Being a first-time buyer is one of the most stressful things that you can go through. It takes a lot out of you to go through all the checks and various other legal requirements that are in place when it comes to buying a house. This is why there are some measures in place to help first-time buyers in a number of different ways.
Help to Buy scheme
One of the biggest schemes that was rolled out by the government to help first-time buyers was the Help to Buy scheme. The Help to Buy scheme is a five-year, interest-free loan up to 20% of the value of the house in which you are interested. The way that this scheme works is by helping you to break over the threshold in terms of the deposit size to get a better deal on your mortgage. While you will still have to pay back the 20% you have borrowed to get your house, you will be able to get a better deal on your mortgage, which will save you money in the long run.
The Help to Buy scheme is in place until 2021 and has a property value maximum of £600,000. In London, the Help to Buy scheme allows for a 40% loan due to the higher property values in the capital. In order to gain access to the Help to Buy scheme, you must have at least 5% of the value of the property in personal funds. The cost of paying back the Help to Buy loan will also be taken into account by your mortgage provider when assessing your finances.
Going straight to the bank or building society might seem like the best option, but there is another option available to first-time buyers: a mortgage broker. When you approach a mortgage broker, they will charge a small fee. However, they are able to get you a better deal on your mortgage. This means that despite having paid a fee up-front, which will increase your initial costs, over time you will save a lot more money on your mortgage. For example, paying £500 up-front to a mortgage broker and then saving £80 a month on your mortgage and getting £100 cash-back from the mortgage provider means that in just one year, you will have saved over £500 compared to if you had gone directly to the bank.
The reason behind this is that the mortgage broker is offered a better deal by the bank for getting clients to sign up to them. It means that a mortgage broker essentially works as a comparison marketplace for house buyers. Not many first-time buyers are aware that a mortgage broker can get them a better deal than going direct to the bank can and so they often miss out on lowering their monthly costs because of it.
It can also allow first-time buyers to buy a house on the more expensive end of the spectrum. Because the interest rate is often lower, it lowers the monthly repayments, which allows for a more expensive house to be bought on the same monthly income. If you are buying a house and getting a mortgage, then a mortgage broker should be one of your first ports of call, no matter what.
Other funding opportunities
If a mortgage is not a possibility for you, then there are other funding opportunities out there. The latest platform that is gaining traction for first-time buyers, as well as other buyers, is peer lending. This is achieved through a peer lender such as Lendy, and it involves an independent financier putting up the money for your loan. You will then use that money to buy your house and will not have a mortgage. You will instead have a loan to the person, or people, who put up the finance for you to buy your house.
Instead of owing money to a mortgage provider, you will have to pay back the provider of the loan. This has the advantage of being able to negotiate a more flexible repayment plan, superior interest rates, and the ability to avoid early repayment fees that mortgages have in place. You will also completely own your house as opposed to the bank having a stake in it.
Make sure that you look through all of the options available to you, and from there, make the decision that best suits your own situation. Buying a house is a long-term commitment, and it is vital to ensure that you have taken the right steps for yourself.