As a first-time buyer, looking to buy your first home can be a daunting prospect. as a property purchase is now so expensive relative to average income. However, there are now many new government-backed financial options for future homeowners, and much discussion in the news recently regarding the help which is available for first-time buyers over the next 5 years.
Help to Buy scheme extension
It was announced earlier this year that the Help to Buy scheme is to be extended in order to ensure first-time buyers are still able to purchase their property through the scheme. As a result of the delays in the construction of new homes due to the pandemic, the new deadline has been moved to 28 February 2021, with the legal completion of the sale required by 31 March 2021. With this scheme, first time buyers need a 5% deposit, and the government lends up to 20% of the value of the home, which can significantly help buyers who are looking to get on the property ladder on their own.
Since its introduction in April 2013, the scheme has helped more than a quarter of a million people to buy a home. It won’t all come to an end on March 31st however, as the government’s new Help to Buy scheme will come into place on 1 April 2021 and run until March 2023. This scheme is restricted to first-time buyers only and introduces property price caps.
95% LTV mortgage scheme
The government recently announced plans to introduce a first-time buyer scheme that will see long-term fixed-rate mortgages available at 95% LTV. This plan would potentially involve removing stress tests for mortgage applicants, which would be a far more effective approach for allowing more young people on the property ladder. Research by GetAgent has revealed that it could save the average first-time buyer as much as £17,981.
Over the last two decades, house prices have significantly increased, which has undoubtedly prevented many first-time buyers from getting on the property ladder. Many young people relied on 95% mortgages to make this first step, but there has been a lack of high LTV mortgages available since the pandemic. Long-term, low-deposit mortgages are key to helping first-time buyers to afford a home, which is why this new government scheme could be a gamechanger for the younger generation entering the property market.
Our top tips for first-time buyers
House prices are now more than ten times the average salary, which means it is a struggle to even contemplate buying a house for yourself. However, it is not impossible – so the team at Hancock and Partners have put together a few tips to keep your hopes high.
- Save as much as you can
Working towards your savings goal can be tough, but it’s important to start saving as soon as you can – without relying solely on the Bank of Mum and Dad. There are various schemes which can help you save, for example, if you save into a Lifetime ISA, or Help to Buy ISA, the government will add a 25% bonus to your savings.
- Improve your credit score
Applying for a mortgage is a big step in your financial journey, and as it’s such a huge sum of money, lenders will look at your credit history to see how you have managed any credit in the past. Before even considering applying for a mortgage, it is essential that you keep your credit score high, so they can use this information to decide whether or not to offer you a mortgage – and you want it to be in your favour.
- Work with a professional estate agent
When you are starting your house search, it would be advisable for you to contact a professional estate agent who can provide you with a realistic set of properties which suit your criteria and budget. You won’t need to spend your time searching yourself, as they can help you identify suitable and affordable properties at the outset. A professional estate agent will help throughout the search and buying process and advise you of any potential areas that might prevent you meeting the Help to Buy deadlines.
Independent advice from a Chichester estate agent
It’s becoming more common for young people looking to buy their first home to receive a contribution from parents or other family members to help with a house purchase and The Bank of Mum and Dad is now the UK’s sixth-largest lender to first-time buyers. However, if you would like independent advice on the other options available for first time buyers, please do get in touch with the friendly Hancock and Partners team, by calling us on 01243 531155, and we will be ready to help you explore these options further.