First Time Buyers
Buying your first home is a very exciting time but can also seem very daunting, we have put together a few helpful points which we hope will make the decisions easier.
Deposit
You will generally need to save at least 5% – 20% of the cost of your home you would like to purchase. For example if you wanted a home costing £250,000 then you will need to save at least £12,500. However saving more than 5% will make it easier for you to apply for a wider range of mortgages.
Help to Buy
The government has set up a Help to Buy scheme, which will help you, buy a property if you only have a small deposit (5%). There are two options within the scheme:
- Equity Loans – Available if you are buying a newly built home and you have a 5% deposit. You can borrow 20% of the purchase price interest-free for the first five years.
- Mortgage Guarantees – Available for both new and old properties and the government will cover part of any losses the mortgage lender may sustain if the repayments aren’t made.
The cost of the home is limited on both schemes and this is different depending on where you are in the UK.
Help to Buy ISAs
This launched in December 2015 and is designed to help first time buyers save for a deposit. The government will top up your savings by 25%. The government will only contribute a minimum of £3000, which means the most you can save is £12000.
Shared Ownership
This is a cross between renting and buying aimed mainly at first time buyers. You buy a share of a home from the landlord (usually the local council or housing association) and then rent the remainder at a lower rate.
Guarantor Mortgage
This means that you have someone (friend, relative, parent) who will guarantee your mortgage repayments if you are unable to pay. Be aware that the guarantor is liable for the mortgage so if you default it could affect both your credit scores.
Buying with Friends or Family
This is becoming more popular and has many benefits including sometimes being able to get a larger mortgage than if you were on your own. Although this can be a great idea, we would advise you think carefully before you enter into it and make sure all parties are happy and any agreements are in writing.