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Dealing with home insurance as a first time buyer

 

You’ve secured the mortgage, paid the fees, and you have chosen your dream first home, but the work isn’t over once you move in. After the challenging experience of first time buying, insurance can often take a back seat. Here’s some helpful guidance on choosing home insurance and how it will protect your new investment.

What is home insurance?

Home insurance is often split into two parts – building and contents insurance. Put simply, building cover insures damage to your physical property (the bricks

house floodand mortar) from unfortunate and unforeseen events such as fire, flooding and weather damage. In places which have high risk of weather damage, such as flooding, your choice of insurance providers may be limited and premiums may be more expensive.

Contents insurance covers all of your belongings, from your laptop to your fridge, and protects them from potential theft, loss or damage.

Do I have to have it?

While you pay off your mortgage your home is technically still “borrowed” from your mortgage lender, therefore they will most probably require you to take out building insurance to protect their investment. However, you don’t need to use your mortgage lender to obtain your insurance. Shop around to compare coverage, there are plenty of price comparison sites such as Confused.com that can help guide you.

How much is my home worth?

It’s highly important to get the right type of cover for your home, so giving your insurance company truthful and accurate answers, when they ask you questions, is essential. Your insurance company will most likely ask you the rebuild cost of your home, which means how much it would cost in total to build your home from scratch again. Many people get a surveyor to help calculate this amount; however you can get an accurate estimate by using the Buildings Cost Information Service’s free online calculator.

Contents insurance is slightly easier; you just need to estimate the worth of all of your valuable property. Money Supermarket has a great online calculator to help you calculate the value of your property.

Do I need to update my insurance?

Planning on a fancy extension? Or dreaming of a spectacular loft conversion? You’ll need to have a chat with your insurer as any changes to your home may affect the rebuild cost. If you don’t change your policy to match any changes and you become underinsured, you may be left to pay the extra if anything was to happen to your home.

Are you a recent first time buyer and have any helpful advice on home insurance? Pop your tips in the comments below.

 

Image Credits: Wikimedia

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Understanding Stamp Duty

You hardly need reminding that it’s tough to to be a first time buyer. But one problem – and it just happens to be Britain’s oldest tax – has become easier.house

This is of course Stamp duty, originating in the 17th century and imposed to cover the cost of registering a change in ownership at a government office called the Land Registry.

This process requires a stamped certificate from Her Majesty’s Revenue and Customs – the tax man to you and me – but HMRC will provide this only when the duty is paid.

So how is it easier?

Well, stamp duty used to be charged on a ‘slab’ basis. So buying a home for £250,000 meant you paid the old charge of one per cent duty on the full price, making it £2,500.

But if you bought, say, a £260,000 home you would have been in the old three per cent category applied across the whole price – so the duty would become a whopping £7,800.

This slab system was considered unfair and a disincentive for buyers. Therefore stamp duty in England, Wales and Northern Ireland is today levied like income tax.

Up to £125,000 it’s zero, and over £125,000 to £250,000 it’s two per cent. Then from over £250,000 to £925,000 it is five per cent.

On that £260,000 home you therefore today pay no duty up to £125,000, then two per cent above £125,000 to £250,000, and then five per cent above £250,000 to £260,000.

It adds up to just £3,000 and in this example saves you £4,800.

There are a few exceptions to stamp duty – but don’t raise your hopes.

There’s no duty at all on zero-carbon homes (but these are rare) while some Right To Buy properties, where tenants purchase their council home, have reduced duty. In Scotland, stamp duty doesn’t exist but there is Land and Building Transaction Tax which is roughly similar and means that north of the border, our £260,000 home would cost £2,600 in LBTT.

Across the rest of Britain buyers of almost all homes sold for above £125,000 have no choice but to pay stamp duty within 30 days of moving in.

In reality, it happens quicker because it’s handled by your conveyancer – that’s the expert you will have instructed to handle legal elements of the purchase.

Sometimes a mortgage lender may offer to add the stamp duty to the loan for the house. It sounds tempting but try to resist: saving for stamp duty may be tough but it will cost less than adding it to a mortgage on which you repay not just the loan itself but interest as well.

One final thing – it’s always buyers who pay stamp duty. That’s not really unfair because as you move up the ladder and sell up, so someone will pay duty to buy from you.

 As the saying goes ‘What goes around, comes around.’

Image Credit: Geograph

graham norwood

Author Bio

This article was provided exclusively to First Home News by Graham Norwood, a successful journalist who specialises in writing about residential property. Read Graham’s blog at Property News Hound or follow him on Twitter.

 

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Five mistakes First Home Buyers make and how to avoid them

The day you buy your first home will most probably be one of the biggest (and most expensive!) achievements in your life, and is usually finalised after years of careful planning and saving.  However, after enduring rental prices and magnolia walls for most of your adult life, it’s easy to feel the urge to rush into certain decisions.  We have found out five top mistakes that first time buyers make – with some helpful tips on how to avoid them!

Overspending

Don’t get your heart set on yohouseur dream property before you know exactly how much you can afford.  There are several online calculators from websites like Money Supermarket and BBC Homes that can help give you financial guidance.  Also question your current financial situation – can you easily afford your rent each month?  Would any potential changes in your new mortgage greatly impact your bank account?

Relying on just the cosmetics

Does the property you have just viewed look too good to be true?  Ensure that it actually is your dream home by taking a second look around.  Avoid cost inducing issues, such as damp, water or electrical issues that can be hidden around the house by getting a survey completed by a qualified surveyor.  Also, check around your neighbourhood and don’t be afraid to ask people questions.  After all you don’t want to buy an attractive house in an area that you may eventually hate!

Taking advice from your estate agent

You may find that your estate agent will try to give you mortgage advice, however you may discover that they don’t provide you with the full range of choices.  Also, you may be charged.  Websites such as Money Saving Expert have extremely helpful mortgage comparison tables which can give you all the information that you need.

Pay twice!

If you are currently renting, don’t forget that you usually have to serve at least a months’ notice before you can leave the property.  Make sure you time things right and don’t lose money by having to pay for both rent and mortgage during the transition stages.

Underestimating the costs

Saving up the deposit may seem like the most daunting task when buying your first home, but remember to also save for the extra costs associated with buying.  Have you considered stamp duty, solicitors’ fee’s, removal costs, storage costs, estate agents fee’s and so on?  Create a spreadsheet of everything you have to pay for so you can avoid any nasty surprises!

Are you currently facing difficulties in the house buying process?  Or are you already in your dream home and made a few rookie errors along the way?

Image Credits: Wikimedia

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What can first time buyers expect to get for their money?

 

It’s no secret that getting on the first rung of the property ladder can be an extremely difficult task, with many first time buyers struggling to meet the high costs involved with purchasing their first home.

According to Rightmove first time buyers can now expect to pay an average of £169,414 to get their foot on the ladder – that’s an increase of 7.6 per cent on last year’s figures. A recent report by The Independenlondon flats 2t also revealed that unaffordable housing is forcing first time buyers out of the home towns they’ve grown up in and love.

So, what can first time buyers expect to get for their money?

London living

Reports claim that those hoping to buy in the notoriously expensive London need to be earning a whopping £77,000 a year to afford the capital’s average house price of £384,856. However, if the national average of £169,414 is more in your price range, you’re likely to be looking at a one bedroom flat in north London or The Isle of Dogs. The sizes may be “bijou” but many would argue that the lack of space is a small price to pay for the opportunity to live so close to the big city and all it has to offer.

A quiet lifeisle of wight
If you enjoy the open air, a slow pace of living and love the sea, perhaps a house across the Solent may be of interest?  You can buy a spacious three bed semi  in the more rural/coastal parts of the Isle of Wight, offering outside space and with a beach never more than 20 minutes away. You can expect to get a lot more for your money than if you buy around the nearby commuter belt of the south east.

 Go up north
Moving further up north to Cumbria, you could enjoy a three bedroom detached property in areas such as Wigton or Windermere. Prices generally are lower in the north with many areas such as Leeds in Yorkshire or the suburbs of Newcastle offering semi-detached or terraced properties with a garden for the average asking price. However, you may find that prices begin to rise the closer you get to the city centre – notably in the larger cities such as Leeds, where you could possibly purchase a two bedroom apartment for the same price as a house several miles down the road.

 How are you finding prices in your area? Do you plan on buying closer to home, or do you have to look elsewhere for something more affordable?

Image Credit: GeographGeograph

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Save hundreds on your fuel bills
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Save hundreds on your fuel bills

Do you live in the Greater Manchester area? Do you receive state pension credit, child tax credit or working tax credit? Then you could be entitled to a free high efficiency boiler which will not only make your home more efficient but save you hundreds of pounds on your fuel bills.

Housing specialist, Keepmoat is working in partnership with The Greater Manchester Local Authorities and its energy partners to bring you this exclusive offer under the Government Grants Initiative known as Energy Company Obligation 2 (ECO 2).

The ECO 2 scheme is part of the ECO Affordable Warmth Obligation launched in January 2013, and aims to reduce energy consumption within the UK by providing free boilers and insulation grants to those who receive certain benefits.

Freephone 0800 0197377 to find out if you’re eligible.

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Top tips for a house buying novice
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Top tips for a house buying novice

We all know the expense of buying your first home, and now more than ever it’s publicised just how much of a struggle it can be to take that first step on the house buying ladder. Whilst saving for a deposit and taking out a mortgage will be the main money worry you associate with the process, there are a number of other costs that you’ll be required to fork out for. If you’re unaware when it comes to some of the ‘hidden costs’, check out our guide below.

Mortgage arrangement and valuation fees

When arranging and applying for a mortgage, there are some additional fees that will be applied on top of your mortgage amount. Arrangement and valuation fees can vary in cost, in most cases being anything from £0 to £2,000. Whilst is can be added onto the overall amount of your mortgage, it will add to the overall amount you owe, whilst also potentially impacting on your interest payments.

Stamp Duty

Whilst Stamp duty has been altered of late, it will still be a major outgoing that you’ll need to budget for when house hunting. Put simply, stamp duty is a lump-sum payment that anyone buying a property or land costing more than a set amount is required to pay. The total amount that you’ll pay varies based on the value and type of property

Survey cost

Upon acceptance of your offer on any home, you’ll now need to have a survey carried out. Costing anything between £400 and £700, a survey can prove to be a costly expenditure, however they are crucial to find out about the condition of the building and, if there are problems, give you leverage for negotiating the buying price down or pulling out of the deal altogether.

Removal costs

Just because you’re moving into your very first home, doesn’t mean that you haven’t got a short lifetime of possessions that you’ll need to transport to your new place. Transporting items on your big day can prove to be a real headache, so if you want to keep fuss to a minimum, hiring a professional, quality removals provider can be one avenue open to you. Shop around, and pick a service well suited to your situational and budgetary needs.

Initial furnishing and decorating costs

Moving into your home should be a fun and exciting time, but one of the most enjoyable aspects of the move comes when you get to put your personal stamp on your new place. Decorating might not be the first thing you choose to do upon arriving, however over the coming months, you’ll need to get your house kitted out and to your liking, meaning you ought to begin budgeting for new furniture and accessories plenty in advance.

Home insurance

You might think that home insurance is something to look into once you’ve arrived at your new property, however it’s crucial that buyers always search out home insurance quotes prior to securing a property. It’s an important step to take early in the process, as it could potentially flag up issues with the property, such as a suspect neighbourhood, or the property being in an area at high risk of flooding. As is often the case when it comes to insurance, make sure that you shop around to make sure that you not only find the most relevant cover for your new property, but also the best price.

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Five ways the budget affects the first time buyer
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Five ways the budget affects the first time buyer

The last budget has now passed before the 2015 general election and this is the time to gain support for what is promised to be an exciting few weeks in the world of politics. But what does this budget mean for the first time buyer? Below are five reasons why the budget is looking after those looking to get on the property ladder.

  1. Save £200 and the government will put in £50

Under new legislation from Wednesday’s budget, those who are looking to buy their first property now have the added advantage of a £50 government contribution for every £200 saved. The savings will have to be put into an ISA account, with persons aged 16 and over able to join.

  1. Up to £3000 to earn

George Osborne announced that the aspiring first time buyer can be in receipt of up to £3000 providing that they save £12,000. This is a massive help to those that really struggle to save for a deposit. The scheme essentially saves you a quarter of the time that it would of otherwise taken to save for a deposit.

  1. It’s tax free

The ISA account that you will be paying into is also tax free! The savings must of course go towards a deposit, but with the added advantage of not paying tax then you’re able to get to the chance to own your own home even quicker.

  1. The scheme can run alongside help-to-buy

Those of you who have signed up for the help-to-buy or the mortgage guarantee scheme need not fear as this proposal can run alongside the initiative. You will need £1000 to start the scheme and can be used for homes costing up to £450,000 in London and £250,000 outside of the capital.

  1. Anyone can join

The good news is that anyone who does not own a property can join the scheme and open an account. This essentially means that couples wanting to buy their first home can claim up to £6,000 when buying together. Therefore if two people are buying as a couple, they could own their own property twice as quickly as you otherwise could have without the scheme.

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Money tips for beginners
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Money tips for beginners

If you’re taking the first steps in the home buying process, finance is one area in which you’ll be needing some guidance. When it comes to money management, we’re no experts – that’s what your bank or financial advisor is for; however what we are capable of doing is pointing you in the right direction – we know just how confusing it can be to get reliable facts and figures. As a first time home buyer, there’s probably no current aspect of your life as important as money. We know that the home buying process is a costly one, and even once you finally secure your dream place, you’re likely to still have jobs to do that will place you under further financial strain. If you’re struggling to wrap your head around finances and just want some tips on keeping your money safe, we’ve got you covered with some basic advice.

Online banking

In the modern day, we all live a hectic life. Gone are the days when you’d need to take a trip to your local branch to check your balance. Nowadays, for the most part, customers like to be able to control their finances at the touch of a button. Most banks now offer services online, however some are easier to navigate than others. Before you jump into your decision, check out the online banking services offered by banks, along with their smartphone apps – as that’s likely to be the quickest way you’ll have of keeping on top of finances.

If you prefer to conduct your banking over the counter at your local branch, then you need to make sure you have regular access. It’s all well and good selecting a bank and opening a current account online, but if you encounter problems and need to speak to someone face to face, you need to make sure you aren’t required to trek miles out of your way.

Check out your bank account features

If you’re just after a standard current account with no frills, then you’ve got hundreds of options to chose from; however many accounts offer at the very least, bonuses and perks to assist your financial situation. It could be something as simple as an interest free overdraft (which not all accounts have) to something more lucrative, like cash back on supermarket and petrol station purchases. If you’re coming off the back of a big house purchase, money won’t be flowing as freely as you’d hope, so an interest free overdraft, just to be utilised whilst money is tight could be a godsend. Shop around and view the overdrafts on offer at different banks and see which best suits your needs

Get the best deal

In an age where there are more different account options than ever before, many banks are now looking to lure you in with deals. Make sure you check out what offers0 you can get before opening an account. Things like cashback accounts now offer to pay you money back on purchases such as groceries and petrol, and other banks even offer you cash to switch to one of their accounts. Make sure you shop around, and take advantage of the deals on offer.

Graduate benefits

If you’re still a student, or are a recent graduate, then there are special accounts still available for you which offer things like overdrafts and freebies. The Young Persons Railcard has always been a popular sweetener for banks when it comes to luring in custom, and things like restaurant discount cards and gadget insurance are also available at banks, as a means of saving you money.

Compare your options

Once you’ve weighed up options and garnered what benefits and drawbacks all the different accounts have, head to a comparison site to compare your options for one last time.

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The Starter Home Scheme
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The Starter Home Scheme

A new scheme, aimed at enticing first-time buyers onto the property ladder has kicked-off this week, with potential new homeowners being being offered a 20% discount on their new home.

The Starter Home initiative will see 200,000 new homes built for first-time buyers under the age of 40, with a 20% discount being made possible by offering developers the chance to build on cheaper brownfield commercial land and waiving taxes.

The scheme however, doesn’t apply to all house ranges, with the price of homes available under the Starter Home scheme being likely to be capped at £450,000 in London and £250,000 around the rest of the country.

The scheme will allow aspiring homeowners to register for the scheme from the beginning of next year and will operate as part of a new host of measures introduced by the Government to help people onto the property ladder. The scheme will operate alongside existing implementations, such as the Help to Buy scheme, which offers help to house shoppers who can only afford a small deposit.

Speaking about the scheme, Prime Minister David Cameron stated: “Hardworking young people want to plan for the future and enjoy the security of being able to own their own home. I want to help them to do just that. Under this scheme, first-time buyers will be offered the chance of a 20 per cent discount, unlocking home ownership for a generation. This is all part of our long-term economic plan to secure a better future for Britain, making sure we are backing those who work hard and get on in life.”

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