If you’re looking to become a first-time buyer, are sick and tired of renting, and want to build up your equity then you’ll want to know how to get your foot on the property ladder. Investing in a property is a big step, and can appear as a distant dream to many people. However, there are many steps that you can take, as well as several options open to you, that can make buying a home much easier.
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Build Up Your Credit
It is imperative that you build up your credit before investing in a property, as the mortgage deal you get, and the finances available to you will largely depend on the health of your credit score. Having credit history, with proof of your financial repayments will allow lenders to make decisions based on your financial history. Get a secured credit card and make sure that you regularly pay back everything on time and do not go over your credit limit. Only buy what you can afford to pay off in full at the end of the charging period, as this can take a toll on your credit score.
Don’t Wait Around
It is better to invest in a property that needs doing up, rather than waiting around until you can afford your dream home. Rather than waiting for your finances to improve until you consider investing in a property, it is better to work with what you have and build up your equity by buying under budget and using the remainder to fix up your property or hire a contractor to do so. You add value to the property by doing this, and importantly, you have a property that you can use as equity to purchase another property in the future.
Don’t Be Guided By Your Emotions
As much as it is important to get your foot on the property ladder as soon as you can, it is also important to not be guided by your emotions when making an offer on a property, which can lead to buyer’s remorse. To avoid regret or buyer’s remorse, choose a property that you can afford to buy, and be very clear with your budget and how much you can pay. If you are involved in a bidding war then have a clear limit that you are willing to go up to, but not over. Bidding wars can lead to you paying far more than you would pay under any other circumstance if you are not level headed and use your head.
Choose A Mortgage With Low Repayments
Make sure you choose a mortgage that you can afford. Maxing out what you can realistically pay each month on mortgage payments will leave you unable to afford other basic living costs, and may even lead to you having to refinance or sell off other assets, such as vehicles. In order to avoid this, stick to your budget and consider whether you can afford to pay the downpayment of a particular property. You’ll need to include all the other costs associated with purchasing a property, as well, such as closing fees, agency fees and other costs that you might not have factored in. Above all, choose a mortgage that has repayments that you are able to afford, as this is a financial decision that will affect you for several years at the very least.
Seek Government Help
Carefully consider the options available to you as a first-time property buyer. This means looking out for any government help, which may or may not be available to you as a first-time buyer. As it is becoming increasingly difficult for younger people to buy property, there is a government scheme in the UK that offers financial support to first-time buyers, who are looking to move out of home. It is worth investigating and seeing what options are available to you, which might include taking out a loan, or asking your bank what they can offer you.
Co-Owning, Or Property Sharing
While having a property share may not be for everyone, it does offer the possibility of owning a property at a reduced cost. One of the benefits of a property share is that it allows you to split the cost of buying a home, while still maintaining control of your own personal finances. It can be a delicate matter, however, as if you are borrowing you will need to all act as guarantors for each other. This can be problematic if someone is unable to pay back a mortgage payment or decides to pull out from the scheme. However, this is an option for people who are serious about investing in a property with a group of reliable and trusted friends or family. One of the advantages of property sharing is that you can borrow more funds than you would be able to do as an individual, meaning you can get a property with increased value, getting, essentially more bang for your buck.
Rent-To-Own Property Opportunities
For many people, a rent-to-own property may be the easiest way for them to get a house without having to pay a hefty lump sum all at once. This process involves paying a monthly fee, similar to renting, along with a small down payment, and after a certain period, usually a few years, having the opportunity to put the extra payments towards the cost of buying the property. The rent payments that are slightly raised will go towards the cost of buying the property. However, this does mean that you will have to factor in a slightly higher than average cost of renting for the duration of your contract.
Avoid The House Rich And Cash Poor Problem
In order to avoid being house rich but cash poor, ensure that you stick to your budget from the very beginning of the process of getting a property. Once you have invested in a property, make sure you avoid using your house as equity, as using it as leverage can be risky business, and lead you to as well as risking losing your property. It is also important to think carefully before refinancing as this will chip away at the value of your property. Build up your cash reserves before you invest in property and pay off any other debts before getting a mortgage, as you will want to as well as allowing you to get a mortgage with lower repayments.