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First Time Buyer Finance and Affordability

Buying a house can be an overwhelming experience, so a first time buyer can easily feel bamboozled by the house buying process: what first time buyer finance is available, what mortgage should they choose, how much deposit will they need, or is there any help out there? Read more at: https://onlineconveyancingsolicitors.co.uk/first-time-buyer-finance-and-affordability/

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First Time Buyer Finance and Affordability

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  1. FIRST TIME BUYER FINANCE AND AFFORDABILITY Buying a house can be an overwhelming experience, so a first time buyer can easily feel bamboozled by the house buying process: what first time buyer finance is available, what mortgage should they choose, how much deposit will they need, or is there any help out there? www.onlineconveyancingsolicitors.co.uk

  2. The first question you should ask yourself is, can I afford to buy a property? You may have been saving for a long time or have been left a legacy in a will and have a sizeable deposit. The deposit depends on the type of property you want to buy. For example, if you are taking advantage of the Help to Buy Schemes, you may not need to have such a large lump sum to put down. First Time Buyer Finance: Affordability The condition of your finances, healthy or otherwise, will be what determines your mortgage. It is important to ensure you work hard to maintain healthy finance practices to build up a good case for your mortgage affordability. You should plan a budget carefully and stick to it and be wise with any spending and saving. First Time Buyer Finance: Credit history Your credit history is the main criteria lenders use to assess the likelihood that you will consistently pay off a mortgage. No credit history is just as bad as a poor credit rating and probably means you are not in a position to buy at the moment. To get a good credit rating, Martin Lewis suggests applying for a credit card, spending something each month and paying the balance off each month. This improves your credit score and shows you are a responsible borrower. Once you secure a mortgage, you should ensure the monthly repayments are affordable. First Time Buyer Finance: Mortgages It is easy to feel swamped by the many types of mortgages on the market, but it doesn’t have to be complicated. The trick is to choose what is right for you.

  3. Fixed mortgage Your monthly repayments are set at a particular rate, which makes it easier to budget. Fixed-rate mortgages are also not affected by changes in interest rates. Interest only mortgage Your repayments go towards paying off the interest, not the actual loan itself. You will have to show how you plan to pay off the loan at the end of the mortgage term. These are not available to take out any longer, however some mortgage companies will agree to move you onto interest only payments for a period of time if you are experiencing financial problems. Variable mortgage (Tracker) The monthly mortgage repayments vary with fluctuating interest rates, as decided by the Bank of England. This means your monthly payment can go up as well as down. Variable mortgage (SVR) The mortgage repayments vary based on the mortgage providers’ own internal systems and rates they set. Discount mortgage A fixed or discounted rate is payable each month for a period of time, after which it then reverts to an SVR mortgage. First Time Buyer Finance: Help available Here are some government schemes that will help first-time buyers get a foot on the property ladder:

  4. Help to Buy ISA This is a high interest account that for every £200 saved, the government gives you an extra £50, up to a total bonus of £3,000. You will only receive the bonus when the money is withdrawn to pay for your deposit. If you are buying with another person, they can have their own account, which allows you to double up. However, there is a property cap of £250,000 (£450,000 in London), and if your property is above the threshold, you can receive the interest on the account, but not the bonus. Lifetime ISA These do not necessarily have to be used by first time buyers, but are there to encourage those under the age of 40 to save for a deposit, or their retirement. You can hold a Help to Buy ISA and a Lifetime ISA at the same time. Help to Buy Equity Scheme This scheme helps buyers with low deposits of at least 5%, although it only applies to new builds. The government will provide a loan of 20%, which means you can get a lower mortgage of 75%. For the first 5 years, the government loan is interest free, and then you pay it back. The loan is repaid when you sell your home at 20% of the then value, so you may pay back more than you initially borrowed. Shared Ownership You pay rent on a part of the home and rent on the remaining portion. The idea behind it is so you can incrementally increase your ownership of the property. Although you can purchase with a small deposit, the scheme usually only applies to flats. www.onlineconveyancingsolicitors.co.uk

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