"If you’re aged between 18 and 40, you can put up to £4,000 into a Lifetime ISA each tax year, and the Government will pay a 25% bonus monthly, up to a maximum of £1,000 a year. So, if you need £15,000 for a deposit and can afford to save £4,000 a year, you’ll have the funds in three years instead of nearly four"
- Kevin Shaw - LRG
Before you do anything else, speak to a mortgage broker. A good broker will be able to assess your affordability properly, talk you through all the costs associated with buying and owning a home, and help you understand all the options open to you.
Often, after speaking with a broker, buyers find they can either afford to borrow more than they thought or that the monthly costs aren’t going to be as high as they feared. And this advice should be free until you take out the mortgage.
Then, here are 5 top tips to help you afford your first home:
Think of ways you can generate additional income
The deposit is usually the biggest stumbling block for first-time buyers, so look for ways to save or make some extra money. For example:
Could you get a part-time job in a bar or restaurant? If you go to the gym regularly, is there an evening or weekend job there that would pay you and give you free membership?
Have a clear-out of your wardrobe and cupboards and sell some of your things on eBay, Vinted, Facebook Marketplace, or Depop.
Are you creative? Could you make anything in your spare time that could be sold somewhere like Etsy? Instead of buying drinks and sandwiches during your work day, take them in from home and set aside the money you save – you’ll be amazed how it can add up!
Invest in a Lifetime ISA
If you’re aged between 18 and 40, you can put up to £4,000 into a Lifetime ISA each tax year, and the Government will pay a 25% bonus monthly, up to a maximum of £1,000 a year. So, if you need £15,000 for a deposit and can afford to save £4,000 a year, you’ll have the funds in three years instead of nearly four.
Buy with someone else or go for a Shared Ownership scheme
You may want a home that’s entirely yours, but splitting the ownership can get you on the ladder – and it doesn’t have to be forever! Buying with a good friend or relative can make the deposit and mortgage payments much more affordable; just ensure you understand your legal and financial obligations.
And if you buy via Shared Ownership, where you own part of the property and pay rent on the other part, you can choose a scheme that allows you to purchase more shares over time (known as ‘staircasing’) until you own the whole thing. If this sounds like something you’d like to learn more about, SOWN, specialises solely in shared ownership properties.
Have a guarantor for the mortgage
If you are confident about the amount you can afford to pay each month but, for some reason, that isn’t reflected in what lenders are prepared to offer, you could consider having a guarantor. This is often a parent who owns their home outright or with a high level of equity, and they essentially agree to make the mortgage payment if you default.
Some guarantor mortgages even allow you to use the guarantor’s equity (or other collateral) instead of a deposit, meaning you can borrow 100% of the value of the property you’re buying.
If this is something you think may be an option, it’s essential to discuss it with a mortgage broker, who can explain all the implications to both you and your guarantor.
Negotiate
First-time buyers are chain-free, which can be a huge benefit to a seller if they are also keen to get into their next home – or if they need to sell quickly for any other reason – and yet so many first-time buyers don’t negotiate.
When people’s time pressure is more significant than their financial pressure, they are often prepared to accept an offer below the asking price. The important thing is that you have everything ‘ready to go’ from your end: a mortgage agreement in principle from a lender, deposit funds in place and a solicitor or conveyancer instructed.
Present yourself as someone who can complete the transaction in good time, make sure the offer you put forward is reasonable and fair, and you might be surprised what you can get if you ask!
