In 2020 the average age of a first-time buyer is now 34 years old. This may come as a shock, but there are plenty of factors that have contributed to this – increase including inflation of prices in regions outside of London. In comparison, the average age to get your first home just over a decade ago was 27 years old. This increase may not read well for those who are starting to think about getting their foot on the ladder.
However, the path to your first mortgage is not necessarily out of reach! In this guide, we will share our tips to getting your first home, which will hopefully put you on track to buy on your own terms as soon as possible.
Understand Your Finances
Before you can even start to think about moving out it’s important to understand what you can afford, or what you may be able to afford in the future. Often the most challenging aspect of acquiring your first home is saving your deposit. This will certainly be the first thing to work out so ask yourself questions like:
- How much can I save each month? Be realistic – ensure you still have room to have fun and enjoy life.
- Can your parents help? It may be an awkward conversation but it’s one worth having early on.
- Once you save your deposit what level of mortgage payment could you afford?
Getting comfortable with what you can afford and when you could apply for a mortgage is crucial when you decide to work towards buying a home. Understanding your finances also means understanding where you should be saving money for the best returns; even if interest rates are very low currently it is worthwhile exploring the options available to get the best return available.
Now is also the time to understand – and if possible, improve your credit rating. There is a wealth of information sites and advice from the Government on how to do this and many companies offer a free service. Simple steps such as checking you’re correctly registered on the electoral roll, checking for missed or late payments and even how many credit searches you have had can have an impact on your credit score.
Other aspects that may affect your borrowing capacity can include credit card debt and even regularly gambling online. A lender will be checking your credit history and bank statements when you apply so make sure you’re aware of all your spending habits.
Once you have set yourself a savings goal and understood what you could reasonably pay each month, you should start to get an idea of what you can afford to buy.
Take Advantage of Current Schemes
While the average age of first-time buyers has increased there are also multiple schemes you can take advantage of. These often represent small chunks of extra money that you can take advantage of, and could save you thousands.
Saving For Your Mortgage
Until last year, the most common scheme you could take advantage of was the Help To Buy ISA. Sadly if you failed to open an HTB account prior to the cut off date then the next best option is the Lifetime ISA.
With a Lifetime ISA, you can save up to £4000 a year, with the government adding 25% annually. The money in this account can only be drawn out without penalty for either your first home or upon retirement, so it’s worth taking advantage of this when you can.
Applying For Your First Mortgage
As well as savings accounts there are options for when you apply for a mortgage as a first-time buyer. Often confused with the Help To Buy ISA, the Help To Buy Equity Loan can be a great way to get on the housing ladder. With this, you can get a Government mortgage contribution making up to 20% of your total mortgage, or 40% if you are buying in London.
While this means that you could buy a home with just a 5% mortgage deposit of your own money, there are important caveats to consider. Firstly, you can only take advantage of this scheme on a newly built home, so this can affect your options geographically.
The loan itself is interest-free for 5 years, and from there you can choose to pay off the interest or pay off the loan in chunks of 10%. This means that while the Equity Loan can be a great way to start on the housing ladder, in the long run, you must ensure you understand the ramifications fully.
Certain banks have now also started offering springboard mortgages, which can be a good way to get on the housing ladder while using your family for assistance rather than the Government. The idea behind this system is that your family can lend you the full deposit which you pay back over the term with interest.
If you’re unsure on the best offers available to you or require support on your application then consider a mortgage broker for first-time buyers. They will be able to provide expert advice on what your best options are, what you can afford and what mortgage conditions would work best for you.
Consistency Is Key
Saving and applying for a mortgage is a tricky business, and likely to be stressful even with full planning. Many get disheartened when saving up for a home, but by being consistent with your savings you can keep on track and understand when you can really look to move out.
It’s also worth taking time before you fully commit to saving to consider which schemes you may wish to take advantage of. If you want to move out sooner rather than later these can be helpful but ensure you plan for the future.
When the time comes to apply for your mortgage than being consistent is also essential. Ensuring your finances are clear and your outgoings under control mean that you can make your application for a mortgage with confidence.
Madelaine Swift BSc CeMAP – Mortgage and Protection Adviser
A mortgage is a loan secured against your home or property. Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other
debt secured on it.