First-time buyers: There’s more than one way to get a mortgage

Saving for a deposit, amongst all your other expenses, can make buying your first house seem like a lifetime away. However, there are other ways to get on the property ladder. We take a look at some of the options available to first-time buyers, before you look at things like home insurance.

Help to Buy Equity Loan
This loan is for first-time buyers who only have a 5% deposit for a home. Under this scheme, the government essentially lends the buyer a part of the overall cost so that they are able to take out a smaller mortgage. For example, instead of taking out a 95% mortgage, the government may lend the buyer 20% of the overall cost, which means they now only need to take out a mortgage for the remaining 75%. The loan from the government is interest-free for the first 5 years and must be repaid either when the buyer sells off the property or when they pay off the mortgage.

Shared Ownership
The Help to Buy shared ownership scheme allows you to buy a share of a property and pay rent on the remaining part. Buyers have the option to pay between 25% and 75% of the home’s value, with the option to buy a bigger share further down the line. To qualify for this scheme, you must be a first-time buyer, unable to afford to buy a property or have a share in your current home but want to move. Buyers would need to take out a Help to Buy mortgage in order to pay for the part of the property they’ve bought outright and they would then need to make a second payment towards the rent.

First Start Mortgage
If you’ve already saved enough for a deposit but can’t borrow as much as you need, you have the option to include a family member on your mortgage who acts as a sponsor for your home. Your assessment will take their income into account. Just remember that this means that you are both individually and jointly liable for the repayments of the mortgage.

Family Link Mortgage
This mortgage doesn’t require a large cash deposit but instead, you can take a mortgage of up to 90% of the value of your new home and the 10% remainder is secured against the home of consenting close relatives. This means that both you and your assistor will be named on the mortgage and for the first 5 years you will make two separate repayments, an interest-free repayment to your relative’s mortgage and a standard payment towards your own.

95% mortgage
If you’re struggling to save for a deposit and don’t want to involve another party in your mortgage, you have the option to take out a 95% mortgage which only requires a 5% deposit. Whilst these are helpful for those with less up-front capital, they can often be seen as a riskier option as your home has an increased risk of falling into negative equity if house prices decrease. Due to this, you may be subject to a higher mortgage rate.

Buying a house for the first time is an exciting step in your life and we hope this guide has helped you see there are more options available than you may expect.

Once you’ve obtained the mortgage for your dream home, you’re going to need to find the right insurance to protect your building and contents in the case that something goes wrong; that’s where we come in.

First-time buyers: There’s more than one way to get a mortgage