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How I bought my first home

A HL client and employee shares their experience of buying a first home and what they’ve learned.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

It’s fair to say that nobody feels Financially Fearless when they’re trying to buy their first home.

We all know how hard it is to get on the property ladder. And the gender pay gap means women might face a greater challenge than men.

A report by the Women’s Budget Group last year found a house costs around twelve times women’s salaries, on average. For men it’s eight times. It might seem challenging for women to buy their first property. But there are steps you can take now to get closer to that dream of home ownership.

Ally, a colleague at HL and also a client, shares their experience of buying their first property.

This article is about Ally’s own personal experience and opinions, and isn’t personal advice. If you’re not sure of a course of action for your own circumstances, seek advice. ISA and tax rules can change, and their benefits depend on your situation.

How I set out to buy a home and started saving

As soon as I knew I wanted to buy a property, I started taking steps to make that dream a reality. Even though the prospect of buying seemed distant at the time, I still wanted to make progress towards my goal.

I started by getting a Lifetime ISA and putting a little bit away every month. It wasn’t a lot when I first started working, but as I changed jobs and my salary went up, I increased the monthly direct debit too. Then I’d top it up with my debit card if I had extra cash from somewhere.

These little bits all added up, especially since the government adds a 25% bonus on top. So, it’s worth looking into a Lifetime ISA if you haven’t already. Just make sure you understand the eligibility rules and limitations, so you know what you’re getting into.

I also knew that my credit score was going to be a factor, so I used websites to keep an eye on it. Even things like credit cards or whether you’re registered to vote can impact your credit score, and lots of websites will give you hints on how to improve yours.

Key Lifetime ISA facts

  • It’s a way to save or invest for your first home or later life.
  • You can pay in up to £4,000 each tax year and the government will add a further 25%. The amount you pay in forms part of the overall £20,000 annual allowance.
  • You can choose to save cash or invest in the stock market, and your money can grow free from UK income and capital gains tax. If you choose to invest, remember that unlike the security offered by cash, all investments fall as well as rise in value, so you could get back less than you invest.
  • You need to be between 18 and 39 to open a Lifetime ISA. But once it’s opened, you can continue to pay in until age 50.
  • You can withdraw your money to buy your first home after 12 months or wait until you’re at least 60 and take your money out then. Other withdrawals will usually mean there’s a 25% withdrawal charge so you could get back less than you put in.

MORE ON THE HL LIFETIME ISA

Working out what mortgage I could afford

I told myself that I’d start taking buying a house seriously either when I started earning £30,000 a year or when I turned 30, whichever came first. It was just a rule of thumb I gave myself to aim towards.

Then I started investigating house prices and mortgages to get a better idea of what I could afford. It’s daunting to see how expensive it all is. But I’d rather know how far away I am from my goals than not. Being in the dark can be scarier and make it seem like a pipe dream.

I was very lucky in that I received money from my family to go towards a house deposit. I wanted to put it somewhere that was easily accessible. But I also didn’t want it in my bank account where I could accidentally spend it.

I chose to put it into an Active Savings account so I could get a bit of interest whilst I was doing house viewings. Plus, I could keep an eye on it alongside my other HL accounts.

MORE ON ACTIVE SAVINGS

Getting an offer accepted on a property

Saving up a deposit is only the first financial hurdle. Even if you get an offer accepted on a property, there are solicitors’ fees and costs of moving to think about. I decided to set cash aside to cover these charges and to help refurbish the property when I moved in.

That was the decision I made but you might want to do it differently. Setting money aside meant a smaller deposit, which in turn meant higher mortgage payments. So, you’ve got to weigh that up.

I also decided to get a mortgage in principle (also known as an agreement in principle) from a bank. It’s where they give you an indication of how much they’d be willing to lend you if you were to apply to a mortgage. I found that helpful when making an offer because it shows that the bank would be likely to give you a mortgage. I chose to go through a broker, but you can go through the bank directly too.

My first offer was rejected, so be prepared for that. But, after what felt like the world’s shortest bidding war, the offer was accepted. The lesson here is to keep trying and it’ll hopefully pay off.

Staying in control of the house purchase

It took seven months from the offer being made to me finally getting the keys. Seeing things through to completion was a long and painful process.

My experience was a lot like most people’s. You’ll rarely find someone who said buying a house was swift and painless. But that doesn’t mean just sitting back and feeling completely powerless.

I found looping the estate agent in on everything got the job done quicker. In my case, the estate agent was the only person who was allowed to talk to all of the other parties involved. I couldn’t contact the seller or their solicitor directly, but the estate agent could. Including the estate agent in emails meant they could chase other people on my behalf.

The other thing to remember is your solicitor works for you and it’s in the estate agent’s interest to help the sale along. At first, I felt under pressure to make rash decisions because I was worried the sale could fall through. But in fact, you’ve got more power than you think you do. So ask them questions if you’re not sure.

My take home message – you’re a key player in the process, not just along for the ride.

The Active Savings service is provided by Hargreaves Lansdown Savings Limited (company number 8355960). Hargreaves Lansdown Savings Limited is authorised and regulated by the Financial Conduct Authority (firm reference number 915119). Hargreaves Lansdown Savings Limited is authorised by the Financial Conduct Authority under the Electronic Money Regulations 2011 with firm reference 901007 for the issuing of electronic money.

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    Important notes

    This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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