If you’re not already a homeowner, it might be a daunting fact to hear that property prices have been increasing every month this year. However, that doesn’t mean you’re going to be priced out of the market and left behind.
There’s simply an increased demand for homes at moment, probably in response to the pandemic and people changing their lives as a result of living differently for the past couple of years. This also means that there are more properties available; the House Price Index showed that the number of homes coming onto the market increased by 7% compared to this time last year.
When I was buying my home back in 2017, there were limited choices in my area, especially within my budget. At least if I were searching for a home now in 2022, there would be many more homes available to view – and more choice is always a good thing, right?
The tiny 0.3% rise in house prices in June is actually the smallest monthly increase since January, which indicates that the property market might be slowing down and now could be the ideal time to start planning your purchase.
Plus, there are usually seasonal dips in home-buying during the summer holidays and at Christmas, so you might have less competition from other buyers and may be able to get a better deal during these months.
It’s easier to get a mortgage to buy your home
The Bank of England has recently withdrawn the affordability test, which previously required lenders to check whether homeowners could afford mortgage payments at higher interest rates. This might mean that you’re more able to get a mortgage now than in previous years, so do your research and speak to your mortgage advisor to check your current situation.
That said, it’s always advisable to make sure that you can afford your mortgage repayments even if your circumstances change. I would recommend that you calculate your payments for a number of different situations, not just your current financial position. For example, check if you would still be able to afford to pay your mortgage and bills if your contracted hours at work were to change, if the interest rates increased to x%, y% or z%, or if your partner was unable to work for any reason.
When you’ve got an idea of what mortgage you could get and a budget to stick to, then you can start searching for your ideal home. Bear in mind that, according to Rightmove, 98.9% of properties are achieving the asking price, so stick to looking at homes that you can afford at the advertised price rather than hoping to make a lower offer. That way, you’ll be able to move quickly and confidently when the right home comes along.
Sure, you can always submit a lower offer and get a deal but at least if you only look at homes you could afford at full price, you know you’ll actually be able to buy the property if you fall in love with it. Likewise, make sure you’re not looking at a house where you would need a bigger deposit than you already have saved, it’ll only lead to heartache if you miss out on your dream home.
If you’re a first-time buyer, there are schemes available to help
If you’re under 40 years old, you can save your deposit in a Lifetime ISA, which gives you a 25% bonus from the government when you use your savings to buy your first home. I did this using a Help to Buy ISA when I was saving for my deposit and the extra 25% really helped – in fact, I think it covered most of my solicitor fees for the purchase!
That’s another important thing to consider – you will need to pay more fees than you think! So, don’t rely on being able to use all your savings for the deposit, as you will definitely need to keep hold of some money to cover the costs of conveyancing, mortgage arrangement fees and stamp duty, if required.
The government First Homes scheme works with developers who are building new properties and offers them for sale at 30% to 50% less than the market value. These are usually new-builds so would be ideal if you’re looking for this type of property but doesn’t give you much flexibility in terms of location, as you’ll have to live wherever the First Homes development.
What if you’re remortgaging your current home?
It’s always a good idea to get a fixed-term mortgage when your current term comes to an end, rather than rolling onto the (usually higher) standard interest rate. You can either renegotiate with your existing provider or move your mortgage to another lender altogether to get a better interest rate.
The good news is that the price rises in the property market will have a positive impact when you’re remortgaging your existing home. It’s almost inevitable that your home will have increased in value since you took out your mortgage, so the Loan To Value will be improved.
The LTV will be lower if your outstanding mortgage is considerably less than the new value of the property. And, if you have a low LTV, the interest rates available when you remortgage will be much lower, saving you money every month on your repayments.
Again, you can calculate your financial situation using a remortgage calculator, which enables you to test out your budget in advance. This will help you to discover whether you could afford to decrease the term of the remortgage and pay it off sooner (yay!) or if you could even withdraw some equity if you need to borrow money to make home improvements.
I hope that this article has helped you to see that the rising house prices aren’t necessarily a hurdle that you can’t overcome. There are many options available to you if you analyse your financial situation and really do your research into fees and mortgages before you even start looking for a new home. Then you’ll be in the best possible position to get onto the property ladder, with a clear idea of your budget and the ability to snap up your dream home when you find it.
I’d love to hear about your own experiences of buying or remortgaging your home and any money-saving tips you have for first-time buyers so please leave your ideas in the comments below.
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This article is a sponsored collaboration. The pink links in the content indicate a sponsored link or information source. The blog post reflects my own experience and the sponsor hasn’t had any control over my content 🙂