Published 11 Oct 2021

4 Top tips for buying your first home in your 20s

Are you starting to look for your first property as a young home buyer? To help you on your journey, we have collated some useful tips to starting your home search. Before you start searching for suitable properties, you need to have some idea of what kind of home you would ideally like to buy.

Shared Ownership or Outright?

Will you go for a Shared Ownership option, buying a share in the property and potentially Staircasing to 100% in the future, or defer your purchase until you can afford to buy property outright?

The pros of buying Shared Ownership is that you get your foot in the door, so to speak, moving into your home and saving to staircase up while re-paying your current mortgage. The alternative will trap you in the rental market until you're ready to buy - in the meantime all your rent payments don't contribute towards your future home ownership.

Another advantage of Shared Ownership is that your new property is effectively your home - even though you only own a share in it. You can decorate it however you want and you will not be expected to move out whenever your landlord wants to renovate or resell the property, which is often the case in the rental market.

On the other hand, an apartment in a new-built block may not be your idea of a dream home. If you're looking for a little house with a back yard and a shed, Shared Ownership may not be for you.

Ways to buy a home!

Decide how you're going to buy

What's affordable for you?

There are several options for first-time buyers aimed at helping them get their foot on the housing ladder. Different schemes may be suitable for people in different circumstances. That's why it's very important to do your research and weigh your options. 

Going at it alone or with somebody else?

If you are planning to buy your new home with your spouse or a partner, joint ownership is a no-brainer, but even if you are a singleton, pooling your resources with a friend or a sibling may mean you can get a bigger, better property in the area you like. You may be weighing your options, trying to decide whether to buy Shared Ownership by yourself or buy outright with somebody else. Or you may be looking at buying Shared Ownership jointly.

Getting a mortgage

Unless you are particularly affluent, you will need to get a mortgage to purchase your property and you will, most likely, make some decisions about how to go about it.

Should I go at it alone or get a mortgage adviser?

Finding a mortgage that is best for you might be a daunting task and we always advise you to enlist the services of an expert. An experienced mortgage adviser will be able to find a mortgage product tailored to your needs - both now and long term - and maximise your chances of being accepted when you do apply.

Make sure, however, that you choose an adviser who is experienced in the type of mortgage you are looking for. Peabody has a panel of mortgage advisers who are particularly knowledgeable about lending for Share Ownership. Also, a good mortgage adviser will not charge you until your application has been accepted by the lender.

How much deposit should I put down?

When you apply for a mortgage, you will have to put down some of the money up-front - your deposit. Traditionally, deposits on a property started from 10% of the total value of your home. Nowadays, there are lenders who will offer 95% loan-to-value mortgages (LTV), which means that you will only have to put down 5% deposit. While 5% deposit makes home-ownership more affordable, you might not get as good a deal on your mortgage than if you'd put a larger deposit. Also, there will be fewer lenders you can choose from as not all lenders offer 95% LTV loans.

In general, the larger the deposit, the better deal you can expect on your mortgage.

Other costs of buying a home

Apart from putting down your deposit, there are other costs that you need to budget for when buying a home:

  • Stamp duty - a tax that you need to pay when buying a property in the UK,
  • legal costs, and mortgage adviser costs if you choose to use one,
  • you will need to get a Homebuyer's Report if you are buying a resale property,
  • you may wish to commission a structural survey if you are buying an old property and you want to be sure that there are no structural problems with it.

Calculating your ongoing costs

Purchasing your first home is one of the biggest decisions in your life and the biggest financial commitment. Getting a mortgage is just the first step. You need to make sure that you can afford the repayments as well as the costs associated with owning your property. Your property may be repossessed if you don't keep up with your bills and payments.

Monthly costs

If you buy a Shared Ownership property, at the minimum you need to budget for:

  • monthly mortgage repayments,
  • monthly rent on the portion of your home you don't own,
  • monthly service charge,
  • monthly bills.

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