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:
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.
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.