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7 Tips to Get on the Property Ladder

7 Tips to Get on the Property Ladder
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    Despite the much publicised problems in the US Housing Market, there are still many long term advantages to buying a house in preference to renting.

    Buying a house has historically been a good investment; since 1945, house prices have increased faster than inflation and have also outperformed the stock market. Also, buying a house gives you the opportunity to live rent free when you have paid off the mortgage. Mortgages do fluctuate with interest rates. However, generally, mortgages become easier to pay over time. If your mortgage payments are currently $800 a month, this may seem alot, but if you income rises, then as a % of income, your mortgage will eventually fall.

    Despite the financial benefits, buying your first house can prove difficult because of the high prices we currently face.

    These are some tips for buying your first house.

    1. Save a deposit.

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    As soon as possible try to put money aside for a deposit. If you have a good sized deposit, mortgage lenders have more confidence in lending bigger amounts of money. This is because you are less likely to suffer from negative equity. The problem is that to save a decent % of a house can take many years of careful saving. However, with house prices currently stagnant, it has become a little easier.

    2. Borrow From Parents.

    Depending on your circumstances, this may be an option. There are several drawbacks to this approach. But, for many it provides the only realistic hope of getting on the property ladder. Parents may be able to release equity from the value of their house and lend you money (hopefully for a very low interest) this can provide the necessary deposit to buy your house. Many parents are willing to do this because they realise that their generation has benefited significantly from rising house prices. In extreme circumstances parents may be willing to act as a guarantor for your mortgage.

    3. Joint Mortgage.

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    It is becoming increasingly popular for young single people to combine their incomes with others so that they can afford a mortgage. Their own salary is insufficient. But, by buying with other people you effectively double your income, and this can enable you to buy a house. However, there are drawbacks. Firstly, you only will only own a 50% share in the house. Secondly, if you fall out with the other person, it can create an awkward situation, both financially and domestically.

    4. Interest Only Mortgage.

    This means you only pay interest on your mortgage loan. This means it is a cheaper repayment. However, there is a big disadvantage. At the end of the 30 year period, you still owe the entire mortgage loan. Interest only mortgages will only work if you can find an alternative way to invest in paying off the debt.

    5. 50 Year Mortgage.

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    A 50 year mortgage means that you spread repayments over 50 years rather than the standard 25 years. It means that monthly payments will be lower than a 25 year mortgage. The drawback is that you end up paying more interest payments over the course of the mortgage. However, it is likely to still be a better option than renting. Also, if you income increases in the future, you can always reduce the mortgage term at a later date.

    6. Move to a Cheaper Area.

    House prices in some areas are much cheaper. If you are willing to move to these areas then you can make buying a house a real possibility. Maybe in the future you can move back to more desirable areas. It is worth bearing in mind that cheaper areas do not always mean lower quality. For example, some areas have a premium because they are close to good schools. It is worth researching carefully average house prices in different areas.

    7. Self Certification Mortgage.

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    If you feel frustrated that banks won’t lend more than 3-4 times your income you might like to consider a self certification mortgage. Basically, a self certification mortgage enables you to state your likely income. In practise this can be a way to borrow more than under standard circumstances. Given the recent problems with sub prime mortgages it is advisable to be cautious when proceeding with this option. I mention it mainly because it is what I used to buy my first house, 3 years ago. Buying a house was a little more expensive than renting. But, self certificating was the only option to borrow enough capital. Do bear in mind, if you borrow a high income multiple (5 or 6 times income) you will struggle if interest rates rise significantly.

    Getting on the property ladder is not easy for our generation. It is likely you will have to make some sort of sacrifices. However, the alternative of renting is often even more unattractive. Which ever option you choose make sure you don’t go beyond your financial limitations.

    Tejvan Pettinger works as an Economics teacher in Oxford. He writes a blog about Mortgages and Finance. This Includes articles about the Housing Market, getting out of debt and paying off your mortgage early

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    Last Updated on January 2, 2019

    7 Steps For Making a New Year’s Resolution and Keeping It

    7 Steps For Making a New Year’s Resolution and Keeping It

    Are you keen to reinvent yourself this year? Or at least use the new year as a long overdue excuse to get rid of bad habits or pick up new ones?

    Yes, it’s that time of year again. The time of year when we feel as if we have to turn over a new leaf. The time when we misguidedly imagine that the arrival of a new year will magically provide the catalyst, motivation and persistence we need to reinvent ourselves.

    Traditionally, New Year’s Day is styled as the ideal time to kick start a new phase in your life and the time when you must make your all important new year’s resolution. Unfortunately, the beginning of the year is also one of the worst times to make a major change in your habits because it’s often a relatively stressful time, right in the middle of the party and vacation season.

    Don’t set yourself up for failure this year by vowing to make huge changes that will be hard to keep. Instead follow these seven steps for successfully making a new year’s resolution you can stick to for good.

    1. Just pick one thing

    If you want to change your life or your lifestyle don’t try to change the whole thing at once. It won’t work. Instead pick one area of your life to change to begin with.

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    Make it something concrete so you know exactly what change you’re planning to make. If you’re successful with the first change you can go ahead and make another change after a month or so. By making small changes one after the other, you still have the chance to be a whole new you at the end of the year and it’s a much more realistic way of doing it.

    Don’t pick a New Year’s resolution that’s bound to fail either, like running a marathon if you’re 40lbs overweight and get out of breath walking upstairs. If that’s the case resolve to walk every day. When you’ve got that habit down pat you can graduate to running in short bursts, constant running by March or April and a marathon at the end of the year. What’s the one habit you most want to change?

    2. Plan ahead

    To ensure success you need to research the change you’re making and plan ahead so you have the resources available when you need them. Here are a few things you should do to prepare and get all the systems in place ready to make your change.

    Read up on it – Go to the library and get books on the subject. Whether it’s quitting smoking, taking up running or yoga or becoming vegan there are books to help you prepare for it. Or use the Internet. If you do enough research you should even be looking forward to making the change.

    Plan for success – Get everything ready so things will run smoothly. If you’re taking up running make sure you have the trainers, clothes, hat, glasses, ipod loaded with energetic sounds at the ready. Then there can be no excuses.

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    3. Anticipate problems

    There will be problems so make a list of what they’ll be. If you think about it, you’ll be able to anticipate problems at certain times of the day, with specific people or in special situations. Once you’ve identified the times that will probably be hard work out ways to cope with them when they inevitably crop up.

    4. Pick a start date

    You don’t have to make these changes on New Year’s Day. That’s the conventional wisdom, but if you truly want to make changes then pick a day when you know you’ll be well-rested, enthusiastic and surrounded by positive people. I’ll be waiting until my kids go back to school in February.

    Sometimes picking a date doesn’t work. It’s better to wait until your whole mind and body are fully ready to take on the challenge. You’ll know when it is when the time comes.

    5. Go for it

    On the big day go for it 100%. Make a commitment and write it down on a card. You just need one short phrase you can carry in your wallet. Or keep it in your car, by your bed and on your bathroom mirror too for an extra dose of positive reinforcement.

    Your commitment card will say something like:

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    • I enjoy a clean, smoke-free life.
    • I stay calm and in control even under times of stress.
    • I’m committed to learning how to run my own business.
    • I meditate daily.

    6. Accept failure

    If you do fail and sneak a cigarette, miss a walk or shout at the kids one morning don’t hate yourself for it. Make a note of the triggers that caused this set back and vow to learn a lesson from them.

    If you know that alcohol makes you crave cigarettes and oversleep the next day cut back on it. If you know the morning rush before school makes you shout then get up earlier or prepare things the night before to make it easier on you.

    Perseverance is the key to success. Try again, keep trying and you will succeed.

    7. Plan rewards

    Small rewards are great encouragement to keep you going during the hardest first days. After that you can probably reward yourself once a week with a magazine, a long-distance call to a supportive friend, a siesta, a trip to the movies or whatever makes you tick.

    Later you can change the rewards to monthly and then at the end of the year you can pick an anniversary reward. Something that you’ll look forward to. You deserve it and you’ll have earned it.

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    Whatever your plans and goals are for this year, I’d do wish you luck with them but remember, it’s your life and you make your own luck.

    Decide what you want to do this year, plan how to get it and go for it. I’ll definitely be cheering you on.

    Are you planning to make a New Year’s resolution? What is it and is it something you’ve tried to do before or something new?

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