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Is it the right time to buy your first home?

Is it the right time to buy your first home?

Getting on the property ladder is a big – and exciting – step to take. However, with rising house prices and huge demand for properties that come onto the market, you’ll want to know if now is the best time to buy your first home or not.

Let’s take a look…

 

Low interest rates

While house prices might be rising, the good news is that interest rates are still low. This means there are some excellent mortgage deals available. And if you’re having difficulty raising a large deposit, don’t worry - there is help at hand:

 

95% Mortgages

The number of mortgages available if you have just a 5% deposit has increased sharply, following the government’s announcement of the new mortgage guarantee scheme. The scheme is designed to help more first-time buyers get on the property ladder, after 95% mortgages had largely disappeared from the market since the start of the pandemic.

The scheme is available to anyone buying a home worth up to £600,000, unless they’re investing in a buy-to-let or second home.

 

Help to Buy Equity Loan scheme

Another option if you have a small deposit is the Help to Buy Equity Loan Scheme.

There are different Help to Buy Equity Loan schemes for England, Greater London, Wales and Scotland. They all vary; the below information relates to England and Greater London only.

How it works:

  • When you buy a new build home using the scheme, the government will lend you up to 20% of the value of the property. Or up to 40% if the property is located London. This is what’s known as the equity loan.
  • You will need to save at least a 5% deposit towards the cost of your home. And the outstanding amount will come from a Help to Buy mortgage.
  • The Equity Loan is interest-free for the first five years. Also, you won’t need to make any repayments during this period. 

 

The new Help to Buy Equity Loan scheme came into effect in April and will run until March 2023. It differs to the old scheme as it is only available to first time buyers. And unlike the previous scheme, where you could buy a property costing up to £600,000 regardless of location, the new scheme has regional price caps. Only buyers in London will still be able to buy property valued at up to £600,000.

 

Help to Buy Equity Loan scheme regional price caps

 

Region

Maximum property
price

London

£600,000

South East

£437,600

South West

£349,000

North East

£186,100

North West

£224,400

Yorkshire and
the Humber

£228,100

East Midlands

£261,900

West Midlands

£255,600

East of England

£407,400

 

Bank of Mum and Dad

The average deposit paid by first-time buyers increased by nearly £12,000 in the last year to almost £59,000. And buyers are increasingly seeking help from family. In fact, the percentage of first-time buyers who received financial help from family with their deposit increased from 22% in March 2020 to 33% in March 2021.* So if you’re lucky enough to have parents or grandparents who can help you with your deposit, this could make an enormous difference.

 

Springboard mortgages

And there are other ways family members could help. Some lenders offer ‘Springboard’ mortgages, where a family member or friend puts down a 10% deposit on the property on your behalf in a special account for a set period of time. This allows you to take out a mortgage on the property. And the money that your family member or friend has put down can earn interest too. However, if you miss any payments, it may take longer for your loved one to get their money and they may not get their full savings and interest back. Another option is they could agree to be your mortgage guarantor. This means they’re guaranteeing to make the repayments on the borrower’s mortgage should they fall behind. However, if you miss repayments your guarantor may risk losing their savings or even their home.

 

Shared Ownership

If your deposit is limited, another option to consider is Shared Ownership. This involves buying a share of a property. And you pay rent on the rest. You can increase the amount of the property you own. This is known as staircasing. As you increase your share, the amount of rent you’ll pay will be recalculated and reduced.

 

Lifetime ISAs

And if you’re still building your deposit, you could turbo charge your savings by taking out a Lifetime ISA. These can be taken out if you’re 18-39 year olds and are for buying a first home or for retirement. You can put in up to a maximum of £4,000 a year until you’re 50. And you’ll get a 25% bonus on your savings of up to £1,000 a year. This could give a serious boost to your deposit.

 

Know your options

When it comes to mortgages, knowledge is power. So getting advice early in the process is a wise move. Especially in the current fast-moving property market as you’ll want to move quickly if you find your dream home.

Speaking to an expert adviser means you’ll be able to explore your options and find out what mortgages are available to you. You may be pleasantly surprised and find out that your dream of becoming a homeowner can happen sooner that you thought.

 

* https://www.financialreporter.co.uk/mortgages/how-has-covid-19-transformed-the-bank-of-mum-and-dad.html

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Our extensive knowledge and experience, along with our access to a comprehensive range of mortgage products across the UK, including access to exclusive deals, enables us to find the most suitable mortgage for you and your circumstances. We want to help you buy your new home and make the process as simple as possible.

As Specialist New Build Mortgage Advisers, we can find the most suitable mortgage for you. Meridian has been helping our customers buy their dream homes for over 25 years.

 

Because we play by the book we want to tell you that…

Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances.
There may be a fee for mortgage advice of up to 1% of the amount borrowed. A typical fee is £99 but this will depend upon your circumstances.

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