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