The common mistakes made by first-time buyers (and how to avoid them)

In this month's edition, we start off by revealing the common mistakes that first-time buyers make when looking for a property, and how they can avoid them. 

We also detail what the Government's plans to abolish Section 21 could mean, we report on the news that one in six parents are remortgaging to help their children, and finally, if you're thinking of renting a property to students, why not read our guide?

The common mistakes made by first-time buyers (and how to avoid them)

 

There’s no denying that purchasing your first property can be an incredibly exciting process. Everything from your first viewing to deciding which bread bin goes best with your new kitchen can feel like a thrill, but that doesn’t mean that there aren’t a multitude of things to avoid as you look to buy your first home.

But don’t fret! We’ve outlined the most common mistakes that first-time buyers when looking for the property of their dreams, and what your best practise should be instead.

Seal an agreement in principle
First thing’s first; get an agreement in principle from your lender in place first. The importance behind getting this step resolved is that it will give you an idea of how much your mortgage provider will allow you to borrow, and given that they’re often valid for 30-to-90 days, you should have the best part of three months to search for the right home before you need to get the agreement re-evaluated.

The benefit of getting what’s also known as a mortgage promise in place is simple; should you find a home you love and need to act fast, there’s no guarantee that you can find a loan big enough for you to buy it. With that in mind, figuring out the amount of money that you have at your disposal is vital.

Check your credit score
Another simple thing, but one that is also frequently missed. Checking your credit score prior to applying for a mortgage can save you a large potential headache; if you have a poor credit score then you run the risk of your mortgage application being rejected, which will cause further damage to your score. An early check of your score prior to applying for a mortgage can allow you to correct errors and get your credit rating in a healthier place.

Do your sums!
The process of buying a home is about much more than the price of a property; you have to factor in valuations, house survey costs, legal fees and conveyancing. These financial hits can seem unreasonable, but again, they’re vital to making sure that the property you’re buying is in good condition. With that in mind, make sure that you have enough money for these vital parts of the purchasing process, too.

What’s going on locally?
We all have certain criteria for the area that we’ll be moving into when it comes to choosing a home. Are there good schools nearby? What about shops or park space? Are the transport links sufficient for your work or other needs?

Research the local area; find out if this place will meet your needs and provide what you require in order to enjoy your life. If you’re able, spend a bit of time walking around and getting a feel for the place. Moving home can be an emotionally overwhelming process, so the more you know about your new area, the more settled you’ll feel once you move in.

Ask questions and don’t be afraid to get advice
It’s important to know what you want out of a home prior to conducting viewings, and it certainly does not hurt to have an idea of what questions you’d like to ask before you start visiting properties. Ask the sellers why they’re thinking of leaving, for example, or how long they’ve lived at the property, whilst testing out things like taps, windows and lights.

Beyond that, seek professional advice from an impartial mortgage broker. This is key, as a broker can assist you with setting up a financial plan, help you to find a good deal on a mortgage and get the ball really rolling on the buying process.

One in six parents remortgaging their home for their children

 

With interest rates remaining incredibly low and competition amongst lenders producing some of the most favourable finance options ever seen, many are remortgaging in order to benefit from cost savings. Rather than simply easing the financial burden, however, recent research has shown that many parents are remortgaging in order to gift the extra money to their children.

Price comparison website MoneySuperMarket has found that one in six parents who remortgage their home then gift some of that extra cash to their children, with the average financial contribution standing at £9,050 per child and nearly 10% of parents giving over £20,000.

More than a third of the children who receive the financial gift utilise it as a deposit for a property, whilst others use it to go travelling (11%), buy a new car (11%) or pay for ‘everyday essentials’ (9%).

Rachel Wait, consumer affairs spokesperson at MoneySuperMarket, commented: “Our research found that 15% of parents released equity when they remortgaged to help their children. However, you’ll only be able to do this if your property has gone up in value and you’ll need to be sure you can afford to keep up with your new repayments.

“It’s also important to factor in the costs associated with remortgaging, such as arrangement fees which can be as much as £2,000, as well as legal, admin and valuation fees. Try to be realistic – only release equity to help your children with life events if you can really afford to do so.

“Also keep in mind that because a mortgage takes so long to pay back, remortgaging may not be the right option for everyone – there may be cheaper ways of getting a cash sum. It’s important to look at all options and shop around before making a decision.”

The potential abolition of Section 21: what it could mean for landlords

 

With the recent reforms taking place in the lettings market with regards to the Tenant Fee Ban and the Fitness For Human Habitation Act, you would be forgiven for missing the recent news from the Government that will make it more difficult to evict tenants.

Plans to abolish Section 21 – the right for landlords to evict tenants from their property after their fixed-term contract has come to an end, and with no need for a reason to be given (as long as eight weeks’ notice is allowed) – have caused some uproar in the lettings community with landlords concerned and tenant campaign groups hailing it as a “massive victory.”

The main concern highlighted by landlords have been around difficult tenants in their property and how they will now be able to evict them. The short answer is that once Section 21 is abolished, landlords will have to enact Section 8, which has more stringent rules with regards to evictions, as highlighted below.

A tenant can only be evicted with Section 8 should they:
Fall into rental arrears
Are involved in criminal behaviour
Are involved in antisocial behaviour
Have broken terms of the rental agreement (such as damaging the rental property)

The Government intends to add some caveats to Section 8 in order to make it more fit-for-purpose in the absence of Section 21, such as the fact that landlords will also be able to evict tenants should they wish to sell the property or move back into the dwelling themselves.

Of course, despite the news that this Government proposal has created, the actual likelihood of a landlord evicting a tenant is low as that is counterproductive. Landlords do not evict tenants for no good reason as that is simply not good business; instead, the motivation to find and retain tenants is the modus operandi for every landlord in order to get some returns on their investment. So, if you are worried about the potential changes which the abolition of Section 21 evictions could cause, then rest assured that should the genuine need to evict a tenant arise, you will still have the power to do so.

What to consider when letting a property to students

 

Those looking to invest in the student rental market could find high returns, especially if you own a property that is close to a university. However, there are a few things you will need to consider when it comes to renting to students:

Tenancy Agreement
We always advocate for the use of tenancy agreements, no matter the type of tenant. The signed document clearly details what is expected from both parties and, in the event of a dispute, it can be used to settle any disagreements.

However, in the case of landlords who wish to let an entire property to a group of students, you might wish to consider a joint tenancy, which requires all the students residing in the house to sign the same agreement. The document will advise the tenants that, as a collective, they are responsible for the costs of the property. For example, if one of the tenants fails to pay their share of the rent, it is the responsibility of their roommates to cover the costs.

If you are renting each bedroom individually, an individual tenancy agreement will suffice.

Do Students Pay Council Tax?
Students are exempt from council tax; however, they will be required to apply for an exemption certificate from the council.

Beware, if you are unable to prove your property was solely occupied by students, then you may be asked to pay the outstanding council tax. We would advise you assist and encourage your tenants in getting the exemption and ask for photocopies for your records.

Furnishings
It’s a given that students are unlikely to move in with their own furniture. In most cases, they will be looking for a furnished property. Items you might want to consider include:

• Washing machine
• Fridge freezer
• Cooker
• Carpets/curtains/lampshades
• Beds
• Wardrobes
• Desks and chairs
• Sofa
• Vacuum cleaner
• Lawnmower
• Bins

Make sure each tenant signs a detailed inventory to safeguard your furniture for future tenants.

Anti-social Behaviour
This aspect of the role can come as a surprise to some landlords! If your students are behaving in an anti-social way and are annoying the neighbours, it is your responsibility to improve their behaviour. If the behaviour continues, the local council may get involved.

The good news is, most universities can assist you in talking to your tenants, and it’s always a good idea to have regular contact with your tenants to deal with any problems quickly.

Anything Else?
Alongside these additional niche responsibilities, you will still be expected to carry out normal landlord responsibilities, such as purchasing a home insurance policy, ensuring your property meets gas & fire safety regulations, adhere to deposit protection rules, and also follow the right-to-rent legislation.