The property ladder involves a different number of steps, some planned and some unplanned. The number of steps on the ladder will relate to your life ambitions, what decisions you make and what life throws at you. Unfortunately, the hardest step on the ladder to reach is the first one. How you climb the property ladder involves getting on it in the first place, but essentially, climbing the property ladder is an ambition most of us hold, and which is dictated by a series of decisions, circumstances and characteristics we have to navigate.
Traditionally, the property ladder involves four key milestone stages. These are first-time buyers who typically go for a one or two-bedroom flat or terrace house, second-steppers who opt for a larger two or three-bedroom semi-detached house, third-steppers who opt for a larger family home with three or four bedrooms, and finally downsizers, who opt for a smaller home to cater for their retirement when their children have flown the nest. Here we will offer some helpful tips for navigating the ladder to reach the next stage, and how to do it skilfully and strategically.
Saving money for a deposit
This is traditionally necessary to get on the very first step on the ladder and is normally achieved once you are in full-time employment but still living at home with your parents, i.e. you have the benefit of a full-time income but no significant financial commitments. If you can put off the purchase for as long as possible, this will enable you to save a larger deposit pot, which will enable you to build more equity in the resulting property, and may also enable you to secure a better mortgage rate that is more affordable or even a larger property. Saving money can be beneficial at any stage of the property ladder, of course. Making sacrifices on lifestyle changes and cutting down on luxuries, working overtime, doing refurb jobs at home yourself etc, can all create a healthier financial position and therefore more financial freedom. More and more people are actually getting some or all of their deposit monies from gifts from parents or relatives as well as their own savings. Most lender’s will accept this, but want the people giving the gift to sign additional forms.
Compromise
Being able to compromise is a key characteristic in being able to move up the property ladder. Everyone has dreams of their perfect home, but in reality, how often do we achieve perfection in life? If you are able to compromise on some key elements, such as location, size or spec of home, this can make a property purchase more affordable, meaning you are more likely to be able to move onto the next step of the ladder. Patience is another similar quality which can help in this regard. Waiting for the right time, or for more savings to be built up, can fund a move better or provide more favourable circumstances than making rushed decisions.
A project
Considering a property move as a ‘project’ may help you add value to it and hence make a bigger profit. Developing a property by buying it cheaply and selling it for much more is a popular way to add value and fund a further move. Of course, this requires considerable knowledge of the market, different trades and financial management, and can be difficult to live with in the short term but refurbishing a home can add more capital to the property quickly.
Local market knowledge
In a similar way to refurbishing a property to add value, you may be able to identify a property in an area that is up and coming, perhaps due to nearby developments which make it more attractive. Keeping an eye on the property market, local planning issues and local news, may help you earmark an area that may be more attractive to a certain market sector in say, five-to-ten years’ time. This again means you can buy a house relatively cheaply and sell it for maybe £10-20,000 more in a few years without doing anything to it.
Costs
Having a thorough understanding of all the costs involved in buying and selling properties enables you to budget accordingly and avoids any nasty surprises at key stages. This will involve mortgage fees, legal fees, stamp duty and could potentially involve capital gains tax if you have two properties.
Watch the market
Keeping an eye on the property market is always a good idea, and helps you to plan the right move and to buy and sell property at the right time. The property market can be very localised, but can also be influenced by economic factors you have no control over, such as interest rates. This can make or break a property move and can seriously impact on the financial benefits, so make sure you are aware of market conditions and that you know when is a good time to move.
Think about the next step
When choosing a property to move to, it is always worth thinking about the next step after that also. It can be difficult to do this, and it is important not to be thinking too far ahead, but essentially we mean, how long is this property going to be suitable for you, and will it help you get to the next stage? Is the property likely to accommodate a growing family? Or will you have to move sooner than you would want to? Is the property likely to increase in value over the next few years? It is always worth planning ahead a little to ensure a property move makes sense in the medium-long term.
Professional advice
A key element to being able to make the right decisions and effectively move on to the next stage of the property ladder, is getting good, professional advice. This could be legal advice on the conveyancing process and the property market, financial advice on mortgage rates and lending products or your own finances, or market advice on property locations and planning issues. It is important you make key decisions based on accurate, reliable and expert information.
If you want legal advice on the property market and help with the conveyancing process, then contact our property conveyancing team at Ison Harrison today.
