So you still want to buy your own place. But can you afford it?
The main problem faced by you as a first time home buyer is probably finding enough money.
Mortgage lenders often don’t want to lend the entire cost of the property.
You have to find the remaining amount – ie. the Deposit – which you’ll have to pay before you can move into your new home.
If you’re looking to buy alone you may not have a chance of getting something decent – particularly in a large city – if you can only borrow the usual total of three times your salary.
However many mortgage lenders will loan up to 4 times your salary – or even more – if they like you.
They won’t admit to this, because they’ll be turning some people down. So approach them on your best behavior and present your case well.
Possible Solutions Help and Ideas for First Time Buyers
For those not already on the property ladder the outlook can be daunting.
All kinds of surveys suggest that that first property is all but out of reach for first-time buyers in many parts of the UK.
However there are many positive steps that the potential first-timer can take to buy their first home.
If you have affordibility problems, the immediate solutions might be:
Ask a mortgage broker what’s the maximum she or he thinks you might be able to borrow.
If you have a deposit, but can’t afford large monthly payments, another possible solution might be to get an interest-only mortgage mortgage. This is a mortgage type where the monthly payments only pay off the interest, and you don’t make any payment towards the capital sum.
Get a longer mortgage: Choose a mortgage term longer than 25 years – it may seem daunting but many lenders will offer mortgages with terms up to 40 years. This may help you afford the lower monthly mortgage payments that will result. The hope is that the property prices will keep rising so when you come to sell you will be able to pay off this longer tern loan. While, historically, property does rise over time, it is not guaranteed.
Look out for other special deals aimed at the first-time buyer. These might include lower deposits, better terms or family guarantor mortgage options.
Group Mortgages and Shared Ownership
This is a growing trend. A recent survey has shown that around 57% of first-time buyers would consider buying a property with friends.
Over the last few years more and more high street lenders have started to offer these which enable up to four people to pool their income and jointly purchase a property.
Read more about Group Mortgages and Shared Ownership in the UK
Increase your knowledge Gather together as much information about mortgages and home buying as possible. OK you’re already doing that by reading this. But keep on doing it. It really will help.
If you’re not finding it easy to get a mortgage then your persistence and information gathering is what will make the difference.
Research property prices. Don’t rely on rumour and hearsay. Find the lowest and highest average prices for the kind of property that you’re after.
Research mortgages. Don’t take the first deal you come across. There are many kinds of mortgage, some aimed specifically at first time buyers. Check them out and list the pros and cons before making a decision.
Negotiate: while it’s important that you don’t underestimate the price of properties of the type and in the area you want – nor overestimate what you can afford – bear in mind that there may be a lot more flexibility in the prices quoted than you think.
See Making an Offer
Try the DIY type sellers who are selling their own properties. They may be more realistic than Estate Agents
Be realistic from the beginning and you’re more likely to find a deal that suits you.
Mortgage Help from The Government
The government has expressed its commitment to make first time buying easier. Currently there are three schemes. Keep an eye on these and find out if anything is happening in your area.
Checkout the latest UK Government Official Home Buying Help
Get a Deposit
Generally speaking, the bigger the deposit you can put down, the better the mortgage deal you can get – and that means lower repayments. It is possible to borrow 100 per cent – or more – of your property’s valuation, but this won’t be cheap.
The higher your loan to value (LTV), the greater the interest rate you’re likely to face.
If you need an LTV of more than 90 per cent, your lender may add a higher lending charge (HLC).
This can also be called a mortgage indemnity guarantee (MIG), additional security fee or mortgage advance premium.
For someone borrowing £100,000, this will typically be in the region of £1,500.
For more information, see Higher lending fees explained.
Ask The Family
Many mortgage lenders will allow your parents to act as guarantor for your mortgage.
Or you might borrow the deposit from your parents.
Recently some innovative schemes have come onto the market allowing you to offset parental income or savings against the loan. Read more about family guarantor mortgages.
Look Further Afield / Move
If you can move around there are still bargains to be had away from the traditional property hotspots in the south and the inner cities.
Look at less salubrious areas or less popular regions.
Remember that once you get a foot on the ladder moving on becomes much easier.
The Power of Your Knowledge
Whether you decide to buy alone, with a partner or one or more friends…
(For more on this, see Group mortgages and shared ownership.)
The more information you gather about the house buying process and mortgages in particular, the further you’ll be able to make your money go.
You’ve made a great start by reading this, but keep it up.
Working your way though the links on this site, will give you:
• The knowledge to build a realistic picture of what you can afford,
• The information to track down the best possible mortgage deal for your needs, and…
• A clear understanding of the ins and outs of the purchase process, so you can keep the costs – and the stress – to a minimum.
You should also keep an eye on the newspaper property pages and read up on your chosen area.
The better informed you are, the more confident you’ll feel about negotiating with lenders and sellers to get what you want.
That’s why it’s vital to go through every single piece of paper from your mortgage adviser, lender, surveyor and solicitor with a fine-tooth comb.
And don’t skip the small print – that’s where the surprises lurk.
It might seem tedious, but when everything’s done and dusted and you’re installed in your new home, with your finances and sanity intact, you’ll be glad you did it.
Graduate And Professional Mortgages
These are mortgages aimed specifically at Graduates and professionals (including teachers, lawyers, doctors) offering better conditions than standard loans.
So, while it is tough out there at the bottom of the property market, it’s not impossible.
Explore all the options and you may find it easier to get that first mortgage that you thought. And remember, the market is always changing.
Interest rates, government schemes, regional values can all vary providing opportunities for the informed buyer.
Also see Taking a Lodger / Renting out a Room
- Intro / What You’re Getting Into
- Process / Flow Chart Of What Happens
- Buying Your First Home
- Be Careful Out There
- Don’t Just Grab The First Mortgage You Can
- Problem: Having Enough Money
- Guarantor Mortgages
- 100% Mortgages For First Time Buyers
- Should I Borrow Five Times My Income?
- Having Problems As A First Time Buyer? Read Some Solutions
- UK Government Help, Homebuy And Key Workers Schemes