The UK housing market is still in rude health, but raising finance is still difficult for first-time buyers. The days of the 100 per cent mortgage are long gone. If you’re a first-time buyer trying to get on the property ladder, you need a good credit rating and a hefty deposit.
Buying your own home for the first time is a minefield. You may have to jump through hoops to raise the finance you need. That’s why we’ve put together a brief list of tips for getting on the property ladder.
Consider shared ownership
Mainstream banks and mortgage providers now lend between three and five times the applicants’ annual salary. If the home of your dreams requires more than this, the chances of securing an approval are low.
But you can tip the balance in your favour by looking for homes that offer shared ownership. You get to buy a share in the property (typically 25 to 75 per cent). The rest of the house is owned by the developer or a housing association.
Shared ownership drastically reduces the mortgage and deposit you need. But it’s not without its drawbacks. You may be required to pay rent on the share you don’t own. And you must have permission to make any significant changes to the property.
The UK Government runs three schemes under the Help to Buy initiative: Shared Ownership, Equity Loan and a specialist ISA. Check out the website for more details or talk to a financial advisor who specialises in property.
In most cases, you’ll get the option of buying the rest of the property at a later date.
Team up with someone you know
There’s nothing stopping you from buying a home with someone other than your partner. For example, if you and your best friend want to buy together, you can apply for your mortgage together. This means you only need to find half the deposit. And you can combine your salaries to increase your budget.
Find a guarantor
A few mortgage providers will allow you to assign a guarantor to your mortgage agreement. This usually has to be a close relative, however. The person you choose must demonstrate that they are in a position to make the repayments if you fall behind. As soon as you miss a payment or two, the institution will chase the guarantor for the arrears.
A guarantor will usually need to provide collateral in the form of their own property. However, other forms of collateral are sometimes accepted.
By finding a guarantor with the necessary assets and a good credit history, you may be able to apply for a larger mortgage. And the lender may consider accepting a far lower deposit. Being a guarantor is a good way for parents to help their children onto the housing ladder without handing over huge sums of money.
Don’t pull the trigger until you’re ready
Being in a hurry to move into your first home is understandable. But moving too early can end up costing you money and unnecessary stress. Don’t buy your first home until you are financially stable.
If you have to move into your parents’ home while you save your deposit, so be it. Paying rent to a landlord means you’re paying off their mortgage instead of your own.
Before you sign on the dotted line with your mortgage provider, crunch the numbers as many times as you can. Will you have enough money after paying your mortgage to live your life? And what happens if you suddenly lose your job? Do you have a financial buffer or contingency plan?
Buying a first home is a big step. This milestone event often happens at a time in our life when we haven’t yet reached our financial peak. While things might be tight, make sure they’re not dangerously so. If you lose your home to repossession early in life, getting back on the property ladder later might be almost impossible.
If your first-time house purchase didn’t go to plan, we can help you move on fast. We buy houses for up to 100 per cent of their value. This means you can raise the funds you need for debt repayments, your next purchase or to avoid repossession. In many cases, we’re able to complete the purchase of a home within just four weeks.