is open to those who are able to achieve a guarantee from a family member.
As soon as you purchase your property you will need buildings insurance, this will be a requirement for your mortgage, plus contents insurance is also advisable. You can often buy these together and it's well worth shopping around as there are good deals available, especially for new customers.
Life insurance is another consideration, especially if you have any dependents. You can purchase insurance so that should something happen to you the mortgage will be paid off.
So you've worked out how much you can afford, found your dream home and decided on what mortgage you would like, the next step is to apply for the loan.