Advice For First Time BuyersAug 30, 2019
Category: Residential Property
One of the biggest challenges facing first time buyers is saving for a deposit. With increasing rental prices and the cost of living, buyers often find it tricky to save enough funds to put down a 10% or even 5% deposit on a new property. There are a few options open to first time buyers to help them get that first step on the property ladder.
Borrowing from the Bank of Mum and Dad –
This is where many first time buyers will get their deposit from. It was reported recently that parents (and often, grandparents) had given over £6.3bn in deposits to their adult children. This would put them in the top 10, in terms of money lent, if they were a lender (not that this money is ever expected to be repaid!)
Help to Buy ISA –
This scheme was set up in December 2015 and has helped over 140,000 first time buyers purchase their new home. Borrowers can save up to £200 per month in their account and interest will accrue on top of this. When the time comes to use the funds, the Government will pay a 25% bonus on the total (and interest) saved. First time buyers will need to act quickly if they want to benefit from this scheme. The Government has imposed a deadline of 30 November 2019 for the last Help to Buy ISA accounts to be opened.
Lifetime ISA –
The Lifetime ISA is a different product that the Government launched with the aim of stimulating the housing market. Those who can benefit are first time buyers and people looking for long term savings when they retire. Again, when they find a property to buy the Government will pay a 25% bonus on the amount saved (and also on the interest accrued). These ISAs can be opened by anyone aged between 18-39 and you can pay in up to £4,000 per year.
New Mortgage Products –
Lenders are always competing to get new clients and the best way to do this is through new mortgage deals. Some lenders even offer a 100% mortgage, usually if an amount equal to 10% is deposited with them in a savings account. Any missed payments would then be taken from savings, almost like a guarantee. This takes us back to the bank of Mum and Dad since they are most likely to be providing the deposit to be saved against the mortgage. Whilst this type of mortgage is not common, this is in part is due to its not being widely advertised. After three years’ worth of payments have been made, the deposit will be released back to the account holder (Mum and Dad usually).
Get In Touch
Our team is on hand to help answer any questions you may have and to guide you through the process from start to finish.
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