Finance and Your First Family Home
Now you've decided to start a family you may find that your existing accommodation simply does not have enough space for your ‘new addition’. It may be that there are an insufficient number of bedrooms or, perhaps, your current accommodation has no garden for your child to grow up and play in or it may simply be that you want a fresh start in a home more fit for a family.Whatever your reasons for moving, the cost of buying the actual property and how you intend to finance it is just one of the many financial considerations you have to take into account when you’re buying a new house, especially for a first time buyer.
The amount you can borrow from a lender will usually depend on the amount you can put down as a deposit alongside your annual income. If you’re approved, you’ll usually be able to borrow between 3 and 4 times your annual income. However, there are many other financial considerations you’ll need to take into account too.
Other Financial ConsiderationsYou’ll also be liable to pay the government stamp duty if the value of the property you are buying is more than £125,000. This could be anywhere between 1% and 5% of the property’s valuation, depending on its value. In addition, your mortgage lender will have to carry out their own valuation of the property which usually costs around £150 and they might also charge a further fee, called an arrangement fee, for completing the transaction.
Then, you’ll need to be sure that the house you are buying is in good structural condition so you will require the services of a surveyor. The cost of a survey varies depending on the value of the property. For a typical house which is valued somewhere between £100k and £300k, the cost of a survey is likely to be somewhere in the region of £600 to £750, depending on where you live.
There will also be your solicitor’s legal costs which could be around £400 plus the VAT associated with the legal bill and associated land registry fees.
You’re also going to need money for moving home, new furnishings, home insurance as well as any renovations or decoration you choose to make. Even if the house has been well maintained, you’ll obviously want to put your ‘stamp’ on it in terms of decorating it for your newborn.
Indirect CostsIn addition to all of the above, there might be other costs which you may incur which you might not have originally factored in to the costs associated with buying your first property. For example, have you considered the location of your new home and how close it is to where you work? It may be that your commuting time is longer and this may cost you more in petrol if you drive, or in public transport costs. You’ll also want to ensure that it has access to nurseries, play groups and, further down the track, schools and, more often than not, access to these kinds of facilities often means that your house will cost you even more.
You should also take into account the re-saleability of the property should you want to move again some time down the track. Things like access to local amenities and schools can dramatically affect the value of a property and can make it more or desirable to other young families who may be starting out after you when it comes to reselling. Perhaps, you’ll be planning to have even more children and will need an even bigger house in the future so you’ll want to make sure that the re-saleable value of your house is going to hold up.
In addition, you may need to do a bit of crystal ball gazing and make some intuitive guess at whether or not you’re buying a property that’s in an up and coming area. This is an important financial consideration if you want to be in a position where your new home is likely to be worth far more than its value at which you purchased it, if you decide to sell at some point in the future. Any development or newly proposed development can also affect the value of your home, so you also need to try and ensure that your home is likely not to be devalued over time as you could end up in the sticky situation of having negative equity.
Also, if you and your partner are going to have a joint mortgage, this will have a positive impact if you need to borrow more money than you would otherwise have been able to do if you applied for a mortgage solo, but you need to take a pragmatic approach and also consider how you would deal with the mortgage if the pair of you decided to go your separate ways in the future.
A Good Place to StartWe all have different needs and different incomes and it’s important that you not only choose the cheapest but also the most appropriate mortgage which is tailored to suit your specific circumstances. With a myriad of often confusing choices, such as interest-only and repayment mortgages then a whole bunch of additional baffling terms associated with the mortgage world, one of the wisest decisions you can take is to seek the advice of an independent mortgage broker.
They can simplify all of the legal jargon for you and they have access to hundreds of mortgage lenders and will find you a deal tailored to suit you. What’s more, a reputable broker won’t charge you for their services. Instead, they simply make their money from obtaining a commission from any lender you decide to borrow the mortgage from as a result of their findings.So, remember, it’s not just the cost of the house you need to consider if you’re thinking of taking the first step onto the housing ladder – there are many other financial considerations that you will have to factor in too, especially if you have a baby or young children to consider too.