Talk to an expert
Speaking to a mortgage adviser can help offer you the relevant guidance on mortgage products available and what deposit savings are needed. An adviser can explain all the options available to you and will look at your income and outgoings to establish how much you can afford to borrow and how much you’re able to save.
Use government schemes
The government offers several different Help to Buy schemes to help get people onto the property ladder. There are several options available, so make sure to check which ones may be best suited to you.
Help to Buy Equity Loan Scheme - If you’re a first-time buyer and interested in a new build, the government will lend you up to 20% of the cost of your new build home. You will need to pay back the loan but not until after five years of being in the property – it’s interest-free up until then too.
Lifetime ISA - If you’re a first-time buyer, the Lifetime ISA acts as a savings account; with a few added benefits. You can pay up to £4,000 each year into your account and receive a 25% bonus (£1,000 maximum) from the government. The cash must remain in the account until you exchange on your first property – you will need to instruct your solicitor to withdraw the funds but this will all be explained when you’re ready to move in. All you need to do is save, save, save and you could be in for a lucrative bonus.
Shared Ownership Scheme – Shared Ownership allows first-time buyers to buy a proportion of the property they can afford (e.g. 25% or 50%) and pay rent on the rest of it. It means that many people can access properties they would otherwise not be able to afford, due to the location or house size. This way, you’re also getting a foot onto the property ladder and then through a process called ‘staircasing’ can slowly save up to own more of the house until it's yours outright.
95% mortgage guarantee - If you’ve been trying to buy your next home but haven’t yet saved up a big enough deposit, you could be eligible to apply for a 95% loan to value (LTV) mortgage. This means that you may be able to buy a home with just a 5% deposit. Introduced by the government earlier this year, the scheme incentivised lenders to reintroduce 95% mortgage deals from April 2021. The mortgage guarantee scheme means the UK Government acts as a safety net for lenders. In the worst-case scenario, if or where the property is repossessed and sold at a loss, the Government will take on some of the losses incurred by the lender.
Shop around for the best deal
A mortgage is one of the biggest financial commitments you’ll make, so it’s important to find the right one that suits your circumstances. A mortgage broker can help you find the most suitable deal, factoring in true costs. It’s important to not only think about headline rates but also assess any additional fees that may be involved.
Get your documentation in order
For all mortgage applications, lenders need to verify your income to assess what you can or cannot afford before lending you money. This means providing various documentation to help evidence your financial position. This can include bank statements, proof of income, proof of address, or your latest utility bill. For those who are self-employed, some lenders may ask for further documentation, such as two or more years of certified accounts, tax calculations and tax year overview. Getting everything in order well in advance of your application will help smooth the process.
Remember the importance of your credit score
If you were about to lend someone a large amount of money, you’d want to know that they are responsible and capable of paying it back. This is why lenders look at credit ratings to help decide whether or not they should lend to you. Two in three (68%) advisers cite ‘poor credit score’ as a common reason that delays buyers getting their mortgage approval. If you’re looking to purchase a property then understanding what your credit score is, and importantly how to improve it can go a long way to avoid any delays. Don’t be spooked by a bad score. There are ways you can improve it over time. From ensuring you’re on the electoral roll, having up to date information such as your address and not missing any repayments can help to boost your score.
Get on the electoral roll
If you’re not already on the electoral register, then it’s vital you apply to be added as soon as possible. Not being on it can impact future finance agreements such as a mortgage offer, lower your credit score, and prevent you from voting. One in five (19%) advisers cite this as a common reason for a mortgage delay, but it’s simple to do and can have a positive impact on your buying position.
