A detailed guide- How to afford a house as a young person

Who does not want to enjoy a relaxing seaside view from their own home? Homeownership grants security, confidence, and comfort. Most youngsters explore mortgage quotes as they turn 24. You may walk up the property ladder with a clear vision. Knowing about mortgage rates, current affordability, house rates, etc., may help.

Additionally, understanding the prime obstacles to home purchase is essential. It makes one avoid potential risks. One of the major ones is a delay in saving for a deposit.

According to the popular forum moneyshed

“Most parents believe it is challenging for their kids to save for a mortgage deposit. Expenses like rent, food, vehicle costs and utilities leave one with a limited amount. Going by that case, it may take years to own a house.”

Moreover, with rising property and mortgage rates, home ownership is yet a dream for many.

It is the reason most individuals depend on inheritance.  It eliminates one from engaging in the mortgage process. However, the owner must pay inheritance tax after ownership. Later, most individuals sell the inherited home to switch to a better property. They use the money from the sale to pay the deposit and some repayments.

However, if you want to own a house as a young person, don’t worry. The blog highlights some steps that might help.

What is the ideal age of owning a house?

The average age of first-time home buyers in the UK is 33 years and 8 months. Londoners are quite active about home ownership. Maximum citizens own one by the time they turn 33 or 36 years old. It is according to the latest stats by Mojo Mortgages.

7 Steps to get on the property ladder as a young person

You may be dealing with multiple liabilities as a student or young professional. However, you must ensure financial discipline. Yeah, it means cutting your weekend gateways or unnecessary subscriptions. Understanding your finances is essential to achieve your home ownership goal. Here are quick ways to get on the property ladder as a young person:

Let’s understand in detail:

Step 1: Understand your home-buying requirements

Unless you know the purpose, you cannot buy. It could be ensuring a rent-free lifestyle, maximising security, or seeking stability. You may want to settle in life with your own home. Understanding the purpose helps you define the further route. You may want to shift to a place near your office or child’s school.

Step 2: Analyse how much can you afford

Knowing how much you can afford helps you finalise the location and the house type. You can buy a condo, apartment or a flat. Avoid choosing a luxurious location or house as you are just starting. Focus on the facilities you need. Accordingly, calculate the amount you can realistically afford. Understand your current liabilities and house prices.

Check whether you can cut down some expenses. It could be your wants, like- shopping for Christmas, etc.  Living by downsizing is challenging.

What if you forget to file an urgent university form? You may need quick money for that. However, downsizing may leave you with minimal sum. Don’t worry; check loans for young people nearby. You may get one from verified providers on part-time income. You can use it to cover the emergency. It would not affect your savings goal. Yes, you may get one despite your low credit history. Choose the one that meets your affordability.

Step 3: Explore the mortgage rates

If you are seeking a mortgage within a year or so, check this. Exploring the mortgage rates will help you know the home-buying costs. You can understand the current interest rates on fixed and variable mortgage rates. Educate yourself on how mortgages have changed over the years and what they hold. Next, identify what it may cost you if you apply for one now.

You can do that by seeking pre-approval on the mortgage. It allows you to know the expected costs and your affordability. It means- you can know whether you may qualify with current finances or not. Pre-approval does not affect credit scores. It just prevents you from seeking the wrong mortgage.

Step 4: Pay the debts and build credit

Now, you know the (approximate) amount you need to buy a home. It may mean the flexibility to make monthly instalments. The pre-approval also helps you identify the credit requirements. You cannot gain an ideal credit rating unless you pay the debts. Getting a mortgage individually requires a decent credit score. Alternatively, you may not qualify. Here is how to do that the easy way:

How to pay debts and build credit as a youngster?

Here are easy steps to achieving an ideal credit score.

It is the easiest way to pay the debts. You can even try debt consolidation loans to catalyse the process. It helps you settle multiple debts at once. However, you must repay the loan timely. If you need to bridge the payment amount, check fair credit loans. These may help you if your recent credit management is good. You can use it to pay the loan repayment. It will help you improve your credit score.

However, individuals with a fair credit history may improve their credit score quickly. It just requires financial discipline.

Note: Checking your credit score once a month helps avoid delinquencies. Instead, it keeps you on top of your payments and financial goals.

Step 5: Save the deposit and first repayment amount

Generally, you must save around 10% of the house value as a deposit. However, that’s not the only cost that comes with buying a home. A mortgage agreement involves- paying repayments. Always try to save for the first repayment. Usually, one struggles with that. Apart from that, don’t forget about the deposit.

 The average deposit amount for first-time buyers in the year 2023 was £53414. It is hard for a youngster to imagine that. Thus, as property prices rise, so do mortgages. It means you pay a high deposit. Therefore, start planning one now. You can set up a different savings account for the purpose. It will help you save a specific amount every month. Even if you start saving money for a deposit at 20, you can buy your house by 30. Thus, the earlier you begin saving, the better.

Moreover, the amount you pay as a deposit reduces the total amount to repay.

For example, if the total amount to pay on the mortgage is 355,000, you can benefit from a high deposit in the following way:

Deposit you pay on the mortgage	Total amount you pay on the mortgage
35,500 (10%) basic	355000
42,600 (12%)	312400
53,250 (15%)	301,750

Thus, you can see that the amount is reduced when you make a larger deposit. Moreover, high deposit payments mean low interest rates. It could be ideal for individuals with a low credit history seeking affordable rates.

Step 6:  Identify other costs related to home purchase

Buying a home requires you to pay stamp duty, survey fees, removal, and legal fees. It may quickly rise to 1,00,000 or so.  You cannot skip any of these. These are important to owning a house. Usually, there is a 5% stamp duty charge for a property costing 250,000. However, buying a house worth 125,000 doesn’t involve any stamp duty charges.

Moreover, the home survey may cost you around 300-400. The solicitor fee may be around 500-750. Thus, don’t forget about such charges. Identify and frame your home purchase decisions after learning these.

Step 7- Apply for the mortgage

Lastly, your preparations stand out. Explore the mortgage cover by using the mortgage calculator. Identify the cheapest APR, interest rate and deposit requirements. Read through the terms for additional or hidden costs. Inquire before signing off on the agreement. Make timely payments to live up to your home ownership dream.

Bottom line These are some steps to achieving your dream home. Identify the purpose of the homeownership, affordability, and credit requirements. Check the timeline it will take you to save for deposit and other costs.  Set up a savings plan by eliminating extra. If you want, get expert assistance like money.co.uk for additional guidance. The authority shares the expertise in the field.

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