You’re reading 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 take in 2022.
As a new year begins, many people will be assessing their goals – and for some, those dreams will include first-time home ownership.
If you’re hoping to get on the property ladder this year and buy your first place of your own, then there are things you need to start thinking about now.
Home ownership is no easy feat, as house prices have soared while wages have stayed stagnant, forcing more people to rent at higher sums than a mortgage.
Stamp duty took a break until June 2021, which allowed some first-time buyers to take advantage, but it’s now back. With house prices as they are and hefty deposits required, as well as a pandemic that has made work more precarious, it’s no wonder home ownership feels like a pipe dream for so many.
But it’s still on the horizon for some people. And if that’s you, there are steps to take this year to put yourself in a better financial position by the end of it.
We spoke to Makala Green, 34, a chartered financial planner, about how to get your ducks in a row on the way to home ownership.
We asked Green what things people should be mindful of when looking to buy property, in terms of finance. “Interest rates,” she tells us. “It may not be the first thing you think of when buying a home, but with the latest Bank of England interest rate increase, there will be a hike in mortgage rates. Interest rates play a major factor in how much you pay, so aim to secure a favourable fixed rate.”
It’s also important to think about any future impact of the pandemic on your situation, she says. “Think about job security. We are still recovering from an economic downturn due to Covid-19, and times are not yet certain, so it’s important to take measures to ensure mortgage payments are affordable and mortgage cover is available should you be unable to work.”
Green recommends splitting your year into two to refocus your home-buying plans. For those hoping to achieve this goal this year, the best of luck.
Steps to take from January to June:
Use the beginning of the year to build a savings deposit by putting away a set amount each month (aim to save between 5%-10% of your desired property price)
Get rid of any unwanted expenses, subscriptions, debts or unhealthy spending habits to make room for your property savings
Investigate and make use of government savings and new tax-free allowances such as LISA’s (lifetime ISAs) or the Help to Buy ISA
Take advantage of bonuses or pay rises to boost your savings.
Steps to take from June to December:
Refresh your budgets mid-year. We tend to spend more during summer months, so stay positive, prioritise your property goals and try to refrain from impulse spending
Seek to create multiple sources of income if you can – that might mean taking extra work on, or simply selling any unwanted items on eBay
- Assess your finances, speak to a mortgage broker and work out your budget and wishlist: what you want in a home and what you’re prepared to compromise on.
- Research properties of interest and stay realistic about your budget.
Things to work on throughout the year:
Keep your credit in good shape; maintaining monthly payments and registering to vote is essential
Consolidate and clear any existing debts
Focus on improving your spending habits to turn your dream of buying a property into reality. That means seriously sticking to your budget.
It might seem daunting but putting these little steps into practice can take you a long way towards your goal. Disciplining yourself to save a large chunk on your pay cheque can help towards your deposit, for example.
A tip from someone who’s done it
For Chelsea, 24, from Sleaford, buying a a two-bed terraced house outside Lincoln via shared ownership in January 2021 meant being meticulous with her spending.
“I had been looking for a home as I wanted to move out from my mum’s,” she tells HuffPost UK. Chelsea works as a duty manager in a hotel and also runs a side business which helped her save.
“I have been saving for a few years, I started my own clothing business, Chelsea’s Collections, so that my wages from my job paid my bills and then any spending money came from my business. The rest of the money from my wages, with £50 going into a back up account so if anything happens to my car for example, I have back up that I only use for emergencies.”
Chelsea followed all the necessary steps, little and large. “I don’t spend much on birthday/Christmas presents as I buy majority in the Boxing Day/January sales and store them (the stuff I can) ready for the year – this includes cards as they are cheaper after Christmas! I also only opened my first credit card in September, purely to help my credit score.”
All the saving paid off. Chelsea found a property available and affordable through shared ownership. “I went to view the house and fell in love, so phoned my mortgage advisor who said to tell the estate agents I was interested, I then went to see her and got a mortgage in principle.”
Her advice for those also hoping to purchase a home: “If you’re looking to buy, avoid taking anything out on finance especially an expensive car as that can really affect whether the lender will let you borrow! Only ever buy what you can afford, otherwise you will never save.”
