For many who are are wanting to become first-time buyers , a first home often remains out of reach the main reason being they simply are unable to raise the deposit that lenders require.

There is now good news, the lending criteria is finally becoming a little more easier. There is a growing number of lenders now offer 95% loan-to-value mortgages where you as the buyer will have to put down a deposit of only 5% of the value of the property. If you are wanting to get something that is better you will need to at least raise a reasonable size deposit of 25% of the purchase price or possible even more.

1. Start by planning for a deposit

For many first time buyers they will find it hard to put together a large deposit but by having a large deposit to put down for a house will have its advantages. One of those being more and better mortgage deals will be available to you the larger your deposit is.

You are then also less at risk of slipping into something known as a negative equity, this is where house prices fall to such a great amount that your property is now worth less than the amount of money you owe on it.

2. Consider the additional costs you will have to pay

Its important that you remember that you will also need to save money to meet the additional costs of buying a home. This would include stamp duty, which can be payable at rates beginning at 2% on all property purchases price above £125,000 and also a mortgage arrangement fees that is charged by the lender you have chosen. There would also be legal fees to pay your solicitor, plus charges for a survey of the property and land registry fees for registering your ownership of it. Its may not be as important but its also good to remember you will need to save money to help furnish your new home.

3. Identify the right way for you to save

You should think very carefully about how you as a person save. Places like a bank and building society accounts will offer complete security but at this moment in time currently pay very low rates of interest. An alternative way could be, a stock market investment which offers the potential for higher returns however its important to know that your savings can fall in value as well as rise.This way mainly suits people who are happy to take a longer-term view.

4. Look at the mortgage market

Being a first-time buyer you will have access to all the same mortgage products as other borrowers will, sometimes lenders will offer them special deals from time to time so it would be worth having a look at them. Its good to know that the mortgage industry and the Government have worked hard together to come up with plans that are there to help first-time buyers get on the property ladder.

5. Talk to your family

Its important that you talk to your family, they might be able to help you and tell you information you may yet not know. What some mortgage lenders do is offer products that are aimed at families, where parents or grandparents want to help their children out with a home purchase. They will include guarantor mortgages which is where a family member agrees they will make the repayments if the borrower can’t, joint mortgages which is for children and parents buying together. What a family offset mortgage does is it aims to use parents savings to help reduce children’s mortgage costs.

6. Consider shared ownership and shared equity schemes

Both shared ownership and shared equity schemes are similar but very much different ideas. What a share ownership does is it offered by housing associations which is where you will borrow enough to buy a proportion of the property for example 75% , you would then pay rent of the remaining proportion. What shared equity schemes do is you buy the whole of the property but you would taken out a loan to fund the deposit which would be part of the arrangement. what you then owe will rise in line with any rise in the property value.

7. Look into Government schemes

The Government runs two separate schemes to help people who are struggling to buy a home. The Help to Buy scheme and NewBuy are available to buyers with a deposit of between 5% and 20% of a property’s value.

They work by either offering you a interest free equity loan to buy a new build property or by the government part-guaranteeing a mortgage loan to make it less risky for lender to offer you a mortgage.

If you are a first-time buyer and would like to have independent financial advice to help give you some guidance in buying a house, we at Hutt Professional have advisers who have many years of experience working with first-time buyers and mortgages who are also very highly qualified and would be more than happy to become your financial adviser and give you independent financial advice. If you are located in Leamington Spa or surrounding areas please do not hesitate to contact us.


source: 04/02/2015