First Time Buyers

what you need to know

Thinking of buying your first property? Good for you! It’s difficult, but it’s certainly not impossible – especially if you’ve been saving up for some time for that all-important deposit.

The good news is that if you haven’t managed to put away that much money, then the government has introduced a raft of schemes specifically aimed at first time buyers which can help with that big deposit – and even reduce the overall cost of the property.

@HomeOwnersAll: “How much you can afford to borrow is usually calculated by taking three all important factors into account: salary, outgoings and credit history. Lenders typically will lend 4 to 4.5 times your salary depending on your outgoings and credit history…Other income such as pensions, investments or earnings that fall outside your main salary will also be considered.”

Government schemes to get you on the ladder

• Help to Buy: equity loan

Available for first time buyers, under the new flagship equity loan scheme, the government will lend you up to 20% of the cost of a newly-built home interest-free for five years. It’s 40% of the cost if the home you plan on buying is in London.

That’s great news if you haven’t had a chance to save up for long as it means you’ll only have to pay 5% of a 25% deposit upfront. Better still, you only start paying back that 20% in year six. That’s at 1.75%. The fee increases each year, based on RPI plus one percent.

You’ll also need a repayment mortgage from a high street lender such as Barclays, the Halifax, NatWest, Santander, Nationwide Building Society, the Post Office, TSB or Virgin Money.

Launched on April 1 last year and ending in April 2023, the new Equity Loan scheme has a regional cap for the value of the properties which qualify for the scheme. It was based on 1.5 times the regional rate. In London, for instance, the property you’re buying can’t exceed £600,000. In the South West the figure is £349,000, in the West Midlands £255,600 and the North East £186,100.

Note that Help to Buy equity loans are only valid for new build homes which have been built by a developer registered with the scheme.

• Shared ownership

The ‘shared ownership’ doesn’t mean sharing ownership with another individual, but rather buying a share of the property outright, the rest you pay in rent. You can buy as little as 10%  of the property’s value or as much as 75%. The idea being that you ‘staircase’ (i.e. buy more of it as time goes on) until you own the property outright.

To qualify you and your partner’s income (or however many of you are buying) must be less than £80,000.

• First Homes

A new scheme aimed at helping first time buyers and local key workers buy their own home, First Homes offers discounts of up to 30% on the market rate of a property. Discounts in certain regions can even be as much as 50%.

You have to put down a 5% deposit of the cost of the property (after the discount has been taken off). To be eligible you have to be earning less than £80,000 per year (£90,000 in London).

• Mortgage guarantee scheme

You can look for a mortgage where the deposit is less than 10% of the property’s value and under the scheme, only pay 5% of it upfront as a deposit. You then get a mortgage on the remaining 95%. The scheme closes in December this year.

• Right to buy

Available only in England and Northern Ireland, this scheme allows you to buy a council or housing association home at a discount price, depending on how long you have been living there. You must have been a secure tenant for at least three years.

The initial discount is 35% for a house and 50% for a flat. But the longer you’ve been in the public sector property the higher the discount so after a decade it would be 40% discount for a house and 60% for a flat. You could end up with a discount of £82,800 (£110,500 in London).

Solicitors fees

You can expect to pay anything from £850 to £1,500 plus VAT at 20% for your solicitor or conveyancer. This is for all the legal work involved in drawing up the lease, transferring fees etc.

At the same time, they will add another £300 for searches to determine whether there are any long-standing underground works, such as mining, or local plans etc which could affect your property and its value.

Valuation/surveyor fees

Before you put a bid in for a property you will want to know if the building is structurally sound and the ground on which it is standing solid. You can find this out from a surveyor’s report. These come in various packages, from a basic survey for around £200 to a structural survey costing more than £600.

Moving costs 

You can hire a removal firm for anything from £300 to £600 – but you can also get a white van and do it yourself to save some cash. If you do opt for a removal firm then make sure they have insurance. That way you’re covered if anything goes wrong and a major piece of furniture, such as your bed or a sofa gets damaged. Shop around too to get the best price; you’re also more likely to get it cheaper if you move mid-week than at the weekend.

What next?

Buying your first home can be made so much easier by choosing the right mortgage broker from the start. He or she can point you in the right direction in terms of which scheme will benefit you most. They can also recommend where to get a mortgage and what you have to do to make sure you are accepted. This includes tidying up your credit score by closing down old credit cards, making sure you are on the electoral roll etc.

As always, we are here to help if you need advice on anything related to mortgages, protection insurances, will writing services, pensions & investments – just give us a call.