Learn > Housing

Buying a house in the 21st century

Let’s not be mistaken, it is now more difficult than ever to get onto the property ladder. With the average UK house price being around £300k it is no wonder young people are feeling defeated when daydreaming about owning their own home.

However, is this because house prices have increased around 1,000% in price in 40 years or is it because nobody ever taught you about how to buy a house? Well, probably a mixture of both. Let’s take a look at the latter:

Why do people want to buy a house?

If you are thinking about buying a home, but you don’t really know why, you should probably give it a bit more thought. If it’s because everyone else is, or you have been told that’s the long term goal, consider whether the below are accurate:

• You want to have the security of owning your own home

• You are planning on living in that home for a while

• You want to own an asset

If you are likely to move out of that house in less than 5 years it could well be worth renting instead as the costs may of buying and selling the house could be higher than 5 years worth of rental costs!

How to buy a house

Unless you are one of the lucky few who are sitting on a pile of cash ready to buy a house with cash, chances are you will need a mortgage to purchase a house. Even if you do have the cash, a mortgage could be a better option for you, improving cash flow.

Before even thinking about applying for a mortgage it is important to understand how the process works. As well as obtaining a mortgage you will need a deposit, which is a lump sum of cash you will need to pay up front.

On most properties in the UK you will probably need a 20% deposit, meaning you will need to obtain a mortgage for the other 80%. If you are buying a new build, see below.

Of course, if you have found your perfect house and can afford to put down more than a 20% deposit you will only need to get a mortgage for the difference between the deposit and the price.

The difficult part comes with finding out how much of a mortgage you can borrow. Typically the rule of thumb is that you can borrow somewhere between 4.5 - 5.5 times your annual income. If you are applying as a couple, obviously this will be based on your joint income.

It would be extremely beneficial to contact a mortgage adviser who is independent of any banks or building societies. Usually there will be no charge for this as they get paid by whoever you take the mortgage out with. They are also impartial and can offer you the best deal out there.

A professional mortgage adviser would also be able to help you with all the additional extras that you may not have thought about; stamp duty, legal costs, surveys etc.

If you need us to put you in contact with a mortgage adviser, drop us an email - hello@thebankengine.com

Help To Buy

If you are reading this, chances are you are saving to buy your first home. We know how difficult it is. From trying to save enough for a 20% deposit on a house to filling in online calculators to find out you can buy a shed.

This is why the Government has introduced a number of schemes to help first-time buyers.

Help To Buy: ISA and LISA

As you may already know from reading our section on ISAs these are two very important accounts. First of all, the Help To Buy: ISA was a great account to open until the Government scrapped the account in 2019. This has now been replace by the Lifetime ISA. (LISA)

Anyone with a Help To Buy ISA, this can still be used for a 25% Government top up on your first home purchase until November 2029 (at a maximum bonus of £3,000).

Anyone with, or considering, a Lifetime ISA will know that this is topped up annually with a 25% bonus up to £1k a year but holds less flexibility than a HTB ISA.

If you have either of these and plan on using them towards purchasing your first property you will need to instruct your solicitor or conveyancer to follow the correct steps.

Help To Build: Equity Loan

If you are looking to build your own home, you can borrow additional funds via the Government’s Help To Build scheme that aims to help people get onto the property ladder and incentivise building of homes in the UK.

This scheme is quite complex, but is well worth looking at in case it is of interest. Here is the Government’s guidance.

Conclusion

The Government’s Help To Buy Scheme is a great way of getting young people onto the property ladder. We are big advocates of both the ISA bank accounts, and if you haven’t already I urge you to read our section on ISAs here.

Should you have any questions regarding anything mentioned above please do let us know. We can also put you in touch with mortgage advisers and solicitors if necessary.

hello@thebankengine.com