Advice for someone hoping to be a first time buyer?

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Gordanus

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My not-so-youngster is thinking about buying in the next few years. And it's a long time since I bought a house so my info may be out of date. Here's my summary of what I said:

1 Save, save, save till the pips squeak, and use a higher interest European bank to save in.​
2 Keep a second saving account for any emergency/holiday etc that might arise.​
3 Current account for all daily/weekly/monthly expenses.​
4 Ensure the money goes from salary straight to savings (once you've decided on an amount), so you don't even see it.​
5 You'll need at least a 10% deposit on a house (has this changed?)​
6 You'll need 3 years of accounts, including self-employment accounts. (Do banks take into consideration periods of time working abroad?)​
7 You'll also need to take into consideration​
cost of solicitor for conveyancing,​
buying appliances,​
mortgage insurance,​
house insurance -​
best to have all this saved for too. Anything else?​
8 But there may be allowances for first time buyers of some description, but this can change from Budget to Budget. (Askaboutmoney is your best source of info)​
​
What else would you advise, suggest or note for somebody in late 20s/early 30s? Is it true that banks don't take into consideration rent paid over previous years as an indication of what the person can afford?​
 
Quick reply. I might think of more later.

Gordanus said:
Is it true that banks don't take into consideration rent paid over previous years as an indication of what the person can afford?
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No, that's not true. It factors, so long as they have record of it.

Gordanus said:
1 Save, save, save till the pips squeak, and use a higher interest European bank to save in.2 Keep a second saving account for any emergency/holiday etc that might arise.3 Current account for all daily/weekly/monthly expenses.
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What I would recommend is to keep their banking as simple as possible. Having multiple bank accounts and money going back and forth between them can raise questions in some cases where its not clear.

Gordanus said:
5 You'll need at least a 10% deposit on a house (has this changed?)
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Correct, but you can reduce that by any first time buyers grants or DIRT rebates they'll get.

Gordanus said:
6 You'll need 3 years of accounts, including self-employment accounts. (Do banks take into consideration periods of time working abroad?)
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2 years is usually enough, but 3 can be requested. Are they self employed?

Time abroad again can raise additional questions. They may be asked to provide their credit record from any country they lived in.

Gordanus said:
7 You'll also need to take into considerationcost of solicitor for conveyancing,buying appliances,mortgage insurance,house insurance -best to have all this saved for too. Anything else?
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Stamp duty.
 
Your son should avoid online gambling or any evidence of betting/gambling on his bank accounts.

Also, if your son were to have a baby before drawing down a mortgage, it will reduce the amount he can borrow significantly.
 
Thanks for that RedOnion! Appreciate it.

Work is a mixture of employment and freelancing, here and in England. Although the majority of the self-employment is here, as the freelancing in Britain (if I'm correct in this) seems to be more formal with tax and NI deducted. But it's all reflected in the yearly accounts.

Stamp duty! Of course! How could I have forgotten?


Have just been looking at the First Home Scheme and Help To Buy scheme - only for new builds, nothing for second-hand homes (unless you're renting it, your landlord has issued a Notice of Termination on grounds of wanting to sell the house, and you can afford to buy it)
 
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Gordanus said:
Although the majority of the self-employment is here, as the freelancing in Britain (if I'm correct in this) seems to be more formal with tax and NI deducted. But it's all reflected in the yearly accounts.
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Ok, there's an extra complication there. If they're paid in GBP for the freelancing work, it can weigh heavily on affordability, depending on the portion of income that's GBP. I'm assuming a sole trader, rather than having their own company set up?
I haven't seen a case of a freelancer with partial GBP income, but the bank might disregard c. 20% of their GBP income in calculations.

If they have a UK bank account, a UK credit report will almost definitely be requested. Can be awkward to obtain if they don't have a UK address!

Gordanus said:
Have just been looking at the First Home Scheme and Help To Buy scheme - only for new builds,
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Yes, a lot of the 'policy' behind it is to encourage new development. They could build their own home too if they fancy a real adventure!
 
Make sure they educate themselves on how mortgages work, eg fixed rates, how break fees work, cash back, switching and barriers to same etc. While the first hurdle will be to get a mortgage and find a home in the first place, once they are in the door they need to then maintain their mortgage in the same way they need to maintain their home.
 
Second this. If there is a choice between a cash back offer and a lower rate it's a useful exercise (with the help of online calculators) to calculate the total cost of both scenarios for the period in question.
 
I'd always encourage first time buyers to avoid the new builds and get something they can add value to. In this case I think it doubly applies as they are not a 'standard' PAYE type employee.

Consider a renovation project & look into the grants available.
 
Full tax review to ensure he is claiming for everything he can and is the most tax efficient he can possibly be, Retrospective tax review for past years also in case he hasn't claimed
On the European bank, check to make sure it is covered under an appropriate deposit guarantee scheme
What can the Bank of Mam and Dad provide, it may not even need to be cash but not every appliance going into the house has to be new. is there anything you can gift him or her to help get them started.
Anyway he can raise additional funds? 2nd job, sell the old mobile phones in a drawer etc etc ?
 
They can of course approach lenders/broker now, well ahead of looking for a mortgage to get initial feedback and understand what they are looking for and try to set themselves up going forwardto meet that.
 
If you and your spouse can afford to help them you and spouse can gift your child and their partner €3K each per annum, to help them save for a deposit. That could be €12K per annum. This is the small gift exemption scheme is there is no tax liability. You could do it now before year end and again in Jan to bring it to €24K.
 
Do people ever hire professionals to help in the search?

Maybe it's just me, but it's such a big once off purchase, how are lay people meant to price and choose a property correctly on their first go?
 
If buying a new build, do your research on the developer. There are good developers who have been around for decades. There are still a lot of cowboys out there too.
 
I would add registration fee to the list of the costs above, also that conveyancing is a lot more expensive than you might have paid 20 or 30 years ago.

Self employment in a non standard way might be challenging - but 3 years of accounts would help.
Some people saying go talk to bank now - I'd say no, I made that mistake once I thought I was in a position to buy, but the bank pointed out I needed a few thousand more and told me to basically go away. Maybe go to a broker first and explain the situation over the phone - they really are the place to go for FTBs who are not standard PAYE workers.

The new build/second hand is a tricky one - all new builds now are FAR higher standard than they were 15 or 20 years ago, but locations are often not great - most towns in the country are heavily built up, there's enormous hostility to infill construction, so most new builds tend to be edge of town developments. Second hand you might get a similar house albeit needing a lot of repairs at a cheaper or similar price but that might be worthwhile if you can get better locations. Ex rentals and homes lived in by very elderly people are often in a poor state of repair compared to owner occupied homes. But then you get to redesign things the way you want them, and not the developer selling you the new build.
 
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