How I Did It: 7 Steps to Home Ownership
Contributed by @ImAdeAkins
After spending the majority of my post-adolescent life believing owning property alone before the age of 30 was a myth, I recently proved myself wrong.
Partly due to the fact I haven't started living in the flat properly and partly due to the fact getting on the property ladder was so flipping hard - it still hasn't hit me properly. However, It is real enough to have inspired this blog post that I hope helps you to join me.
Below are the 7 steps I believe will enable you to get your foot on the property ladder and will cover everything from the start of the process up until your offer has been accepted.
Look out for the follow-up posts where I'll share my tips post-offer acceptance and moving in.
1. Check your credit score
Unless you're fortunate enough to be able to buy a house outright without any loans, your ability to secure a decent mortgage and on good terms is dependent on your credit score. My preferred, free tool for checking this is Experian which is the most well-known credit score provider.
The Experian Credit Score runs from 0-999, (the higher your score, the greater the chance of the best credit deals).
2. Get serious with your spending and saving
My parents decided to move to Nigeria in 2007 which meant that getting serious with my finances wasn't a choice but rather a necessity. Whilst I can't say that every year since then was spent making the best financial decisions, knowing I couldn't rely on the bank of mum and dad had a big impact on my spending and saving decisions.
We often overlook how important it is to control our spending and just focus on saving money instead. Quick wins to get your spending in order:
Get a Monzo bank account
I personally love Monzo because it automatically tracks and categorises my spending and allows me to set targets. There's usually a big waiting list for this so drop me an email if you'd like a golden ticket to beat the queue!
Get savvy with your spending
Whether this means you only go to bars during happy hours (a personal fave of mine), bring in your own lunch for 4/5 days of the week or sign up to voucher sites, there are ways to spend less for more.
Some of my go-to's are:
- Shopmium - Offers free and heavily discounted grocery products (many of which are newly launched) - sign up here.
- TopCashback - Gives you money back for completing your online purchases through its website (affiliate links) - sign up here.
- VoucherCodes - I'm sure you've used one of their codes before, never buy anything online without checking if there's a valid code knocking about.
Be more disciplined
Do you really need to that daily coffee from Pret? Does the motive you want to attend require a new outfit? Would leaving earlier mean you avoid getting Uber everywhere? These are the kind of questions to ask yourself to practice more financial self-discipline.
Who doesn't like free money that goes towards your deposit? Help to Buy ISAs are eligible for all first-time buyers and work by giving you a 25% bonus for every £200 you pay in each month (aka £50 for every £200 you pay in) up to a maximum of £3,000.
When I signed up, Halifax was offering 3% HTB ISAs which meant that on top of the 25%, I also received a 3% bonus on the anniversary of the account. I had my HTB ISA for exactly 12 months and the bonus I ultimately received was worth over £1,500. Check with the issuing it for the exact Ts and Cs. I recommend this Money Saving Expert article as it will help you choose the best HTB ISA for you.
When I was in the market for a new ISA, LISAs weren't readily available. However, these offer much more than HTB ISAs and you can keep them open until you're 50. As you can tell by my vagueness, I am not clued up on the intricacies of LISAs but here's another Money Saving Expert article to help break it down.
Want to invest but don't have the knowledge or time to do so? You should consider Nutmeg. You'll need a minimum of £500 to invest up front and then at least £100 a month going forward and you determine your comfortability with risk. With all investments, the value can go up as well as down so only put in money you're comfortable losing (I made circa £600 profit by the time I closed my portfolio down but it had been worth over £300 more just weeks prior).
Company share schemes
I also joined my graduate company's share scheme which really helped fund my deposit, if your employer offers this, consider getting involved as part of a diversified investment portfolio.
3. Find out how much you could borrow and get a Mortgage Agreement In Principle
London and Country is a well-known and reputable mortgage broker that offers free mortgage advice. Setting up a call with one of their advisors will give you a feel for how much a mortgage lender would let you borrow. There's no obligation to get your mortgage through them and it doesn't cost you a penny to speak to them.
At the end of the consultation, you will be sent an Agreement in Principle (also known as a Decision in Principle). This document is essential to let estate agents and developers know you're not just wasting their time and are able to secure a mortgage.
As you're reading this.. you may like to know about a related event we're hosting on 06.06.18. 'Let's Talk: Getting on the Property Ladder - Tickets available here.
4. Weigh up the different buying options
Let's assume once more that you are not able to buy a property without using any form of loan or assistance and are buying a property to reside in, there are a few options available to consider. I believe there isn't a right or wrong option as it depends entirely on your circumstances.
You save for a deposit and then take out a long-term loan (up to 35 years), to cover what's left. (This is the option that I went for and my deposit was about 12.5% of the total flat value). My mortgage broker was AMAZING and enabled me to borrow circa £8,000 more than what London and Country offered. What's even better is they also didn't charge me a penny as they would be paid by the mortgage lender -get in touch if you'd like their details.
If the mortgage repayments on 100% of a home are too high, Shared Ownership offers you the opportunity to buy a portion of your home (between 25% and 75% of the home’s value) and pay rent on the balance. A lot of people feel these aren't worthwhile but I know of a good friend who was able to eventually buy 100% of their property and has seen the value of their home appreciate by over £100,000!
This is where the Government lends you up to 20% of the cost of your new build home, which means you only require a 5% cash deposit and a 75% mortgage to fund the difference. For those wishing to buy in London, there's also a separate London-specific scheme.
** Please note, if after speaking to a mortgage broker, your preferred method of purchase has changed, you should get a new Agreement in Principle.
5. Shortlist potential areas to buy in (and identify property type)
Once you're sure of how much money you'll be able to borrow and have an idea of your deposit size, it's time to give location some serious thought. The two websites I used for this mainly were Rightmove and Zoopla.
I had spent so long focusing on London and developing a bad case of tunnel vision that subsequently became disillusioned with my ability to buy property at all. Fortunately, I ended up buying outside of London (Grays, Essex to be exact), and this was due to several key factors including:
Calculate the commute time to work
When I had a job based in London Bridge, I wanted to be no more than 60 mins away door-to-door). Although I'm now outside of London, my commute into the city will be shorter than many Londoners have to experience on a daily basis (I used to travel almost 3 hours in total each day getting to my grad job).
Getting more for your money outside London
Tell a London estate agent you're looking for something around £200,000 and just wait for their shady comments and remarks. Once I looked outside of London, I suddenly realised I could get a 2-bed apartment with parking instead of a 1-bed ex-council flat in a dodgy area.
Willingness (or lack there of) to do work on the property
I do not enjoy DIY, nor was I buying a flat as a passion project. I got fed up with paying ridiculous amounts in rent and wanted somewhere I could just move into. Unless you have a preference for a fixer-upper such as the one below, this will impact your options.
Wherever I moved to needed to be within 10-minute walking distance of a train station, even less if I was buying outside London. Don't be afraid to be bougie when it comes to your home, think about the late nights as well as visitors!
Property value trends
I wanted to buy in an area that had seen homes similar to mine rise in value over the last few years. Advice to anyone who can afford to buy this year - try and buy somewhere along the Crossrail line as these towns and areas have already seen massive value gains and development.
The above are just a handful of my uncompromisable factors. I encourage anyone reading this to discover what their own uncompromisable factors are and use these to dictate your choice in area and home.
6. Start viewing properties
The sooner you can get out and inside potential homes the better! This is the best way to get a feel for the different areas and property styles. As I mentioned earlier, you really should get your Agreement in Principle before reaching out to estate agents. Below are a few tips to help navigate this step:
Call estate agents, don't rely on the automated email forms
There are countless people just like you wishing to purchase the very property you're considering- don't play yourself!
Minimum number of years left on the lease
The majority of flats and apartments will be leasehold. Aim for properties with at least 90 years left on the lease as any less makes getting a mortgage/re-selling harder.
Don't buy above commercial premises
Similar to the previous point, these kinds of properties are harder to get mortgages on and also are less desirable to future, potential buyers. In addition, you also should consider the different forms of pollution you may have to put up with (noise, small. waste etc).
Bundle your viewings with each other
Try and view as many properties as possible when you're in any given area. By not putting all your eggs into a single basket, you avoid a wasted trip if the property you're considering sells before you get there.
Try and visit as many times as possible
I knew my flat was right for me as soon as I saw it. However, it is more common that you have multiple viewings and also visit the property at different times of the day to get a feel for what it's like in the area.
Ask if there are any items included in the sale
I was able to secure a very nice washer dryer and matching fridge/freezer worth a combined £1,500+ included for free! Another friend of mine was able to get a full set of furniture at a bargain rate- (it's much less hassle for the sellers so always ask).
Find out why the current residents are selling
Whilst it's not a given that they will tell you, they may be selling for a reason that would later concern you (anti-social neighbours, imminent structural works by the landowner/council or undisclosed damage/problems with the property).
Find out how much (if at all) they're willing to flex on the asking price
It is expected that vendors and buyers will negotiate on the final selling price. There's nothing wrong with finding out how low they're willing to go prior to submitting your offer.
7. Make an offer (and have it accepted)
Once you've identified the place you'd like to call home, it's time to make an offer - this should be made in writing (usually via email) via the estate agent. I made an offer for the place I ended up buying an hour after viewing it for the first time. I went £9,000 under the asking price and was politely rejected. Luckily, they made their minimum price known to me (£2,500 under asking price) which I thought was fair. Had I not known this, I would have had a series of rejections and wasted time.
Before you finish the first part of this guide, it is worth taking note of the 2 following points - both of which I think are worth taking into consideration.
1. I had the right people around me
Several of my close friends had purchased their own properties within the last few years which gave me a great insight into the complexities of buying your first home. I cannot stress how helpful it was having people to turn to along the journey to home ownership who I knew had been there and would give me the real.
Forming a WhatsApp group with others in the same boat as I was also a great help. Many of those friends I mentioned earlier joined and shared the expertise with complete strangers - love it! (If you'd like to join the group, drop me an email me with 'WhatsApp Group Request' as the subject and send your name and mobile number).
2. There are some amazing, specialist organisations with information to help
I am far from an expert on property. These are the tips that worked for me and I believe can help you. 2 great companies to check out are:
1. Property Cohort - Property advice, guidance and services for first-time buyers and investors.
2. Huuti - Intelligent assistant for prospective first time buyers.
I hope you've enjoyed this post and it has helped you understand what you need to think about on the journey to home ownership. Please, please, please drop a comment, share and subscribe to the newsletter.
Let me know what you'd like to see in the follow up posts where I will document my tips once you've had an offer and another post for once you've moved in.
Peace and blessings!
*RELATED PROPERTY EVENT ALERT*
Off the back of this post and the amount of positive feedback we've received, I am delighted to announce that tickets for 'Let's Talk: Getting on the Property Ladder', are now available. Find out more here.