For many first-time buyers mortgages seem almost untouchable; we’re plagued with stories in the media about 40-somethings still stuck at home with ma and pa and needing the equivalent of a bank heist for a deposit. In the olden days (dinosaurs etc.) there existed the 100% mortgage. Those days are long gone.
Mortgages are tricky to get your head around, but they don’t need to be scary. Here are some pointers to help if you’re trying to negotiate that first step on the property ladder. Just so you know: the average age of a first-time buyer in the UK is 30.
1. The Help To Buy Mortgage Scheme
The Help To Buy Scheme allows buyers to get a mortgage with only five per cent of the housing cost, which is placed as a deposit. The government (yes, really) then wade in with an equity loan of 20% meaning you need to secure 75% mortgage to get the home of your dreams. This is a great way to help first-time buyers get onto the property ladder without help from family or parents (see later), or buyers that can’t save more than five per cent from their income. Mortgage lenders are compensated if mortgage repayments aren’t met.
2. The Bank Of Mum And Dad (And Grandparents)
More often than not, first-time buyers are only able to get mortgages with the help of parents and/or family. In fact, it’s more uncommon not to get financial help from family for a mortgage with some 61% of first-time buyers getting help from parents or grandparents. Advice? Open up conversations with your parents to let them know you’re planning on getting on the property ladder and see what support they can offer. And don’t be afraid to accept help!
3. In Case You Forget: Invisible Costs
Buying a house isn’t just about the price of the house itself. You need to allow for a whole range of additional costs including: stamp duty, home insurance, property searches, surveys, mortgage arrangement fees and removal costs. And solicitor’s fees.
4. Mortgage Fees/ Arrangement Fees
If a mortgage-lender doesn’t charge a fee, they may well charge higher interest rates in which case it would be wise to calculate the cost of each and work out the better deal. Mortgage calculators are available online. Interest will also differ depending on the type of mortgage so again, sit down with a cuppa and work out which you can best afford with or without support. Always remember you need to be realistic about your costs and living expenses.
5. Credit Scores Come Into Play
Lots of mortgage vendors won’t provide you with a mortgage if you have a poor credit rating, or they may provide you with one at a higher interest rate. There are free resources online that will allow you to check your credit score and plenty of advice on how to improve it.
6. Shared Ownership
If you’re earning less than £60,000 per year then a shared ownership mortgage might be an option for you. You would own a pre-agreed share of the property while other parties (landlord, government) would hold the balance.
If you need advice or information on first-time mortgages or mortgages generally then contact us at www.lgbtmoney.co.uk