Being a first time buyer can be confusing at the best of times, and the current coronavirus pandemic brings even more challenges. But don’t panic. There are still ways that you can buy a home and we are here to tell you what they are.
At the start of the 2020, there was a record number of 95% LTV mortgage options, meaning lots of lenders were happy with a 5% deposit. But those golden days have temporarily disappeared for now thanks to covid.
More lenders are offering 90% options again – hooray! – but only a handful are currently accepting 5% deposits and there are stricter lending criteria across the board. So, now you probably need at least a few grand more to get a traditional mortgage.
If you’ve poured your heart and soul into saving for a deposit and are still short, don’t worry. You’re not alone. Recent research has shown that seven out of ten first-time buyers feel priced out of the market. So, you’re not alone but what can you do? Well, there are three options you could investigate:
The first option is to ask for a helping hand. You may cringe at the mere thought of asking family or friends for cash; however, this has become an increasingly more common route to home ownership, especially now.
Research shows that almost one in four purchases this year will involve financial help from family and friends. Different lenders treat gifted deposits differently, for example some will only accept gifts from family. Speak to your mortgage adviser to see what options you would have if you went down this route.
Help to Buy
If the bank of mum and dad (or grandma or uncle or next-door neighbour) isn’t available, don’t despair. Another popular route into home ownership is the Help to Buy Scheme ( https://www.helptobuy.gov.uk/equity- loan/equity-loans/ ). This allows you to buy a new-build with only a 5% deposit, borrowing 20% (or 40% if you’re in London) from the government. The new Help to Buy scheme launching in England in March 2021 is exclusively open to first-time buyers. There are some restrictions, such as regional price caps, so ask your adviser what Help to Buy might look like for you specifically.
A third option is shared ownership. This is where you buy a portion of a property, have a mortgage on the part you own and pay rent to another party, usually a housing association, who owns the rest. As a result, you need a smaller deposit because you’re taking out a mortgage on a fraction of the property’s full value. There is also the option to increase how much of the property you own in stages, which is called ‘staircasing’.
Your home maybe repossessed if you do not keep up repayment on your mortgage.