SimplyFinance - First Time Buyer

Is Home Ownership now less of a Status Symbol?

2010-01-05T00:00:00Z

It seems that one of the effects of the recent property market crash is that more people are choosing to rent, rather than take on a potentially risky housing investment. According to professional advice site Unbiased.co.uk, over 1.75 million homeowners would now consider selling their home in order to start renting.

So what are the main reasons for this shift in the attitudes of British homeowners? Almost a third of those renting (31%) have found that renting gives them more freedom, and that home ownership - or rather, the mortgage that is a feature of house purchasing for many Britons, often presents more of a financial burden than a form of security.

12% of homeowners no longer feel that owning their own home represents a status symbol, and therefore do not aspire to climbing the property ladder to the same extent as before.

As a measure of exactly how much attitudes have changed, 32% of the 1.75 million homeowners wavering about whether to sell up stated that they would not have considered this as an option in the past. A further 31% said that the price that they would get for selling their property would be too low to make it worth considering.

Interestingly however, British renters do not seem to have been put off to the same extent, with 13% of renters stating that they still hoped to purchase their own property. This enthusiasm for home ownership seems fairly concentrated in the 18-34 age bracket, with 22% willing to buy as compared to only 6% in the 35-54 bracket.

For those who have seen the values of their properties plummet in recent years, there is clearly plenty of trepidation about borrowing money for an unstable investment. Renters on the other hand seem to still place a certain value on the ownership of property, perhaps considering it still to be a form of security as Britain slowly comes out of recession.

Karen Barrett, Chief Executive of Unbiased.co.uk comments, "While there are mixed messages as to whether house prices are now starting to rise again, it is clear that the property market crash has had a profound effect on the way people view their homes. For many who own their own home, the worry and stress of this through the property market volatility has caused them to re-think about whether long-term renting is a viable option for them."

"It has also caused renters to think about their long-term options, and while some still want to get on the property ladder despite the recent crash, many have now decided that the British status symbol of owning your own home no longer has the same importance. For those renters who are still looking to get on the property ladder, especially first time buyers, it is vital that they see a whole of market mortgage adviser to ensure they are getting the best possible advice from the whole of the market.

If you would like to talk through your options with an experienced whole-of-market mortgage adviser, please fill out our short mortgage form.

Are You 'Clueless' about Home Buying Costs?

2010-04-08T23:00:00Z

Are you fully aware of the financial commitment you're taking on when you decide to buy a property? According to research carried out by IFA portal unbiased.co.uk, 24% of homebuyers have no idea how much the additional costs of buying a house will set them back. 9% of those surveyed thought that the extra costs would only amount to 1,000 GBP. Those 9% would be surprised to know that this is only a fraction of the probable cost.

Things are looking up for the 2010 first time buyer, in that this year's Budget included a two-year extension to the Stamp Duty holiday for properties costing up to 250,000 GBP. Stamp Duty would otherwise have cost these buyers up to 2,500 GBP on top of the price of their property. However, despite these savings, there are a number of other costs associated with buying a house that it is essential to be aware of.

Mortgage Arrangement Fee

Typically there will be a fee of 500-1,000 GBP to pay when you take out a mortgage. Some lenders will offer a lower arrangement fee, but approach these deals with caution as the costs will often be recouped through an increased interest rate. When you're comparing mortgage deals, use the APR (annual percentage rate of change) as the basis for your comparison, because this figure takes all the arrangement fees and introductory rates into consideration.

Valuation and Survey

For a start, you need to have the house valued and surveyed by an expert. Often, your mortgage lender will insist on this process being carried out before agreeing to a home loan. The valuation confirms that the house is worth the amount that you wish to borrow, and the survey serves to determine the property's basic condition and overall state of repair.

If you're planning to buy a particularly old or damaged property, it's a good idea to get a full structural survey carried out before agreeing to the purchase, to ensure that it is habitable. A survey could cost from 50 to 1,000 GBP, depending on how thorough you need it to be.

Solicitor Fees

The legal process of transferring ownership of a property is a complicated one, and you will need to hire a professional solicitor or conveyancer to take care of this for you. This can cost between 600-1000 GBP for the basic service. You'll also need to pay for the Land Registry fee to register as the new owner of the property. The costs for other searches and environmental checks may fall to the buyer to cover, although they may be included in the home information pack (HIP) and therefore be covered by the seller. Allow up to 1,500 in total for these legal fees.

Buildings Insurance

Often, your lender will make it a condition of your mortgage that you take out home buildings insurance on the property. This is because if the house is damaged, they can recover their investment. Of course, it also works out well for you because you would not have to pay the full costs of having your house rebuilt in case of flood, subsidence or fire damage.

The cost of buildings insurance will depend on multiple factors, including the value of the property and whether you are buying a property in an area at high risk of flooding. When you have found your property, shop around for home buildings insurance quotes - usually there is no requirement to take your lender's insurance, so you may be able to find a cheaper deal elsewhere.

Karen Barrett, Chief Executive of unbiased.co.uk comments, "Buying a home is a huge financial commitment, and it is crucial for consumers to factor in all the additional costs involved in order to then calculate which price bracket they can afford. This involves thinking beyond your deposit and mortgage, and taking into account stamp duty tax, survey and solicitor fees, and other essential checks - not to mention how much you may need to spend on your home once you actually move in."

"Consumers should ensure they seek advice from a whole of market mortgage adviser so they are fully aware of all the costs involved in house-buying before they find themselves out of pocket. Especially if they decide to add these extra costs onto their mortgage - as the added interest will be on top of the value of your property - pushing the cost up significantly.

Simply fill out our short mortgage form to request a callback from an experienced mortgage adviser. The adviser will be able to talk you through the full cost of purchasing a property, and provide you with no-obligation mortgage quotes based on your personal circumstances. Use our 'Total Cost of Home Purchase' Calculator to help you with your research.

Calls for Stamp Duty to Support the Housing Market

2009-11-18T00:00:00Z

As the end of the stamp duty 'holiday' draws nearer, the debate over whether the government should increase the threshold indefinitely becomes increasingly heated. Last year, the level at which homebuyers were liable to pay Stamp Duty on their properties was temporarily increased, in order to help stimulate the ailing property market. This meant that anyone buying a house worth up to £175,000 would not have to pay the Duty until the end of 2009, at which time it will revert back to the previous limit of £125,000.   

The current feeling is that removing the upper limit again in the early days of recovery will cause a dip in the housing market. Gary Smith, President of the National Association of Estate Agents, said: "There is strong demand for property and more optimism in the housing market than we have seen for months. This is good news for the recovery of the market and for the UK economy in general.

"Many buyers are at the very beginning of the house buying process and this is creating a lack of properties in the short term. It is now up to the Government and the banks to do more to keep the momentum of market recovery going. A good place to start would be for the government to extend the Stamp Duty holiday, which mainly affects first time buyers, and is currently scheduled to end in December."

On a more general level, Stamp Duty is viewed by industry professionals as "damaging" and "anachronistic". In a rare act of industry-wide collaboration, organisations including the Council of Mortgage Lenders (CML), the Association of Residential Letting Agents (ARLA) and the Home Builders Federation (HBF) have joined together to form the 1808 coalition. The name comes from the date in which Stamp Duty was introduced for property sales in Britain.  

The coalition believes that the government should do away with Stamp Duty altogether. However, they have also suggested some alternative considerations, such as suspending the Duty on properties fully until the housing market has recovered, and changing the threshold calculation "from the distorting 'slab' system to a more progressive 'slice' system". At the moment, a property that is valued at only several hundred pounds more than another can cost thousands more in Stamp Duty because it falls into a different value bracket.  

A further suggestion for reforming the system is that the threshold should fall far above the current £175,000 to give as much assistance as possible to first-time buyers looking to get onto the property ladder. Adrian Coles, Director General, BSA, said: "The current Stamp Duty system in the UK is archaic and in desperate need of reform and modernisation. A fairer and transparent system is needed that doesn't discriminate against young and first time home buyers, and promotes an effective housing market."  

According to the Rightmove House Price Index, the average UK home cost £162,038 in October 2009, a rise of 0.4% from September. This clearly indicates that should the Stamp Duty threshold revert to its previous level of £125,000, a large number of first time buyers will still be liable. Considering that property deposits are now far higher than they have been in recent years, it is unsurprising that a lull in the market is expected at the start of next year. In order to keep the property market in a state of recovery, it is essential for new home purchases to remain financially viable for first time buyers.

First Time Buyers, Your Time Has Come!

2009-10-08T23:00:00Z

According to new research from national lender Abbey, it is now actually cheaper for potential first time buyers in the UK to purchase a property than to continue renting. The only exception to this is in London, where it would still work out more expensive to get a first time buyer mortgage than it would be to remain a tenant.

The research found that 1.61 million Britons were looking to buy in areas outside of London, and based on today's first time buyer mortgage rates, the people surveyed would save £624 each or a collective £1 billion over the next 12 months if they did decide to buy a place of their own. Unfortunately for those based in the capital looking to get onto the property ladder, the fact that house prices are still at a premium means that they would actually be £466.19 worse off per month by choosing to buy rather than rent.

For the potential first time buyers outside London, the average monthly rent comes to £434. First time buyer mortgages, as they stand in the market today, would cost an average of £382 per month if taken out with a 25 per cent deposit - a saving of £52 per month. Of course if you are able to put more upfront capital into your property in the form of a larger deposit, your savings could be even greater.

Across the UK, typical first time buyer properties (new-build flats and terraced houses) now cost an average of £92,861, a decrease of 9 per cent from last year. Therefore, if you were looking to take advantage of these lower prices, you would need an average deposit of £23,215 (or 25 per cent) for a first time buyer mortgage. It's particularly good news for potential first time buyers living in Wales, where you would make an average monthly saving of £90.91. This is followed by the North West (£87.43) and Yorkshire (£77.06). Buying a place in East Anglia as opposed to renting would save you a fairly disappointing £2.59 per month.

As the mortgage market is so competitive, many lenders will offer you free valuation and legal fees with first time buyer mortgages, so you should make sure that you shop around to see who can offer you the best deal. If you have a deposit totaling 25 per cent or more of the value of the property you wish to buy, you are hot property for mortgage providers, so if you don't have sufficient savings yet but you want to buy a place, get started as soon as possible. Consider an ISA for tax-free savings or a savings account where you have limited access to your money, as these types of saving usually yield the highest returns.

To find out more about first time buyer mortgages, and talk to an experienced adviser from the SimplyFinance network about your options for getting a mortgage, simply fill out our short first time buyer form and an adviser will be in touch shortly.

How will the Government Define First-time Buyers?

2010-03-31T23:00:00Z

First time buyers have been served. In this year's Budget, Chancellor Alistair Darling said that the stamp duty holiday for homes announced in last year's speech has been continued for first-time buyers. He also added that stamp duty on residential properties worth over 1 million GBP is increasing from 4% to 5% by April 2011 in order to fund the initiative.

Previously, the stamp duty tax was 1% for residential purchases where the property value is more than 125,000 GBP and up to 250,000 GBP. This was a temporary measure first implemented in 2009 for a 12-month period, with the aim of helping Britain's economy out of recession by boosting new property sales.

However, as detailed in the Finance Bill 2010, the stamp duty exemption limit for first time buyers has now been doubled from 125,000 GBP to 250,000 GBP for a further two years. Darling said, "This will mean that 9 out of 10 first time buyers will not have to pay any stamp duty". The announcement caused a host of cheers at the House of Commons on Wednesday 24 March.

But how has the government defined a first-time buyer? It appears the answer may not be as clear-cut as the term would suggest.

Who is eligible for the Stamp Duty concession?

According to HM Revenue and Customs, the first-time buyer must:

* be someone who has not previously owned a property in the UK (except a lease with less than 21 years to run) and anywhere in the world
* place a deposit on a house between 25 March 2010 and 25 March 2012
* own property worth less than 250,000 GBP
* own property that acts as their main home, not their holiday home or a house to rent out
* be someone who has not previously acquired an interest in a residential property as a joint tenant or a tenant in common
* be of any age (18 years old and above)
* be someone who has not previously owned an inherited property
* be someone who is buying for themselves therefore buying on behalf of family does not comply

Is this Definition clear?

The Council of Mortgage Lenders (CML) welcomed the stamp duty concession for first -time buyers but warns that there will be genuine practical barriers for effective implementation. The CML feel that the stipulation that first-time buyers "must not have previously acquired a major interest in residential property, anywhere in the world" will be a difficult one to verify.

Michael Coogan, director general of CML commented, "The Budget offers a modest potential boost to the housing and mortgage market in terms of reducing transaction costs for first-time buyers and potentially improving efficiencies for lenders. But as always the devil is in the detail, and the detail is confused. The stamp duty in particular looks like a tax loophole waiting to happen."

The recent announcement of the stamp duty holiday has sparked a debate among tax experts. Reports from the Guardian and the Daily Mail reveal that experts think the exemption will trigger a rush of property owners to fake a first-time buyer status. There is also speculation as to how to confirm whether the property bought is the owners' 'main home of residence'.

However, HM Revenue and Customs have warned that penalties will be enforced for dishonesty. The CML estimates that over the next year, there will be 136,000 newly exempt first-time buyers under the new allowance resulting in total savings for new homebuyers of 224 million GBP.

Looking for a mortgage? Fill out our short mortgage enquiry form and we will connect you with an experienced mortgage adviser from the SimplyFinance network who will be able to talk you through your options.

Lowest levels of Income needed for Mortgage payments for five years

2010-01-13T00:00:00Z

If you have just bought a house, or are in the process of completing on a property purchase, you may be interested to know that in November last year home buyers had a record amount of spare cash left in their pay packets after making the monthly mortgage payment.

New data released today by the Council of Mortgage Lenders (CML) shows that the amount of income that home buyers in November needed to use for mortgage payments was a at a record low. Typically people buying properties at the end of 2009 needed only 10.6% of their gross income each month to meet their mortgage payments, down from 11.1% in October of last year.

Commenting on the data, CML director general Michael Coogan said: "It is encouraging to see that mortgage interest payments are so affordable for home movers and first-time buyers. But with substantial deposits still needed to secure a mortgage, the market will continue to be relatively restrained for some time to come.

"With refinancing still unattractive or unnecessary for many borrowers due to continuing low rates, we are now seeing a much more house purchase-focused market, a profile much more like the beginning of the Noughties than its latter years." There were 53,000 house purchase loans granted in November, with loans to pay for new house purchasing accounting for 60% of all new UK lending in November, the highest proportion since 2001.

Remortgages have gone the other way however, due to the tight lending criteria and the fact that with the interest rates as low as they are. For many people, their current mortgage deal cannot currently be beaten. If you'd like to receive a free quote on a remortgage, please fill out our short remortgage form to be connected with a qualified adviser.

For those looking for either a first time buyer or a next time buyer mortgage or a remortgage at the moment, there are plenty of deals to be had, with many banks and building societies offering free valuations, cheaper arrangement fees and even offers on home buildings insurance. When deciding on whether a mortgage offer presents a good deal, make sure you take all of the costs into consideration. Read our article about calculating the true cost of your mortgage.

For a free, no-obligation mortgage quote, please fill out our short mortgage form and we will connect you with a professional, authorised adviser.