Five top tips to help first-time buyers get on the housing ladder

Saving up for a deposit and taking out a mortgage can be a daunting prospect and it’s important to do your homework on how to get the best deal. Mortgage rates are expected to come down over the next year, and if you’re starting out on the journey to owning your own home, here are five top tips:

Start saving as soon as possible

If you’re a first-time buyer, you’ll need on average £34,500 for your deposit, according to UK Finance. So the sooner you start saving, the better.

A Lifetime ISA (individual savings account) offers 25% bonuses for those who are saving for a first home. For each £4,000 saved in any given tax year, the government will top it up by £1,000.

On that basis, crunching a few numbers shows that if you maxed out your savings allowance from the age of 18 to 30, you could pick up £22,000 in free cash from the government.

Note that the money can only be withdrawn to fund a first-time home purchase up to the value of £450,000.

Look at low-deposit mortgage options

More low-deposit mortgages are available now than at any time since the financial crisis of 2008. There are a wide range of 95% loan-to-value (LTV) deals available, so have a good shop around.

However, small deposit mortgages typically offer higher rates and may not be suitable for many self-employed homebuyers who may struggle to meet the strict eligibility criteria.

Explore shared ownership

Shared ownership has been available in England since the 1980s and enables a first-time buyer to own a “share” in their home of between 25% and 75% of the value.

You only need a small deposit and can take out a mortgage to buy your share, with rent paid to the landlord for the rest.

Over time you can increase the amount of the property you own and reduce rental payments. Known as “staircasing”, the aim is to eventually own the home outright.

Consider an ‘income boost’ mortgage

If the “Bank of Mum and Dad” is not an option, family members can still help without having to gift the cash for a deposit.

An “income boost” mortgage (aka a Joint Borrower Sole Proprietor mortgage) allows a homebuyer to add up to three family members (or in some cases friends) to their mortgage to increase the amount they can borrow from a lender.

While the “boosters” are on the mortgage, they are not owners of the home and the buyer’s first-time buyer status is not affected.

“Boosters” just need to consider that they are jointly liable for the mortgage if the buyer is unable to make repayments.

Investigate ‘Professional’ mortgages

If you work in a regulated or accredited profession – such as doctors, architects, and accountants – some lenders offer borrowing of up to six times your income.

Specialist lenders also offer deals to particular professions. For instance, Teachers Building Society works with those in the teaching profession, while Kensington offers a better earnings calculation to NHS staff, police officers, firefighters, and teachers.

  Back