After two years renting in Edinburgh, my husband and I realised very quickly that the money we were paying every month to the landlord would be better invested in something else. It was 2013 and our rent for a 2 bedroom flat was £800, plus all the bills and council tax on top *expensive alert!*.
Renting is great when you need the freedom and mobility however we were happy living in Edinburgh, both of us had stable jobs and no intention to move elsewhere for the medium term. Spending money in rent and saving for a deposit at the same time was a challenging objective, but as a couple, we were fully committed to make it happen. We started to skip the morning Starbucks and the popcorn at the cinema to put together a decent 10% deposit towards our first step in the property ladder.
Getting your first buy right
First steps in the real estate market have very little to do with your dream home or that fancy fireplace you always wanted to have in your living room. My personal opinion is that your first mortgage needs to be an easy to pay, good investment in the medium term. For some people, it can be discouraging to buy a flat rather than a house or having to cut down the number of bedrooms that they ideally want *goodbye dressing room!* however you must adopt a long term mentality with all your investments, including your home.
Every person is different and so are each one’s needs. Perhaps you are looking to buy your first home on your own, maybe you have a partner and some buyers might be even expecting their first little one. Life goals are very important: you can be career focused or perhaps your main purpose is to be independent and travel the world non-stop. When talking about lifestyle, there is not right and wrong as everyone has the right to live at the fullest. That being said, I find there are some hints and tips that are useful prompters when starting to hunt for a home to call yours.
Five recommendations towards a first good property investment
I. Understand how much you could borrow under your current financial circumstances.
This is the first step that everyone should take when starting to consider getting into the property ladder. Most of the people I know start by looking at properties and have major disappointment when banks don’t give them a big enough loan or even a mortgage at all.
Ask your usual bank (and ideally a couple more) to study your personal financial situation and give you an estimate amount that you could borrow. This ballpark figure will help you to filter which properties you should be looking at. No one wants to be wasting time looking at a four bedroom + conservatory home that you cannot afford.
II. Think about how much deposit you would need
Once you know how much money you could potentially borrow, you will have an estimate of how much deposit you would need in advance. For example, if banks are telling you that you could borrow up to £250k, your minimum deposit will be around 10% of that amount or £25k.
Bear in mind that you don’t have to borrow the entire sum that the bank is willing to lend you. Borrowing less will also make your deposit smaller, which might mean that you could get in the property ladder faster (and this would be really good for your money as instead of spending it in rent, you would be paying towards your own property).
III. Do some maths and find out how long would it take you to save that amount
Saving £25k is tough, especially if you are paying rent at the same time. Perhaps you have some pre-existing savings that can use towards your deposit but make sure that you think about feasibility. The sooner you have your deposit in a bank account, the quicker you will stop paying rent and living in your own property.
IV. Consider what are your home musts and the nice to have.
We started to look for a home in Edinburgh after we completed steps 1, 2 and 3 above. The next thing we did was to take some time to prioritise which things were absolute requisites for us. For example, we wanted to have more than one bedroom and a spacious kitchen. It was very important to us to be in a quiet neighbourhood with lots of connections to the centre. My husband was adamant that he wanted to have a garden.
This enabled us to filter out a lot of one bedroom properties without even going to visit them. We also discarded areas that were very far away from the centre as well as the city centre itself.
Once we have a clear view of the essential characteristics we definitely wanted, we also defined things that we would like but they were more negotiable, such as wooden floors, double glazed windows, built in closets, south facing property, etc.
V. Be realistic about your lifestyle
Make sure you are realistic at this stage, as it won’t make sense to look for a five bedroom detached house in the most expensive area if the amount you can borrow is very limited or if you are currently unemployed.
Ask yourself some key questions such:
* Will my lifestyle change in the short term? (e.g. do you see a breakup in the horizon? Are you and your partner trying to have a baby?)
* Do you trust you will do well in your professional career? (e.g. is your employment stable? Do you enjoy what you do? Are you willing to push for that promotion?)
* Are you ready to settle in one place for the next 5 or 6 years?
* Are you committed to save for your deposit?
Remember you are buying the home you need now. It is cool to have life goals such as getting married and having three children; however you don’t have to buy your life goal home right now if you are single and still living the dating life. Houses, flats, studios, penthouses… all of them can be sold when your lifestyle changes in the future.
- I created a First Home Buy Goals template to help me think about the non-negotiable home features versus the flexible ones. You can download for free here.
- The Money Advice Service have some interesting recommendations around buying your first home
- Some people have uploaded YouTube videos explaining their own experiences: Ria Alice talks about how she saved for a mortgage deposit and and Helen describes the process of buying a home in very simple terms.
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