When is a good time to jump onto the housing ladder?

 

Property-Ladder-FI

It’s the question vexing so many middle-class Brits in our generation, with the housing crisis in full swing. For our elders, home ownership was almost a given. Today, the number of zeros attached to property prices causes eyes to water, and makes getting a leg-up onto the property ladder all-to elusive for a lot of people. Even those who find themselves poised on the fence, and merely debating the possibility of buying are in a better position than most.

But of course, if you do have a bit of money squirreled away and fit into the ‘undecided’ category, this is a decision you will want to give careful consideration to, as it is one of the most important ones you’ll make in your life. So when is the right time to make the leap?

The arguments for and against buying

On the face of it, you’d likely want to become a homeowner as soon as you have ‘enough’ for a deposit. Not only are rents extortionate in the current climate, but the idea of throwing it all in to pay off someone else’s mortgage instead of your own is galling. What’s more, interest rates look set to remain low for a while, which is good news for those with, or considering, a mortgage. So, the sooner the better, eh?

Not exactly. The first thing to clarify is the word ‘enough’ in terms of what’s in your piggy bank. Obviously the deposit is the most important obstacle, but it doesn’t end there. What percentage deposit will leave you with affordable repayments on a mortgage? And can you afford the stamp duty, legal fees and removal costs associated with buying? And if the place needs a bit of TLC, will you be able to afford home improvements?

You could always consider a loan, but this would bring another debt into the equation for yourself, and you don’t want to leave yourself crippled in terms of your monthly budget. These are all things to consider when analysing your financial situation.

There are other advantages to renting too. For one, you are not generally liable for repairs and maintenance costs. So if the boiler breaks down, it won’t be on your account. Also, you have great flexibility as a renter. If you don’t like where you live, or you don’t like your landlord, you can leave (as per the terms of your agreement, of course!). And if you have a young child who you are looking to get placed into a good school, you will have the mobility to choose to rent in that catchment area. Then, once they’re in, they’re in – and you are free to move on if you wish to.

A helping hand

Then again, Government has taken the heat off potential first-time buyers with the new Help-to-Buy ISA scheme, which essentially offers the potential to receive ‘free money’ to the tune of £50 each month if you put £200 or more into this ISA. That amounts to a subsidy of up to £3,000 over five years, which is a handy shot in the arm for those thinking ahead. For further explanation on Help to Buy ISAs, along with some handy tips for establishing whether you are ready to become a homeowner, this article may come in useful.

Ultimately, there is no perfect science to it, and there is always the possibility of unforeseen circumstances occurring. There will always be emotion involved in the decision too, and that’s okay. But, as far as possible, try and balance that against reasoning. Remember, even if you delay your dream for a little while longer, it doesn’t mean you won’t get there in the end.

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