I feel so sorry for the current generation of first time buyers. There are constantly horror stories in the press about people under 40 never being able to get on the property ladder and with four children myself, it is a genuine worry about when they will be able to afford to buy their own homes when they are older. Not only are there not enough properties at the bottom of the ladder, but the middle are struggling to move up too, leaving everyone in a proper pickle!
However, for many young people, there just aren't enough options open to them and they get stuck in an overinflated rental market. Late last year the average monthly rent topped the £900 mark for the first time in history! Compare that to the average monthly mortgage payment of £852 and you can see that renting isn't that economical! Figures from ARLA also show that people who buy their first home in England in 2016 will have spent more than £50,000 on rent since moving out of their family home. However I totally get it, so many young people are being turned down for a mortgage and renting seems like the only option.
However, there is a way to do both! Shared ownership is where you only buy part of your home (for example 40%) and then pay rent on the remaining 60%. This means that you only need a deposit and mortgage for the part you are buying which makes it much more manageable for a first time buyer. Alternatively there is the Help to Buy scheme which is open to both first-time buyers and home movers - but is restricted to new-build homes. Under Help to Buy, the buyer is only required to raise 5% of the property value as a deposit. According to experts, signing up for Help to Buy can reduce the age of a first time buyer by up to five years!
Other first time buyers might like the idea of a starter home. The Government has pledged to build 200,000 starter homes over the next five years. These homes will be exclusively for first time buyers under the age of 40 and will come with a 20% discount off the market value. To decide which is right for you all depends on how long you will keep the property. Most experts say that if you live there for five years or more a starter home may be better, but if you plan to move sooner you may be better off with Help to Buy. It is really easy to find out about schemes in your area by going to www.helptobuy.org.uk/ and there are usually some great events on where you can speak to people in detail about the schemes available.
Saving up a good chunk of cash for a deposit is also really important when buying a home as usually the more you have at the start, the better mortgage rate you will get. Having around 15% of the property value will give you some decent mortgage options but for the most competitive deals you need at least 25%. Saving for a deposit can be hard work but the new Help to Buy ISA which launched in December could hand first time buyers up to £3,000 from the Government when they save. First time buyers will need to put away up to £200 each month, but the Government will then add 25% on top (so you'll get an extra £50 for every £200 you save). The maximum the Government will contribute is £3,000 but that would mean you had saved a total of £12,000 to put towards your first home and in just four years, so it is definitely worth saving straight away! It will be interesting to see how the Lifetime ISA compares when that launches in 2017 too.
The most important thing for anyone wanting to buy a new house is to have a good credit rating. So many people get turned down for a mortgage because of a low credit score but in many cases, the score is low due to errors, which are easily corrected. If you sign up to a free 28 day trial with CreditExpert you can check your file and make sure everything is in order. Not being registered on the Electoral roll is one of the main reasons why people are turned down for credit so check that first! When you are ready to apply, sort out your paperwork and have everything ready in advance (bills, bank statements, wage slips) and then speak to an independent broker like London & Country. A good way to know what you are likely to be able to borrow is to get a mortgage in principle from your lender. This puts you in a stronger position and saves time when you come to actually buy your property too.
From the letters I receive I know that buying a home is a priority for most young people but the biggest rule is to only borrow what you can really afford. Clearing debts before you begin the mortgage process is vital and then you can start looking for your dream home with a clean slate. It will happen!
For more advice you can visit the 1-minute-guide-to-first-time-buying