London Property Purchases: A Guide for First Time Buyers
The confusion surrounding the minefield that is house-hunting can understandably be daunting for first time buyers, this confusion is often amplified when purchasing in the Capital. Before getting down to the nitty gritty of mortgages and extra costs, it’s first key to establish which area you intend to buy in.
A common misconception on the property scene is that you need a salary similar to that of a City Banker to be able to buy a home in London. The truth of the matter is that while prices are rising faster than wages in some places, neighbouring areas which have previously been overlooked are growing increasingly desirable to first time buyers. Elephant and Castle for example, on the fringe of Zone 1 and a stone’s throw from the Shard, is far more reasonable in price than its neighbours, London Bridge and Borough.
A good trick is to pin point your ideal location (even if it’s financially unrealistic) as the centre of your search, increasing the radius until you settle on the best location for you. This method ensures you are as close to the amenities and environment you have identified as desirable for the best price.
Buying with a friend is an increasingly popular option for first time buyers. With the average age of marriage rising and increasing numbers choosing not to marry at all, this alternative way of buying a home spreads the risk and lowers the cost. Mortgage lenders now allow up to four friends to pool their funds, which means bigger deposit and better borrowing potential.
It’s not just a deposit you have to stump up for when buying a house, there are plenty of hidden extra costs to be aware of when buying your first home.
These can be anything from £500-£2000, even more if they’re a percentage fee, which can be a real stinger if the amount you plan to lend is particularly high (typically about 1.5% of the loan amount).
A good rule of thumb is about £250, generally paid up front when you make your mortgage application.
Solicitors can command anything from around £500-£1500, sometimes more, to cover the cost of the completion of legal paperwork.
Calculators are available for your property, but the cost of stamp duty is as follows;
£0-£125,000 will pay 0% rate of purchase
£125,001-£250 will pay 2%
£250,001-£925,000 will pay 5%
£925,001- £1.5M will pay 10%
£1.5m and over will pay 12%
When budgeting for your first home, it’s key to consider these hidden extra costs to your budget. By doing your research on the best location for you, and additional costs associated with property purchases, you’re future proofing yourself and your home.