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Your student days are
over - no more living in an overcrowded flat surrounded by lots
of other noisy undergrads. Perhaps you have a dream of buying somewhere
and settling down?
Now that you have graduated,
all the newspapers are full of stories about how property prices
are shooting up like a rocket, so you probably want to climb aboard.
But beware- this will
be a major decision with long term consequences, so Graduate UK
has some tips to help you:
Timing
You alone know your financial
situation and obviously this general advice will depend upon your
cash, income, and property prices in the area you are considering.
Although it is tempting
to buy your own place as soon as possible, have you thought about
the benefits of renting for a bit longer?
Flexibility can be very
useful and if you want to gain experience by changing jobs, it is
much cheaper and usually quicker to leave a rented property. You
can budget for the rent and have no worries about structural repairs.
A furnished place saves
you the hassle and cost of making these arrangements.You can easily
move to somewhere of a different size if your needs change.
So consider your situation
carefully and, if you can't plan the next year or two with any confidence,
then you may be wise to defer buying.
Benefits
of buying
Buying your own property
can be very exciting. It gives the security of knowing that you
can live there as long as you want, you can decorate and arrange
things in your own style and will benefit from capital growth if
prices keep rising.
Cautions
On the other hand there
are a lot of initial costs to meet and you will have to pay for
repairs and maintenance.
There have been times
when prices have fallen and you could lose money if forced to sell
by a job move, or increases in interest rates making your mortgage
unaffordable. Such a situation would be very traumatic.
Costs
OK - so you are still
interested in buying. What will the costs be that you need to plan
for?
Deposit
Many lenders will
grant 100% mortgages to graduates, but you often get a lower
interest rate if you can contribute at least 5% (and ideally
10%) of the purchase price as a deposit.
Mortgage Indemity
Premium
Also be aware that
high value percentage loans usually attract a Mortgage Indemnity
Premium. This is a single payment for an insurance policy to
protect the lender against losing money if the property has
to be sold at a loss - it could cost several thousand pounds,
but not all lenders make a charge.
Survey
It is a very good
idea to apply for a mortgage before you start seriously looking
for your "ideal home". You can use a broker or apply
direct to the company of your choice - best buys are shown in
the money section of many weekend papers. Getting agreement
in principle lets you know your borrowing limit, the costs chargeable
by the lender and puts you in a strong position to negotiate
with the seller. You will probably need to pay for a surveyor
to inspect the property and report on its condition - very important,
but it could cost several hundred pounds .
Legal costs &
Stamp Duty
Legal costs will
also need to be paid. Stamp Duty is 1% on deals between £60,000
and £250,000 and the solicitor will charge for his work
and expenses - ask for a quote in advance to build into your
plan.
Miscellaneous
Will you need to
hire a removal firm, are extra carpets and furniture required,
what will insurance cost?
Where
should you buy?
Estate Agents say there
are three important things you should consider - location, location,
location! After deciding on the general area, consider things which
are important to you - public transport, shops, leisure facilities,
etc.
Sometime in the future
you will want to move again, so to help you make a quick sale then,
think ahead and buy a property which is convenient and will be attractive
to other buyers.
Type
of property
Another choice - do you
buy brand new, modern or historic?
Brand New
Buying from a builder
has advantages - everything new, a 10 year guarantee and neighbours
moving in at similar times may be more friendly. Be aware that
some builders offer incentives such as "free" carpets,
white goods, legal fees etc within the price.
However these things
do not increase the property value, so do not be surprised if
your surveyor gives a lower valuation than you are going to
pay, which can effect your mortgage application.
Established
A more mature property
will save you having to landscape any garden and may also offer
the opportunity to buy some of the existing furnishings at a
good price.
Renovation
If you are a DIY
expert , the prospect of buying an older property in need of
renovation might appeal. Buying something which is structurally
sound but cosmetically neglected can be a good opportunity to
add value with some flair and hard work.
Major alterations
can be very time consuming and usually cost more than planned.
Beware - this would be a big distraction at a time when you
are trying to work hard and make a good impression with your
new boss!
Conclusion
Expert advice is usually
worth paying for. Happy hunting but remember the old saying, "buy
in haste -repent at leisure!"
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