Getting one foot on the property ladder is often tricky, but once you've climbed the first rung moving up the ladder is comparatively easy. Or is it? According to the latest Lloyds Bank Second Steppers report, homeowners looking to take the next step often struggle to fund the move, leaving them reliant on the deep pockets of their friends and family.
While it is generally accepted that many first-time buyers will require a little financial help to buy their first home, it is often assumed that current homemovers have no such need as the equity built up in their home can help to cover the costs. However, the report found that first-time movers typically need to find an extra £125,694 to move to their second home, which is ideally a detached property. This is a huge sum, so it is perhaps unsurprising that almost one in five (17%) respondents admitted that they need financial assistance from their family or friends, and that 44% cited that the size of the deposit is the biggest barrier to moving.
Respondents thinking of turning to the Bank of Mum and Dad were typically planning on asking for around £22,480 to fund their move – a significant sum, but one that 50% of those questioned said they need in order to buy their second home. This is up from £21,080 in 2014 and £21,273 in 2013, which indicates that the costs for climbing the property ladder are steadily increasing.
These high costs can put a strain on both the homemovers and those who choose to help them fund it: 43% of respondents confessed that their parents had had to make sacrifices in order to help fund their plans, while one in five (20%) were putting their plans to start a family on hold in order to cover the costs. Clearly, the budgets of both second steppers and their families are reaching their limits, so what can you do to achieve your dream of moving home?
As well as leaning on friends and family to help foot any gaps in your finances, making the most of surplus income can pay dividends in your mission to move home. The report found that many would-be homemovers were being proactive, with 37% increasing the amount paid into savings over the last 12 months. The same number were also using any excess cash to overpay their mortgage, reducing the balance owed and potentially reducing the loan-to-value (LTV) of the mortgage needed to buy their next home.
"For many, parental support will be reaching its limit as prices increase," commented Andrew Mason of Lloyds Bank. "It's [therefore] encouraging to see so many second steppers also standing on their own two feet, planning ahead and taking action to top up their equity levels."
So, if you want to move out of your first home and make the next step up, you need to join the ranks! Making savings wherever you can may help you to build up a sizeable savings pot to help you fund the move, and when the time comes, it's also a good idea to see what mortgages are available. Another provider may be able to offer you a better deal, so if you looking to remortgage, check out the market! This will reduce the cost of the property when you move in, while some deals may have incentive packages that will cut the upfront costs that come with buying a home.
So don't just rush to the Bank of Mum and Dad for a loan – maximise your savings and reduce that outstanding balance! It may be hard, but moving into your dream second home will be worth it.
Remember, in order to secure a mortgage, credit card or personal loan you need to have a good credit rating. To find out if yours has a clean bill of health, contact a credit check provider, such as Experian CreditExpert to investigate your credit report.
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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