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.
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.
Important information
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. The fee is up to 1%, but a typical fee is £99.