If you’ve been following this blog for a while, you may know that we’re currently on a mission to save a huge deposit to buy a home (we’re renting at the moment).
We need to save a huge deposit because of the damage our debt managment plan did to the hubby’s credit rating when we were defaulting on our debts, plus we have no desire to be mortgaged up to the hilt.
Even though we’ve been through the home buying process a couple of times now, the fact that we’re having to save up so much money for a deposit makes us feel a bit like we’re trying to buy a home for the first time! How things have changed though since we really did buy our first home together back in 2002. It was a tiny two bedroom end terraced house with a garage and tiny garden. Tiny but perfectly formed and in a pretty decent area in Nottingham where we used to live. We bought it for £84,950. Sounds cheap right?
Well, we actually bought this house when property prices were just about to peak, because just 18 months prior to us buying this house, it had sold to the previous owners for £49,450 ( we found that out later from the Zoopla website which details sold house prices). You can imagine how much we were kicking ourselves when we realised how much house prices had gone up by before we had chance to get onto the property ladder!
By the way, we funded our home back then with a 100% mortgage – of course we had no deposit (you only have to read our debt story to get a rough idea of how we managed our finances all those years ago)! It was pretty easy to get a mortgage for the full asking price and so we did just that.
The difficulties facing first time homeowners
Nowadays however, getting onto the property ladder is extremely difficult for first time homeowners. A deposit (as much as 20% in some cases) is absolutely required. What’s more, many first time buyers will now have to save up for more than a decade in order to get the money together, according to this recent news article from The Guardian. That’s a crazy length of time to have to wait whilst throwing away dead money on rent, but sadly these are the times we’re living in.
It’s not just house deposit savings that first time buyers need to worry about though. In addition, there will be solicitors fees and house survey costs to pay for. When we bought our first home, we added all these costs onto our mortgage, this was not the brightest decision we ever made but luckily the price of our home rose a little to cover such costs. Although house prices are on the rise again now, putting these kind of fees onto a mortgage is definitely not advisable!
Then there’s the dreaded stamp duty to contend with. Following the recent stamp duty reform, for properties priced under £125,000, there will be no stamp duty to pay. But for properties which are priced at £125,001, stamp duty land tax starts at 2%. Stamp duty needs to be paid within 30 days of property completion – it is possible to add this onto your mortgage but seeing as it’ll then take the entire length of a mortgage term to pay off, it’s definitely better to pay this upfront if possible.
Home insurance (buildings and contents) is another cost to consider and can be purchased through a site like Nash Warren Insurance. These insurances really should be arranged prior to moving in just in case the worst should happen and something ends up damanged during the moving process.
On top of all of the above costs, many first time homeowners will need to buy furniture for their new home. This can cost thousands unless it’s possible to obtain second hand furniture from friends and family. And once first time buyers are happily settled into their home, they’ll need to stay on top of household bills by managing their finances effectively. It’s a sobering prospect to think about falling behind with mortgage repayments.
Unlike first time homeowners who need to fork out for furniture, we’re lucky enough to have plenty of furniture now that’s all paid for, so at least we’re off to a helpful start in that respect. It’s definitely not easy for first time homeowners and I’m already worrying about how my little girl will get on when she’s in a position one day to buy a home for herself. I know that’s a long way off and I hope to be able to help her with a deposit. But I’m suspect this will still be a tricky process with plenty of costs associated with it.
What’s your experience of buying a home for the first time?
*Image courtesy of Flickr
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