Getting onto the housing ladder – a guide for First Time Buyers
In my opinion, there’s never been a better time in the past few years than now, for First Time Buyers to be thinking about getting onto the housing ladder and owning their own home.
Why?
Lenders are becoming much more flexible around lending to first time buyers with 5-10% deposits and over recent years first time buyers have been competing with buy to let landlords for starter properties – the recent changes to how landlords are taxed will force many buy to let landlords out of the market, those landlords will sell and first time buyers will re-enter the market to pick up that housing stock.
Very few people can afford to buy their first property with cash, therefore they are going to need some assistance to get onto the property ladder. That assistance can come in the form of a couple of things:
- A mortgage
- A mortgage and help with deposit
I’m going to show you the various ways to help you get onto the housing ladder for your first property.
As professional and expert mortgage brokers we have access to the whole of the market, which means that we can help first time buyers looking to buy their first home find the very best first-time buyer mortgage that’s available to them.
This helps you to cut down the time spent researching and sifting through all the various first time buyer mortgage deals that are available and we guarantee you that we can help you to find the best type of mortgage for first time buyers that is currently available.
We even help guide you through all the steps to buying your first home, from the mortgage through to explaining the legal (conveyancing) process that works in tandem with your mortgage application, as well as talking you through all the life insurance options to make sure your new first time buyer mortgage is protected should you not be able to work, through illness or death, as well as protecting the property itself.
Did you know that as professional mortgage brokers we have access to solicitors who can help you with the legal process required with buying your first home – at much cheaper rates than high street-based solicitors!
We also have access to surveyors who can perform a more in-depth property survey than you can purchase independently or than those provided by mortgage lenders.
How Much Deposit do I need?
The MINIMUM deposit you will require is 5% - this can either be from your savings, inheritance or gifted to you.
Contrary to popular belief, there are a significant number of lenders available who offer 95% Loan to Value (LTV) mortgages for you to choose from.
Start small and profit from rising house price inflation
This might mean buying a starter home or apartment just to get onto the housing ladder and profiting from rising property prices before you move onto a bigger property a few years later.
Benefit from a gift
Lenders are quite happy to let you use a deposit that has been given to you by family members.
Some lenders (not all) are happy for the gift to come in the form of cash or equity from builders or friends too!
If you fall into this category, it’s always best to speak to an adviser as its specialised and can take a bit of digging around the lenders to work out who will permit this type of deposit.
It’s not possible to buy a property without a deposit, so the first thing you’re going to need is at least a 5% deposit (the amount of deposit alters if your classified into a specialist area – see below for examples) – the deposit can come from your own resources or as a gift from an employer, friend or family member.
The government runs a Help to Buy scheme whereby you put down 5% of the purchase price and the government helps you to arrange a 20% loan (effective deposit of 25%) to which you then arrange a 75% mortgage with a lender – this is only available to new builds and the builder has to be authorised to offer help to buy on their new build properties.
As lenders are only lending 75% Loan to Value the risk factors reduce and is why many lenders are happy to lend in this area.
You can find out more about the governments Help to Buy scheme here https://www.helptobuy.gov.uk/ or feel free to contact us to discuss.
You could purchase your council property under the RIGHT to BUY scheme if you qualify, (speak to your local authority/council regarding this) and receive a generous discount to purchase it – the discount is calculated by your local authority and typically depends on how many years you’ve rented from them as to the size of the discount – This definitely an area that we can help first time buyers with.
Another option is to purchase a property using the SHARED OWNERSHIP scheme – these are properties offered for sale by local housing associations, they offer you the opportunity to purchase a share in the property i.e. 25%, 50%,75% etc and for the remaining share you pay rent to the housing association.
We have lenders who let you purchase the share from the housing association WITHOUT the need of putting down a deposit (99% of the remaining lenders do insist on a 5% deposit being put down) – so this can be a great step onto the housing ladder for buying your first home - – This definitely an area that we can help first time buyers with.
There is a lender who permits you to use a personal loan as the deposit – we don’t encourage this, but if it’s your only option then we know where to look.
What about my credit rating?
This very important and it does have an impact on which lenders are available to you and also it could determine how much deposit you are required to put down.
If you have a squeaky clean credit file then you should be fine for 95% loan to value mortgages, if your credit file is not perfect then lenders typically restrict how much they lend and the deposit required is determined by the severity of your credit file - any broker/adviser worth their salt will request a copy of your credit file PRIOR to telling you what first time buyer mortgage deals are available to you, so that they can let you know if your deposit expectations are feasible.
I also see enquiries from first time buyers who have specialised and complex income, including self-employed first-time buyers with only 1 year’s accounts – minimum deposit required here is 10% (slight blemishes on your credit file are OK too).
I am always happy to talk through potential enquiries if you’re unsure on any aspect.
This article was written by our in-house mortgage adviser Andrew Ducksbury CeMAP.
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Contact our friendly team at our Long Stratton office now