Sources of Finance Available for First-Time Buyers
Getting onto the property ladder can seem like a daunting task. Many young couples and families are unable to buy their own homes because of a lack of affordable mortgages. Parental assistance is often required in order to afford the deposit and some first time buyers are choosing part buy and part rent schemes in order to begin an investment in brick and mortar.
Save to buy schemes
Although there have been better times to be a first time homeowner, there are still options available to you. Save to buy schemes, like those run by Nationwide, are offering a solution. These schemes can assist first time purchasers with the arduous task of saving a deposit. Most lenders are looking for at least 10 per cent of the property price as a deposit, so a save to buy scheme that offers a competitive saving rate and the option of a mortgage at the end of a set period or when a set amount has been saved, could be the answer.
Getting a mortgage backed by a guarantor could also be another option. This type of mortgage is offered by lenders like TSB, whose Lend a Hand mortgages offers a competitive lending rate so long as a guarantor is willing to deposit 20 perc cent of the property’s value into one of their savings accounts.
If going guarantor doesn’t appeal to your parents then perhaps they would consider a straightforward loan. If they do not have money available, they could release equity from their own home in order to help pay the deposit.
Buying with friends
This is another option if you are unable to afford the deposit or the mortgage repayments. If you choose to get onto the property ladder in this way, you should get some advice from a lawyer and make sure that an agreement is drawn up.
Interest only mortgages
Before the credit crunch this was the accepted way to get onto the property ladder. They were the fast-track to home ownership because of the cheaper monthly repayments. Now this type of mortgage is harder to come across. They are still available but lenders are restricting the loan to value rates. Borrowers with Santander can now borrow 50 per cent of the property’s value on an interest only loan, whilst Lloyds Banking Group have restricted this type of mortgage so much that few borrowers quality.
No matter which method of borrowing proves to be the right one for your circumstances, the most important thing to consider is your financial wellbeing. Don’t overstretch yourself with your mortgage. Experts suggest that no more than 40 per cent of your monthly income should be committed to it during these financially uncertain times.