How to Buy Cheap Houses in London
With the average price of houses in London easily surpassing £700,000, it can be quite difficult to find cheap houses in London for sale. This is especially problematic for first-time buyers and those not working in a lucrative profession.
In this article, we consider ways to find affordable or cheap houses in London and nearby areas. We start by explaining how reconsidering the type of home area you wish to live in as well as its condition can give you access to cheap houses in London.
In the second part of the article, we look at all the government initiatives which can help prospective home-buyers get a foot on the property ladder by reducing the price they pay.
Reconsider where you want to buy London property
Although you might dream of living in an affluent area like Chelsea, there are very few – if any – cheap properties for sale in this borough. When house-hunting in London, you must be realistic and be prepared to look at less prestigious addresses.
One of your most important criteria should be close access to a bus stop and tube or train station. With the extensive public transport system in London, you will therefore never be far from where you want to go.
As you travel further afield and into the Greater London area, you will find that property prices become lower and lower. Some areas, like Bexley and Croydon, have houses for sale which are half the price of similar properties located in central London.
Having a good look at the various property auctions in London is also an excellent way of saving money and finding a cheap house in London, but this does not always work as property auctions can get out of hand with bidding wars and the final price often greatly exceeds the guide price shown in the auction guide.
Reconsider the type of London property
Although you may wish to buy a semi-detached house with a specious garden, you will have to be realistic about the type of property you can afford. A terraced house or a flat might be a more affordable choice if you are on the lookout for cheap property in London.
Once you have got your foot on the property ladder and built up some equity in your property, you will be able to afford something better next time.
Buying a cheap or badly maintained property
As well as the location and type, the condition of a property also determines how much it can be sold for. If you have the time, practical and organisational skills and the budget, you can find a wide variety of cheap houses in London which need work.
The advantage of buying a run-down, neglected cheap house in London is that there is less competition so you might be able to get a further discount. Another benefit is that you can put your own stamp on the property as you are doing it up so that your new home reflects your personality, personal preferences and circumstances.
There are, however, disadvantages of buying a rundown property. One is that you need to ensure that a thorough property survey is carried out to pinpoint any major structural issues which may be costly to fix.
Another drawback concerns your mortgage provider. You may find that a mainstream lender will refuse your mortgage application if the property is considered to be uninhabitable. For example, the bathroom facilities do not work.
Finally, renovating a poorly maintained property can take a long time. You may even have to temporarily rent a house elsewhere while repairs are being done. This can be an additional burden for you financially.
Buy to let property in London
Another factor driving up property prices in London is the huge demand for rental properties and the boom in the buy-to-let property market in London. While there used to be many houses for sale in London under £200,000 this is simply no longer the case.
If you have the budget and you are seriously considering becoming a landlord in London you need to be aware of the reality of London property prices. However, with the right property rented out with a short assured tenancy agreement, the returns can be extremely lucrative.
Help to Buy London
Available exclusively for first-time buyers, Help to Buy London gives an equity loan of up to 40% of the property price for the purchase of new-build properties in the Greater London area. This scheme is only available for properties worth up to £600,000 and for would-be buyers who have saved a deposit of at least 5%.
The first five years of this equity loan are interest-free. After this period elapses, the loan must be repaid in monthly instalments with an administrative fee of 1.75%. Full repayment of the loan must be made when the property is sold, when the mortgage ends or after 25 years (whichever comes first).
Rent to Buy in London
The Rent to Buy scheme enables prospective home buyers to rent a house at 20% below market value for a term of 5 years. At the end of this period, they are given the opportunity to buy all or a percentage of the property as part of a shared ownership scheme.
The eligibility criteria of Rent to Buy in London are:
- First-time buyers only
- Household income of under £64,000
- Possess a good credit history
Starters Homes Initiative
Although the Starters Homes Initiative was announced in 2014, no properties have been built yet. This scheme is intended to help first-time buyers aged 23-40 and who have a household income of under £90,000. The discount that is available is up to 20% off the house price, making cheap houses in London a little more within reach.
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