1. Not getting a clear idea of options
Most house buying guides will tell you to start by getting an agreement in principle for a mortgage so that you have a clear idea of your budget. But what this misses is that buying a property with a traditional mortgage is not the only option these days and so you may be ignoring an option that works better for you. For example, using shared ownership or the Help to Buy equity loan might mean you get a much better home for a given income and deposit.
StrideUp tip: If you live in London a great starting point to understand these alternatives is London Home Show. You’ll find a range of housing associations, developers and finance providers, and you can pick up a lot of useful information.
2. Not getting your debt in order
Getting a mortgage is complicated and having lot’s of debt and credit obligations adds to the complexity. This doesn’t mean having debt rules you out of a mortgage - rather by understanding what lenders look for and how they assess it, you may be able to significantly improve your chances. Not all debt is looked at the same – a car loan for example may not be seen as a negative sign, whilst a payday loan (even if repaid) almost certainly will be. For credit card debt, most lenders apply an assumed repayment rate of around 3% per month, so if you have £10,000 in debt, they will reduce your monthly disposable income by £300 per month. If you think your credit situation is complicated it may be worth speaking to a specialist broker first.
3. Emotional attachment to properties
Of course, buying a house is an emotional decision, but the emotional and financial aspects need to be balanced. At StrideUp we sometimes work with buyers who fall in love with a property and then leave themselves vulnerable to estate agents’ pressure tactics. The reality is that the average property in London recently has been selling for 7% below the initial asking price and so despite what an estate agent might say, there’s nearly always some room to negotiate on price.
StrideUp tip: remember there’s no reason not to view a property more than once – you’ll have a chance to think it over and decide with a clear head if the property and the price are right for you. In research by Which, 74% of homeowners said they viewed their current property more than once…
4. A property report or mortgage valuation report is not a survey
This is one area of the house buying process that seems to cause confusion. If you are getting a mortgage the lender will want a valuation report and someone will visit the property to do this, but this is not for your benefit – it’s a very basic check for the lender to manage their risk. Likewise with the “report on title” - your solicitor produces a detailed pack with information on the property, but this is not a survey and doesn’t serve the same purpose. Surveys are for your assurance that the property is sound and you will have to organize these separately from the points above. There are different levels of a survey at varying price points, so you’ll have to pick the most suitable one, but in all cases make sure you use an RICS regulated firm.
5. Paying rent and your mortgage
This is a common problem and unfortunately, the way the house buying process in England and Wales works means there’s no easy solution. If you’re currently renting often your landlord will want two months’ notice to terminate the tenancy. However, buying a property can easily take 6-8 weeks and there’s always a risk that the transaction falls through. It is only after exchanging contracts on the property purchase and paying a deposit that you can feel confident the transaction will complete, so it wouldn’t normally be advisable to give notice to your landlord before this.
StrideUp tip: the only real advice here is to negotiate as best as you can! If you can get a long period (up to a month might be possible) between exchange and completion and can convince your landlord to break early, you might be able to avoid making rent and mortgage payments at the same time.
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