Does your home meet your future needs?

Deciding to buy a home is very exciting, but it is important to understand that it is a major financial commitment that should be given the proper consideration. Given the long-term nature of a property investment, there are some essential elements that should be carefully measured beforehand, to ensure you are making the right decision and purchasing a property that meets your needs both now and in the future.

Purchasing a property is a decision that will have an impact on your financial well-being, which is why it is essential to make an informed decision based on your life plans. Consider both your criteria now and how your needs could evolve over the next five to ten years. Rushing into the decision without considering your future plans and goals could end up costing a lot more money in the long run.

Before even looking at potential properties, sit down and determine what features you currently need in a home, as well as the features you may require in the future. A few elements to consider would be the number of bedrooms and bathrooms, the need for a garden and accessibility to public transport .  There may also be special criteria such as energy-efficient features, the number or type of parking facilities or wheel-chair accessibility.

Here are some examples of questions you might ask when looking for a home that will meet your future requirements:

  • Do I need a home office?
  • Do I plan to have children?
  • Do I have children who will be moving out soon?
  • Am I close to retirement?
  • Will I need a home that can accommodate different life stages?
  • Do I have an older relative who might come to live with me?

Everyone will have their unique criteria that will be specific to their life stage and plans.

The biggest restriction when looking to purchase a home that will fit in with your plans is affordability. Financial restrictions could mean compromising on certain aspects, even if only for the time being. For example, if a newly married couple who want to start a family need a second bedroom, but can only afford a one-bedroom home, they could find a home that they can add onto when they are financially ready. This way the home will meet their current needs while having the potential to grow into their plans.

Regardless of the type of home, you decide to buy – sustainability is a key issue to homeownership. Ensure that you can afford to sustain the financial obligation before entering into the agreement.

Mortgage repayments are not the only financial consideration when it comes to affording a property, as there are other costs involved in both the property transaction and homeownership. Take these additional costs into consideration when assessing affordability as they can add up to a relatively large amount.

Another essential aspect to consider in every property purchase is location. Location is a key influencer when it comes to a home’s future investment potential. It is far better to compromise on the features of the home than on its location. Purchasing a property in the right location that meets both your short and long-term needs will provide you with the benefits of an accommodating home that grows in value over time.

5 Essential tips for single homebuyers

  1. Budget

Buying a home on your own is an amazing move and a great step towards financial security, but make sure it’s a home you can afford if there is a momentary, or longer, blip in your financial profile.

  1. Maintenance

Being the only person with a set of house keys also means being the only person responsible for maintenance. A leaky tap or overgrown lawn won’t take care of themselves.

  1. Safety and security

Remember that being a single homeowner doesn’t allow for someone to be home the majority of the time. So you will need to consider safety and security issues.

  1. Resale and longevity

Purchasing a home is a great long-term investment. However, there are many reasons single homebuyers may need to move, such as relocating for a job or lifestyle change.

  1. Future

You buy yourself a nice little home or apartment now. But someday you might not be single and you’ll add a significant other to your team and possibly even children.

How to avoid the home buying blues

Studies reveal that eight out of ten homebuyers have at least one noteworthy regret regarding their property purchase decision. Why is this? The fact is that many homebuyers get caught up in the emotional journey of buying a home and sometimes overlook certain important aspects. It is only once they have moved into their new home, and everything has settled that the reality of the situation sets in and they start to see the things they previously may have missed.

Purchasing a property is a large financial commitment, yet many base their home buying decision on only a few minutes of viewing the property. If you are not fully prepared and do not have an idea of exactly what you are looking for, it could be easy to miss something or make an incorrect decision.

Here are a few tips you can use to avoid regretting your purchase:

Stay focused

Ideally, before you start to look for a home, make a list of your needs and wants, prioritising the must-haves and noting the elements you are willing to compromise on. Don’t get distracted by the wants and remain focused on the must-haves. If the house has many of your wants but does not meet their main objectives – it is not the right house. Due to the long-term nature of homeownership, you will have to deal with your compromises for a long period. Therefore it is essential you make the right decision up front. Working with an experienced, reputable real estate professional will assist you to keep on track and find a home that meets all your criteria.

Check the finances, and then check them again

One of the main reasons that buyers regret their home purchase is unexpected costs. Calculate how much you can afford, considering all the associated costs that go along with homeownership such as council tax, insurance, service charge, maintenance and ground rent if the property is leasehold.

The bank, mortgage lender or professional financial adviser will be able to provide you with a list of costs that you can expect to pay when purchasing a home.

Having the home inspected will also give you an idea of the type of repairs that you can expect so that you can budget for this beforehand.

Don’t get caught up in a bidding war

A competitive offer from another prospective purchaser could make a home seem more attractive than it is and lead you to push up your offer. However, it is important to stay objective and keep in mind that you are trying to buy the right home – not win an auction. It is best to walk away from the deal than overpaying because of a bidding battle. Paying more for a property will mean larger deposit requirements, higher fees and thousands in additional interest on a larger mortgage. Another downside is that it will take much longer to build up any equity.

Purchasing a home is one of the largest financial investments most people will make in their lives. While finding the right home can be an emotional rollercoaster, it is important to keep things in perspective and focus on what matters to avoid any remorse.

Downsizing – is it the right decision?

The kids have flown the nest, and you no longer need a large high maintenance property – maybe it’s time to downscale? For some, this could be a tough choice to make, especially if they have lived in the home for many years and seen their kids grow up there. However, others may well look forward to a more relaxed lifestyle, unfettered by monthly mortgage payments and the never-ending upkeep and maintenance that is part and parcel of owning a larger property.

Either way, when it comes to downsizing, there are a few aspects to consider.

The pros

There are numerous lifestyle benefits to downsizing from a large property to a smaller one. For one, you are no longer responsible for the upkeep and maintenance of a home, a large garden, and other property features you may no longer use. Also, downsizing can result in significant monthly cost savings on water, gas and electricity, council tax, buildings and contents insurance, ground rent, service charges, and maintenance and building work.

Run the numbers

The biggest expense in most households is the mortgage repayment, and whether you will be free from this responsibility will depend on how well the family’s finances have been managed. If you have paid off your mortgage or at least the bulk thereof, it might be possible to sell the property, settle the outstanding balance and have enough capital to purchase a smaller property without having to enter into a new loan agreement.

On the other hand, if enough equity has not been built up, things could be slightly more tricky, especially if you are retiring. After a certain age, banks are not as willing to grant applicants mortgage finance. In this situation, you will need to carefully consider what monthly rental or mortgage repayment you can afford on your lower pension income. Bearing in mind, it will also need to cover the costs involved in buying a new property, such as a deposit, stamp duty, conveyancing, valuation fees, mortgage arrangement and broker fees, and removals.

Capital Gains Tax (CGT)

Most people who sell the primary residence will not have to worry about paying Capital Gains Tax because of the private residence relief. However, there are certain instances where CGT becomes a factor in the property sale. You may be required to pay CGT if:

  • Part of the home has been developed, for example, by converting part of it into flats
  • You sell part of your garden and your total plot, including the area you’re selling, is more than half a hectare (1.2 acres)
  • A portion of the home has been exclusively used for business
  • Let out all or part of your home – this doesn’t include having a single lodger (to count as a lodger and not a tenant you need to be living in the property too)
  • You have moved out of your property 18 months or more ago – to move into a partner’s home for example
  • The home was purchased for the purpose of renovating it and selling it on.

Timing is key

If it is not the best time to sell, consider delaying the decision to downscale by a few months as it could result in a better selling price depending on market conditions.  On the other hand, you would be selling and buying in the same market and delaying the downsizing decision could mean missing out on a good buying opportunity.

What about letting it out? 

If your mortgage is paid off, perhaps consider letting out the property, rather than selling. If there is still a mortgage on the property, this option will be far less attractive with the introduction of the Section 24 taxation on landlords. Letting out the property will also come with its own set of challenges such as who will manage the property.  This option will also require you to have enough cash flow to cover any vacancies. While letting out the property can supplement your income, it is important to remember that once you have let the property for 18 months it becomes subject to CGT.

Provided all aspects are considered carefully, downsizing can form part of a comprehensive plan that leads to a simpler lifestyle that offers financial freedom. A real estate professional or financial adviser will be able to give excellent advice on the first steps.

INTEREST RATES AMONG THE LOWEST IN HISTORY

While the interest rate increased from 0.25% to 0.5% in November last year, it still at one of its lowest values in history and is highly-favourable for potential homeowners who are trying to get their foot on the housing ladder. While the marginal change in the interest might have some consumers tightening their belts slightly, historically 0.5% is still one of the lowest interest rates the British home buyer has had to endure.

From 1971 until this year the interest rate in the UK has averaged 7.59%, reaching an all-time high of 17% in November 1979 and the record low of 0.25% in August 2016. In July 2007, the official bank interest rate was 5.75%, which means that from that date up until November last year, the bank’s base interest rate had dropped by 5.5%. Even with the 0.25% increase, homeowners who purchased their property with a mortgage within the last decade are paying less for their home now, than they did when they first bought it. Bearing in mind that banks will generally grant mortgages at an interest rate around 2% to 3% above the base rate, on a repayment mortgage of £200,000 over a period of 25 years at 7.75% (base rate of 5.75% plus 2%), the monthly repayment would have been £1,511 with a total repayment of £453,149. The same mortgage at an interest rate of 2.5% (base rate of 0.5% plus 2%) would cost £897 a month with a total repayment of £269,204.

While there are markets such as prime central London, where the majority of home sales are cash buyers, for the most part, prospective homeowners around the country are dependent on mortgages to purchase a property. A low-interest rate will help build consumer confidence and increase their chances of getting into the market. High-interest rates widen the gap for prospective homebuyers to meet the necessary criteria that mortgage lenders require for the applicant to obtain the finance. They also mean that applicants may have to opt for a lower mortgage amount, which could result in them having to choose a smaller home or perhaps one outside of their ideal location. Very often, high-interest rates push lower-income earners out of the market completely.

Another advantage of the current favourable interest rate is there may be some room in  consumer’s budgets to pay extra into their mortgage to reduce the term of the loan and pay the property off faster. This will, however, depend on the lender and their policies and fees with regard to overpayment. Most lenders will allow homeowners to overpay 10% per year if they are still in their introductory fixed, tracker or discount period. Usually, once this period has passed, you will be able to overpay as much as you want, but again this depends on the lender and their policies, so best to clarify beforehand.

At the moment the UK is among the top fifteen countries in the world with the lowest interest rates. While there are talks of the interest rate going up in the future, for the time being, UK citizens should make the most of the current circumstances and place themselves in the best possible position to get into the property market.

 

8 TIPS FOR AN EASY MOVE

Get Rid of Clutter Before You Move
The more items you can clean out before you move, the better off you’ll be. Decluttering and getting rid of unused items means you will have less to physically move on moving day, which means you will be less tired and stressed. If you’re feeling overwhelmed by how much stuff you have, try the 12-12-12 rule. Donate 12 things, throw away 12 items, and return 12 items to their proper place. It’s an easy, laid-back way to declutter your space quickly.

Pack for a Successful Move
It is essential to pack your boxes well to ensure that all your items arrive at your new place in the same condition they left the old one. To reduce shifting and to maximise space, pack your plates, dishware, frames, and books vertically. Keep clothes on hangers and wrap rubbish bags around a bundle at a time. This makes them easy to carry without falling on the ground. For your beautiful accessories, thread delicate necklaces through a straw and fastening the clasp so they don’t get tangled.

Colour Code and Label Everything!
When packing you need to be thinking about the unpacking process when the items arrive at your new place. Make it as easy for yourself as possible and label boxes with things you will need straight away with “Unpack First.” Load these labeled boxes into the truck or storage container last. When taping up your boxes, buy different coloured tape and assign a colour to each room. This will make unloading and sorting in your new home easier.

Take Photos of Your Audio & Video Components
Take a photo of your electronics wiring configuration before you pack them so you’ll be able to reconnect them at your new place. There are tons of apps, like Evernote, Sortly and Google Keep that let you take images, record audio, and create checklists.

Purchase All Your Moving Supplies Before Moving Day
Stock up on box tape, rope and any other moving supplies you may need before moving day. Make sure you securely pack all of your belongings and have your big items covered in the moving truck or container to avoid damage and minimise shifting. Moving bands are also a great way to wrap blankets around soft furniture, like couches and mattresses, before you tie them down.

Hire Packers and Loaders
Trusted moving and storage companies should be able to provide you with contact details of people that can help you move. Before hiring any help, check their reviews, social media, and ask friends for any recommendations as well. Hiring professional, reputable moving help can be the icing on the cake when it comes to planning an easy move.

Maximise Your “Cubed” Space
Rather than used bags, pack as many of your items into boxes as you can. Boxes stack well and can give you a tight fit in your storage container or van. This makes all your belongings more secure and allows you to efficiently fit more stuff in a smaller space.

For Moving and Storage – Think Outside the Van
Portable storage containers allow you to have unlimited time when loading and unloading your belongings. Stay organised and in control by loading your boxes into your container as soon as you pack them. If you label them properly, this will eliminate confusion and spare you from drowning in a sea of boxes inside your home.

School Ratings Impact Property Prices

Regardless of whether you have children or not, if you are looking to purchase a property, it is best to choose a home that is near a well-rated school. Why? Because school ratings affect demand and have an impact on property prices.

According to a study published in the Financial Times, an increase in a school’s Ofsted rating inadvertently boosts property prices in the area. The data revealed that homes located in well-heeled areas received an immediate increase in their value when a local primary school was awarded a higher Ofsted rating.

The Ofsted rating is used by parents across the country to determine school performance and assess whether they would want to send their children to that particular school.  The rating is given more weight by parents than any other school performance measures such as exam results. Schools with an “Outstanding” rating are in high demand among parents, which in turn increases the demand for property within an easily commutable distance. As demand increases, so does the value of the homes in the catchment area as buyers are prepared to pay more to live there. In certain circumstances, buyers have been known to offer between 5% and 10% over market value for the right home within the right catchment area.

The findings of the study, which looked at the ratings of 8,000 primary schools in England, found that prices of properties located in affluent areas where a school’s rating had been improved by one notch, rose by as much as 1.5% on average. The impact on home values in less-affluent or disadvantaged areas was not as apparent, with prices in those neighbourhoods only increasing by approximately 0.5% on average. This could be a result of other factors in those areas negatively affecting demand in those areas.

While an improvement in the Ofsted rating had a positive impact on housing prices, the opposite held true when a school was downgraded with home prices taking a knock in those areas by the same margins.

With Ofsted having such a bearing on the property prices in an area, property search portals have introduced a ‘school checker’ feature which shows a school’s most recent rating, the catchment area and the distance from the property.

At the end of the day, it is clear that people are willing to pay more for a home if it means they have given their children the opportunity at a better-quality education.

A great real estate agent will be able to provide insight on the schools in the neighbourhoods where you’re looking to buy. Find one to work with here.

5 Budgeting tips to help you save for a down payment

Here are a few tips to help you on your journey to becoming a homeowner:

1.Track Every Pound

Find out exactly where your money goes each month by keeping track of every single you purchase over 30 days. Review your card and bank statements to categorise where you spend each pound.

2. Rate Every Purchase

Using the month of expenditures, rate each item or service you bought as a “want” or “need”

3. Set Savings Goals

Using your “needs” and “wants” list determine where you can realistically cut spending. Use the budget to set monthly and yearly savings goals.

4. Set Aside Funds

Create a separate savings account for your down payment. It’s not only easier to track but blocking off funds may make you think twice before dipping into that money for something other than your future home.

5. Save Automatically

Set up a “down payment” savings account and have a set amount automatically transferred each month.

Carry on renting or buy?

Deciding whether to stay in the rental market or buy is a choice that many people struggle with. Purchasing a home is one of the largest financial decisions you will ever make, so it stands to reason why so many are apprehensive about getting it right. Weighing up the pros and cons will help you make up your mind and know what the right choice is for your current situation.

So what are benefits of getting your foot in the door?

  • The sooner you get into the market, the sooner you can pay off your mortgage and have a home you can call yours. Once the mortgage is paid off, the home is yours for as long as you want it.
  • You will benefit if your home increases in value. Over the long-term property will appreciate in value, creating equity that can be used to help to buy a bigger home or fund your retirement.
  • Decisions regarding the home are yours to make. You don’t have to ask a landlord’s permission to spend money improving the home. Also, spending money on the home will help increase its value, which will benefit you directly.
  • Depending on the situation, it can be cheaper to pay a mortgage than the rent.

While the benefits of owning a home are appealing, there are cons to being a homeowner.

  • A property purchase should be viewed as a long-term investment. It is a big commitment, so you need to be sure you are ready and can afford it for the term of the
  • If the interest rate goes up – so do your mortgage repayments. There needs to be some financial cushioning in the budget if this happens.
  • As the owner, you are responsible for all maintenance costs. Ideally, you should have a contingency fund saved up to assist with emergencies such as a broken boiler.
  • There is also the matter of additional services charges when purchasing a flat, which you won’t incur if you are just renting.
  • Depending on the market, you may have to hold onto the property for longer than you initially intended to.
  • There is less flexibility when you own a home. Moving involves possibly selling, which means more money and planning.

When considering whether purchasing a home is the right choice, a major factor is affordability. Does buying a home make financial sense for you in your current situation? It is important to remember that there is more to being able to afford a home than paying the mortgage. Here are some other costs you will need to factor in during the home-buying process:

  • A deposit – on average first-time buyers put down a deposit of between 10% and 20% when buying their first property. If you opt to use a Help to Buy or shared equity scheme, the deposit requirements will typically be around 5% with the government or developer loaning you the remaining 15%.
  • Survey costs – a survey will let you know of any possible repair costs you can expect to pay in the future. It will give you an idea of how much you will need to invest in the home after you have bought it. Surveys vary in price from around £500 to £1,500 depending on the type of survey and the amount of detail you require.
  • Stamp Duty – any residential property or land purchased in England, Wales and Northern Ireland that costs more than £125,000 (£40,000 on a second home) will incur a Stamp Duty. The amount of Stamp Duty liable will be based on a sliding scale depended on the value paid for the property over the £125,000 threshold.
  • Legal costs – there are a few ways in which solicitors charge their fees, such as a fixed fee, an hourly rate, and a percentage of the property price.
  • Ongoing monthly costs – Council tax, gas, electricity, phone line, etc.

If your goal is to ultimately ditch the rental market and own a home, but you can’t afford it at the moment – save, save, save. If possible, find ways to curb your spending and set up a savings plan that will help you reach your goal. Depending on your career and financial situation, there are also help to buy schemes that will assist buyers to purchase their first home.

Buying a home – It’s an emotional journey

While the majority of home buyers will generally have a checklist of must-have features such as the numbers of bedrooms, bathrooms, amenities in the area and commute to the office, often it is emotions that drive home purchasing decisions and not the facts. For many home buyers, the decision comes down to how they feel when they first walk into the property.

Ideally, buyers should err on the side of caution when purely basing their decision on emotion, as this could turn around and bite them in the future. While it is natural to have an emotional response when going through the process, it is crucial that emotions are not the only reason that certain decisions are being made.

As buyers move through the home buying process, there are four emotions they are likely to experience. Understanding these emotions and keeping them in check will help you to remain level headed and buy the best possible home.

Exhilaration
Owning a home is an amazing milestone that many aspire to, so it seems only natural that the initial emotion would be excitement. If you are just starting out your home-buying journey it is likely you are in the dream phase of the process and searching for properties online. In these early stages, you will start to figure out what you like and what is available in the current market.

The start of the journey is an ideal time to sit down with a financial adviser or your bank to discuss budget and affordability. Another great resource is an estate agent who will be able to guide you through the steps of buying a property, along with the costs associated with buying a home, such as stamp duty, valuation fee, mortgage costs, and legal fees to name a few.

Overwhelmed
If you are a first-time buyer, there is a vast amount of information to ingest during the initial stage of the search. Apart from the various listings you will be viewing, there is also the matter of calculating finances, and preparing to move to a new home. The masses of information available and the number of decisions that need to be considered can be overwhelming.

You might start out with an idea of what you are looking for, but after seeing property after property, it is possible to lose sight of the initial vision. Having a clearly defined list will help to stay on track and narrow down the search. There are a few other ways that will help you keep tabs on all the properties to compare them:

• Write notes on each property viewed – this can be done using a smartphone, tablet or the more traditional pen and notebook. Make a list of the pros and cons of each property.
• Take photos – this can be done with the camera on your phone.
• Keep the records of properties you are really interested in and discard the others.
• If you have any inquiries, talk to the agent who showed you the property. They will have a record of the homes that they have shown you and will have a list of each property’s features.

Anxious
Once your decision is made and you are moving ahead with purchasing the home, you are likely to start feeling stressed out. Buyers are often anxious to get through the process as quickly as possible so that they can move into their new home. During this time is it important for the agent to explain the legal process while providing an estimated time period that each stage of the process will take.

Satisfaction
Often buyers feel a sense of accomplishment and fulfillment once they have made it through the process. Owning a property can provide you with a sense of security, as well as a cornerstone for building wealth, provided the right decisions are made from the beginning.

Understanding the home buying process and the emotions that accompany it will assist you to make decisions that are based on the facts and not just your heart.