When I moved to the UK and rented my first room, I wasn’t in slightest thinking of a way to become a homeowner or get to a property ladder. Because How? I was working as a waitress with a weekly salary that was perfectly covering my rent and basic food. If I got extra tips, this went to clothes and basic needs(read. parties!) Yes, I was a free spirit, a late teenager and not an adult yet. It didn’t even cross my mind, that perhaps I should be saving for my future. I was living the day by day. I met my boyfriend and we moved together. I focused on my education, blowing every single penny on a transport, books and other educational needs. Once I have finished my University, we moved to Manchester where we rent an apartment close to city centre. Living year after a year, the idea of a own home start growing in my head. Then I became the adulter adult; as fellow blogger used to say. Having a huge debt from University, it wasn’t very helpful with the idea of saving. My rescue was IKEA Live Lagom to pay off my debt, but more about this on my next post. Once, I actually managed to pay the debt off, I am now on the urge to save up for the deposit. I started researching and looking for ideas how to achieve this goal. (featured Image Image Source)
Nearly every person I know who rent their home, want to become a homeowner. So today, I want to show you where to start and what should you consider when thinking of becoming a homeowner. Please note, I am not a financial advisor, neither I am a layer. This is just purely my research and in order to get things right, you will have to dig and get a right bank advice for your mortgage and actually seek to advise with an actual finance adviser. Here, is just his basics.
Rent to buy.
We came across this options when we were looking to rent an apartment and of the apartment was listed as Rent to Buy. Basically, this is a government scheme that allows you to rent an apartment cheaper and usually around 20% below the market price. You have around 5 years to save up (and use that 20%) to put on the side so by the end of year tenancy, you can buy the full property or via Shared Ownership Scheme( all explained below). The lengths of a rent or lower price is usually stated in your contract. If you won’t manage to save up, you will be asked to move out or pay the full rent price but usually, they will ask you to vacate the property. You will be eligible if your household (your & you partner together) does not exceed £60 000 a year and you are a first-time buyer.
Plus side: You can rent and live in a really nice new built house and treat like your own before buy it, so you know you are the only and only owner 🙂 This is a bit of-try before you buy!
Downside. The prices of the actual house may increase as you live there, so even you save up to what was required you may be not eligible to buy in the end as you won’t have enough. Don’t forget the costs of legal fees, banks etc. Also, most of the Rent to Buy will only allow you to buy via shared ownership which means you can’t really do many changes like decorating etc. Also, bad news for pet owners, as most new build even if you buy the whole property is under building management who may have (and usually have) no pet policy, so even if you are a legal owner of the property you still can’t keep a pet. This was the reason why we opted out. No cats- no home. In Manchester, you rent from Plumlife and chech as well Manchester Move for other options.
When you want to buy a house, you normally will be required to buy 100% of your house, with a shared ownership you can just buy between 25% to 75% of the property. This means your deposit may be smaller as well but this depends on of the scheme. Most housing association would still require 10% deposit. Shared ownership is very linked to a Rent to Buy scheme as this would mostly likely be your option after your Rent to Buy property 5-years contract will end. This is a typical ‘staircasing’ when you have the option to buy shares along until you fully own 100% of the property. As per Rent to Buy you will still be required to pay rent for the remaining shares, so if you own 25% of the property, you pay for 75% in rent plus service charge per year. For an obvious reason the more you own, the less you pay the rent. Just be careful, as the if property value increase, so will the price of your share but the same- if the price decreases your share will be cheaper.
Plus side: The mortgage of your share will be smaller than what would you normally have to pay when you buy a 100% of the property. You will still need to pay all legal fees, stamp duty mortgage etc. so, you still need more than just a deposit.
Downside: It’s a leasehold and often buy topamax uk very similar to a typically rented flat where you are very restricted on any improvements and same as with Rent To Buy, often when you buy newly built property especially in the city centre, you can’t keep animals. Your annual service charge may increase as well and the house share price is not stable either. You can read further at help to buy page.
Starter Home Scheme.
Launched in December 2014 is a new Government scheme allowing first-time buyers to purchase their home 20% cheaper of the current market. The prime minister then announced that builders will not have to pay the planning fees, but in an exchange will offer first-time buyer a minimum of 20% of the property price. The scheme is available for the first-time buyers of an age below 40. Developers building the houses the specially designed for this scheme, so you will get a new home.
Help to buy.
This scheme is designed for those who haven’t managed to or are not able to save the whole 10% of their deposit. With help to buy you can contribute as minimum as 5% of the property value. The property value can’t go over £600 000 and you can’t rent out this property. This is a purely designed scheme for those who wish to live in their property for a lifetime. The government can help you in a two ways with this scheme.
Equity Loans Available from both government and developer, this loan help first-time buyers with their deposit. Once you have saved up your 5% , you will be given 20% interest-free loan for the first 5 years from the government, so this means that you will only have to repay 75% of your loan at that time. Of course, after 5 years you will start paying an annual fee of 1.75% on that, so consider this option carefully.
Mortgage guarantee with this scheme all you need is as little as 5% and your lender ( listed at gov ) will lend you up 95% of your mortgage. There are few requirements, to be accepted and very similar to the both above but also to be accepted you have to be less than 4.5 times your income. This scheme only runs until December 2016 so hurry! I personally consider the option for myself!
Help to buy ISA
You start saving while you rent but you need to contribute to the first payment of up to £1200 then if you able to save up £200 a month, then the government would contribute up to £6000 to your deposit and minimum of £400. You can only use this toward your deposit and not toward the legal fees or any other contracts.
If you not sure what is best for your, try this scheme finder, it will tell you which schemes are may be eligible based on your answers,
One off loan.
Buying a home can be a huge expense in itself, a deposit is one thing but then repaying your mortgage is another and even then once you buy your home you will also need to furnish and decorate it! If you chose a new build then the cost will be a significantly less, so you will have more budget to go around. However, if your budget is really tight, you can still find most items from charity shops, second hand/ free cycle companies and by getting creative doing some DIY. (Like me ;))
Of course, it is one thing buying into your new home and another moving into it, and it can really knock your finances in both cases. Therefore, should anything go wrong – such as your washing machine breaking down, especially if it’s before a payday, it can be a nightmare! For some there are friends and family, for others, well, it can be a really hard times! Many people often turn to credit cards, over drafts and long term loans. This can be risky if you don’t do your research properly, so make sure to use a responsible lender and to look into the fees, APR and interest attached to any loan that you are considering.
For the time sensitive emergencies when you need the cash fast there are also short term loans, where you lend just what you need for a short period of time and then repay it back on your payday. Companies like Vivus, which is the new kid on the block within short term loan lending work, offer loans for only what you need without hidden fees, Vivus also offers your first loan at half price.
Buying a home is definitely a lifetime investment. Even if you are not yet thinking of moving out of your rented pad, it’s time to start thinking of your future house. Is good to start doing your research and think of best solutions for you. This is what I am doing now. Researching and trying to find, my next step. For example, I started my ISA savings and I think for now I would choose Help to buy mortgage guarantee scheme if I manage to save up the 5%. I will next write about the way I am saving, and how to save money while you rent. Also, try these mortgage repayment calculator to see if you are able to pay off! I have also found helpful article at Zoopla to calculate the cost of buying a house.
*Collaborative post but opinion as always my own,girl gotta eat you know 🙂