While we hear lots about the difficulties facing first-time buyers, climbing the property ladder isn’t easy either. One recent study – from 2018 – reported that 6 out of 10 second-steppers felt the process was tougher than getting on the ladder in the first place.
If you’re looking to make the next step and upsize to a family home, here’s how to avoid becoming unstuck:
Start with selling
According to Dee Ryall from estate agents Jackson-Stops, the first thing you need to do is put your own property up for sale. Not only will this ensure you’ve done all you can to get the house sale-ready (which might include a few pesky repairs), but it’s also crucial to ensuring you’re seen as a serious buyer.
‘It may sound simple, but many buyers begin to look for properties without putting theirs on the market,’ she says. ‘That puts them at a disadvantage when making an offer, as the seller is likely to favour offers from buyers who have already begun the process, and may already have an offer in hand.’
But before you can sell you’ll need to find the right agent – someone who can help you understand how much your property is worth and how it’s likely to fare in the current market. Even better if you can find one who knows the area particularly well and who already has potential buyers on their books.
Your agent should work closely with you in order to manage the particulars – like creating a floorplan, arranging the necessary photography, and writing up a description of the property itself. You will also need an Energy Performance Certificate to show how energy efficient – or not – your current property is.
Of course, it’s not just an estate agent you’ll need – you’ll also require a solicitor. And according to the experts, it’s best to engage one as soon as possible in order to ensure the process doesn’t end up being waylaid by legal complications.
‘A lot of second-steppers find that – when it comes to the legal side of things – the process can take longer than they anticipated,’ says Dee Ryall. ‘This is particularly so if you’re moving from a leasehold property – or have a share of a freehold – as the additional paperwork can hold up the process.’
To avoid being hit by unexpected costs, try to get a sense of exactly how much the lawyer’s final fee will be. It’s common for solicitors to quote a standard fee at the beginning of the process, but they are likely to add additional fees along the way, particularly if there are delays or hiccups.
As a first-time buyer, you’ll know just how many things have the potential to go wrong. And when you have two transactions to worry about – a purchase and a sale – there is twice the scope for problems. As always, it pays to be cautious and be as prepared as possible.
Crunch the numbers
According to home-builder Project Etopia, the price gap between the average first home and second purchase has more than doubled in the past decade, which means you may well have to borrow more money.
The second-step gap is often exacerbated by specific local factors: second-time buyers in London, for example, are typically moving from a flat to a family home, which inevitably means a bigger jump. But that’s not the biggest regional difference. Grainne Gilmore, head of research at Zoopla, has crunched the numbers and calculated that the toughest region for upsizers is the South East, where the average move – from a 3-bed terraced home and a 4-bed property – amounts to nearly £200,000 more.
When it comes to lending, you should find out straight away if you can port – or transfer – your existing mortgage. Be aware that your application will be judged by the lender’s current criteria, which may have changed since your original mortgage. Obviously any change in your circumstances – more kids for example – will have an effect too.
The specifics of your mortgage will depend heavily on your own situation. Buyers over 40 will likely find that lenders will only offer a plan that takes them to retirement age (i.e. 25 years), meaning they end up with steeper monthly payments.
And of course you’ll also need to take into account stamp duty, which applies to homes worth over £125,000. Consult the current brackets to find out how much extra it will cost you.
Help to buy
The past ten years has seen the government launch several well-publicised initiatives to support first-time buyers. But some of these are also open to people moving up the property ladder – a fact that’s often overlooked by second-steppers.
The Help to Buy equity loan initiative is a scheme through which the government will lend you 20 per cent of the purchase price of a property (rising to 40 per cent in London) with no interest for the first five years. Although there’s no cap on household income, it’s only available for purchases up to £600,000.
If you qualify for this scheme, you can reduce the necessary deposit to five per cent – helping you access more advantageous mortgage terms than if you were borrowing a higher proportion of your home’s value. That might end up being the difference between buying your dream home or settling for less.