Buying your first home: a step-by-step guide
Download our free 5 Steps to Owning Your First Home guide for some stress-free tips to help get you onto the property ladder or click here for our flow chart to see the process of buying your first home from start to finish.
For many would-be first-time buyers, a first home remains tantalisingly out of reach because you’re not able to raise the deposit that lenders require.
The good news is that lending criteria are finally beginning to ease. A growing number of lenders now offer 95% loan-to-value mortgages, where the buyer has to put down a cash deposit of only 5% of the value of the property. But to get the best deals, you’ll need a really sizable deposit – 25% of the purchase price, or even more.
1. Start by planning for a deposit
Getting a sufficiently large deposit together may be hard work, but being able to put a sizable cash sum down on the property has advantages. For one thing, more and better mortgage deals will be available to you the larger your deposit is. Our impartial advisers can talk you through the size of deposit you’d need, and will tailor their advice to your personal circumstances.
2. Consider the additional costs
Remember too that you’ll also need cash to meet the additional costs of buying a home. These include stamp duty, which is payable at rates beginning at 2% on all property purchases priced above £125,000, and mortgage arrangement fees charged by your lender. There will also be legal fees to pay your solicitor, plus charges for a survey of the property and Land Registry fees for registering your ownership of it. Plus you may have to find money to furnish your new home.
3. Identify the right savings vehicles
Think carefully about how you save. Products such as bank and building society accounts offer greater security but currently pay very low rates of interest. You might also want to look into savings schemes like the Help to Buy ISA which could help you get your foot on the ladder.
4. Investigate the mortgage market
First-time buyers have access to all the same mortgage products as other borrowers and some lenders offer them special deals from time to time. It’s worth looking out for these. In addition, both the mortgage industry and the Government have worked hard to come up with initiatives and innovations designed to help first-time buyers get on the first rung of the property ladder. Call 0800 316 4071 now to talk to one of our expert advisers about the mortgage options available to you.
5. Talk to your family
Several mortgage lenders offer products aimed at families, where parents or grandparents want to help their children out with a home purchase. These include guarantor mortgages, where a family member agrees they will make the repayments if the borrower can’t, and joint mortgages, which are for children and parents buying together. Family offset mortgages aim to use parents’ savings to help reduce children’s mortgage costs.
6. Consider shared ownership and shared equity schemes
These are similar but different ideas. With shared ownership schemes, typically offered by housing associations, you borrow enough to buy a proportion of the property – say 75%. Then you pay rent on the remaining proportion. With shared equity schemes, you buy the whole of the property, but you take out a loan to fund the deposit as part of the arrangement. What you owe rises in line with any rise in the property’s value.
7. Look into Government schemes
The Government runs two separate schemes to help people struggling to buy a home. The Help to Buy scheme and New Buy are available to buyers with a deposit of between 5% and 20% of a property’s value.
They work by either offering you a interest free equity loan to buy a new build property or by the government part-guaranteeing a mortgage loan to make it less risky for lender to offer you a mortgage.
Take independent advice
Most first-time buyers will really benefit from taking independent advice before buying their first home – both on what their options are and who offers the best deals. Our expert mortgage advisers will search thousands of mortgage deals made available to us and pick out the one that’s right for your circumstances. They’re paid a salary – not a sales commission – so you can have confidence that you’ll receive truly impartial advice.