Getting your first mortgage isn’t as simple as just being able to afford the monthly payments. With lenders asking for upwards of 10 per cent as a deposit, first time buyers are faced with the prospect of saving up huge amounts before they can even consider looking for a house. To get the lowest available rates, buyers will need even larger financial pots, which can be a daunting prospect for even the most conscientious of savers.
If you’re worried about getting your deposit together, or have started saving but are beginning to lose enthusiasm, here are some key tips to help you make the most of your house deposit.
- Consider a Help to Buy loan
If you’re buying a brand new property, you could be eligible for a Help to Buy loan, which will see you moving into your home with as little as 5 per cent deposit in the bank. With this scheme, you can borrow up to 20 per cent of the property’s value interest free, as long as you’ve saved at least 5 per cent yourself and don’t own any other property.
- Apply for a Help to Buy mortgage
With this scheme you don’t need to be a first time buyer to qualify. In this situation, the government guarantees the mortgage lender 15 per cent of the property price if you don’t keep up the repayments on your mortgage. This means you can be approved for a mortgage with just a 5 per cent deposit. New builds and other properties are eligible up to the value of £600,000 – provided the buyer does not own any other property. More information on Help to Buy here.
Unfortunately the government has just announced that the Help To Buy Mortgage Guarantee Scheme will be close at the end of this year (31st December 2016). So if you want to take advantage you will need to move quickly – contact me if you would like to discuss this option in more detail.
- Save the largest deposit you can
All the best deals on mortgages are limited to buyers with around 35 to 40 per cent of the property value to put down as deposit. Those with only 10 per cent will pay a significantly higher rate, so saving as much as possible before applying for your mortgage is crucial. To help with this, the government has launched the Help to Buy ISA, where you can save your mortgage deposit safely and also receive up to £3,000 cash bonus from the government. Rates are still competitive at 90% LTV (loan to value), so worth investigating. More information on this here.
- Consider different locations
There is always compromise to be endured when it comes to buying a house. Chances are you’ll need to compromise on either size, location or budget. You probably won’t have a great deal of wiggle room when it comes to budget, so think about what you would be willing to sacrifice on the other two issues. What is important to you? Would you prefer a small flat in the town centre, or could you live in a less popular area if it meant you had more space and a quieter situation? Review property prices further afield to evaluate what your best options will be.
- Make your borrower status as attractive as possible
When you come to apply for your mortgage, your lender is going to be looking for a squeaky clean credit record. Take the time to clean yours up, by paying off any unsecured debts, checking your credit reference report for errors and making sure you are correctly entered on the electoral roll. Make sure all your ID documents are up to date, and if you’re self-employed, collect all the evidence necessary to prove your earnings. Further advice on cleaning up your credit record is available here.
Saving a house deposit is never going to be easy, but if you approach the issue intelligently and do what you can to maximise your chances of getting a great deal, you could be packing those boxes before you know it! Make sure your money is being kept in a place where it can grow steadily, and do everything you can to give your lender confidence that you’ll be a great borrower.
If you’re finding it difficult to find a mortgage because you don’t meet most lenders’ criteria, call me for an informal chat. Mortgage products are available for the self-employed, the retired and other people who don’t fit the normal stereotypes, I can talk you through this if you need some help. Call 01252 759 233 or email email@example.com