First Time Buyer

What sort of help is there for First Time Buyers?

Help to Buy scheme

The majority of high street lenders offer some kind of product that will go hand in hand with the Help to Buy scheme. It’s nice and simple, you put down a minimum of 5% deposit and the government will top that up with an extra 20%. This way you only need to borrow 75% of what you need to buy the house from the mortgage lender. Because it’s a 75% Loan to Value, the likelihood of you being approved when we do the Agreement in Principle is slightly higher because it’s lower risk. The interest rate you’re offered is usually slightly more competitive than what you get if you only put down 5% or 10% on your own.

The Help to Buy scheme is ending in 2023, but we wouldn’t be surprised if the government soon introduces an alternative to assist aspiring home buyers.

Please note: The Help to Buy: Equity Loan scheme will close to new applications at 6pm on 31 October 2022.

The Deposit Unlock Scheme 

This is very new and it works similarly to the Help to Buy scheme in that it allows you to put down a minimum deposit, but with this scheme, you won’t get any support from the government. You can put down a minimum of 5% deposit and there are a couple of lenders that will let you buy a new build property at 95% loan to value, whereas typically you’d be looking at 80%. However, there are only a couple of lenders that currently offer it.

What is Shared Ownership?

Also commonly known as Part Rent, Part Buy, this scheme allows you to buy a share of a property and only need to put down a minimum deposit of 5-10% of the share you’re buying, then get a mortgage for the remainder of that. The remaining share is owned by the housing association that you’re buying it from and they would expect you to pay rent for that amount.

You’re able to do ‘Staircasing’, which is where you can increase your ownership, in some instances staircasing your way to owning up to 100% of the property. A lot of associations do like to keep a share of the property, but it’s an option for you to get onto the property ladder and maybe buy something that might be outside of your price range otherwise. The fact that you’re paying a mortgage and rent at the same time must be considered and both need to be affordable.

Joint Borrower Sole Proprietor

We’re seeing more and more of this over the last six years and more lenders are offering this type of mortgage. It allows you and a close relative to get a mortgage together. You get all the benefits of their income and it allows you to combine your income with theirs so you can potentially borrow more. That will then allow you to buy a property that might be outside of your price range otherwise.

The relatives that help you out don’t go on the title deeds of the property, which means you’re still a First Time Buyer when it comes to the likes of stamp duty.

There are downsides to take into consideration, such as the joint borrower’s financial commitments will be deducted from their income, much like with a standard mortgage application. They are also responsible for this debt as much as the buyer is, and that could impact what they wish to borrow in the future.

When we look at this as an option, we try to build a future plan for everyone going forward, just to make sure that everyone goes into this with their eyes open. Lenders will insist on them taking independent legal advice so they know that they are signing up to this commitment and what it could entail in the future.

What sort of fees are involved when buying a house? 

Stamp duty

This is essentially the tax that you pay when you buy a property. The good news is First Time Buyers get stamp duty relief up to the first £300,000 on any purchase they make. So, as an example, if you did buy a house for £300,000, you wouldn’t pay any tax on it. If, however, you bought it for £300,001, you’d pay tax on that £1.

Arrangement fees

Mortgage lenders will typically have two types of products within their range. They will have a fee-free range and also products that have an arrangement fee, which tends to be between £1000 and £1500.

The benefit of paying that fee is usually a more competitive rate of interest than in their fee-free range. First Time Buyers can typically add the fee onto their loan rather than pay it upfront if they chose to.

Searches and Surveys

You’re going to need solicitors to help with the purchase of your property. They will typically request some initial money to carry out searches on the property to make sure that the title ownership is clear, that there are no issues with whether it’s freehold or leasehold if there are any covenants that could potentially cause you an issue in the future, etc. Search fees typically cost around about £300, but a solicitor’s overall fee can be anywhere between £1,000 – £2,000, including the searches. Always discuss options with your adviser before adding fees, which will accrue interest over the term of the mortgage.

Mortgage Protection

Unfortunately, bad things can happen to us. When obtaining finance for your home, all you need to do is have a conversation with a broker to make sure that in the event of the worst happening to you, suitable protection for your family, property and lifestyle are in place. That could be to clear the debt completely, it could be to help you in the event of a serious illness such as Cancer, or if you’re unable to work due to accident or sickness. It’s just about making sure that you can stay in your home, protect your investment and loved ones (and hard work!) and enjoy it really.

What other services do you provide as a mortgage broker that First Time Buyers would find helpful? 

We’ve got an approved panel of solicitors that we work closely with, so if you can’t find your own solicitor or you like the idea of us having an existing relationship with them, we can get you a competitive quote for their services. Because we’ve got that existing relationship, we’ve got points of contact, so if you’re not happy with the level of communication we can use whatever influence we have to try and get that response that you need.

If clients are really concerned about their credit score or credit rating, we recommend they make sure they are updating all of their active credit accounts to the correct address. This can knock your score up a couple of points, but also lenders are going to need to see proof of address and one of the easiest things you can provide is a bank statement or council tax statement. We also suggest that everyone who is eligible to do so gets themselves on the electoral roll at their current address, because that’s a big one when it comes to your credit profile.

Make the most of our Free Home Setup Service

We’re partnered with Just Move In, to provide a complimentary Home Setup Service for everyone who completes their mortgage with us – usually £290 if you went direct!

They take the hassle of out moving home but handling the research, paper work and phone calls required to set up the likes of broadband, energy, council tax and more. Not only do they do the hard work for you, they find you some great deals too.

Your home may be repossessed if you do not keep up repayments on your mortgage.