So you think you are ready to take the plunge? Looking at ways to getting on the housing ladder?
With latest announcements from the Bank of England that it is now curbing the income multiples on mortgage lending, there will be many sighs all around. The intent is to avoid an over-heated housing market, but the effect may be to push current home owners back into negative equity. Currently at the time of writing, no greater than 15pc of new mortgages will be extended to people borrowing more than 4.5 times their incomes. A “loan-to-income” ratio indicates how much a house buyer is borrowing relative to their annual earnings. For example, a borrower on a £50,000 salary who wants a £150,000 mortgage has a loan-to-income ratio of three. Nationally, around 9pc of new loans are at 4.5 times income or more, according to the Council of Mortgage Lenders (CML), but the figure is 19pc in London, which is said to be in a “bubble”. The Bank of England described 15pc as the “limits of our tolerance”. So how can you maximise your chance of successfully by getting on the housing ladder and, at the same time, feel confident that you can afford the mortgage and maintenance costs?
Before getting on the housing ladder, firstly, take a long hard look at your finances.
If interest rates rise will you be able to manage the mortgage repayments? And, what about house maintenance? You will be responsible for all repairs, together with the running costs including Council Tax, water, and other utilities, so make sure you factor these in.
Take time to get your financial position soundly organised otherwise you may find it very stressful.
Then shop around for a loan. Looking at mortgages and rates will help you to fine tune what’s in your price range. There are many different deals available, although not so many as in the pre credit crunch days so you will really need to find some good mortgage advice and work your sums out. It’s a good idea to get the property surveyed although if the purchase falls through for any reason, you will lose the fees you’ve paid out, so only book a surveyor where you’ve put an offer in on a property but are still at the stage where you can negotiate the final price with the property vendor. You will need to pay for local authority searches and if the property costs more than £125,000 you will be liable for Stamp Duty Land Tax (SDLT) of between 1% and 7% on the whole purchase price. You will also still have to pay SDLT if you swap something of economic value for a property, e.g. shares, another property…You won’t pay any SDLT if the property you are buying costs £125,000 or less.
One way in which you can increase your chances of getting on the housing ladder is look for an affordable property that’s a great bargain is to look at our properties; in addition, on our property website, you’ll find lots of useful hints and tips to make your property buying quest a great deal easier!