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Advice for the first-time house buyer

Buying your first home can be one of the biggest decisions you'll ever have to make. It can be exciting, yet at the same time disheartening. One minute you'll be dreaming of your perfect home, and the next you'll be hitting your head against the wall with all the delays, paperwork and other frustrations! If you're a first time buyer, you'll need all the help and incentives you can get, whether financial or practical, to buy your first home. So just how should you go about making that all important first step onto the property ladder?

First find your house

While it is more likely you will let the heart rule the head when choosing your first home, you still need to do your research to make sure you end up in a home you’re happy with. Visit the property at different times of the day and check out the neighbourhood on both weekdays and weekends.

Ensure that you are realistic when working out exactly how much you can afford to spend on your new house. Even a newly built house will require some sort of furnishings, whereas older properties may require work such as new flooring or rewiring. Make sure that you factor in all these likely expenses in addition to the purchase price. You may also be surprised at the amount of one-off initial costs you will have, including:

• A deposit
• Stamp Duty Land Tax
• Surveyors’ fees
• Lenders fees and charges
• Land Registry fees
• Furniture removals, packing and storage charges

When buying for the first time, there may be a number of details in the houses you are looking at, which you may not pick up. Always take an experienced home buyer, such as one of your parents, or a homeowning friend, when looking at property as they may be able to spot potential issues that you could overlook.

Getting help

High property prices have made it difficult for many people to afford to buy a home. However, there are a number of schemes aimed at helping first time buyers. ‘Low-cost home ownership schemes - a guide’ outlines the ones currently available and you can read this at www.direct.gov.uk.

Sharing the cost

You may want to think about buying a home with other family members, friends or a partner. Buying with others can be a solution to coming up with the deposit and sharing costs. However, it’s important to carefully think about what might happen if circumstances change and one of you wants - or needs - to sell their share of the property. You should get legal advice and draw up an agreement as to how the property will be divided in case of death or if one of you gives up their share.

Finding the right mortgage

Most mortgage lenders require a deposit of at least 10% of the value of the property you wish to buy. There are many types of mortgages available and some are targeted specifically at first time buyers. It’s not easy to compare first mortgages as personal circumstances really decide what’s best for any one individual. This is where professional advice comes in, and we would be pleased to help you find the best first mortgage for you.

Basic mortgage types

There are two main ways you can pay off your mortgage. These are called ‘repayment’ or ‘interest only’. With a repayment mortgage you make monthly repayments for an agreed period (the term) until you’ve paid back the loan and the interest. With an interest only mortgage you make monthly repayments for an agreed period but this will only cover the interest on your loan. You’ll normally also have to pay into another savings or investment plan that’ll hopefully pay off the loan at the end of the term.

Taking care of your home

Once you exchange contracts for your property you’re responsible for insuring it. Mortgage providers insist that you have building insurance so that in the event of a disaster it can be repaired or rebuilt. Home contents insurance is optional but gives protection to anything that is not a fixed part of your home, for example your valuables, electronic goods, furniture and clothing.

Taking care of yourselves

You will need life cover to pay off the mortgage loan if you die, and there are also several types of insurance which will help you meet your mortgage payments in the event of your being off work due to sickness, disability, or even periods of unemployment, subject to terms and conditions.

Again, we would be pleased to help you plan a solution which is the most suitable for you in your individual situation to ensure the safety of your home and family finances. A fee of a maximum of £300 or 0.5% of the loan amount if greater is payable on completion. Typically this will be £300.

Your home may be repossessed if you do not keep up repayments on your mortgage

This article was taken from Seneca Reid's Autumn 2009 newsletter.

Seneca Reid is a trade name of Andrew Charles Reid Smith who is an appointed representative of Openwork Limited which is authorised and regulated by the Financial Services Authority.

The information on this website is for the use of residents of the United Kingdom only. No representations are made as to whether the information is applicable or available in any other country which may have access to it.

Openwork Limited offers insurance and investment advice on products from a limited number of product providers and advice on mortgages representative of the whole market.