5 tips for getting on the property ladder
For Millennials, getting on the property ladder is nothing but a pipe dream.
With soaring property prices all around the UK, and especially in London, 20 and 30-somethings are increasingly turning from the traditional path of buying a house and settling down to other paths – travelling, boat-homes or motor-homes, property guardianships or making the most of renting.
It’s great that lifestyles are diversifying however for those keen to get onto the properly ladder, here are five great tips.
Get a ‘Help to Buy ISA’
A Help to Buy ISA is a partnership between the bank and the government.
It’s a bank account called an ISA (Individual Savings Account) which means that the interest on the money you save is tax-free.
The Help to Buy ISA includes a bonus from the government of up to £3,000 if you save the maximum possible amount, making it appeal to first time buyers.
This bonus knocks money off the mortgage though, not the deposit – make yourself aware of all restrictions to do with the Help to Buy ISA to avoid nasty surprises and it can be a wonderful way to save.
Get a credit card
Unless you are buying a property outright at its full price, an act reserved for a tiny minority, you will need a mortgage to buy a house.
You will need a bank to lend you a mortgage and for a bank to decide whether or not they trust you to repay a mortgage, they will perform a credit check.
This check demonstrates your ability to borrow and repay money, which whilst you may know full well you have in spades, a bank does not. Enter your need for a credit card. Apply for a credit card, use it monthly for small, easy-to-repay purchases, pay it off each month, and watch your credit score grow.
Take care to do this as soon as you are even thinking of buying, so at the point of mortgage application, your credit score is as high as possible. And take care not to ever miss a payment or your credit score will plummet, defeating the point!
Get your paperwork in order
It may or may not surprise you the amount of boxes you have to tick in order to borrow a mortgage.
Not only do you need a great credit score, but if you are freelance, lenders will want to see two years worth of books to prove your business is stable.
If you are renting, lenders will probably want a landlord reference from your current landlord, so a bad relationship with your landlord or a dodgy sublet before buying is a no-no.
Prioritise savings over big buys
Everyone has a different saving style but one myth that just has to be busted is that scrimping on everyday spending in order to save will amount to the deposit for a house.
Millennials have been lambasted in the media for extravagant diets of avocado toast and monthly takeaway – note, by estate agents and millionaires – and advised to favour cheaper lifestyles so they just might be able to afford a house.
You don’t have to live off baked beans in order to save money. Just be sensible. Make healthy choices, not luxurious ones. A night out every now and then and hobbies are part of a healthy social life.
You may be eligible for Shared Ownership as a first-time buyer. This scheme allows buyers to purchase a share in a property and pay the deposit and mortgage for this share only, rather than the full price of the property.
You can gradually increase your share until you own the property, giving buyers with less savings and a lower salary the chance to get on the property ladder.
With all the complications and expenses of getting into property, you’d be forgiven for not bothering. It can often be an opaque process too, with little information out there to help first-time buyers make the right decisions. However, getting your facts straight is the first step to buying, so if it is on your to-do list, keep researching and get saving.