By Holly Barry, @HJBarry
After three or four years at university, most students will be thinking about their next steps, and in particular, where they will be living. Many graduates choose to rent with friends in their university town, whilst others relocate to the location they have landed their job or graduate placement. But, wherever you decide to move to, you need to decide whether you will rent a property or take a much bigger step to buy, in order to get onto the property ladder sooner. Doing this could be a smart move in an ever more competitive housing market, so if this is an option that might work for you, read on to learn more about how to make those first steps to buying your first property.
Invest the Hours and Save
The stereotypical image of a university student involves living on pasta and baked beans, spending their entire student loan on wild party nights and working their way through as many student deals as possible. In fairness though, not all students take that approach, and many try to save at least some of their loan, in order to start building up savings as early as possible. Wherever possible, try to make your money go as far as possible, and spend only what you really need to live off. Try to get into the habit of careful budgeting and regular saving as early in your university life as possible, to give yourself the best chance of staying on track and building up a sizeable savings pot for when you’re ready to take that first step onto the property ladder.
Getting a job, either on or off campus will also help you to get extra money together, and any job, no matter how small, will help boost your credit rating and give you a head-start when it comes to applying for a mortgage, as you will need payslip evidence of a regular income to qualify for mortgage financing.
If you are ready to take the plunge and look into buying a property, make sure you do plenty of homework. It’s an exciting step, and it can be tempting to fall in love with the first property you see and rush into a purchase, without checking out all your available options first. Take your time to assess the market in the area you’re interested in, and look at the different types of property, to ensure that you choose somewhere which is suited to your requirements and affordability.
As a graduate, you won’t have the years of experience that your parents have in buying and selling property, so you need to educate yourself on local property prices, market fluctuations and how to get the best possible deal when making an offer on a property. Remember, if a property seems too good to be true, it almost certainly is. Take time to work out why a property is being offered at such a good price, and identify what hidden costs might surface further down the line. A property might have damp issues, or need structural repairs, for example, but if these are identified at the outset, you can make a low offer that takes into account the costs of putting things right. Alternatively, if a careful and objective appraisal of a property reveals significant issues, it might be best to walk away from that particular property, to continue your search elsewhere. Whilst that decision might seem painful at the time, especially if you have fallen in love with the place, you will eventually be pleased that you didn’t burden yourself with a nightmare property.
Determine your borrowing power
You might think that with your student days coming to an end, you’d be saying goodbye to time spent researching. Hang on in there though, as you still need to apply those analytical skills you’ve acquired to work out the best loans, ISAs and deals available to you. The government’s Help to Buy ISA is one product you should investigate as early as possible. If you put money into this ISA on a regular basis, for every £200 you save, the government will add another £50, up to a maximum of £3,000. There aren’t many chances for free money in life, so this one is well worth taking up. Another government scheme that could boost your chances of owning your own home, is the Help to Buy loan, which provides a loan of up to 20% of the purchase price of a new-build home (40% in London), and this loan is also interest-free for five years. Of course, many parents are happy to help their children out with a deposit for a property, but only consider this if you are sure that your parents can do this without putting themselves into any financial difficulty. You also need to research all of the peripheral costs of buying a property, such as stamp duty, valuation fees and so on, as well as understanding how the process of buying a property works.
You may find it beneficial to seek advice from a financial advisor, although their costs are not free, many do offer initial free consultations which will give you a quick snapshot of how much you may be able to borrow. Depending on the type of financial advisor you see, they could have a wide access to the mortgage market and could secure you a good deal and save you money in the process.
Whether you decide to rent for a while, or buy immediately after graduating, both options need careful planning and organisation, to avoid costly mistakes or disappointment. Find out what deposit you’ll need, what your monthly repayments will be, and what the other costs of owning a property are likely to be, including utility bills and council tax, for example.
If, however, you decide to rent instead, you still need to do your research. Make sure you are clued up about renting your chosen type of property and the area you are looking at, so you don’t end up living somewhere you’re unhappy with.
Finally, whether you ultimately choose to buy or rent, make sure that your moving checklist is planned carefully too, so that your big move from Uni goes as smoothly as it possibly can.