The release of the housing white paper “Fixing our Broken Housing Market” predicted that by 2020, only 25% of 30 year-olds will own their own home. The government claims that the housing market is broken because not enough homes are being built, they are being built too slowly and commercial developers still dominate the market.
The paper then outlines how to rectify the crisis. The aim is to build a million new homes by 2020 and make sure that these homes are built in the right places. Only time will tell if the proposals will succeed.
For first-time buyers under 30, you may be concerned about being in the predicted 75% without your own home by 2020. Getting a mortgage for the first time is a struggle many people face, but there are tricks of the trade that can help you on your way. Here is some advice for first-time buyers to help you towards getting on the property ladder.
Check Property Prices in Your Local Area
Since the EU referendum in 2016, the property market has been uncertain about what will happen when we finally leave the European Union. The outcome could fluctuate house prices, so it’s important to keep up to date with what is happening in your area. Monitor the current prices of houses in the area you wish to move to and check what price the houses are currently selling for. Other factors can change house prices as well, such as the introduction of the Cross Rail; the announcement of the line caused an increase in house prices.
Discuss Your Finances with a Mortgage Broker
Navigating all the information online about buying a property can feel overwhelming. The best advice for first-time buyers is to talk to a mortgage broker. Discussing your financial situation with an independent advisor is essential. A mortgage broker will have knowledge about all the lenders and which mortgage type will best suit your needs. As an independent advisor, they won’t be trying to sell you a certain type of mortgage, but will aim to find the best mortgage for you.
Look at How You Can Save Money
It’s advisable to save 25% of the property price for a deposit, as this allows for much more choice and flexibility. In some areas, 25% will be a huge amount of money, so saving for a mortgage requires strict budgeting. There are multiple ways to spend less money and you should look through your monthly expenditures to see where you can cut back.
Be Aware of Other Fees You Need to Pay
Unfortunately, the mortgage deposit isn’t the only cost that will occur when buying a property. Stamp duty, surveyors, legal fees and land registry fees are all other costs that you will need to bear in mind. It’s important to find out how much these are and incorporate them into your budget.
Use Government Schemes
The Help to Buy ISA is a great way to have your mortgage savings topped up. Most banks and building societies offer the ISA for first-time buyers and it has helped thousands of people take that step towards getting on the property ladder. The idea is simple: the government will give you an additional 25% of the money you save in the ISA. The maximum amount they will give you is £3000, meaning you will have saved £12,000. In April 2017, a new lifetime ISA will be introduced and this works in a similar way, with the money going towards either a mortgage or retirement.
Another government scheme is the Help to Buy: Equity Loan which requires only a 5% deposit for a new-build home. You would then receive a 20% deposit from the government and a mortgage at only 75%.
The Help to Buy: Shared Ownership and Help to Buy London are also viable options which can be considered for those getting a mortgage as a first-time buyer. All of these various government schemes are available under certain conditions and requirements. A mortgage broker will be able to discuss each one in detail and what can work best for you.
Scott Farrell is the director of Rite Mortgages. Providing independent mortgage advice for first-time buyers all over the UK, Scott and the team strive to make sure buyers get the best mortgage deals.