For many, owning a home is a big deal. As prices continue to rise, the question becomes more urgent: how do first-time buyers get on the property ladder?
With expert advice from professionals like Eden Hawk Financial Solutions, first-time buyers can gain insights into navigating the housing market, making informed decisions about their first step onto the property ladder. Here’s how.
1. Save Early for a Deposit
Saving for a deposit is the biggest obstacle for first time buyers. The purchase price of homes means a big deposit is needed to secure a mortgage and keep monthly repayments low. A bigger deposit can also get you a better mortgage rate.
Here’s how to boost your savings:
- Open a Lifetime ISA: This government backed savings account gives you a 25% bonus on savings up to £4,000 a year to help you save for your first home.
- Use a Separate Savings Account: By keeping your deposit savings separate you can avoid dipping into these funds for other expenses.
- Save Regularly: Try to save a portion of your income each month to build your deposit over time.
2. First Time Buyer Schemes
The UK government has various schemes for first time buyers. Each scheme is designed to make homeownership more affordable:
- Help to Buy Equity Loan Scheme: Under this scheme you can buy a new build home with as little as 5% deposit. The government will lend you up to 20% (or 40% in London) of the property price, interest free for the first 5 years.
- Shared Ownership: This allows you to buy a share (25-75%) of a property and pay rent on the remaining share. It’s for buyers who can’t afford the full property price but want to own part of their home.
- Stamp Duty Relief: First time buyers buying a home under £425,000 are exempt from stamp duty on the first £300,000. Some of the upfront costs of buying.
3. Get Your Credit Score
A good credit score can make a big difference to your mortgage deal. Here’s how first time buyers can improve their credit profile:
- Get on the Electoral Roll: Being on the electoral roll makes it easier for lenders to verify your identity.
- Pay Bills on Time: Paying utility bills, credit cards and other commitments on time shows lenders you’re responsible and reliable.
- Limit Credit Applications: Too many applications in a short space of time can lower your credit score which could affect your mortgage application.
4. Look at the Open Market and New Build Homes
The type of property you choose can affect the support and options available to you. New build homes for example qualify for Help to Buy and open market properties have more choice and sometimes lower prices.
To get on the ladder consider:
- Talking to an Estate Agent: Agents can help you find affordable options within your budget, including open market bargains.
- Shared Ownership Properties: Many housing associations offer shared ownership properties which can help you buy a home sooner than you could if you bought outright.
5. Get a Mortgage Adviser
A mortgage adviser can give you insight into the best mortgage deals for your circumstances and help you through the mortgage maze. Mortgage advisers such as Eden Hawk often have access to exclusive deals so you can get options that aren’t available if you apply direct with lenders.
6. Estimate Costs Beyond the Deposit
Buying a home is more than just saving for a deposit. There are other costs to consider:
- Legal Fees: You’ll need a solicitor to do the conveyancing which will cost a few thousand pounds.
- Mortgage Fees: Some lenders charge an arrangement fee for the mortgage so check with your lender.
- Moving and Furnishing Costs: Be prepared for removal costs, furniture and repairs.
7. Get Government Help
If you’re a first time buyer there are government backed benefits and incentives to take advantage of:
- Government Bonus on Lifetime ISA: A Lifetime ISA gives you a 25% government bonus on your savings for a deposit, up to £1,000 a year.
- Help to Buy Equity Loan: The Help to Buy equity loan can help with your deposit and is interest free for the first 5 years so the initial payments are more manageable.
8. Use Shared Ownership as a Stepping Stone
Shared ownership allows you to “staircase” by buying more shares in your property over time and eventually own the property outright.
It’s for first time buyers who want to get on the ladder more affordably. It also gives you the option to buy more shares as your circumstances improve.
9. Look for Properties Below Market Value
Some properties are listed below market value, often because of the condition or location. This can be a cheaper way to get on the ladder but you may need to do some work on the property.
10. Know the Buying Process
Understanding the buying process is key. From mortgage applications to legal fees, having a clear view of each stage can prevent delays and costs.
Being informed also helps you negotiate and choose the right mortgage lender which is crucial for your first home.
Conclusion
Being a first time buyer can seem scary but with some planning you can do it. Save for a deposit, use the schemes and get a mortgage adviser to get the best mortgage deal. And you’ll be on the ladder in no time.
