As a first-time buyer (FTB), it can be very challenging indeed to take that first step onto the property ladder and there are all sorts of obstacles getting in the way of homeownership.
But, it’s by no means impossible and being aware of the problems you’re likely to encounter could help you be proactive and focus your attention in the right area, getting you on that first rung sooner rather than later.
‘Generation Rent’ is a term you’re likely to hear being bandied about, referring to young adults aged between 18 and 40, who have been priced out of the market and who have to dedicate a large proportion of their income to paying rent.
As well as being faced with a pricey housing market, this demographic also has to contend with high costs of living, student loan repayments and low wage growth… so, while they’re employed, they have no disposable income – which makes saving for a deposit difficult.
The situation is being driven by low interest rates, which have helped to encourage interest in buy-to-let properties and the desirability of homeownership, which has pushed up the average house price, so it’s harder to get a big enough deposit together. Population growth has also meant that there is a shortage of houses to go around.
So, with all this in mind, how can FTBs make their dreams of owning their own home a reality?
Help to buy
This government scheme is designed to help those with small deposits buy their first home. There are two parts to the scheme – an equity loan and an individual savings account (ISA). Properties purchased with an equity loan have to be new-builds and within the value of regional price caps. The scheme cannot be used to invest in a buy-to-let property.
Right to buy
Council tenants in England can take advantage of the Right to Buy mortgage scheme to purchase their council home at a discount. The amount you’ll receive will depend on the value of the house, how long you’ve been a tenant and the property type (flat vs house).
This scheme allows you to buy a share of a property from a housing association or council, paying rent on the remainder. There is an option to buy a bigger share later down the line.
The bank of mum & dad
There are various ways in which your parents can help you buy your first home, whether that’s by loaning you the money for a deposit, acting as guarantors or taking out a mortgage jointly with you. With this latter option, both your names will be on the deeds and you will both be responsible for mortgage repayments – but it should make it easier for you to get a mortgage and borrow more than you would be able to do otherwise.
For more information on mortgage options for first time buyers, get in touch with Tulip Mortgages today.