The UK housing market is going through a tough time at the moment. Prices are fluctuating wildly with few experts actually able to read the market accurately.
Thousands are trapped in negative equity, however, lending figures for August increased for the first time in a year for home movers and first time buyers.
Recent signs of recovery do not even come close to pre-recession levels and, in the meantime, the North-South divide continues to grow.
On top of this, homeowners reaping the benefits of record low interest rates are debating whether or not to remortgage.
How, in this mess of a market are you expected to find (and pay for) your dream home?
Here is a quick guide to finding that dream home;
Getting a foot on the ladder
Getting onto the property ladder can be hard, especially when banks have behaved so badly in the past. The recession left many first time buyers in disarray after banks and lenders, once so generous with their loan-value (LTV) ratios, quickly closed the door on anything less than 80% LTV.
Recently, however, banks and lenders have eased up, offering higher LTVs for first time buyers. Some mortgage lenders will even accept a 10% deposit in the current climate.
Compare mortgages with Money Expert.
Think carefully about the location when searching for your new property. The neighborhood and catchment area will play a significant role in determining the price of the property. The latest research found that the average house price in the South is twice as high as in the North.
A typical property in the South of England now costs £336,743 compared to £164,347 in the North, according to Rightmove. Asking prices have fallen 9.6% in the North since the credit crunch. However, they have risen by a staggering 5.4% in the South of the country.
You may want to think about what type of property you are looking for. Terraced house owners have seen the value of their property rise by an average of £118 a week over the last decade. Terraced houses have increased in value by 68% from just under £90,000 in 2001 to just over £150,000 in 2010. Research by Halifax found that whilst all types of property have increased in price over the last decade, flats have seen the smallest price growth.
First time buyers should also consider all the hidden costs and fees that come with buying a house. Firstly, there is the stamp duty, followed by removal and hire fee, not to mention the solicitor and mortgage arrangement fess. Such considerations could easily add up to approximately £10,000, eating away at your deposit.
Expenses will continue to grow as you move into a property. As part of your mortgage agreement, you must have adequate home insurance. This may involve having separate cover for the contents and the building, as well as boiler care.
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Taking the next step
Congratulations, you are now the proud owner of a property. However, if youíre looking to take that next step you may have to wait a while. The UK housing market is softening, but it is still a volatile and unstable place which has left many living in negative equity.
Selling whilst living with negative equity could lead to a substantial mortgage shortfall, leaving you out of pocket.
Moving house can be an extremely expensive process and, therefore, it makes sense to move somewhere that you hope to settle for a sustained period. Otherwise, sit tight until you find the perfect property for your specific requirements.
Experts predict that interest rates will not increase for another year, or even until 2013, so it could be worth switching to a tracker mortgage. However, if interest rates were to increase sooner than predicted, which is a possibility, think about whether or not you could afford the payments.
Compare variable mortgages with Money Expert.
On the other hand, you could opt for a fixed rate mortgage. There are some very reasonable mortgage deals available at the moment. The average fixed rate mortgage has fallen to 3.82%. Leeds Building Society, for example, have launched their lowest ever two year fixed rate at 1.99%, bringing the two year fixed rate down to 3.82%.
Compare fixed mortgage rates with Money Expert.
Paying off the mortgage
Paying off a mortgage could seem like an impossible task during these tough times, however, it is possible. Paying off a mortgage early eliminates one of your largest debts quickly. Even though interest rates are low at the moment it will not last forever, which means that now could be a great time to start making overpayments. Watch out though, some lenders cap the amount you are allowed to overpay.
Alternatively, many lenders and high street banks offer ëoffset mortgagesí which allow homeowners to pay off their mortgage faster. Borrowers are able to use their savings to reduce the interest they paid on their mortgage.