How to Buy a House in 2021

How to Buy a House in 2021

You may have noticed on local Facebook pages an increase in the number of posts asking if anyone knows of any properties that are coming up for sale. There has been a housing boom since the pandemic across the UK with property prices increasing at a steady rate. In October 2021 Halifax announced the latest monthly growth is the largest since 2007, with the average house price rising from £263,000 to a record-breaking £267,587.

At first glance this doesn’t seem to be good news for first-time buyers, however by following these tips, owning your own home may not be as out of reach as you may think.

 

Interest Rates

Mortgage interest rates are at an all-time low. In recent days, the Yorkshire Building Society has released a market-leading rate of 0.78% However in order to qualify for this very low rate, you would need to have saved a 30% deposit.

There are two main types of mortgage interest rates and it will depend on your personal circumstances which one you choose:

Fixed-rate: the interest rate stays the same for a set number of years. The advantage of this is that the monthly payment will stay the same so it is easier to budget each month. The major downside to the fixed rates is if the interest rates fall you will still need to pay the higher rate.

Variable-rate: the interest rate you pay can change each month. This could be ideal if you expect the rates to fall, however, if rates rise, your monthly payments would also rise. In the late 1970s, mortgage interest rates rose to 17%

 

 

Affordability

So you have scoured through the online property websites and have found the house of your dreams but can you afford it? Before contacting your chosen lender, you can check your affordability online. Affordability calculators let you calculate how much money the lender is likely to lend to you. When working out if your dream home is affordable to you, it is worth thinking about the following factors:

  • Income – How much do you earn and is this likely to change over the next few years.
  • Moving costs – Will your new home need to be renovated before you move in and how will you finance this.
  • Living costs – How much money will you need to cover your living costs – council tax, utilities, insurances etc
  • Future interest rates – Are they likely to increase or decrease in the coming years.
  • Mortgage Payments – How much will your payments each month be? It is worth putting some figures into a payment calculator to work out the monthly payments. It may be possible to reduce the monthly payment by increasing the term of the mortgage eg taking out the mortgage over 30 years instead of the traditional 25. 

 

Government Schemes

Due to the rising property prices, the UK government have schemes in place to help you onto the property ladder. Depending on your circumstances you may qualify. The 3 main schemes currently running in 2021 are:

Help to Buy: Mortgage Guarantee scheme

This scheme was newly launched in 2021 and is aimed at buyers who wish to purchase their new home with a 5% deposit. The government will then underwrite 15% of the mortgage in the event that you default on the payments. First-time buyers and existing homeowners can apply for this scheme.

Help to Buy: Equity Loan

This scheme was updated in 2021 and is for first-time buyers wanting to buy a new build home. The government will lend you 20% of the house value (40% in London) as long as you have a 5% deposit and you can get a mortgage to cover the remaining share of the property. In order to qualify the housebuilder needs to be registered onto the scheme.

Shared Ownership 

This allows you to buy part of the new build property and rent the other part. You can then buy more of the property over time by reducing the rental part so you can eventually own the property outright.

 

 

Its always recommended that you seek professional help when applying for a mortgage. A good financial advisor will be able to guide you through the options available to you and may be able to find you deals that are not readily available to the average customer. Good luck!

 



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