Your guide to buying your first home.
There is nothing like the excitement of buying your first home, but before you get the keys to the door there are plenty of hurdles you must first overcome. The Cambridge’s first time buyer guide can help you achieve your home ownership dreams, whether you are going it alone with your hard-saved deposit or you are looking to take advantage of a home ownership scheme. You can download a full copy of this guide here.
Saving for your deposit
When you buy a home, you’ll need to give a deposit which will pay for a percentage of equity in the property. In 2018, the average deposit given by a first time buyer was a staggering £32,841*. This can lead people to dread saving for a deposit and assume the task is impossible. This isn’t the case, let’s break it down:
How much can you save?
Look closely at your current spending to see where you could make savings.
Do you make the most of cashback offers? Buy One Get One Free (BOGOF) or loyalty schemes are great (as long as you were planning on making the purchase in the first place).
Work out your bills and outgoings on a monthly basis, determining the essentials and then save what’s left over from your income.
Once you’ve worked out how much you can afford, it should be easier to calculate how long it will take you to get there. This also depends on how much deposit you’re planning to save; many First Time Buyers believe that a 10% deposit is required to buy a house but this isn’t true. Various lenders including The Cambridge offer mortgages that only need a 5% deposit.
The right savings account
Now you know how long saving will take you, you’ll have an indication of what account will be best for your needs.
Now set up a standing order
Setting up a standing order to pay a set amount from your current account into your savings account will help saving become a habit!
These are just a few ways to encourage saving, sometimes you have to make the most of every opportunity. For more information on savings, read our guide.
*Published online by Which? March 2019 News article; ‘First Time Buyers: How much mortgage deposit do you need in your area?’.
Considering the length of your mortgage
Mortgages are a long term commitment and can be taken out for various terms, anywhere between 5 to 40 years, dependent on the individual mortgage needs. However it is important that as a First Time Buyer you and your Mortgage Adviser decide on a term that is right for you and your individual circumstances.
At The Cambridge, we offer a maximum lending term of 40 years on all of our mortgages. For First Time Buyers, this gives you more affordable monthly payments as generally a longer term allows for smaller monthly repayments. This length of term coupled with a 5% deposit, for example, could help you get onto the property ladder. However, the longer the term of the mortgage, the more interest you will pay in total.
Affordable home ownership schemes
Buying your first home in today’s property market is not easy. For many, Government backed, affordable home ownership schemes are simply the best way to get onto the property ladder, so what are they and how can they help you?
Shared Ownership is a type of residential property buying scheme that allows you to part-buy, part-rent a home in the UK. The scheme works by you purchasing a percentage (also known as a share) of a property, for example 50%, and the housing association owns the other 50% which you then pay rent on. Some schemes offer first time buyers the possibility to buy a home in stages because their circumstances mean they cannot afford to buy a property on the general market on their own.
For more information on Shared Ownership such as eligibility and staircasing, read our guide.
Help to Buy Equity Loan
The Help to Buy Equity Loan scheme has been designed to enable people to buy a new build property where without the equity loan, getting on the property ladder would have been too expensive. Primarily, once you have at least a 5% deposit together, the government will assist you by providing a Help to Buy Equity Loan of up to 20% (more in London), meaning that you're able to provide a total deposit of at least 25%.
Perhaps you’ve heard the term Guarantor? This is where a family member would help you buy your first home by acting as a Guarantor for your mortgage. The family member would agree to support your mortgage application, taking on the risk of the mortgage by paying the monthly payments if you can’t afford them.
Because this family member would be taking on this risk, it is essential that they are fully informed of all the terms, conditions and possible consequences.
The Cambridge recommends that independent legal advice is sought before entering into an agreement to make sure the commitment and the potential consequences of this decision are understood.
Guarantors can read our online guide for more information.
Right to Buy
For council tenants who have the chance to buy their house at a discounted price, we can lend up to 100% of the discounted price.
Find out if you are eligible to apply to buy your council home on the gov.uk website where you can also find out about the level of discounts available, how to apply and information on all agencies that can help you.
Dreams to schemes—your next steps
Once you have worked out the best way for you to buy your first home, you will need to consider the home buying journey. Read our ‘Buying your Home: Step by Step guide’ for useful information on everything from house hunting, surveys and finding the right solicitor, right up to completion and getting the keys.
We’re always ready to help
We hope we’ve answered many of your questions. Your Mortgage Adviser will be pleased to help with anything else that’s on your mind alternatively email us at firstname.lastname@example.org or call us today 0345 601 3344.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
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