Buying a home, especially your first one, is a big step. Most people will require a mortgage to purchase property. There are a few different types of mortgages on the market, and choosing the right one might seem like as big of a decision as choosing the property itself.
How much should I borrow?
To put yourself in the best position and give yourself a larger pool of products to choose from, you should save as much as you can for your deposit. The next step is to find out how much you can borrow as then you will know what purchase price you can look at for your property. According to Money Supermarket, the average loan to value for first time buyers is 82%, compared to 74% for home movers.
What types of mortgages are there?
The help to buy scheme is available for first-time buyers and anyone looking to move up the property ladder. This scheme is only available on new build homes, and a 5% deposit is required. The government will lend you the rest of the deposit, which could be up to 20% of the property price (or 40% in London), and the loan is interest-free for the first five years.
Another option is to take a joint mortgage with a partner, friend, or family member. You may be able to save a larger deposit, and multiple incomes mean that you should be able to borrow more on the mortgage to purchase a larger property.
A guarantor mortgage might also be worth considering. The guarantor offers to pay any mortgage payments which you cannot afford, although they won’t be listed on the mortgage. Independent legal advice should be sought before taking out a guarantor mortgage so everyone involved is clear on where they stand.
A first-time buyer who earns less than £60,000 a year might be eligible for shared ownership. This is where you take out a mortgage for a percentage of the property and the government or a landlord will own the rest. You will then pay rent for the portion of the property which you don’t own. Under some agreements, you can purchase more of the property at a later date.
The type of mortgage you choose should be the one that best suits your own circumstances, which is different for everyone. You might be able to get some advice during the conveyancing process from a quality conveyancer such as https://www.samconveyancing.co.uk/conveyancing-process.
What other help is there for first-time buyers?
In addition to the different types of mortgages listed above, first-time buyers do not have to pay stamp duty on properties up to £300,000. There is a stamp duty holiday in place for all home buyers until 30th June 2021, where the first £500,000 of the purchase price is exempt from stamp duty. Once this holiday ends, however, first-time buyers will still benefit from discounted stamp duty rates on properties up to £500,000.
