Kia again, and this week I'm returning to one of A Little Bit Richer's most important topics, buying your first home. We've talked about the different schemes to help you get on the ladder, but it doesn't change the fact that it's still likely to be a lot of money. So I'm talking to Hazel Johnston from Legal
and General. Hazel was previously a mortgage advisor, and now helps other advisors grow their business, so she knows a thing or two about the cost of getting on a property ladder. So Hazel, let's kick things off about talking amounts. When we talk about saving up to buy a house, just how much are we talking here?
It really depends where you're in the country. As a starter it varies so much, but I'd say it can be a lot of money. You can tell by my accent I'm based up in Edinburgh, Scotland. If I use Scotland as an example, we're looking about 34, 000 pounds roughly as an average compared to London, that jumps up quite a bit.
Poor London, that number is always a lot higher, isn't it?
It is, 144,000 pounds on average. So, it can be really tough to get yourself into a position to have those savings for that deposit. And I think as we look at generations gone past, some of our friends were maybe buying properties when rates were a bit better and property prices were lower. So we are in probably quite a different space to what we were a few years ago when looking at the same sort of properties.
Absolutely. I think I make it a point because I'm in the process of saving up for my first house.
Congratulations.
Thank you. And I make it a point to have a look at different areas I want to live in. I mean London, as you mentioned, that number is very hefty, so not necessarily feasible for me, but any areas I do look at, I like to go on property search websites and have a look at the sold listings because then you know, it gives you a good understanding
of what properties in that area have actually sold for. Because I mean we can look at what's currently listed, but that doesn't mean it's going to sell for that. So that's kind of a little habit I've got myself into whilst I'm saving so I kind of have a good understanding of how much that's going to cost me, but it is a lot of money. But there are a lot of things that come into it. So let's talk about
mortgages. Maybe you can give us a quick explainer. So Hazel, what is a mortgage, and what are different options that are available to people?
Yeah, so a mortgage essentially is just like a loan that a bank or building society will give you to be able to fund your purchase. Because I think we'd all love to have a couple of hundred thousand sat in the bank to buy these properties, but it's not the case for most of us. So yeah, banks, building societies will
lend that money in the form of a loan. There are lots of options though, so it's not just a case of if you're looking for that set property, you can adjust things on that mortgage to make it affordable for you, such as the length of time, as one example. So that's
called your " mortgage term." So you could have a mortgage that's slightly shorter, that will mean that your monthly payments are higher, and you'll pay less back to that lender. Or you can have lower monthly payments each month for that mortgage by extending it right out and taking it over longer periods of time. So there are different options depending on what your circumstances are and the budget that you
want. The good thing with mortgages as well is you can get advice on them. So, if that's something that you are looking at and you want to have a think about what's affordable for you, then absolutely you can speak to a mortgage advisor and they will be able to tailor your monthly payments to that budget as well.
I think it's always good to know that you can get advice. I think things like this, buying a property is such a big purchase that you want to make sure that you are going down the right path for you and you're picking the right options for your situation. So I want to ask you, when it comes to mortgages, how does that actually impact your deposit?
Yeah, so your deposit can vary and that really depends on how much you're wanting to buy that property for. So obviously the more expense of the property depends on area, it's repair, actually the desirability of that home, you are going to probably need a bigger deposit than maybe a property that needs a bit of work or somewhere
that's in an area slightly out of a main town. The more you can afford to put in, then the smaller your mortgage is going to be. And that's always going to mean you can potentially obtain better interest rates in that lender and have a lower monthly payment. But that's not achievable for everyone. We've just seen how much deposits are on average.
So what I would say is sometimes that's where we do see people opting to look at Bank of Mum and Dad. I mean if you look at our Bank of Family research that was recently done, about 47% of buyers under 55 years old had to get support from their relatives to help them get on the ladder. So it's
a hard one. I mean it is hard to save up for that deposit, but what I would say is there are different options out there for people if needed.
Absolutely. I mean like I said, as someone who's currently saving it is very difficult, especially when you have this massive number that you're trying to reach, right? Whether it's 20,000, 30, whatever your number is, it's a massive number. So if you have that help from Bank of Mum and Dad or family members or even friends you want to help pitch in, that's great. But what if you don't have access to
that kind of family support? Do those people risk being locked out of the property market?
I'm really interested you used the word " overwhelming," because it can be so easy to feel so overwhelmed looking at the amount, and I was a first- time buyer actually not that long ago, and I felt the exact same. I felt like I was saving forever to get that property. But what I'd say, it probably comes to three things. I'd say first of all, no, you're not locked
out that market. If we're talking about savings and actually being able to financially get there, I'd say if you're anything like me and you've got a pot of money saved up, you want to try and keep that there. And it's so easy to dip into that or be tempted to if your friends, I don't know, make a trip or something. So I would always say try and
save on the side. So have your property savings either in an ISA, or whichever way that you choose to do that. But then there are some apps and tools that can help make saving on the side for your little luxuries really easy. I know for example with my bank it will round up automatically the spare change to the nearest pound, and then that's my little fun fund. Because that actually builds up-
It does.
... quite a bit over time.
It does.
And so I would definitely say trying to utilize little tools and techniques like that can help without it then feeling like a chore, trying to get those savings up. Thirdly, and the more practical part really, if you really can't afford to save, or get to the savings that you want to are all the schemes that are available. So Skipton Building Society have launched a new mortgage product
to really help renters get on that property ladder. So it's a no- deposit mortgage, there's lots and lots of details which I'm sure mortgage advisors could help you with on that, but that's a great incentive in terms of that no deposit option. And then you've also got Lifetime ISA, essentially getting free money. If you put a thousand pounds in, they'll give you a thousand pounds for every 4,
000 pounds you save. So it's 25% of your savings up to 4,000 pounds each year. And I just think people need to be more aware of that. And then finally, as I said, I'm up in Scotland. Scotland's actually the only area that still have this, I was speaking to one of my friends who's a
mortgage advisor the other day, is the lift scheme. That's something that people forget about and that's run by the Scottish government where they'll give you a percentage of funds towards that deposit in that home. So it's not just about buyers and purchasers having to do all these different things to try and get into the industry. A lot of big industry names are also supporting new and innovative
initiatives. So, one being generation home, that's a startup mortgage company, so there's lots and lots going on to try and make it easier for people to get on that property ladder. So, that really can help people out and we just don't often realize all that's out there.
I love that, I think it's so important. I want to talk about then, we've mentioned obviously mortgages, you mentioned deposits, but there are lots of other fees associated too with the home- buying processes, I'm sure you know, having been through it yourself. So what else should people consider financially when it comes to buying a property that isn't just a deposit?
Yeah, so you've got quite a few different fees to consider as part of the buying process. I would say as a kind of first port of call, standard ones like your solicitor fees, potential surveys, and anything maybe that you want to put aside if you want to do up that property. The only way I could afford mine was to buy a property that needed everything done and I had to then factor in, I need some funds to do
that property up and make it livable. Another expense could be stamp duty, always worth checking because if you're a first time buyer you may not need to pay it, but for certain property values and if you're a home mover moving for a second, third, fourth time, then absolutely it's worth checking how much that stamp duty is. It's dictated by property price and can also be dictated, depends on if you've got
secondary properties running in the background. So it's always worth going on your government website depending on where you're based in the country. And you can type in the " property value" and it will tell you based on your situation how much
stamp duty is payable. So I'd say they're your key ones and part of the buy- in process, you potentially need to consider lender product fees as well, depending on which mortgage products you're going to look at. But again, as I said, mortgage advisors will keep you right. So definitely I speak to them, they'll keep you in the know. And sometimes you can add them onto the loan as
well. So you've got options there. But then you've got to think about your more practical living costs as well. So in terms of the property, you may find there are, if it's a leasehold property, you've got your ground rent service charges up in Scotland, that would be your
factor fees. And we're talking about a lot of first time buyers here, but actually any home mover, if you are moving to a new area, it's really worth considering that your commute, nursery, childcare, all these other elements that may change in your life from that change of vocation
as well. And then I would just say if you're looking to save for a deposit to get to that point, it's really, really valuable to think about your finances now and what commitments you're getting into now such as car loans, Klarna's a biggie. It's again, another very big temptation out there-
I love the fact that you mentioned thinking about your finances now. Because I mean home buying often isn't, I decided to stay, I want to buy a house, I
buy it tomorrow. It is a long- term process, but you've got to factor in, like you said, what commitments financially are you making now that could impact if you did take out car financing that could impact maybe your affordability or just anything that you're committing to that could maybe detract from you being able to get on a property ladder or make it harder for you once you move into that property.
Yeah.
Like you said, I mean, who moves into a property and wants to sit on the floor for six months?
No.
You want to make sure that you've got money- ... to be able to furnish it. So that's something that you've got to
Exactly.
think about now as well as think about future finances as well.
Yeah, and they'll impact your affordability with that lender too. So it's not even just about your own budget and being able to have your lifestyle and at home. If you go on lender websites, there's usually affordability calculators. So if you are thinking of a certain car finance or loan or whatever it may be, just check it, and you can do that on the lender website. It's really easy quite often.
I love that, that's really, really good point that you made there. So Hazel, I always end our episodes with the same question, which I'm going to ask you now. What three tips do you have to help people get a little bit richer?
My first one would be talking about that comparison piece. So I don't think you'll ever feel richer if you're always competing to others. There'll be people that aspire to be where you're at and you'll probably also always be aspiring sometimes to where other people are. So I'd say that first one is just celebrate the small wins, even if you've managed to save a 10er, that's a 10er more than what you
did yesterday, so celebrate those. Secondly, I would say think about stabilizing your income. We do sometimes see people suffer illnesses or have to take time off work. COVID was a massive time for that. And what you don't want to have to do is to dip into those savings you've
worked really, really hard for. Take out things like products, like income protection policies and it's a little bit of a safety net just in case you fall ill, you don't want to have to touch those savings that you've really worked hard for. And then the third one is
seek industry help. Take advice from experts, whether that's estate agents, mortgage advisors, solicitors, ask around because everybody's been there for the first time at some point if they want a property. And I would just say, always ask.
Hazel, thank you so much. That has been really, really good tips, especially celebrating the small wins. I think sometimes we always have a big goal, but you can celebrate the small milestones as we get there. So like you said, I'm going to celebrate the fact that I'm saving.
Yes, please do.
That's what I'm going to take home, I'm going to let all my friends know I'm saving. This is the small goal I want to celebrate. And I think that'll keep you motivated as you keep going.
Definitely it does.
So thank you so much-
Thank you.
... for coming on. This has been such a great episode. So thank you so much. Next week I'm taking a look at things women specifically need to know about money. If you're not a woman, don't hit " skip." There'll still be some highly tips for you too. I promise. Don't forget to follow and review the podcast and I'll catch you next week.