With increasing numbers of people spending longer periods of time renting properties, the concept of actually buying a property to call home is an unfamiliar process amongst large groups of people. When we think of purchasing a place of our home, we tend to think about the aesthetics of what we’re looking for, where we want to property to be located, and how we’re going to decorate the interiors.
This isn’t all too surprising – these are the fun parts of the process of getting your foot on the property ladder. But it’s extremely important that you have just as good an idea of what financial processes you’re going to encounter when purchasing a property too. After all, these are the steps that will legally make the property your own and put your name on the ownership deeds. This may all sound a little intimidating, but don’t worry – we’re here to help. Here are a few major financial aspects of buying a property and how best to deal with them!
Nowadays, it’s extremely rare that people will save up money and purchase a house outright. It just doesn’t make sense. The price of properties is too high and you’ll end up having to pay rent for somewhere to live while you save for your own property. It’s just not feasible. However, you will have to practice the process of saving in order to get a deposit together. Saving up a deposit is the first big step towards getting your hands on your own property, as it is generally a prerequisite to being approved on a mortgage.
There is no standard amount that you need to save before you have a deposit. The expected amount will vary on the overall price of the property you’re looking at. The more expensive the property, the larger the deposit will usually have to be. Generally speaking, you should aim to save up 20% of the overall property price. Nowadays, with increasing numbers of millennials finding difficulties in getting on the first rung of the property ladder, the presence of 90%, 95%, and even 100% mortgages on the market are on the rise. This means that you’d require no deposit, or only have to gather up a 5% or 10% deposit.
However, it’s always good to bear in mind that the larger the deposit you put down, the smaller your subsequent repayments will have to be. Once you know how much you need to save for your ideal home, you can begin to feel a little fazed or daunted by the large figure. But it is completely feasible. All you need is a solid plan! Sit down and work out a budget, then stick to it. You’ll have a deposit together much sooner than you’d initially think.
Once you’ve pulled together a deposit, you can start looking into finding a mortgage. There’s no point looking before this point, as saving a deposit takes a long time and chances are that by the time you’ve got it together the property you’d originally looked at will have been taken off the market. Now, a mortgage is a loan that you take out for the specific purpose of securing land or a given property as your own. However, seeing as your home is likely to be the biggest purchase you’re ever going to make, you need to take your mortgage seriously. Find out exactly what you will be able to afford by using a loan calculator. This will ensure that you can afford the advertised price of the property you’re looking at as well as the interest rate. This is important, as if you ignore the interest rate, you may find that you are not able to afford the total costs of the property that you have an eye on.
Now, just because you understand how mortgages work and you have worked out exactly what you can afford, doesn’t mean you should start applying for them right away. You need to bear in mind that a mortgage is one of the biggest loans that you can take out. After all, your home is perhaps the biggest purchase you’re going to make in your lifetime. So it’s not all too surprising that, as with any other form of a loan, your mortgage provider is going to base their decision on whether to hand you the cash by evaluating your previous spending and lending habits.
Considering the amount of money involved, they are only likely to approve your application if you have a truly impressive credit score. If you have a bad record, they are unlikely to approve you. After all, the lender is going to want to be confident that you will stick to your contract and pay them back. So, check your credit score to ensure that you have a good record and if not, start taking steps towards improving it.
Once you’ve gathered together a deposit and know that you’re in a position where you will be approved for a mortgage that you can truly afford, it’s time to take a serious look at what’s available to you. Don’t feel the need to rush. You’ve waited this long, and you can wait a little longer if it makes the difference between settling for a property that’s adequate and moving into the property of your dreams. Keep a constant eye on the market.
Once you find something that catches your eye, it’s time to decide whether to agree on the set price and miss out on the chance of securing a better deal, or to offer a lower price and run the risk of missing out on your dream home should someone else offer more. The best thing to do is to play your cards close to your chest. Downplay how much you’re willing to spend. If you view a property that you fall in love with, don’t declare your love right there and then in front of everyone. You need to act as nonchalant and laid back as possible. You then run everything to your advantage, keep in control, and make the best decision possible in each given situation.
These are some of the major financial processes that you will go through before landing a property of your own. So, make sure that you are familiar with them and know how to play them to your advantage!