Looking for your first home?
Although last year saw a withdrawal of many high loan-to-value mortgages, these are now largely available once again making home ownership within many buyers’ reach once again.
At present there are plenty of 90% and 95% loan to value mortgage deals available, which means that you only need a 10% or 5% deposit in order to secure a mortgage.
Finding a high loan to value mortgage
Although most lenders withdrew their mortgage deals during the pandemic, many of them have reintroduced some fantastic deals with low rates making home ownership affordable for first time buyers. If affordability is still an issue, then you could consider a guarantor mortgage whereby your parents or grandparents will secure your mortgage against their home or put their money into a fixed-term account. Be aware that your family member’s cash, or property is at risk. Talk to a mortgage broker to find out what these deals involved and whether you are eligible.
There has been a high level of demand for homes since the property market re-opened last year due to pent up demand, the stamp duty holiday, low interest rates and a reassessment of buyer’s requirements. Last year buyers faced having to raise deposits of around 20% in order to secure a loan and this was against a backdrop of house prices increasing and, as a result, a substantial number of first time buyers have had to put their plans on hold. This scheme means that those with a small deposit can now realise their dream of getting onto the property ladder.
Although Help to Buy (Scotland) and the First Home Fund have now ended, the government backed ‘Mortgage Guarantee Scheme’ came into effect from April this year. The scheme aims to help buyers with a 5% deposit. Under the scheme, buyers can purchase a property priced up to £600,000 and it is open to everyone, not just those who are buying their first home and never had a mortgage before – as was the limitation for the Help to Buy Scheme. This means that the scheme will help both first-time buyers as well as those looking to move up the property ladder.
House builders often have incentives such as free fixtures and fittings, stamp duty bills and legal fees.
Pool resources with friends or family
One of the most common ways to purchase a property is to pool resources with friends, a partner or family. The ‘bank of mum and dad’ is increasingly popular but whoever you are committing to buying a home with, you need to think about what will happen if one party wants to sell or if they are unable to meet their share of the mortgage repayments. If you borrow you as borrowers are ‘jointly and severally liable,’ the lender can chase either of you for missed payments.
Buy at a fixed price
With house prices rising since the housing market reopened at the end of June at an unprecedented rate – due to the stamp duty holiday and a re-evaluation of buyers’ priorities – buying at a fixed price means you aren’t being priced out of the market. The price you see is the price you pay with no closing dates, offers over or paying over the odds due to high competition for the same property.
Reassess your wish-list
Lenders are becoming increasingly tough on what they will lend, resulting in stricter criteria for calculating what you can borrow, based on your income and expenditure. Some lenders are offering 4.5 times your salary instead of 5.5 previously which impacts what you can afford to buy. With this in mind it may be worth reconsidering where you want to live and the sort of home you want to buy. Do you need to live near public transport and travel links, could you purchase a new build home to make it more cost efficient and do you need an extra bedroom?
It’s important that you have a good credit score in order to obtain a good rate on your mortgage – the lower the score the lower risk you are considered to be by the lender. Check your credit score before you look to buy a property to give you time to improve this.
A larger deposit
If you can cobble together a little more savings to put towards the cost of your mortgage it will keep your outgoings down and open up more mortgage options. Some lenders are offering 10% mortgages aimed at borrowers in the local area and for those in particular professions. Ideally you want to have 15% deposit to get the best possible deal.
Talk to us at Urban Union if you’re looking for your first home. Our properties can be reserved with a small reservation fee and are available at a fixed price in our Glasgow and Edinburgh developments.