Mortgage help for first-time buyers
Getting a mortgage is the biggest hurdle for first-time buyers, and the numbers have shifted more than you’d think.
Starting out in the homebuying process for the first time can feel overwhelming, especially if you are on a tight budget that needs to be managed carefully to ensure you don’t overstretch yourself and find yourself having to manage side debt as well as repayments of the mortgage and general living expenses.
There is a lot of help provided by the Government, from helping with buying a new-build property, assistance with the stamp duty payment and other schemes to help smooth out the transition into a homeowner.
But one of the biggest expenses connected to the whole homebuying business is, of course, the cost of the mortgage.
Getting your mortgage assessed
Once you have your eye on a property you like, lenders will insist on their own mortgage valuation survey to be performed by a qualified professional. This will factor in similar properties in the area and their values, knowledge of the local housing market, and anything pertinent to the specific home that might affect the value figure they derive.
At the same time, mortgage lenders will look at your annual income (jointly with anyone else you are buying the home with), offsetting that with your standard outgoings (other loans, such as for a car finance agreement, and general ongoing costs for your living needs and so on), in addition to confirming that you can provide the stipulated amount for the deposit. From this, they will be able to come up with a figure that they would be prepared to lend to you.
From this information, they will decide if you are worth the risk to lend the money. After all, the mortgage companies are in business to protect their investments, so won’t be prepared to overextend offers for mortgage loans that are at significant risk of being unable to be paid back. They look at the sale price in the event that you default on your repayments and the home is repossessed, so that they can recoup the amount that they have lent you.
All of which makes it a scary prospect to dip your toe into the pool of owning your own home.
Why the numbers have got tougher
Historically speaking, the price of buying a home was significantly easier with mortgages requiring a 10% deposit and offering three times the annual income paid back over a period of just 25 years. Since then, annual income increases have not kept pace with the inflation of house prices, which means that the available pool of properties has dwindled for those first-time buyers with a restricted budget, not helped by the decreasing amount of disposable income.
As time has gone on, various changes to their mortgage products have been made by lenders, including increasing the multiplier for annual income, the term of the loan and the amount required for the deposit before they are prepared to lend the money.
The bank of mum and dad
The fabled “Bank of Mum and Dad” (where a family member or friend provides the financial security and surety to back the first-time buyer, and perhaps pays some or all of the deposit to meet the lender’s terms) is one of the options often used, but inevitably there will be required an investment from the prospective first-time buyer themselves.
New low-deposit options
Building societies are now coming up with greater opportunities to help first-time buyers. The Coventry Building Society, as reported by the HomeOwners Alliance (HOA) among other outlets, has announced a mortgage product that offers loans at 6.5 times the annual income total at just a 5% deposit.
There are eligibility requirements that need to be met: sole applicants must have at least £30,000 minimum annual income (£50,000 minimum for joint applicants), they can’t be self-employed (as income tends to be erratic and unpredictable), they must be able to pay the minimum 5% deposit (15% for new-build flats), and must meet the building society’s lending criteria.
HOA quote Coventry as giving an example of a first-time buyer earning £39,260 per annum being able to borrow up to £255,190 to buy their first home. As HOA points out, this would be sufficient for an eligible buyer to purchase the average first-time buyer property in England.
Getting the right advice
Of course, such offers are not for everyone, but they can help for those seriously thinking about putting their money into bricks and mortar for the first time. As the eligibility criteria dictate for Coventry, it’s always advisable to seek guidance from a mortgage broker, especially if you are new to the property market. They will have the information on all the latest and existing mortgage products and will be able to provide sound advice as to which is the best fit to your needs and circumstances.
Key, too, to the success of buying a home comes with appointing a good solicitor. This is a clear necessity when you’re buying a home, but, in order to manage the sometimes bewildering legal side of the transaction, you can still find a value-for-money firm that provides a focused, quality service, like Best Value Conveyancing, while still keeping a firm control on the expenditure.
Talk to Best Value Conveyancing about your move
Once your mortgage is sorted, the legal side needs to keep pace. We assign you a solicitor from our panel and quote a fixed price upfront, including standard disbursements, so there are no surprises later. If your sale or purchase falls through, even through gazumping, our no completion, no fee guarantee means you won’t be left out of pocket.
Call us now on 0800 0387 007, free from mobiles too, or get a quick quote to start your transaction moving.
