Housing prices have been consistently on the rise in the UK for more than 2 years now. With rising prices, higher rentals and unexpected upsurge in household expenses, it is taking people longer to fund their first house. This has resulted in a generation where many people are deciding to own their first home only in their 40s.
At the same time, the previous generations who have come into new age money[i] in their 40s are also deciding to take out a second mortgage or sell their house for a new one as their needs and aspirations change with age.
No matter which group of 40s something you fall in above, if you are getting ready to buy a home, here are some tips that will help you go through the harrowing process with ease and confidence.
The one thing about your home that will not change over time is the area in which it’s located. Keep in mind that your home is a long-term investment and make sure that the neighbourhood is one that is aligned with your lifestyle aspirations. If you have young children, it’s important to make sure that the location of your new home is conducive to their needs.
If you want to start saving for the down payment on your home, spreading cash across high interest paying current accounts as well as regular savings accounts is a good idea.
Another great option is the government’s ‘Help to Buy ISA’ scheme[ii]. The upfront investment is £1,200 in the first month and then £200 per month, up to a maximum of £12,000. The best part is the government bonus of 25%. Moreover, if a couple is buying a property together, both can participate in the scheme individually. The maximum savings would be £24000, and the Government bonus would be a whopping £6000.
Lifestyle Must Be Kept in Mind
People in their 40s have widely different lifestyles. You may be a confirmed bachelor, raising young kids or have kids that are about to leave for college. Whatever be the situation, it is important to find a home that matches your needs vis-a-vis your family and life choices. This will determine your neighbourhood, facilities in the house being purchase which can add or subtract significant cost to the house.
Make Sure Your Credit Score is Okay
Many times, your request for a mortgage may get rejected because your credit score[iii] is messed up due to an error. For example, active accounts registered to an old address can harm your score badly. It’s important to go over all the documentation and make sure your credit score is in place.
Get a Mortgage in Principle (MIP) Before Making an Offer
Although you can’t get an actual mortgage before you actually decide to buy a house, you can get a mortgage in principle. This lets you know how much you can borrow provided you find a house within the given time. Having a MIP in place can greatly increase your chances of actually getting the house you make an offer on as it helps increase your credibility.
Get Your Documentation in Place
This is especially important if you are buying a new home by selling your existing one, especially if your current house is still on the market. You need to make sure that all the documentation[iv] and the mortgage payments on the current house are taken care of so that there are no problems in taking out another mortgage.
Buying your home, whether it’s your first or second, can be a cumbersome and painful task. Getting the basics right and being adequately prepared before you set out to actually purchase the home can save you a lot of worry and heartache down the line.