1-minute guide to First time buying

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First time buying

The average age of first time buyers has risen to almost 40!

But don’t despair! There are now LOADS of schemes available to help first time buyers get on the property ladder

You need to save as much as you can to get a standard mortgage BUT with some schemes, the magic number is just 5%

Once you have 5% of the value of your new home schemes like Help to Buy and Shared Ownership could give you a leg up onto the property ladder

Help to Buy

Help to Buy: Equity Loan–  This is a government loan for up to the value of 20% of your new home. It is interest free for 5 years. You will still have to provide a deposit of 5% and get a mortgage for the remaining 75%. This is also available for people wanting to move up the property ladder BUT it only applies to selected houses and developments. Contact your local Help to Buy agent to applyHelp to Buy: Shared Ownership (also known as part rent part buy) – A scheme where you buy part of your new home (eg 25%) and pay rent on the rest. This means you only need a deposit and mortgage for the amount you are buying. You can then ‘staircase’ and gradually buy the rest of your home. Contact your local Help to Buy agent to apply

It’s VERY easy to get more information about what is available in the area you want to buy. Help to Buy England has details of agents and local events. Click for more information on schemes in ScotlandWales and Northern Ireland

Help to buy ISA

As of the 2015 March budget the government has launched a fantastic new ISA designed to help first time buyersFrom December 1st 2015 the Treasury will give you £50 a month for every £200 you save up to a maximum of £3000!

Banks offering the ISA include Nationwide, NatWest, Barclays, Lloyds Banking Group, Santander and Virgin Money.

The Help-to-Buy ISA scheme expires 30 November 2019 and you must use your bonus by 1 December 2030.

Take a look at this factographic for the full details

You can also read our full summary of the announcement here

Lifetime ISA

In April 2017, a new ISA is launching called the Lifetime ISA. The new ISA will give you a 25% bonus on top of anything you save.First-time buyers will be able to save up to £4,000 a year, either as a lump sum or by putting cash in gradually. The state will then add 25% extra on top.

The bonus will be paid annually in the 2017/18 tax year, and then monthly from April 2018. You’ll also get interest on top of the state bonus.

The maximum bonus you can get is £32,000 – which is a significant chunk in the era of rising house prices!

The Lifetime ISA can be used for one of two things. The first is for first-time buyers to put towards their first residential property, providing they’ve had the ISA for 12 months. The second is to take the money out and use it in retirement after you turn 60.

With both options, there is no tax to pay when you take the money out.

For more information, you can visit the Government’s page here.

Need to know

  • Make sure you have paid off debts (excluding any student loans) and saved a separate emergency fund before you drain your savings buying your new home
  • Apart from your deposit you will also need to save for other fees including: Stamp duty (1-15% of the property’s value), Arrangement fees charged by the lender (£0-£2000), Legal fees (vary), a Survey (£100-£1000+) and  Land registry fees (£50- £920). You can check your expected Stamp Duty below
  • If you only have 5% have a look at the Help to Buy schemes BUT these will restrict the deals you can get on your mortgage, if you are able to put together a larger deposit you will be able to access mortgages with lower interest rates
  • If you live in a big city have a look at ex-council properties, which are often very central and much cheaper than surrounding houses. Don’t focus on the outside, it could be gorgeous inside!
  • Consider borrowing from the Bank of Mum and Dad, or Grandma and Grandad, or Aunty and Uncle… Any interest free lump sums you can borrow from family or friends will help you put together a larger deposit. But DO set up a payment plan so they know when they can expect their money back
  • To get the BEST mortgage deal, you need a deposit of at least 20% (so an 80% mortgage). Look out for 90% mortgages which will have MUCHhigher interest rates. If you only have 5-10% for a deposit, look at Help to Buy and Lend a Hand schemes
  • Look locally, Lloyds TSB and Leeds Building Society have joined with local authorities to offer the Local Lend a Hand/ Helping Hand Mortgages. If your local authority is participating, you may be able to get access to mortgages with better rates for just a 5% deposit
  • A Helper Mortgage (called Lend a Hand at Lloyds and Family Springboard at Barclays and Woolwich) is where a helper allows you to gain access to better rates, by transfering their savings into a savings account held by your mortgage provider to act as insurance until the end of your deal (which could be as long as 5 years)
  • A Guarantor Mortgage is where your guarantor agrees to meet your repayments if you are unable to, again this will get you access to better rates

Mortgage broker

We recommend that you speak to a mortgage broker. However before you start it might be worth gathering some important information first.

Before you speak to anyone you should work out roughly what you can afford to buy. Most lenders will take your income into account but also any debts.

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Sarah Willingham
Sarah Willingham is a serial entrepreneur, business investor and leading consumer expert. She has received a number of accolades for her contribution to business including The Sunday Times 500 Most Influential People in Britain 2016, The Times 35 Most Successful Women Under 35, Business Weekly’s Young Entrepreneur of the Year, Courvoisier Top 500 and an entry into the Who’s Who of British Business Leaders. She holds three business degrees including an MBA from Cranfield School of Management, where she is also an advisory board member.