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Owning your own home is something that a lot of us aspire to do in our adult lives. As a country, we have been known to obsess over deposits and finding that perfect mortgage. But where do you start? Do you even know what you can afford to borrow? What interests rates are available or the difference between the interest-only, flexible rate or a fixed-rate mortgage. There is a lot to consider before you sign on the dotted line.

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Source: Photo by Lina Kivaka from Pexels

The UK Mortgage Market

The UK mortgage market has changed considerably during the last decade, especially due to the global financial crisis in 2008. If you can remember the Northern Rock scandal that so many were trapped in. This led to a review of how mortgages were managed and approved and created new borrower rules, but according to The Guardian, UK mortgage applications are at a 12 year high with house prices still rising. So we all still want to buy our dream homes, which is no surprise when, according to ONS in the UK, 63% of households are homeowners.

However, it is worth mentioning that homeownership has declined within the mid-30s to mid-40’s age band, with most still renting in the private sector compared to their parents who own their own homes. The ONS report that if the declining homeownership trend continues for the current generation of 35 to 44-year-olds, older people in future would be more likely to live in private rented accommodation than today.

But the government has a plan, as the BBC mention Boris’ new first-time buyer scheme offering 95% mortgages. It could just be the perfect mortgage for first-time buyers. I wouldn’t get too excited, just yet. Every five-ten years, the government introduce a new housing scheme, which I will talk a little about below.

Rent vs Mortgage

Should I rent or buy my home? Do I really want to be paying someone else’s mortgage? While these are valid questions to ask yourself, taking on your perfect mortgage there is a huge commitment whether you manage to do this alone or with a partner.

There are of course benefits to both the upside of buying, is that when you’ve made your last mortgage payment (and I mean your last) the house is officially yours! That is fantastic, what an achievement but there are some downsides. All the maintenance, issues and problems become your responsibility, not your landlords and it can also be an expensive mistake if you realise you have awful neighbours!

Owning a property is a huge investment and one that shouldn’t be jumped into without weighing up the risks. It could mean having to give up all those extra luxuries you are used to.

How Much Can I Borrow

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Source: Photo by bongkarn thanyakij from Pexels

Before jumping right in and applying for every mortgage out there, it is worth noting that you have three! Yes! That’s three mortgage applications before it harms your credit rating. Credit profiles, see it as three rejections, not just looking at offers so be very careful before applying. There are, however, options to help you out, including mortgage calculators that can help you work out the deposit you need and the amount you are likely to borrow based on your income so you can secure the perfect mortgage for you.

Once you have an idea of what you can afford, its time to shop around, always try your high street bank (if you have one) or building society if you have any accounts with them, they can often offer the best deals. If you have special circumstances, for example, you are self-employed, on a contract or you need a special mortgage then your best bet is to try an all of the market mortgage brokers, they can look across a whole range, you would need at three years proof of income and supporting documents that you can afford the repayments.

The next step is to ask for a mortgage in principle. This is the first stage when you approach the lender for the mortgage and ask for the best rates etc. You need to be prepared to have a clean credit history, and you don’t want any excuse for them turning you down. If however, you find you can’t borrow as much as you thought, there are fortunately other options to help you get on the property ladder.

Government Schemes

In the early 2000s, the labour government realised that young people were struggling to get on the property ladder. So they looked to help first times buyers secure their own properties with financial support or low-cost housing initiatives. Included below is an example.

  • Help to Buy
  • Right to Buy/Right to Acquire
  • Shared ownership
  • People with disabilities
  • Shared equity schemes
  • Starter Home scheme

Some of these schemes are coming to an end in April 2021; others will no longer support homebuyers who already own a property. Depending on the area you live, will depend on the support you could be offered. You can even approach your local council who may have other options including rent to buy and low-cost rent (so you can afford to save for a property).

The Impact of Covid-19

No one can deny that the coronavirus has had a huge impact on the housing market. With sales put on hold and even completion dates pushed back months due to the virus.

We can’t forget that for the first half of the year we had to enjoy our homes for what they offered. However, the coronavirus bought with it furloughed staff, redundancies, contract changes and for some closure of their businesses.

Happy couple dancing while packing boxes
Source: Photo by Ketut Subiyanto from Pexels

In the UK, the Nationwide house price index for May showed that prices fell 1.7% from the previous month, the largest decline for 11 years. Rightmove however, reported that they had an increase in property searches for out of city areas, like London. At the same time, many expect a sharp fall, like in 2008, the prices have actually stayed for the time being.

However, the first thing to change things after the virus was the approval of mortgages, with most lenders asking for larger deposits, wanting larger incomes from first-time buyers and generally taking the best deals off the market. So it has become harder for a lot of buyers to secure that perfect mortgage offer.

If you already own your own home some homeowners are able to release money that is already available but is locked into the house, these schemes are called shared equity agreements, you don’t have to pay anything back until either the property is sold or the agreement comes to an end and can be the perfect solution if you can’t afford to move and decided to improve.

Word of Warning

Owning your own home really is rewarding. From that first lick of paint to a full house renovation. However, before finding your dream home on Rightmove or Zoopla, make sure you are financially ready for the commitment. Don’t lease a car or take out a loan, and this could substantially lower your mortgage offer, or worse cause it to be turned down. If you have credit cards or loans, get them paid off first and make sure you check your credit report for any nasty surprises.

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  1. Hi Gemma. It can be a scary prospect taking on a mortgage, can’t it?

    We’ve paid ours off now but there are two things that really stick in my memory:
    1. How ridiculously easy it seemed to get a 100% mortgage (yes, it was that long ago!)
    2. The truly terrifying scenario of having a variable rate mortgage and our starting rate ending up being doubled thanks to government policy in the early 1990s!!!
    So, for anybody setting our on their mortgage journey now – don’t dismiss the peace of mind offered by fixed rates 🙂

    1. Thank you Richie, we were lucky our fixed rate was 6% when we took out our mortgage. They wanted us to remortgage but the variable rate was 3% so we stuck with it. This was the early 2000’s so very different now.

  2. These are great tips. I love that you included the fact that there ARE cons to buying a property as well. I find that our society pushes the idea of homeownership and while there are benefits, it’s not always the right choice. I went through a period of time where I was moving regularly – largely due to changes of job, etc. I’m talking 12 different houses in 10 years. That would have been WAY too complicated to try buying each time knowing that it was likely going to be a short-term stay. I swore that I wouldn’t consider ownership until I knew I wanted to stay in one place.

    1. Thank you Britt, I completely agree. There isn’t much flexibly with homeownership. We had to go the route of a shared equity scheme and it meant we couldn’t move for nearly 10 years! We got trapped due to the financial crisis. They wouldn’t let us rent it out either due to the shared part and we needed to move for work commitments. We sold in the end and now rent. Hopefully we will get back on the property ladder eventually.

  3. Great post ☺️ I’ve just moved back to Australia from the UK and one of my top goals (once I have work!) is to buy a house. I’m lucky enough to have inheritance which is doing next to nothing in savings accounts so I figure I may as well put it to work in the housing market! Thanks for sharing!

    1. Thank you Helen, we bought our first house with inheritance and did some renovations. It is worth it. Best of luck 🙂

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