House prices have been increasing month on month for some time now, which has only increased the challenges that now face First Time buyers up and down the country. Whether it be struggling to build a deposit, or having sufficient income to pass affordability checks, which could be about to become harder following recent Bank of England announcements, First Time buyers are finding it increasingly more difficult to take that first step onto the property ladder.
Below, we look briefly at possible options that might enable first time buyers to make that first step.
Help to Buy – Government scheme
A scheme from the Government where-by First-Time Buyers can invest in a Help to Buy ISA and receive a government bonus equivalent to 25% of contributions up to £12,000 (giving a Government bonus of £3,000). You may also be able to benefit from the new to 2017 Lifetime ISA (LISA) which also provides a tax-free government bonus of 25% on savings up to £4,000 each year, with bonus paid until you reach 50. Finally, the Government’s Help to Buy Equity Loan may also be an option allowing First Time buyers to purchase their home with just a 5% deposit with the government providing 20% and the remaining 75% coming from a mortgage lender in the form of a mortgage.
Bank of Mum, dad and even grandparents
According to a report published by the London economic site, Bank of Mum and Dad, as of the beginning of June was the 9th Largest mortgage lender ahead of the likes of Clydesdale Bank. Many First Time Buyers are using funds from parents and even grandparents to help increase their deposits with some research suggesting an average borrowing of just over £21,000. This is also beginning to increase to those purchasing their second home also. However, this can potentially lead to inheritance tax implications and future retirement funds for parents and grandparents.
4 applicants – some lenders (increases max borrowing)
Some lenders have increased the number of applicants allowed to apply for a single mortgage from 2 to 4. This could be used to help you increase the size of your maximum borrowing from lenders which may enable you to purchase your property with the help of a higher earning family member. Additional applicants don’t need to be named on the title deeds however they will be equally responsible for keeping up with the mortgage repayments.
This scheme enables you to purchase a portion of your home if you are unable to afford the whole property and rent the remaining part. Your owned portion can be bought with your savings, a mortgage or combination of both and must be at least 25% initially however you can then increase your share by purchasing more of the property until you own 100% of it.
It is important to note that mortgages are secured debts that could lead to your property being repossessed if you don’t keep up with the repayments. It is also important to consider all possibilities, and, if necessary, seek advice to ensure you understanding the positives and any potential consequences.
However, the above options do provide you with ways of getting on to the property ladder if they are suitable to your circumstances during a time when interest rates are very low and property prices are high, and still increasing. Although it may be difficult in the current climate, it is not necessarily impossible to purchase your first home.
If you are interested in buying your first home and would like help and support in obtaining a mortgage, please do not hesitate to contact us via our Facebook page , or alternatively, you could use our contact us page.