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Paul answers your questions here:
“There are a number of options to help first-time buyers get on the property ladder. First of all, for those with a five per cent deposit there are 95% mortgages available from a number of lenders. Some of these are also supported by the Government’s Help to Buy Mortgage Guarantee Scheme. For those buying brand new homes the Government’s Help to Buy Equity Loan Scheme is available. Buyers still need a five percent personal deposit but the Government will lend up to 20% of the purchase price (up to 40% in Greater London).
A family member providing assistance with a deposit can often be a great help in getting onto the property ladder. This is often referred to as ‘Bank of Mum and Dad’. The deposit provided reduces purchasers borrowing and the lower the loan to value often means lower interest rates too. A ‘win-win’ situation’! Barclay’s has also recently launched its Family Springboard Mortgage where a family member can deposit 10% of the purchase price as security, which is returned with interest if mortgage payments are maintained.” Terms and Conditions will apply to these schemes.
“Lenders often rely on a credit report as part of their decision to lend and there are a number of factors to help achieve a good credit score. These can include: having some credit and always making payments on time (no credit at all doesn’t always work in a potential borrower’s favour); not being over committed with credit agreements; not missing any payments and being on the electoral role. Lenders also like to see a stable employment and address history.”
“Help to Buy ISAs are great as the Government will boost savings by 25% up to a maximum of £3,000. For those eligible, that’s a good way to start saving. We applaud the Government for encouraging first time buyers to start saving this way. The scheme can also be used in conjunction with other government supported schemes, including Help to Buy Mortgage Guarantee / Equity Loan and Shared Ownership. Terms and Conditions will apply to these schemes.
“There are a number of factors to be mindful of when comparing mortgage costs, it’s not just about comparing interest rates. Lenders often make initial charges including a mortgage fee for the chosen product and a valuation fee. These vary widely but many schemes are available without these up-front fees so be sure to compare these. With current low interest rates, fixed rate mortgages are popular and give borrowers certainty of rate and monthly payment for an initial number of years. Borrowers should always compare what their mortgage interest rate could revert to after this initial period ends. Lenders call this their Standard Variable Rate (SVR).
Finally, check if the mortgage has any redemption penalties that would apply on early repayment. Especially for fixed rate mortgages, where there is often a penalty if the borrower wants to repay all or part of the mortgage during the fixed rate period.”
Lenders require a number of documents to help them assess a first-time buyer’s eligibility for a mortgage and the level of borrowing they will allow. These include valid identification - i.e. passport, driving licence, proof of address and utility bills dated within 3 months. You'll also need evidence of earnings such as recent payslips (typically the last three months), or HMRC tax calculation and overview forms for the self-employed, plus recent bank statements and proof of deposit.
If you take your time and research properly, owning a new home does not have to feel like such a faraway dream. Remember too when it comes to buying a home, a new build offers a number of extra benefits including warranties and often cheaper utility bills due to them being more energy and fuel efficient. For the benefits of buying new see here.
The Stonebridge Group is one of the UK’s largest independent mortgage brokers.
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