Help for First Time Buyers
20th May 2021
Buying your first home can seem like an uphill struggle. You scrape together a deposit, sort out affordable mortgage terms and jump through what feels like a hundred other hoops to get started. When it’s all said and done, it can feel like you’ve taken on the biggest debt you’ll ever face just to get one foot on the lowest rung of the shortest ladder in town.
So what does it all add up to in the end? Well, that depends on what you make of it. It turns out there are a few ways to make that first property purchase simpler and more meaningful overall. Make no mistake, buying your first home’s a huge step for almost everyone, but with the right help and planning, it’ll be one of the best moves you ever made.
Find the kind of deal that works best for you
The most important thing to do when you’re a first-time buyer is to understand what you’re getting into. You’re going to be dealing with the impact of these early decisions for a major chunk of your life, after all.
There are a lot of deals on offer if you look for them. The real trick, though, is knowing what kind of arrangement is going to work out best for you.
95% Mortgage Deals
Chancellor Rishi Sunak has announced a scheme for lenders to offer 95% mortgages to first-time buyers. In real terms, this means you only need to put together a 5% deposit to plant your foot on the property ladder. This type of deal was evaporating right out of the housing market during the peak of the pandemic, so its return is pretty huge news now.
You’ve still got to be cautious, though. Only fronting up 5% as a deposit is going to leave you with a mountain of a mortgage that’ll take decades to climb. Not every deal you’ll be offered will necessarily be as sweet as it seems, either.
Read the Small Print
That tasty 95% headline can sometimes be used to draw your attention away from the less palatable details. Basically, make sure you read the smaller print thoroughly before making your final decision.
If fact, it could well be worth looking outside the 95% mortgage bracket to see how that works out for you. If you could bump up your deposit to, say, 10%, you could easily find yourself with more comfortable repayments to make each month. You could also have a lot more choice available, which is always a good thing when you’re making major financial decisions.
If you aren't confident that you will understand all the details of the offer or what different offers will mean for you in practice (and most people aren't) then ask for expert advice from an independent person or organisation.
Availability of Deals
Not every type of deal will be available in every part of the country, either. Make sure you understand exactly what your options are as a first-time buyer, since there are certain kinds of offer that you can only get if you’re a first-timer. Those are the ones you’ll want to check out most closely.
Some of them come with fees attached, or specific incentive packages that may or may not mask not-so-great terms. Don’t be afraid to get professional advice if you’re not 100% sure of your footing.
First Time Buyer Options
While you’re sorting through your rates, percentages and fixed terms, keep in mind some of the other help that’s out there for first-time buyers.
Depending on your situation, for instance, you might want to look into sharing ownership of your new property. There are actually some special types of mortgage for this, and you might end up boosting your options and spending power a lot.
If you’re struggling with your deposit, or trying to stretch your budget a bit, you might be able to get a Help to Buy equity loan. This means you can borrow as much as 20% of a newly built property’s value, or 40% if it’s in London. You’re taking on another debt by doing it, of course, but it can work out worthwhile. You’ll still need to be able to stump up at least a 5% deposit to get the loan in the first place, though.
Armed Forces Help To Buy Scheme
If you’re in the Armed Forces, the Forces Help to Buy scheme was extended recently. It’s now running through the end of 2022, and amounts to a 0-interest loan of up to 50% of your salary (capped at £25,000). See our blog here for the main details.
Whatever kind of property or mortgage deal you’ve got your eye on, make sure you’re all square with the taxman before you buy. A full tax refund could be a major step toward hitting that deposit target, a big boost in making repayments or even just a great way of decorating your new home. Talk to the UK’s top tax experts about getting back what HMRC owes you. No one knows refunds better – and that’s why you’re always better off with RIFT Tax Refunds.