You’ll read if this is the year a series of guides to tackling those big life goals the pandemic has put on hold – with the help of experts, we’re breaking things down into more manageable steps to be taken in 2022.
As the New Year begins, many people will rethink their goals – and for some, owning their first home will be one of those dreams.
If you are looking to move up the real estate ladder this year and buy your first property, there are a few things you need to think about now.
Homeownership is not an easy task as house prices have skyrocketed while wages have stagnated, forcing more people to rent higher rents than a mortgage.
Stamp tax has been on a hiatus through June 2021 which has allowed some first-time buyers to take advantage of it, but now it’s back. With current home prices and high security deposits required, plus a pandemic that has made work more precarious, it’s no wonder that home ownership seems like a pipe dream to many.
But for some people it’s still in sight. And if that is you, then this year you must take steps to put yourself in better financial position by the end.
We spoke to Makala Green, 34, a chartered financial planner, about how to get your ducks on their way to home in a row.
Makala Green says to divide your year in two to realign your home buying plans
We asked Green what to look for when buying property when it comes to financing. “Interest rates,” she tells us. “It might not be the first thing you think about when buying a home, but with the Bank of England’s recent rate hike, mortgage rates will go up. Interest rates play an important role in the size of your payments. So try to get a cheap fixed rate. “
It’s also important to think about the potential future impact the pandemic may have on your situation, she says. “Think about job security. We are still recovering from an economic downturn due to Covid-19 and the times are not sure yet, so it is important to take steps to make sure mortgage payments are affordable and mortgage coverage is available in case you cannot work . “
Green recommends splitting your year in two to realign your home buying plans. Good luck to everyone who wants to achieve this goal this year.
Steps from January to June:
Use the beginning of the year to build up a savings deposit by paying in a fixed amount every month (the aim is to save between 5 and 10% of your desired property price)
Get rid of unwanted expenses, subscriptions, debt, or unhealthy spending habits to make room for your real estate savings
Identify and use state savings and new tax-free allowances such as LISAs (Lifetime ISAs) or the Help to Buy ISA
Use bonuses or pay increases to increase your savings.
Steps from June to December:
Update your budget in the middle of the year. We tend to spend more during the summer months, so stay positive, prioritize your property goals, and try to avoid impulse spending
Try to tap into multiple sources of income whenever possible – this could mean taking on extra work or simply selling unwanted items on eBay
- Assess your finances, speak to a mortgage broker, and create your budget and wish-list: What you want in a home and what you are willing to compromise on.
- Research interesting properties and be realistic about your budget.
Things to work on all year round:
It may seem daunting, but following these small steps can get you far closer to your goal. For example, disciplining yourself to save a large chunk of your paycheck can add to your deposit.
A tip from someone who made it
For Chelsea, 24, of Sleaford, buying a two-bedroom townhouse outside Lincoln in January 2021 through joint ownership meant that she had to be careful with her expenses.
“I was looking for a home because I wanted to move out with my mother,” she tells HuffPost UK. Chelsea works as a duty manager in a hotel and also runs a side business that has helped her save.
“I saved up for a couple of years, I started my own clothing store, Chelsea’s Collections, so my wages from my job would pay my bills and then all the pocket money would come out of my shop. The rest of the money from my salary, £ 50, goes to a reserve account. So if something happens to my car, for example, I have reserves that I only use for emergencies. “
Chelsea followed all the necessary steps, small and large. “I don’t spend a lot on birthday / Christmas gifts as I buy the majority in the Boxing Day / January sales and store them (as far as I can) ready for the year – this includes cards as they are cheaper after Christmas! Also, I didn’t open my first credit card until September just to improve my credit rating. “
All the saving was worth it. Chelsea found a property that was available and affordable through joint ownership. “I went to look at the house and fell in love, so I called my mortgage advisor who said I should let the real estate agents know I was interested. I then went to her and basically got a mortgage.”
Her advice to those who are also looking to buy a home: “If you are looking to buy anything, avoid financing anything, especially an expensive car, as it can have a huge impact on whether the lender will give you credit! Always buy what you can afford, otherwise you will never save. “
HuffPost / Isabella Carapella