A first-time buyers’ case
We went along to meet Rob and Liz, who have just moved into their new 3-bedroomed home in Maidstone, Kent. With obvious pride they showed us around the property and Liz told us about her plans for the garden as soon as she gets the house sorted out. Apologising for the mess – it was a rainy day and their two daughters had been playing in the living room – Rob, an engineer and Liz, a primary school teacher, agreed to speak to us about their experience as first-time buyers and how they managed everything.
First things first, why did you choose to buy a new-build?
Rob: Well, the first consideration was the price.
Liz: We looked at other houses in the area but found nothing we really liked.
Rob: The deciding factor though was the Help to Buy equity loan. We couldn’t have afforded to buy a house without it. Definitely not in this price range anyway. So we decided to go for a new-build.
How much was the house?
Rob: The house cost £320,000 but we had our 5% deposit saved and then we got the 20% equity loan to bring our mortgage down to 75%. It made our mortgage payments about £400 cheaper a month so it made all the difference to us.
“The deciding factor though was the Help to Buy equity loan. We couldn’t have afforded to buy a house without it.”
What about the loan? Are you worried about how you’ll manage to pay it off when it’s due or the extra charges after 5 years?
Liz: We’re hoping to have paid off at least half in the first 5 years. One of the problems we had when we were looking around for mortgages was that an important part of Rob’s salary is his annual bonus. But banks will only take half of that into account when they work out how much money you can borrow.
Rob: Then, I’m also hoping to get a promotion in the coming year so that’ll make things easier for us as well.
Why here? Why did you choose to buy a house in Maidstone?
Liz: Well, we did originally look at houses further out and we could have bought a 4-bedroomed house for the same price further out from London but Rob commutes there every day and the season ticket would have been much more expensive.
Rob: Plus I’d have spent longer sitting on the train and I hate commuting. At least this way I get home earlier and can spend time with Liz and the girls.
Liz: Also, both our families live nearby. My parents recently retired and my mum was in hospital a month ago so I wanted to be near in case they need anything. I’m an only child you see.
Rob: (laughing) That way, we have baby-sitters whenever we need them.
Liz: They also help out with taking the girls to school as we only have the one car.
Rob: We thought about getting a second one but it didn’t seem worth the extra expense, the petrol, insurance, road tax and all that. Liz drops me off at the station most mornings or in good weather, it’s only a 20-minute walk.
So you’re both locals? Childhood sweethearts?
Liz: Locals, yes but not childhood sweethearts though we grew up quite near to each other. We both returned to the area after we’d finished our degrees and were introduced by friends. Rob had got a job in London and I’d just started my first teaching job at a local primary school. We’ve been together for 12 years and married for 9.
Why didn’t you buy a house before?
Liz: There were a few reasons for that. Just after we got married, one of my uncles got a job in Saudi Arabia and they were worried about what to do with their house. It’s a lovely cottage in a village outside Maidstone. They thought about renting it out but didn’t know if they could trust anyone for their stuff. And they also had the animals to think about…
Rob: We met up at a family barbecue at my in-laws’ and listening to Dave, I said as a joke, “We’ll look after it!”
Liz: But then it seemed an ideal solution and we ended up living there for 6 years. We discussed buying but we were so happy in the cottage that we thought any other house just wouldn’t match up.
Rob: And then, Liz got pregnant.
Do you think having the children delayed your plans to buy a house?
Liz: Oh, definitely. After Ashley was born, Charlotte came along 18 months later so it did affect how much money we had coming in.
Rob: Although Liz’s aunt and uncle didn’t ask much of a rent. We just had to make sure that bills were paid and fix any problems around the house.
Liz: But then my uncle got transferred back to the UK…he’ll be retiring in a few years…and so they wanted the house back.
Did you move straight from their house to this one?
Liz: No. We lived with my parents for just over a year until this house was ready.
How much had you managed to save living at your uncle’s house?
Liz: Thinking back we probably could have saved more but I was on maternity leave, then we had the kids and we still wanted to go out, go away on holiday, splash out occasionally on a night out. I know a lot of our friends did buy a house years before us.
Rob: That’s true but then, I think they struggled a lot more than we did, saving for the deposit, cutting down on lots of stuff, not taking holidays and all that. I’m glad we did things the way we did.
So you’d just saved £16,000 for the deposit?
Rob: No,we had about £40,000 saved and we could have put down 10% but with the equity loan, it didn’t seem worth it and I think we would have had trouble paying all the extras. We still had to budget for the Stamp Duty and think about how much we’d have to fork out on moving and furnishing the house.
How much was the Stamp Duty on the house?
Rob: It was £6,000.
What about all the other expenses? Did you have to pay your mortgage provider any fees?
Liz: No. The building society didn’t charge us any arrangement fees with the deal we got so that was a saving. I paid just over £200 for the valuation survey though.
“Most of the kitchen stuff was included in the price so that saved us money. That was another thing we liked about having a new-build.”
Did you pay for a snagging report?
Rob: No. I downloaded a checklist from the internet and did it with my brother-in-law. With me being an engineer and him working in the construction industry, it was pretty straightforward.
How about furniture and electrical appliances?
Liz:That was another thing that we liked about having a new-build. Most of the kitchen stuff was included in the price so that saved us some money. Also, the carpeting was done throughout the house. Neutral colours but that’s fine until we start re-decorating.
Rob: We already had the basic furniture so we’re OK at the moment. We just splashed out and bought a new dining room table and chairs. Once we’ve lived here a while, we’ll start thinking about changing things. Start with the living room and then do it up room by room.
How about the move? Did you pay for a removal van?
Rob: No. My brother-in-law got us a van and we called some mates to come and do all the donkey work. We just paid them with a few beers and some takeaway pizza. In fact, it turned into a bit of a house-warming party at the same time.
How about the conveyancing?
Liz: Apart from the Stamp Duty, I think that was probably the most expensive part of buying the house. In the end we used a solicitor recommended by the building society and she was really good. No complaints at all. She charged us a set fee of just over £1,000.
And the buildings insurance, how did you find an insurer?
Rob: We already had home contents insurance so we just spoke to our insurer and asked to give us a quote for buildings insurance. We just changed the policy to a joint home contents/building one and that only ended up costing us about an extra £150 a year.
Did you take out any insurance in case you can’t work like income protection?
Liz: When we took out the mortgage, the building society asked us if we wanted mortgage payment protection insurance but we decided in the end not to take it out.
Rob: We thought about it but my company has got a really good sickness scheme as one of the perks so mortgage insurance just seemed like doubling up on cover.
Liz: Instead, we changed the terms of our life insurance policies so that if anything happens to either of us, the mortgage is paid off as a lump sum.
Questions on being a first time buyer
A first time buyer must never have owned a residence in Britain or abroad, to properly qualify as such. The past ownership restriction does not only apply to owning a residential property outright, but also includes freeholds and interests in leaseholds. Additionally, the buyer must be purchasing their only or main residence.
The first time buyer rules apply to property that has been used in the past for residential purposes. Therefore, if the potential buyer has previously owned a shop or other business property, but have never before bought a home, then they would be qualified as a first time buyer. If they have previously owned a home in the UK or abroad, however, they will not qualify.
If you are qualified as a first time buyer in the UK, then you are entitled to a status which grants certain advantages when purchasing your first home. This can include no down payment loans, or low down payment loans, grants, forgivable loans for closing costs, as well as down payment assistance, depending on your circumstances and available government support.
How did you go about choosing your mortgage provider?
Rob: In some ways, our hands were tied with this. Before we’d done any research on the Help to Buy equity loans, we’d thought you could go to any lender for your mortgage.
Liz: So we had to start from the banks and building societies which offered mortgages for Help to Buy.
Did you know anything about mortgages before you bought the house?
Rob: A bit but only the basics really. Just the stuff you pick up from conversation with friends. Most of our friends had already bought houses and so they were able to give us some pointers. Tell us what to watch out for.
Liz: Talking to family helped too.
Rob: So really we asked around, worked out what kind of mortgage we wanted and then used a mortgage comparison site for Help to Buy equity loan mortgages. Researched them some more till we’d narrowed it down to the two we liked best.
Did you think about using a mortgage broker?
Liz: Not really, no. It didn’t seem worth it as our application was quite straightforward. But I think Marty did, didn’t he?
Rob: Yes. Marty, one of our friends, used a broker but in his case, it was because he’s self-employed. These new affordability rules make things a bit more complicated if you aren’t on a regular salary.
How did your application for an ‘Agreement in Principle’ go? Did you prepare for it at all?
Rob: I checked our credit files online with a couple of the credit reference agencies and there were no problems on there.
Liz: We also had finished paying off the car the year before we applied for a AIP so I think that helped. I think we were both a bit careful about not putting too much on our credit cards too.
Rob: The building society let us know quite quickly that it had been approved, a couple of days I think. So that gave us the green light to start looking at new-builds in the area. That took us a couple of weekends till we found this house.
What kind of mortgage did you choose?
Liz: We both agreed on a fixed rate mortgage. At least for a couple of years so we know how much we have to pay every month. We chose one with a fixed rate of just over 2% for 2 years. After that, it goes up to an interest rate of 3.74%.
Rob: We looked at other mortgages with a cheaper introductory rate when you’re locked in but we saw that most of those go up pretty sharply after they go on the bank’s SVR.
How do you think you’ll manage making the mortgage payments?
Rob: Well, as I said before, I’m expecting a promotion later in the year so that’ll be a help when the bank’s variable rate kicks in.
Liz: We make £74,000 gross on our combined salaries and that’s counting only half of Rob’s bonus so we’ll be fine with the mortgage payments. They’ll be about a quarter of our joint salaries so I don’t think we’ll have any problems. I’m teaching full-time now and the family’s complete so no more maternity leave for me!
What about the future? Can you see yourselves staying here?
Liz: I think so. Our family’s here and the kids are so happy at their school. In fact, that’s another reason why we wanted to stay around here. We didn’t want the girls to have the upset of changing schools. And the secondary school here is great too.
Rob: Who knows what will happen? But we’ll definitely stay until we’ve paid off the equity loan and built up our own share in the house. Then, we’ll think about remortgaging to see if we can get a better deal. That might be the right time to re-consider whether we should move or not to something bigger.
Thank you both for agreeing to talk to us and we wish you all the best in the future!
Liz: It was our pleasure but just tell any other first-time buyers that it might seem a bit tricky jumping through all the hoops to buy a house and you might feel like screaming in frustration at times but it’s worth it in the end.