If you’re looking to get onto the property ladder one of the biggest difficulties that you are likely to face is saving the deposit that you need to secure a mortgage.
To help with this, Warners are running a series of helpful pieces, offering advice for anyone buying a property in Scotland, on what you can do to make securing your dream home a reality.
As regular readers will know, last week we kicked things off by looking at some general money saving tips to help you plan budgets, reduce your outgoings and earn more from your savings.
This week we’re looking at how you can reduce the amount of money that you need to pay upfront to secure a property, drastically reducing the amount of time that you will need to spend saving.
Look Into the Available Government Schemes
Perhaps the biggest single thing you can do to help get you onto the property ladder is to take advantage of one of the government schemes that are available to first-time buyers. There are two main schemes available just now:
Help to Buy (Scotland) Affordable New Build Scheme – This scheme allows you to buy a new build home from a participating builder with a deposit of just 5% while the Scottish Government purchases an equity stake of up to 15%, allowing you to get access to far better mortgage rates with a smaller deposit.
As you’d expect, there are terms and conditions attached to this and you can read all about the scheme here on the government’s website.
Low-cost Initiative for First Time buyers - or ‘LIFT’ for short! The initiative shares some similarities to Help to Buy. It is possible to purchase an existing property on the open market using LIFT, so you are not limited to only buying a new-build property as is the case to Help to Buy. Again, the government has lots of information about the scheme on their website and you can read all about it here.
Avoiding Bidding Wars
In a competitive market you will find that most properties advertised on the open market sell for more than their valuation. Unfortunately, most lenders will only lend up to the valuation figure for the property you are buying. This means you will need to have the money on hand to cover any amount over the valuation figure that you bid.
To give you a practical example of what that means, if a property has a valuation of £100,000 and you want to bid £105,000 to buy it, the lender won’t lend beyond the figure of £100,000 meaning that you will need to have the remaining £5,000 on hand in addition to your deposit.
For many people, that can present an insurmountable hurdle. One of the advantages if buying a new build property is that you avoid getting dragged into a bidding war and can buy the property at its valuation figure, reducing the amount of money you need to have up front.
Another way to minimise the chances of getting involved in a bidding war is to look at properties that have been on the market for a bit longer. Properties always attract the most interest during their first few weeks on the market. If there aren’t a number of notes of interest on a property after this time it makes the likelihood of a closing date much lower and sellers may be more likely to accept a more modest offer.
Next week, in the final part of our series of money saving articles we’ll look at the steps you can take to help lower what you’re paying in rent while you are saving up for your deposit. In the meantime, if you have any questions about buying a property, feel free to contact us on 0131 667 0232 or email firstname.lastname@example.org