First Time Buyers

You're a first time buyer, you'll need all the help and incentives you can get, whether its financial or practical help to buy your first home. So just how should you go about making that all important first step onto the property ladder?

 

Can You Afford To Buy Now?

It's not an easy time to be a first-time buyer - struggling to save for a home in the current financial climate. Unfortunately at the moment it's almost a necessity to have a deposit of at least 10% - and frequently one that's substantially larger than this - in order to get a mortgage (there are some 95% deals still around, but the interest rates may put monthly repayments out of reach).

Don't forget the deposit isn't the only money you need to raise - you'll need to consider all the costs associated with buying (Stamp duty, legal and removal costs, survey and mortgage arrangement fees and buildings insurance).

 

Can your parents help?

Little wonder that 46% of first time buyers under 30 are getting 'substantial' financial help from relatives, compared with just 10% in 1995, according to the Council of Mortgage Lenders (CML). If it's an option, go for it. You'll have a significant advantage. The bigger the deposit the better mortgage rate you'll get.

 

Clubbing Together To Buy A House

It's very popular now for first time buyers to boost their buying power by looking for property as a couple. In fact, joint ownership mortgages are available for up to four people (although lenders tend to lend on multiples of the two highest incomes). Lenders have become much more relaxed about who you can take out a joint mortgage with - family, friends, even a stranger looking for property to invest in.

But anyone considering a joint mortgage should ideally rent together first to make sure they really do get on and get a legally drawn up co-habitation or joint ownership agreement when they buy. You need to be clear what happens if someone loses their job, moves a boyfriend in, how you deal with the deposit, what belongs to whom, and so on. Be aware, too, that if one person stops paying their share, the remaining owners are responsible for meeting the whole of the mortgage payment each month.

 

Set Up Savings Accounts

Set up a standing order to transfer money into a high interest savings account every month. Also, benefit from tax-free interest on up to £5,100 a year using a cash individual savings account (ISA).

 

Be Ready To Buy

House prices will continue to fluctuate or fall somewhat in many regions over the next year. If you've got finances in place, you are in a strong position to take advantage of this. The sluggish market means there will be sellers out there desperate to sell. However, the prices within each street within each area within each region can differ, so keep a close eye on things.

Be Active

Sign up to the local estate agents and register at the property portals such as Rightmove and Zoopla.

 

Is The Property Right?

Don't let your relief at finding something you can actually afford, blind you to other issues. Choosing the right location is still as important as choosing the right property - and you should still be looking to buy in the best location possible. Familiarise yourself with your target area. Remember a number of factors will affect the desirability and therefore price of a property including transport links, schools, leisure facilities, shops and green space. Use www.upmystreet.com for background research. At www.mouseprice.com you can check out what properties in the neighbourhood are selling for, too.




Clever Ways To Get On The Ladder

Homeownership Schemes

In England first-time buyers may be able to take advantage of schemes to help with home purchase. These schemes offer either an equity loan towards the house’s purchase price with no fees for five years; or shared ownership, where you buy a share of the home and you pay rent on the remaining share. These schemes are run by HomeBuy agents. HomeBuy schemes are open to households which earn £60,000 a year or less. The FirstBuy scheme is also available for first-time buyers across the UK who have a household income of less than £60,000.

 

Graduate And Professional Mortgages

If you've recently graduated, are a trainee in a certain profession (such as law, medicine or accounting) or are working in the public sector, then you may be eligible for a graduate or professional mortgage.

These are based on the premise that your income is likely to rise at a faster pace than normal. Bear in mind that if you have a lot of student debt to pay off as well as high mortgage repayments, you could struggle in the first few years.

 

Developers' Own Schemes

Some of the big new homes builders also offer a type of shared equity deal on their starter homes. You take out a mortgage for most of the cost, and the developer supplies the rest as an interest-free loan. You pay back the developer either within 10 years or on re-sale. With developers doing all they can to ease the financial burden of purchasing a new home, there are some excellent opportunities to buy and good deals to be had, as long as buyers are sensible about what repayments they can afford to make on a monthly basis.

 

Guarantor Mortgages

If your parents want to help but don't have a stash of spare cash, they could guarantee your mortgage instead. Their income is taken into account by your lender as well as your own salary, enabling you to borrow more money.

'However, most lenders ask that the parent's income can cover their entire mortgage plus all of yours within a traditional multiple, and that often isn't practical,' says Katie Tucker, technical manager, Charcol.co.uk. 'Parents would be better off raising the money on their own property to gift as a deposit. In return, you might give them a share in the property and a stake in any increase in equity,' she says.

There are some more flexible deals (where parents' spare income can be used), so shop around.

 

Make An Offer

All the incentives and cheap mortgage deals in the world aren't good value if the property is still overpriced in today's market. Don't be afraid to make an offer. Developers are desperate to sell so there are some good deals around. Be careful where you buy too. If the development isn't selling, ask yourself why.

 

Buying At Auction

An auction may seem like no place for a novice, but buying a house at auction can provide the opportunity to pick up a bargain. The buying process is completely different. So do your homework. Taking someone with you who knows how the system works is a real asset.

'The great thing about property auctions is that it's a much faster process - ideal for first time buyers who are not in a chain and want to move in straight away. Very often you can purchase a property for below market value. Repossessed properties are usually sold at auction. But bear in mind they may be in need of some TLC and aren't always the bargain they seem - the previous owner may well have tried to sell the property themselves unsuccessfully first.

Visit www.eigroup.co.uk for information on property auctions nationwide.

You may also like to read about:
Buy to Let
Lease Extension
Mortgages