As a first time buyer, understanding mortgage terminology and knowing what mortgage is right for you can be difficult, so David Blake at Which? Mortgage Advisers has joined up with First Time Buyer, to answer your mortgage-related questions
David Blake of Which? Mortgage Advisers has more than nine years experience in the financial services industry and prides himself in helping first time buyers get on to the property ladder. In his current role at Which? Mortgage Advisers, David and the entire team provide independent, impartial advice and search thousands of mortgage deals to help buyers find the deal that is right for them.
Q What assistance can my partner and I get from the Government to help us get on to the property ladder?
A The first step on the property ladder can be difficult, but there are various schemes on the market to help make it easier. The Government has three main schemes at present: Help to Buy 1 (for newbuilds), Help to Buy 2 and shared ownership.
Help to Buy 1 is only applicable to newbuild properties and is an equity loan. Provided you meet set criteria and have a deposit of 5%, the Government will provide you with a loan of 20% of the purchase price, while you arrange the mortgage to cover the remaining 75%. As you’re only borrowing 75%, you’re likely to have access to more mortgage deals and better rates than you initially would have done with just a 5% deposit.
Help to Buy 2 is essentially a government-backed mortgage guarantee scheme. Despite the added insurance for the mortgage lender, it’s not likely you’ll find a better interest rate than if you had a standard 95% mortgage, as you still pose the same risk, but instead you’ll simply have more options to choose from.
Last but not least, shared ownership means that you own a share of a property, while you pay rent on the remaining share. This option can really help those with smaller deposits buy a property, although it’s important to note that the cost of increasing your share in the property will depend on the property’s value at that time, so it could increase.
Q I’ve been saving for a deposit for some time now and was wondering if there was anything I could do to maximise my savings, to boost the deposit I put down on my future home?
A Getting a large deposit together is likely to be one of the biggest hurdles to overcome for most first time buyers, so it’s good news that you have savings under your belt already!
Being able to put a sizable cash sum down on a property certainly has its advantages, including giving you a greater choice and potentially better mortgage deals – depending on just how much you manage to pull together. With this in mind, clearly maximising your deposit is the key to getting a better deal.
For the savings you already have, shop around and make sure you have the most competitive rate of interest. Be sure to read all the terms and conditions of the savings packages before signing up, as some accounts come with access restrictions and various charges.
You could consider the new Help to Buy: ISA which is coming in next year. This is designed to give a helping hand to first-time buyers saving a mortgage deposit. Savings deposited won’t
be taxed and the big benefit is that the Government will effectively give you a 25% top-up on savings up to £12,000 (effectively a maximum bonus of £3,000).
While the deposit will perhaps pose the biggest hurdle, remember, too, that you’ll also need cash to meet the additional costs of buying a home. These include stamp duty, mortgage arrangement fees, legal fees, plus any survey of the property you might need to carry out.
Q Are there any new first time buyer mortgages available on the market?
A Typically, first time buyers will have a smaller deposit to put towards their first mortgage, so lenders see first time buyers as a more risky prospect to lend to and, in turn, there are fewer mortgages to choose from. Despite this, in recent weeks, an increasing number of 95% mortgage products have entered the market, which is encouraging and shows a strong commitment from lenders to lend to people with smaller deposits.
First time buyers are the lifeblood of the property market and play an important role in helping to complete chains, enabling those that already own a property to move. As we approach the end of the year, lenders are reducing their rates of interest in order to meet yearly lending quotas – good news for first time buyers.
If you decide to take out a 95% mortgage, it’s important to remember that you will face higher rates of interest on your loan. The bigger the deposit you can put down, the lower the rate on your mortgage and the more mortgages are likely to be available to you.
To ensure you are getting the best deal and taking advantage of the latest on offer, it’s always best to speak with an independent whole-of-market mortgage adviser. They will be able to understand your finances and the options available to you based on your own individual circumstances.
For further help and advice from Which? Mortgage Advisers, please visit: which.co.uk/ftbmortgages, or call: 0808 159 4852