Research1 has revealed that the outlook for first-time buyers is slowly becoming more optimistic. A large proportion of first-time buyers do believe that it is still very difficult to get on the ladder. But this attitude has started to shift.
First-time buyers with small deposits have a much bigger choice of product today compared to five years ago.
Data reveals there were 288 95% Loan to Value (LTV) deals on the market in June this year. This has gone up from 251 this time last year, which is quadruple the 63 deals five years ago.2
Amanda Shearer, a Mortgage Adviser at True Bearing Chartered Financial Planners, gives her views on what first-time buyers need to take in account when making their first step onto the property ladder:
Save as much as possible for your deposit
Saving for a deposit can potentially be the most difficult part of the entire process. If you’re already renting, it can be difficult to put aside enough money to make a significant difference to your savings. But even saving small amounts can help.
You should look at savings accounts that offer the best rates. You might find you’ll need to lock your money away for a set amount of time to secure the best deals. Make sure further additions will be allowed after your initial deposit, otherwise, you won’t be able to add to your pot!
It is also viable to consider the ‘Help to Buy’ ISA. The Help to Buy ISAs are a new type of ISA designed to help first-time buyers save up a deposit for their home. The government will add 25% to your savings. This can be up to a maximum of £3,000 on savings of £12,000. If there are two of you saving for your deposit, you can each have a Help to Buy ISA, so your money could quickly add up – particularly with the Government boost.
The new Lifetime ISA, launched in April 2017, can also be used to save for a first home. The Lifetime ISA is a longer-term tax-free savings account that gives you a government bonus of 25% of the money you put in. This can be up to a maximum of £1,000 a year.
Make sure you’re on the electoral roll
Lenders use electoral roll data in identity checks (to ensure you are who you say you are! They need to check that you live where you say you live and that you’re not laundering money).
Check your credit report
If necessary, look for ways to build up your credit score.
Make sure to repay any existing debt (or have a comprehensive plan in place to do so).
Budget and ensure you can repay on your monthly mortgage amount
Sit down and work out your budget before applying for a mortgage. You will need to be sure you can borrow enough to cover the purchase of the property and that you’ll have enough spare to cover all the associated costs and fees.
Getting your finances in order is vital. You’ll need to think not only about saving but about sorting out any existing debt. Ensure that you consider any future repayments and their affordability – something that’s an increasingly strict requirement due to the mortgage regulations that lenders have to adhere to. So, set a budget and stick to it.
Do your homework – get advice
Speak to a mortgage adviser about how much you could borrow before searching for properties.
A mortgage is usually the biggest financial commitment of your life and can be daunting for first-time buyers. Do your research and keep abreast of the market by checking for new deals regularly.
There’s nothing worse than feeling bewildered by technical jargon and doubting what to do next, it could also prove costly, too. If you don’t know how the mortgage market works, the different terminology, interest rates, fees and charges, you could end up paying far more than you need to, both in upfront costs and longer-term repayments.
Ideally, you’ll want additional financial advice so you’re confident going forward – speaking to a mortgage consultant or financial adviser could be the best route.
The current market is looking far brighter for first-time buyers. There has been a distinctive shift in the number of people getting on that first rung of the housing ladder. Obviously, this has been helped by Government incentives (such as Help to Buy), meaning home ownership is now a much more viable possibility.
It’s now possible to buy a house with a 5% deposit – in years gone by this would have been a near impossibility. However, there are still challenges involved.
Here at True Bearing, our mortgage advisers have access to a comprehensive range of solutions. For a no obligation meeting, please call our Mortgage Advisers on 01257 260011.
- The figures from 2017 are sourced from a nationally representative survey conducted by Opinium Research with a sample of 1,505 prospective first-time buyers and 505 actual first-time buyers between 27 July and 3 August 2017. The sample was restricted to GB adults who were students or in work.
- Your money.com: http://www.yourmoney.com/mortgages/big-rise-small-deposit-mortgage-deals-first-time-buyers/