For the millennial buyer, getting on the property ladder is tough enough, but ascending it is another task altogether. Rising house prices and low interest rates have combined to knock the stuffing out of first-time buyers for several years, but the market for the second home buyer is also treacherous. However, some methods do reap dividends, such as these:
Borrow or work for a deposit
There’s no getting around the need for a decent deposit, and the low interest rates built on a current base rate of 0.25% hardly give someone the incentive to place it in a savings account. You cannot get a loan or credit cards with the intention of placing them in a deposit, since any outstanding debts will be deducted from your deposit. The alternative is to borrow from the bank of mum and dad, or work hard to build up that pile of cash.
Once you’ve got your keys to the front door, what can you do next? After the turmoil of one purchase moving onwards to house number two is probably the last thing on your mind, but this piece is about moving up the property ladder. So, if your mortgage conditions allow it, you should try overpaying where possible. The more of the mortgage you overpay, the larger the equity you’ll have when it comes to remortgaging or looking onwards. If you can’t overpay, then put money aside anyway or pay off any associated debts.
One of the more disheartening aspects of buying or selling a home is the associated costs. Surveys, conveyancing, estate agent costs and other fees stack up and can take a sizeable chunk of your deposit, hammering your LTV and potentially bringing down the number of options available. These effects will be particularly noticeable if you buy and sell several houses, leading to tens of thousands of pounds of costs. Therefore, if it’s possible to cut costs by using an online agent such as HouseSimple.com or by carrying out some of the tasks yourself (photography, etc), it might be beneficial to your chances of ascending the ladder in the long run.
Move town or city
While logistically impossible or unrealistic for many, the fact is that some areas of the country are cheaper to live in than others. The price of an average house fluctuates wildly, but perhaps more hopefully the actual property types differ in cost behaviour as well. For example, in Preston the gap between flat and house prices has risen by 16.5% in the past decade making it difficult to move upwards from flat to house. Meanwhile, in Aberdeen, the gap has actually shrunk by more than 10%. So, depending on your need to own, you might wish to up sticks for the best chance of clambering onto the next rung.
Living out of boxes?
Homes and Property spoke to three couples who had climbed the property ladder to varying degrees, highlighting different tactics and methods and a different end game. While one couple took seven years to go from a one-bedroom flat to a two-bedroom, another started with a £62,000 property and ended with a £6 million mansion, after a huge amount of work and moving across the country. The lesson – ask yourself how much work and sacrifice you’re willing to endure, and plan accordingly.