If you are about to take the big leap onto the property ladder and become a first time buyer, you will no doubt be wondering how much of a deposit you will need to save towards your mortgage. The deposit is the lump sum you pay upfront towards the total price of the property you are buying. Mortgage lenders lend you the remaining portion, making up the sum total. 

Mortgage deposits are normally expressed percentages of property price. In today’s market, first time buyers will usually need a deposit of at least 5% of a property’s value in order to be offered a mortgage. However, putting down a larger deposit can mean lower monthly payments and interest rates so bear this in mind when calculating affordability. Generally, you can usually take advantage of better deals with a 15% deposit, though the best rates are usually reserved for those who can put down a deposit of 25% or more: according to Experian, first-time-buyers saved on average a 17% deposit in July 2019 (£30,595 – this time last year, the average mortgage deposit was £26,498). 

How is my mortgage affordability worked out?

When you apply for a mortgage, the lender will assess your affordability. They will require information about your annual salary and any other income you receive such as child maintenance or child benefit/tax credits. They will compare them will all your outgoings including credit card and loan repayments, household bills, entertainment, car running costs, childcare, travel and even your weekly shopping bill.  Lenders will also ‘stress test’ your ability to make payments if your circumstances were to change such as if you lost your job or started a family. Your credit history will also be scrutinised to decide whether you are a reliable borrower or not. This is why you should put together a detailed budget before you go house hunting.

Is there any financial help for first time buyers?

There are several Government schemes available for first time buyers, designed to help them become property owners. Here is a brief summary:

  • Help to BuyIf you have a 5% deposit, you could be eligible for the Help to Buy scheme. This is for the purchase of new-build properties costing under £600,000
  • Help to buy ISA – Available for a short time only and a means of saving for a deposit. The government boosts your savings by 25%. In month 1 you can save a maximum of £1,200 reducing to £200 per month thereafter.
  • Lifetime ISA (LISA) – You can save up to £4,000 per year until the age of 50. The government will add a bonus of 25% up to a maximum of £1,000 per year.
  • Right to Acquire – A scheme offered in England and Wales aimed at housing association tenants who not qualifying for the Right to Buy. Discounts are slightly smaller than ‘right to buy’.
  • Shared Ownership – Where you buy a share of your home from either the council or housing association. You rent the remaining share.
  • Starter Home Scheme – A new government where 200,000 new build homes are available to first-time buyers under 40 years old with at least a 20% deposit. Price limits apply.
  • New Supply Shared Equity (NSEE) (Scotlend) – Where you can buy a steak of between 60-80% in a new-build property from a housing association or a housing co-operative, the remainder being funded by the Scottish Government.

Conveyancing for First time Buyers.

‘Conveyancing’ is the legal and administrative process of transferring ownership of property and land from one person’s name to another. The process begins after your offer has been accepted on a property. Conveyancers take over the payment of certain fees including Stamp Duty and Land Registry fees. They will also bill you for other disbursements (third party fees) like searches made by external organisations like the local authority and utility companies. Your conveyancing solicitor will check that contracts are drawn up by the seller’s solicitor and conduct the payment of deposits and balances via wire transfer. They will also liaise with your mortgage lender, pay any fees on your behalf and bill you for their services.

Your Conveyancing solicitor will be dealing with one of the highest value transactions you will ever make. This is why it we advise that you always seek a number of conveyancing quotes and make a careful comparison when deciding which conveyancing solicitor to go with. 

This article was written by Amy at Conveyancingsuperparket.com.

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Daniel Peacock

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