Tuesday, 29 January 2019

Is it time to buy your first home?

First time buyer couple looking at smart phone
How old do you have to be to buy your first home? The obvious answer is that there is no particular age to become a first-time buyer. But sooner is probably better than later.

Research last year by Santander found that owning a home is cheaper than renting in every part of the UK. On average, across the UK, you could make a saving of £2,268 per year if you move from renting to owning. Savings are greatest in London where the average monthly rent is £289 more than comparable mortgage payments, adding up to a potential £3,500 annual saving.

So, if you can afford to buy, it’s the smart financial decision.

Rising house prices, though, have put mortgages out of reach for many young people. As a result, the English Housing Survey reports that the average age of first-time buyers is now 33 years, up from 30 years a decade earlier.

And research which we’ve done at Larkfleet found that 58 per cent of house buyers said that their parents bought their first home at a younger age than the survey participants had done.

Financial benefits of buying - not renting

Not surprisingly, research shows that one of the main motives of becoming a home owner is a desire to stop wasting money on rent and instead start investing in an asset that you own.

When it comes to buying your first home, though, it’s not just about the money. A survey for Yorkshire Bank last year found that more than 90 per cent of actual and prospective first-time buyers say they made the change because owning a property is a good financial investment. But nearly as many also cite ‘emotional’ drivers such as ‘it feels more like home if I own it’, ‘it makes me feel grown up’ and ‘it is essential to feeling like I have succeeded in life’.

In fact, first-time buyers say that owning their own home is the most important milestone in their lives – rated more important than having children, getting married or achieving career or educational aims.

So, if home-owning has all this going for it, why isn’t everyone doing it? Well, you probably don’t need us to tell you that the biggest obstacle is getting a mortgage. And, in turn, the biggest obstacle to getting a mortgage is putting together a deposit.

Help with the finance to buy your first home

Putting together the money you need to buy your first home may not be as hard as you think. Government schemes such as Help to Buy can make a big difference to how much you have to raise and how much you have to save.

And government isn’t the only source of financial help. Research has shown that 'The Bank of Mum and Dad' is the equivalent of a £5.7 billion mortgage lender. It’s supporting more people than ever - around 27 per cent of all buyers receive help from friends or family. And our own survey showed that almost half of the buyers who received financial assistance in this way were not expected to pay it back.

Even if your family cannot afford to put up cash, they may still be able to help you get a mortgage – without a deposit. Read our insight into ‘guarantor mortgages’.

So, maybe it is time to make a move. But what sort of house should you buy?

Buying a new home

Partly because of Help to Buy – which is only available on new-build homes – more than half of new homes being constructed by most builders are now being sold to first-time buyers.

But in addition to the financial incentives, first-time buyers say they buy brand-new homes (as opposed to ones that have been previously lived in) because:

  • Once you’ve bought the house, that’s it. It is decorated, ready to move into, and fitted with a new central heating system and new appliances. Buy a second-hand home and you may soon be facing big bills for redecoration, repair and replacement at a time when you are already financially at ‘full stretch’ with your new mortgage.
  • It comes with a ten-year guarantee. If anything significant goes wrong, the builder has to put it right – at no cost to you. With a second-hand home, you’re on your own from the minute you pick up the keys.
  • You will get help and support from the builder throughout the sales process in a way that is just not possible for someone selling their house privately.

So, how old do you need to be to buy your first home? The answer is ‘old enough’. If you can raise the necessary finance (and as we’ve noted above, that may not be as difficult as you fear) there is no time like the present!