Buying House

Buying a house is not just an investment in property, but a foundation for future dreams. 

Overview

In this page we will deal with the following topics.

• How to buy your first house?

• What to do if i don't have deposit to pay for new house?

• How will my small house generate money to buy a bigger house in future? 

• How to use debt as a lever to increase my personal wealth?

How to buy your first house?

If you’ve just moved to the UK or started your first job, one of the first things you should consider is buying a house or flat. Even if it's small, like a 1 or 2-bedroom property, it doesn’t matter. The location may not be perfect either—just buy it. It may seem difficult to invest so much money early on, but it's worth the effort. This property could potentially generate around £70K-100K in value, helping you buy your next home within 3-5 years.

Key Steps to take:

• Build Financial Stability: Lenders typically want to see consistent income and job stability, so aim to work for at least 6-12 months before applying for a mortgage.

• Check Your Credit Score: A good credit score is essential for getting favourable mortgage rates. Pay off debts and ensure timely bill payments.

• Save for a Deposit: Aim to save at least 5-20% of the property price. The larger your deposit, the better your mortgage terms will likely be.

• Understand Costs: In addition to the deposit, budget for solicitor fees, surveys, and stamp duty. Factor in ongoing costs like maintenance and utility bills.

• Use Help-to-Buy Schemes: Consider government schemes like Help to Buy or Shared Ownership, which can make purchasing your first home easier.

• Get Mortgage Pre-Approval: Before house hunting, get a mortgage agreement in principle to understand how much you can borrow.

• Avoid Big Purchases or New Credit: While saving for a home, avoid taking on new loans or making large purchases that could affect your mortgage eligibility.

What to do if i don't have deposit to pay for new house? 

If you don't have a deposit for a new house, consider these options:

1. Government Schemes: Look into Help to Buy, Shared Ownership, or First Homes, which offer lower deposit options.

2. 100% Mortgages: Some lenders offer 100% mortgages, but they are rare and often require a guarantor.

3. Guarantor Mortgages: A family member or close friend with good credit can act as a guarantor, reducing the need for a deposit.

4. Save Over Time: Create a savings plan to gradually build up your deposit, focusing on cutting expenses.

5. Lender Assistance: Some lenders offer products where they contribute part of the deposit, though these may come with stricter conditions.

6. Equity Loans: Explore equity loan schemes where the government or a lender provides a loan for the deposit.

How will my small house generate money to buy a bigger house in future? 

Your small house can generate money for a bigger future home through:

1. Property Appreciation: Over time, the value of your house may increase, allowing you to sell it for a profit.

2. Mortgage Repayment: As you pay down your mortgage, you build equity, which can be used as a deposit for a larger home.

3. Renting It Out: If you move out, you can rent the house to generate income, helping to fund a bigger home.

4. Home Improvements: Renovating or improving the property can boost its market value for a better sale price.

5. Remortgaging: You may remortgage your home to release some equity for a new property.

How to use debt as a lever to increase my personal wealth?

Using debt strategically can help increase your personal wealth if managed wisely. Here's how:

1. Good Debt vs. Bad Debt: Use "good debt" (like mortgages or student loans) that helps you acquire assets (property, education) which appreciate over time or increase earning potential.

2. Leverage Real Estate: Take out a mortgage to buy property, which can appreciate in value or generate rental income, growing your wealth over time.

3. Invest in Income-Generating Assets: Borrow at low interest rates to invest in assets like stocks, bonds, or businesses that provide returns higher than the interest on the debt.

4. Consolidate High-Interest Debt: Use low-interest loans to pay off high-interest debts, reducing overall interest payments and freeing up cash for investments.

5. Maintain Cash Flow: Borrow money to invest while keeping your cash liquid for other opportunities, ensuring you don’t tie up all your capital.

6. Tax Benefits: In some cases, interest on loans used for investments can be tax-deductible, potentially lowering your tax bill and enhancing returns.

Always assess the risks, ensuring the returns on the debt outweigh the costs.