HOME PURCHASE

Whether you're buying a family home, downsizing for retirement or taking your first steps onto the property ladder, buying a property is a huge moment. It's exciting to think about the life you want to lead and where you want to live it, but it can be intimidating too.

One of the biggest challenges though, can be building up the savings you might need to support you in buying your new house. The numbers involved in purchasing property are usually high, and sometimes nerve-wracking.

The best way to start is to work out your savings goal, and then plan out the steps you can take to get there.

Set your savings goal

When you start saving up, the first thing you need to do is work out your savings goal.

A mortgage deposit is usually between 5% and 20% of the full property value. You may be able to access schemes which allow you to use a smaller deposit. The more you can save for a deposit the better, as a larger deposit could give you a better mortgage rate.

For first-time buyers, it's worth considering whether you wish to take advantage of government-backed savings products like Lifetime ISAs. These offer a bonus on top of your own savings.

When you set your savings goal, remember the cost of buying a home is more than just the property price. Try to include any associated costs in your total:

• Stamp duty (England and NI)
• Land and Building Transaction Tax (Scotland)
• Land Transaction Tax (Wales)
• Surveys
• Conveyancing
• Removals
• Estate agent fees (if you're selling your current home)

These costs can add up quickly. For more help use the stamp duty calculator from MoneyHelper.

How to start saving

Now you've set your savings target, think about any areas of your life where you might be able to cut back, either for now or the longer term. Are there any sacrifices you could make now to get closer to owning your home in the future?

In addition to cutting back where you can, setting up and keeping to a budget can be one of the most important things you do to save money towards a long-term goal. Visit our budgeting section to get more information on how to put a plan in place.

We've also shared more tips on saving in our savings section.

A mortgage is a loan from a bank or building society. It's usually used to purchase property. The bank or building society loans you the money to buy your property, and you agree to pay back the money in regular instalments over a set time period. The amount you pay back includes interest and lender charges. Your chances of getting the mortgage you have applied for is impacted by your financial history and credit score.

Mortgages are long term loans and they function a lot like paying rent – except instead of paying a landlord, you're investing in your own property. But don't forget, you could lose your home if you don't keep up your mortgage repayments.

There are a number of different types of mortgages. They depend on what the property is and what best fits your circumstances. Some of these options include:

1. Repayment mortgage: You pay the deposit, then repay the remaining amount of the property value (capital) over a set period of time as well as interest that accrues on the mortgage.
2. Interest-only mortgage: You only pay the interest that accrues on the mortgage, and then you repay the original loan amount when the term ends. You could do this by selling the property or through savings.
3. Offset mortgage: Your mortgage provider also provides you with a savings account. The interest on the mortgage you have to pay is offset by the amount you have in a linked savings account.

The rate of interest you pay on these mortgages can be different too, a couple of examples would be:

• Fixed-rate mortgage: You and the bank agree a figure you will pay back each month. The rate stays the same across a fixed period.
• Tracker mortgage: There's no fixed interest rate, so the amount you pay in interest each month can fluctuate depending on interest rate changes set by the Bank of England.

There are also mortgages, called home purchase plans, that are aligned to Sharia Law, visit MoneyHelper to find out more.

To find out more about mortgages, visit MoneyHelper or try out their range of mortgage calculators.

Secured lending is also an option whereby, unlike rent, the lender has the right to repossess the property. The property may be repossessed on the basis that repayments are not met. There are many fees involved with secured lending such as legal, administration and valuation charges.

Agreements in principle

Before making an offer, you should consider getting an 'agreement in principle' (AIP). (If you're buying in Scotland, you have to have an agreement in principle before you can make an offer.) It's the first step to getting a mortgage, and it gives you an idea of how much you'll be able to borrow.

It also means that, when you put in an offer, the seller can see you're able to afford the property.,

The transaction

Buying a property isn't a standard purchase. It's a legal transaction, so you’ll need a solicitor, conveyancer or other legal professional to support you. Remember to include the cost of legal services in your budget.

The legal transaction will involve a number of steps, and those steps vary in the different UK regions.

Moving in

This is a huge moment, so take a moment to enjoy it. The process of packing up and moving can be stressful, but it's all worth it once you've moved into your new home.

When you're setting up a new household, it's a good idea to draw up a detailed budget. Price comparison websites will help you to get the best deals on utilities and insurance, and you should check back in on these annually to make sure you're not spending more than you have to.

You should also put some time aside to go through and update your new address in any of your accounts, for example:

• Current and savings accounts
• Driver's license
• Medical records
• Pensions
• And many more

You may also want to consider setting up post forwarding with Royal Mail to make sure you don't miss anything after you move.

If you are already in your own home and you're struggling to meet the payments on your mortgage, you may wish to get in touch with your lender to discuss this.

If you're a resident in Scotland, you may be able to apply for the Scottish government-backed homeowners support fund. For residents in Northern Ireland, there's additional support available with rates payments through rates rebate if you don't receive Universal Credit.

On top of the Lifetime ISAs, there are other schemes to support home ownership:

• Help to Buy Equity Loan Scheme: If you're a first-time buyer struggling to save up the deposit for a home, the government can provide you with an equity loan to add to your deposit.
• Shared Ownership: If you can't buy the property outright, you might be able to purchase a portion of the property. The local authority and housing association can then buy the remaining portion. You would need to pay rent on the equity that you do not own on top of the mortgage repayment.
• Right to Buy: If you're renting from your local authority, you might have the chance to purchase the property at a discounted price through this scheme.
• Forces Help to Buy: If you're a member of the Armed Forces, you could get interest-free borrowing up to £25,000.
• First Home Scheme for Key Workers (NHS staff or veterans) who can claim a discount of at least 30%.

For more information on these schemes, visit the government's Own Your Home website. Please note each scheme has different rules depending on where you live in the UK. You may want to seek financial advice, be aware there will normally be a charge for any advice given.

Now that you're tied into a mortgage, it may be a good time to take out some form of financial protection to avoid losing your home if your family’s income drops unexpectedly. Many lenders offer protection policies such as Life Insurance alongside your mortgage, so we would recommend reviewing protection products you may already have in place and considering whether to renew, replace or add to them.

Given that you’ve bought your home and don’t have to keep saving for it, it’s worth considering what to do with money you would have previously put into your home deposit.

You could redirect your savings into your pension and benefit from tax relief, as well as a potential increase in employer contributions. Before making any changes to your pension, we recommend that you speak to a financial adviser. You can find an Adviser at the Unbiased website. Please be aware that you will usually have to pay for any advice you receive.