As a first time buyer, life is tougher than it has been for decades. In the 1980s it was still possible to earn a low wage and save to buy your own place. A flat cost maybe three times your salary. An average studio flat cost £30,000, you were paid £10,000 a year, you got a mortgage without much trouble, and it was relatively easy to manage. Now, according to the government's UK house price index, the average UK property costs around £226,000. No wonder most of today's UK first time buyers are around 30 years old.
Just like the old days, you still benefit from saving a decent deposit, maybe 5% or 10%, but that's a lot more money than it used to be when property prices were lower. To buy an average home you need a 10% deposit of more than £22,000, or a 5% deposit of around eleven grand, and that's no joke. At the same time a 100% mortgage is a very rare thing, almost unheard of these days.
There's more. Mortgage providers are more risk averse than they used to be, and they'll make you work hard for a mortgage offer. Unless all your ducks are in a perfect row, with no issues or problems, you can easily be turned down.
All this means that as a first time buyer you've got your work cut out for you, assuming you're prepared for the long haul it involves. Many young people these days have given up and don't bother trying to get on the property ladder. If you live in the super-expensive South East your dream home might even feel like a complete impossibility.
Whatever your situation, you really need to know how much money you can borrow before you start looking at places to buy. Getting in touch with a local mortgage broker is the best way to find out how much you can afford, they’ll guide you through the process and handle the complete mortgage applications.
Luckily there are some handy options available to help you improve your chances of getting on the property ladder. Here they are:
Some of the most popular first time buyer mortgages are joint ones, where you buy a home with other people, for example a good friend, partner, or family member. They might help pay the deposit, or pay part of your mortgage, or add their income to yours so you can afford the kind of place you need. It may mean you and the others own equal parts of the property as joint tenants, or a different amount each, which makes you tenants in common. Either way it's wise to get independent legal advice before taking out a joint mortgage, and make sure you've legally agreed, up front, what happens if one of you wants to sell up or leave. A Mortgage advisor can give you a better idea of how this type of mortgage works.
Shared ownership / help to buy
If you earn less than £60,000 a year a shared ownership mortgage could be just what you need. It means taking out a mortgage on a percentage of the property, while either the government or a landlord owns the rest. You pay low rent on the value of the property that isn't in your name, and you can often buy a bigger share of the property later on, when you can afford it.
Help to Buy is effectively a government equity loan. If you have a 5% deposit saved you can get on the housing ladder by buying a newly-built property. The government lends you as much as 20% of the property value and after five years you begin paying interest on the loan they've provided.
With the help of a guarantor, a trusted person who will pay the mortgage if you can't, you could get a bigger mortgage for your first home than you would otherwise manage. The guarantor in these cases is usually a parent or close family member, and while you don't need to put their name on the mortgage, they will need to sign a legal agreement confirming that they’ll pay your mortgage if you fail to. you do need independent legal advice to make sure everything's boxed off properly and all future potential circumstances taken into account.
Why you need local mortgage brokers
If you live in Kent, for example, find a good local Kent mortgage broker. The property scene is different across the country, cheaper in some places and expensive in others. Different regions have different issues and problems. Local insider knowledge means you can get a better deal, or more choice, or at the very least some valuable insight into the areas you're thinking about buying.
If you need a mortgage agreement in principle or just want to know a but more about mortgages and the options available to you feel free to contact Prospect Tree Mortgages on 0800 8620 840, we are able to help you no matter your location.