There's a mind-boggling array of mortgages out there- but which ones are available to first time buyers and what are the pros and cons of each?
If you've recently graduated, are a trainee in a certain profession (such as law, medicine or accounting) or are working in the public sector, then you may be eligible for a graduate or professional mortgage.
These are based on the premise that your income is likely to rise at a faster pace than normal. Bear in mind that if you have a lot of student debt to pay off as well as a 100% mortgage to service, you could struggle in the first few years.
If you are a first time buyer and a key worker (such as a nurse, teacher, police officer) you could get help buying under the keyworker schemes.
With Open Market HomeBuy, you buy 75% of any property yourself and the remaining 25% with the help of an equity loan. (An equity loan is where the lender shares in any rise or fall in the value of the property over the course of the loan). Half the equity loan comes from the bank or building society and the other half from the Government through a HomeBuy agent.
New Build Homebuy You buy a share of a property from a housing association (at least 25%) and pay rent on the rest. This was previously known as shared ownership. As you become able to afford it, you can buy additional shares until you own per cent.
You must buy at least half of the property and the national regeneration agency, English Partnerships, will retain the rest. After three years, you pay a monthly fee to English Partnerships based on a percentage of they equity you do not own.
To find out if you are eligible for HomeBuy or the First Time Buyer Initiative, check out www.housingcorp.gov.uk
(under "finding a house") or www.directgov.co.uk (type in: home buying schemes). But be aware, these schemes can be complicated, come with a lot of strings and take several months to apply.
How To Buy: First Time Buyers
www.unbiased.co.uk to find a local independent financial adviser who specialises in mortgages for first-time buyers.
Some of the big new homes builders also offer a type of shared equity deal on their starter homes. You take out a 75 per cent mortgage and they supply the rest as an interest-free loan. This amount is paid back either within 10 years or on re-sale whichever comes first.
If your parents want to help but don't have a stash of spare cash, they could "guarantee" your mortgage instead. Their income is taken into account by your lender as well as your own salary, enabling you to borrow more money.
"However, most lenders ask that the parent's income can cover their entire mortgage plus all of yours within a traditional multiple, and that often isn't practical," says Katie Tucker, technical manager, Charcol.co.uk. "Parents would be better off raising the money on their own property to gift as a deposit. In return, you might give them a share in the property and a stake in any increase in equity" she says.
There are some more flexible deals (where parents' spare income can be used), so shop around.
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The views represented in this article are those of the author and not of Channel 4. The purpose of the article is to provide general information only and does not constitute financial, investment, legal or other advice.You should not rely on any information provided in this article and you should always seek out independent professional advice relevant to your own particular circumstances.
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