With Brexit looming the city of London is currently in home-buying turmoil, as house prices are fluctuating and mortgage rates have dropped. Recently the housing market has become more affordable, as the cost of homes has dropped considerably. In turn, this has created a competitive housing market and many purchasers are making all-cash offers – particularly buyers from the Middle East and China. A contributing factor to this current surge in house buying can also be seen to be linked to expert predictions that house prices will skyrocket post-Brexit.
However, if you are not familiar with all the complexities of purchasing a home, you may have future financial regrets if you impulsively try to jump on the property ladder. Do not fear – I know the housing market can be a scary place, so I have compiled a list of the top 5 mistakes first-time buyers often make:
- One of the first things people forget to consider is the option of renting a home. Although purchasing a home is often the best financial decision you could make, it doesn’t work in all cases. For example, if you have plans of only living in that house for a few years, it would not be economically viable to have to repay the completion costs in such a small time frame.
- Another mistake first-time buyers often make is not considering all of the financial implications of purchasing a home. Other than the cost of the house, there is also a deposit, stamp duty, maintenance fees and legal costs which may eat up your savings and leave you with no emergency funds.
- People also tend to forget about the importance of a home inspection before purchasing a home. An inspection will help to find any faults in your potential home, allowing you to use this as a bargaining chip with the seller. This will potentially save you from having to pay thousands of pounds in repairs after the sale has gone through.
- First-time buyers also tend to be under the impression that their new home will, without a doubt, rise in value. This is unfortunately not always true and there is not always a guarantee that if you pour all of your savings into a home you will receive a higher value home in return. A mortgage broker can also give you a reality check on house prices and values, as today, many home buyers rely on such online sites as Rightmove or Zoopla and may get a false sense of the true values of homes in the area.
- Buyers also commonly forget to consider affordability and the debt-to-income ratio before looking for a lender. This can leave people feeling disappointed, as a lender may reject your request based on your ability to pay for a home. Some first-time buyers fail to realise that if you’ve accumulated too much debt, your mortgage may not be approved and you must always show a history of saving before going to a lender. So make sure you keep a close eye on your credit score before applying with a lender, because if your score changes significantly before closing time you may find out that you no longer qualify.
All of these points will help you to make the best financial decision for yourself when purchasing a home for the first time. Remember to research and spend time understanding the market, and always make sure your credit score is as high as it can be and savings are in place before making the plunge. But most importantly, don’t forget to have fun – this is an experience you must enjoy!