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Getting Your Funding Sorted

Getting Your Funding Sorted

In this section of the Cameron Stephen Guide to First Time Buyers in Edinburgh we explain a little about how you will need to fund the purchase, usually a mix of mortgage, savings and often a little help from the Bank of Mum & Dad, and share some tips for getting that will help you get that all important first foot on the property ladder.

With the prices of properties in Edinburgh going a little crazy at the moment it is now becoming scarily common for properties ideally suited to first time buyers are selling within a week of going on the market and at prices that are well over Home Report valuation and typically 10% or more over valuation.

Your Mortgage will be loan to value and not loan to price

The first thing to explain to you, is that the likelihood is that you will need to offer more than the Home Report Value of the property. Forget about the offers over asking price. That is just a guide but realistically the seller will be confident in the current property market in Edinburgh that they will be able to sell for comfortably over the Home Report Value.

However, the mortgage you will get will be a percentage of the Home Report Value and not the price you offer.

It is best to explain this in a simple example:

The property you are interested in has a Home Report Value of £200,000

You offer the seller £220,000 and the seller accepts your offer.

That offer price is £20,000 over the Home Report Value.

Let’s say you get a 90% loan to value mortgage.

That means your mortgage will be £180,000 (ie 90% of the Home Report Value of £200,000) and that, in turn, means that your deposit (the balance you need to find) will be £40,0000.

Now that is a lot of money in anyone’s language and it is no wonder that first time buyers in Edinburgh are finding it hard to offer successfully on a property.

First time Buyer in Edinburgh?

SPECIAL GREAT VALUE FEES FOR PEOPLE LIKE YOU

We are experts in helping First Time Buyers in Edinburgh.

It’s a tough market for First Time Buyers in Edinburgh at the moment but we are sure we will be able to get you your first home. And we offer a great value fixed fee to give you a little extra help.

So, what can you do to help fund your deposit?

There are a few common ways in which First Time Buyers like you get their deposit together and we explain them as follows:

The Mortgage

Although in our example above we used a 90% loan to value mortgage, many lenders are prepared to lend First Time Buyers 95% loan to value. It does come at a price, however. Typically, the interest rate will be a little higher and that (together with the fact that you will be borrowing more) means that your monthly mortgage payments will be higher.

Mortgage Agreement in Principle

The mortgage agreement in principle is an important first step.

This will tell you what the maximum mortgage (loan) you are likely to get based on your earnings and outgoings and that way you will know how much you can borrow and help you identify which properties you can afford.

You can get a mortgage agreement in principle online or in branch at most banks and building societies although finding a branch that is local to you can be a little difficult nowadays as can getting an appointment.

However, and as we explain in the next section, we are starting to recommend first time buyers like you, to go to a mortgage broker to give you expert advice and get you a mortgage agreement in principle.

Use a Mortgage Broker

Whilst you can do a lot of your own research online, we are of the growing opinion that going through a mortgage broker to source you a mortgage is well worth the extra cost.

The broker will be able to source you the right mortgage for you from the whole market range and give you advice on any problem areas that you might encounter and resolve them for you at an early stage. They might even be able to find you a better deal than you might otherwise get by your online research.

The mortgage broker will also, initially, get you a mortgage agreement in principle.

We are lucky to have an independent mortgage broker working from our office who is more than happy to have an initial meeting with you for free. For more information, click here to go to our Mortgage Section and find out how to get in touch with Alasdair.

Help to Buy ISAs and Lifetime ISAs

For more information about Help to Buy ISAs, we have a separate guide that explains in more detail what they are (Find Out More).

But essentially, if you are a First Time Buyer, they are a great way of getting extra on your savings. In effect, the government gives you an extra £25 for every £100 you put into your ISA as a bonus to help you buy your first home and Lifetime ISAs work in a similar way.

Help from the Bank of Mum & Dad

Again, we have a separate guide to explain more about the Bank of Mum & Dad (Find out More).

A lot of First Time Buyers are using money from their parents to help them with their deposit and this is generally acceptable to lenders when you apply for your mortgage. However, the lender will insist that the money is a gift and not a loan and will also ask your parents to confirm this and that they will have no interest in the property you are buying.

Not every one has parents who are able to afford to gift funds to help, but if they can and are willing to do so, then this certainly helps you to fund your deposit.

Added Value:

Ask us to give you a breakdown of what price of property you can afford.

If you let us know what deposit you have and what the amount of your mortgage agreement in principle is, then we can give you a quick breakdown of that price range of properties you should be looking at and the split between mortgage and deposit.

It is handy to have this, and we don’t charge a fee to our clients for this.

Edinburgh Area Guides
Are you are planning to buy a property in Edinburgh but not sure where to start? Our Area Guides will show you what’s on offer in different locations across the city. Including history, how to get there, places of interest and local schools.
Find out more

But what can you do if your deposit is relatively small?

If you are working on a tight budget and have a limited amount of savings then here are some tips that might help you:

Fixed Price Properties

Although relatively rare at the moment in the Edinburgh property market, if you can find a property that is being offered at a fixed price in your price range, then go and see it.

Fixed Price properties are typically those properties that have been on the market for a while without selling and so the asking price is changed from an “offers over” price to a fixed price in the hope of getting a buyer.

Usually, there is nothing wrong with such properties, but check the Home Report to see there are no issues with damp or in need of roof repairs etc.

But be quick, fixed price properties are sold to the first buyer who offers the seller the fixed price and so go out and view as quickly as possible and if you want to offer, let us know as quickly as possible so that we can make the offer for you. Speed is all important for fixed price properties.

Widen your search or lower your ambitions

Edinburgh’s property market can be seen as a bubble particular to itself and property prices outside of Edinburgh are lower so as a First Time Buyer you get the advantage of (1) more property for your money and (2) lower levels of competition.

But if Edinburgh is the place for you, then it might be that at the moment you cannot afford the property you would ideally like, so consider lowering your immediate ambition for that property and look at the properties you can afford. Think of your first property as your first foot on the property ladder and as a stepping stone to the next property.

New Build Properties

Have you considered a new build property? Not everyone is keen but the advantages to you as a First Time Buyer is that they are sold at fixed prices (so you won’t have to pay over Home Report Value) and since the run-in time to completion of the purchase is usually around 6 months, that gives you more time to save more.

There are a lot of new developments going up around Edinburgh at the moment and so this might be the way to go for you. That said, there is a high demand for new build properties, so again, speedy action is important. Get to know when properties are going to be released (made available for reservation) and get your reservation and pay the reservation fee as soon as possible.

Buying

For all things buying property related, see our BUYING page.

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