There are many more schemes available now to enable first time buyers to get on the mortgage ladder. Most lenders are now offering 5% deposit mortgages, however for those who will still struggle to afford a mortgage of 95% or to save any monies for a deposit there are alternatives out there which can help.
One of the schemes available is the government’s help to buy equity loan, which is available on new build homes with a purchase price of up to £600,000. So how does it work? You need a 5% deposit and the government will then lend you up to 20% with an equity loan, which means you only need to be able to afford a mortgage for 75%. This can help those who would struggle with higher repayments due to affordability.
However you will need to pay equity loan fees but these wont apply for the first five years. These fees don’t count towards the repayment of the equity loan and the loan must be repaid after 25 years or whenever you sell your home. You are able to pay back the loan at any time however the smallest repayment you can make is 10% of the market value of your home.
Another alternative for those with family who are willing to help for the first few years of home ownerage is the Barclays Family Springboard Mortgage. This scheme offers 95% and 100% loan to value mortgages, as long as you have a helper who has a 10% deposit available.
But there is a catch, the helper cannot withdraw any of the monies for three years and if three or more payments are missed the monies will be retained until the mortgage account is up to date. Also at the time of withdrawal there has to be no missed payments in the last 12 months and no more than two in the last 36 months. If the property is repossessed the funds will be used to clear any losses in its sale, so this is why Barclays make sure the helper seeks independent legal advice before going ahead.
If you have parents or family that are willing to do this for you it could give you a cracking start to owning your own home without having to save the deposit, although you would still need to save for solicitors fees etc. The current deals available are very competitive with the 95% loan to value deal offering a three year fixed at 2.79%, and the 100% loan to value deal offering a three year fixed at 2.99%.
However, I believe these should only be considered if necessary, as saving for a deposit gives a new home owner good practice in money management prior to committing to their first mortgage, and if you can afford to wait a larger deposit can get you much better interest rates. As always independent financial advice should be sought in order to discuss what will be best for you.
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