Newstricky| Becoming a homeowner can be a long and scary process. Everybody’s journey is different, so there are many different ways available to buy your first (or any future) homes. These will usually involve a mortgage of some description and getting the right type of mortgage for the right type of property can be all-important.
For that reason, here are some tactics you should use to work out the right combination for the best methods for you to buy a house.
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Table of Contents
Buying outright
There will, of course, be a small minority of people who have saved, inherited, or won enough money to buy a home outright. This is often seen as the best move (and usually is), but there are exceptions. If interest rates for mortgages are relatively low, for instance, 1.5%, and the same amount of money could be invested for 5% elsewhere, then it makes sense to borrow at 1.5% and invest at 5% to give you a better return overall.
Informal loan from friend or family
Also, relatively uncommon are those that are lent the money to buy a home by a friend or family member, to be paid back over time, usually at low or no interest rates. This is typically done by those who want to give a family member a ‘leg up’ and see their family as a better investment than anything offered by the banks. Most commonly, though, family are more likely to gift or loan a family member the money for a deposit so they can get a better deal on their mortgage.
Mortgages
Unless you fall into either of the categories above, you are likely to need a mortgage to buy your home. This will be the vast majority of people, and as a result, there are a huge number of mortgage products to choose from. This will vary depending on where you like, so it can be best to let a reliable source like The Money Hub do most of the hard work for you and narrow down a large list to a handy shortlist you can use depending on your situation and what type of property you are going to buy:
New build
If you are not going to win any awards for your handyman skills, then a new build might be the best purchase. Everything will be brand new, and if something does need fixing, it could be covered under the builders’ guarantee. Typically, lenders look kindly on these as they see them as a good investment, especially if they can be bought ‘off plan’ (i.e., you buy them for an agreed lower price before they are finished saving the builder marketing costs).
Self-build
Building a home, yourself will usually take a specialist mortgage, with money released in stages as you complete the build, from buying your land to getting the frame up and making it watertight. The mortgages here are typically specialist because the risk to the lender is greater if the build is not finished.
Fixer-upper
This can be a house that is in great need of a little love, and sometimes some major renovations too. This can be an interesting one to call, as lenders are likely to want a larger down payment on a house with the doors falling off of the hinges, but you are also going to need some ready cash to start the work you need to do to make this the home of your dreams. This sort of scenario is one where using a savvy mortgage broker to get you the best-balanced deal should be your ‘plan A’
Use the available options wisely
Of course, there is a very good chance that the home you buy will not fall easily into any of these categories, and a more regular mortgage with various options will become available. Using these options can help you get a deal that can potentially save you tens of thousands over the life of your mortgage or tailor payments so that you can reduce working time to start a family or a business.
To sum things up
The best method to buy a house will vary drastically depending on your personal situation, how much money you have saved up, and what your plans are both in the long and short term. For this reason, getting the best professional help or using the internet to source the best possible deals will give you a much clearer path than just opting for the first things that your bank offers you.
