How To Get On The Property Ladder If You're A First Time Buyer

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getting on the property ladder

There are several schemes available to first time buyers wanting to buy their first property.

Shared Ownership:

These schemes are provided through local housing associations. In a shared ownership, you buy a percentage share of your home, ranging from 25-75% with a mortgage and pay a reduced rent on the remaining share. This reduces the amount required for a deposit, as well as the proportion of the property’s value needed as a mortgage. With this scheme you can buy a new build property, or an existing shared ownership home. You have the option to buy more percentage shares of your home- meaning eventually you own the home outright. 

Shared Equity:

In shared equity, you buy your home using a 5% deposit, mortgage and an equity loan. With a shared equity loan you have more control over your home, and are free to sell it more easily; although both the mortgage lender and equity loan provider will have a charge. This means that if you fall behind on payments, they could repossess your home. When an equity property is sold, the loan provider is entitled to receive a share of the value of the property at the time of sale.

Help to Buy Loans:

Under this scheme, the Government provides an equity loan to help fund your purchase. This scheme is available to persons buying their own new build property home. As long as you have a 5% deposit in place, the equity loan provided by Government and Homes and Communities Agency matches your deposit, and will top it up by 20% of the purchase price. This loan is interest free for five years. This charge rises to 1.75% per annum on the outstanding amount of the equity loan after 5 years. This will then rise annually at 1% at retail price index. 

Lender Schemes:

Some mortgage lenders provide special mortgage deals, aimed at those struggling to save for deposits.

Some financial services offer shared equity mortgages. Castle Trust offer a Partnership Mortgage, where 20% of the home is provided by Castle Trust, and the normal mortgage is taken out for the remaining 60%. This means you will qualify for a better mortgage rate, as your deposit will be higher, meaning your monthly mortgage payments will be lower. 

Bank of Mum and Dad:

The biggest challenge for first time buyers is the deposit. Inflation makes this even harder in today’s climate. Rent and property values continue to rise. 

Relying on parents and grandparents is a way to get on the property ladder. Some banks have schemes in place for borrowers with a 5% deposit, Lend a Hand scheme requires family members to have savings of 20% of the property value. This means that you would access mortgage deals available to those with a 25% deposit. 

The Post Office Money First Start Mortgage lets parents or family member’s incomes to be taken into account when first time buying. This increases your borrowing power. 

Living Rent:

Under this scheme you can rent a home for two thirds of the market value, with a view to buying it on a shared or full ownership basis. Rents will be set locally at one third of the average median household income for that area, will full ownerships basis within 10 years. London Living Rent homes will become available over the next 5 years. 

Right to Buy / Right to Acquire:

These schemes are in place for those who rent their home from local councils. It allows tenants to qualify to buy their home at a discounted price. The discount varies depending the location and type of property. Tenants living in a council home before it being transferred to a landlord or housing association, may be eligible to buy their home under the preserved right to buy scheme.                     

Things to consider:

Fees: Mortgage booking fees, arrangement fees, valuation fees, account fees, legal fees, search fees, survey fees and moving fees all cost and add up to a substantial sum, and therefore should be taken into account when planning your budget. 

Only borrow what you can afford: Beware of exaggerating how much you can afford, in order to buy a dream home. It is vital to consider how much you can afford to spend on a monthly basis. Calculate how much you can afford to borrow first. Calculate expenses, bills, credit cards and loans, any other financial dependants or maintenance payments. It is crucial in the first steps to analyse and understand your current spending. Begin to monitor spending; which will enable you to calculate how much you can afford to borrow. 

Finding the right mortgage: How much deposit do you require for each individual scheme? Once you have an estimate of what you can afford, you can begin to approach mortgage providers. Your deposit and income will be the main factors in determining your mortgage loan. The minimum for any deposit is 5%. The larger your deposit, the less you need to borrow, the less your interest and monthly payments will be. 

Call Christopher Brierley on 0113 284 5143 or alterntaively email mailto:Christopher.Brierley@isonharrison.co.uk for free advice.

  • How We Can Help

    At Ison Harrison we have a thorough understanding of procedures and are able to advise, deal with and register loans in a timely and efficient manner. We are recommended by Developers to act for a number of purchasers as we are able to offer them the confidence that the purchase will not be delayed because of the additional paperwork that a loan brings.  

    Our role as your solicitor will be to explain and analyse deeds and contracts for you. We ensure that you are buying exactly what you think you are buying. We will endeavour to accelerate what can feel like a slow procedure.

    As the customer, you expect correct advice and prompt communication from your solicitor. We can make the process less stressful by keeping you up to date and making sure you understand the home buying process.

    This commitment to service is only possible with a team of experienced and professional lawyers. We are proud at Ison Harrison to have maintained such high standards whilst at the same time becoming increasingly competitive with our charges.

    We offer competitive and fixed price conveyancing. We make sure you are kept up to date with the proceedings and communicate in clear language so you understand the conveyancing process. We are honest about property status and condition.

    Areas we specialise in: 

    • Buying and Selling Houses
    • Buying and Selling Flats 
    • Joint Ownership / Transfer of Ownership 
    • Buy to Let properties

    Call 0113 284 5143 or email Christopher.Brierley@isonharrison.co.uk for free advice.

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