Work Out Your Budget
According to the Money Advice Service, lenders assess what you can borrow based on your income. In general, you can borrow no more than 4.5 times your salary.
So if you earn £40,000 per year, you may be able to borrow an amount up to £180,000. In addition, they will take into account your living and personal expenses.
When they look at your salary, they take your basic and any other earnings, such as overtime, freelance work, or a second job into consideration. They will also factor in your investments and any pension, as well as income from child maintenance and any financial additions from an ex-spouse.
For those who’re self employed, you’ll need to provide proof of income via bank statements, business accounts, and details of tax payments made.
Future possible changes will also be assessed, such as if you or your partner became unemployed, if interest rates were to increase, if ill health forced you to stop work, or lifestyle changes such as starting a family or taking a career break.
- Mortgage calculator: You can use online tools such as the Money Advice Service mortgage affordability calculator or mortgage calculator to give you an idea of what you might be offered by a lender.
They can also be useful tools to work out how repayments might rise if interest rates went up in the future. - Lenders: There are many different lenders to choose from. These include banks and building societies. The biggest banks in the UK are a good place to start, such as HSBC, Barclays, and Lloyds, but very often people find that smaller building societies offer better deals.
You can use various comparison websites to find these, such as Money Saving Expert, Money Facts and Which. - Help to buy scheme: The British Government is committed to helping people get on or move up the housing ladder. To this effect, they’ve introduced various schemes, such as an equity loan where you can get a 5-year interest free loan of up to 20% of a property price (maximum property price of £600,000).
In year 6, you’ll be charged 1.75% interest on the loan, and this will increase every following year. The loan must be paid back after 25 years or when you sell your home – whichever is the earliest.
Once you’ve worked out the amount you can spend on purchasing a house, the next step is to…
Choose an Area
- Work out priorities: These will differ depending on your personal circumstances. These might include whether or not you have a family, if you have pets and need to be close to open spaces, where you work and the transport links to get there, whether you want a garden or not, how many bedrooms, etc.
- Average prices per area: London Property Watch is a daily updated website that gives average property prices in all London postcodes for all different sizes of house.
This is a great tool to start to work out if you can afford to live in a particular area, as prices range considerably from the cheapest to the most expensive. - Flexibility and compromise: When it comes to working out where you can afford to live and your priorities, it’s highly likely that you’re going to have to compromise on at least some issues.
For instance, you might choose to live in a cheaper area so you can afford a larger house, or you might be willing to forgo the luxury of a large garden so you can afford to buy in a certain school catchment area.
Once you’re at this stage, the next step is to…
Start the Search
- Websites: This is the place many people begin, and there are a few comprehensive websites that list properties from the various different agents. The best known of these are Zoopla and Right Move.
On both sites, you can narrow your search in many ways: from area to area, house size, specifications such as a garden or private driveway, bungalows, houses, flats… The list goes on.
Both websites also offer handy tools to aid your search, such as previously sold prices, how house prices have risen and fallen historically in areas, and various other advice topics and property guides. - Estate agents: Of course, many people like to register with estate agents. Doing this means that once they know your needs, the agent can contact you the moment a house comes on the market – and probably before it even gets on the website.
Some of the biggest estate agents in London include Foxtons, Featherstone Leigh, and Hamptons. - Private listings: Many people choose to market their home privately, instead of going through an agent. The advantage for both buyer and seller is that there is an absence of estate agent fees to pay, and therefore the property may be cheaper.
There are various websites that private vendors advertise. These include Gum Tree and The House Shop. Purple Bricks is also worth looking at – a fairly new venture that offers sellers a low fixed fee, therefore you may find houses at a lower price than with other, more traditional estate agents. - Understand estate agent jargon: It won’t take you very long to realise that estate agents have, how shall we put it… A way with words…
And once you’ve viewed a few properties, you’re likely to become very adept at understanding it. For instance, things like “boasts character features” could mean that the property has low beams and ceilings. And a “low maintenance rear garden” means that there’s no lawn!
Another classic to be aware of is something along the lines of “tremendous scope for improvement,” which translates into “needs an awful lot of work.”
However, such a property might well be ideal for those looking to put their own stamp on a house, and might well mean that you could snap up a bargain. It’s all about compromise and flexibility, as mentioned above.
Hunting for a house in London is one of the most exciting yet frustrating things you’ll ever do. It’s important to remember that this is a happy event (as you trudge to yet another property that looks nothing like the listing, or you get another offer declined).
Keep at it, you really will find the right house, and the day you take possession of those sacred front door keys honestly will be a day to remember. Good luck and happy hunting…
