Mortgage Options for First-Time Buyers
Saving enough money for your deposit and securing a suitable mortgage can be a headache, so we’ve compiled a helpful list of ways to help you get onto the property ladder.
95% mortgages
A 95% Loan-To-Value (LTV) mortgage allows you to borrow 95% of the property price from a lender so you’ll only need to save enough for a 5% deposit.
- You can purchase properties up to £600,000 with a 5% deposit
- It’s open to all homebuyers (not just first-time buyers)
- Normal mortgage affordability checks will still be in place
Lifetime ISA
If you don’t need to buy right now but want to start saving to buy in the near future, then the Lifetime ISA could be for you.
A Lifetime ISA essentially acts as a savings account; with a few added benefits:
- The government will boost your savings by 25%
- You can save as often as you like
- The maximum annual bonus you can earn is £1,000 (assuming you save £4,000)
Once you’re ready to purchase your first home, you can use the Lifetime ISA to pay your deposit.
Help to Buy Shared Ownership
If you can’t quite afford the mortgage on 100% of a home, the Help to Buy Shared Ownership scheme offers you the chance to buy a share of between 25% and 75% of your home’s value, and then pay rent on the remaining share.
Shared Ownership schemes might be a good option for anyone who’s unable to raise a mortgage large enough to buy a home in a conventional way, as it means that you can at least part-own the property you live in, and benefit from any increase in value over time.
You could buy a home through the Help to Buy Shared Ownership in England, if:
- Your household earns £80,000 a year or less outside London
- Your household earns £90,000 a year or less in London
- You're a first-time buyer
- You used to own a home previously, but can't afford to buy one now in the normal way
- You're an existing shared owner looking to move home
Rent to buy
Rent to Buy offers borrowers newly built homes to rent for a pre-defined period of time with the expectation that you will buy a share of the property at the end of the rental period. Homes are available through various housing associations on assured shorthold tenancies with an affordable rent of 80% (or less) of market rents.
The rent is payable for a pre-defined and limited period, after which time there is an expectation that you will purchase the property on the terms of Shared Ownership.
The rental period provides you with the opportunity to save for a deposit towards buying a share in the home, enabling you to access mortgage availability.
Guarantor mortgage
Your friends or family members can opt to be your mortgage guarantor. They can use either their own savings or their own property (if they own one), to offset against your mortgage. In some cases, they could put the deposit money into an account which they can get back after a few years, and it can even earn interest!
Springboard mortgage
Some lenders have a mortgage product called a ‘Springboard mortgage’ where a family member or friend can put down a 10% deposit on your behalf, which then allows you to get a mortgage on the property. The savings that your family member or friend put down for your deposit can actually earn interest, which is a bonus for them.
Bank of Mum and Dad
If you’re fortunate enough to have parents who are in a position to help gift you money for a deposit, this is great as it won’t go against you as a debt when your mortgage adviser carries out their affordability checks on you.
