First Time Buyer? Your Moving House Finances
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Moving house will be an exciting step but, as a first-time buyer, settling your mortgage deposit may seem daunting. For some financing ideas to get your first dream home, read on…
First Time Buyer? Your Moving House Finances
Looking to put a deposit down on a new home? Well, as a first time buyer, there are certainly a number of obstacles you’ll need to face. In fact, once you’ve sorted out your property conveyancing or conveyancing for shared ownership details, so all the legal stuff is in check, the next step is financing your move.
One of the things to organise when moving house is your mortgage deposit – you can’t expect to get a property under your belt without a hefty deposit. That being said, especially as a young person, securing your first mortgage can be a real minefield. You have to think about coming up with the money, as well as proving your ability to pay it back.
Not to worry, though, as there are many ways you can get financial aid. For some moving house tips and tricks and first time buyer mortgage advice, you came to the right place!
Finance Options for Moving House
As a new buyer on the property ladder, it can be difficult to not just buy a house, but even just get a mortgage! In fact, scraping together a first time buyer deposit is probably the hardest part. Once this is all sorted, then paying off your mortgage each month will likely be cheaper than your monthly rent right now! That being said, there are a number of ways you can get the money together for your first deposit…
Help-to-Buy ISA
The first, and probably most common, way to finance a house deposit is through a first time buyer ISA. Our first option for this is the Help-to-Buy ISA.
Unfortunately for a number of young people, the Help-to-Buy ISA stopped in November 2019. That being said, many people may have been persuaded by their friends to apply for one just for the sake of it, before this deadline. This way, when saving for a house becomes a genuine concern, the option is now on the cards.
The ISA is a great way to get a little bit of extra money towards your new home mortgage. Some of the rules for the Help-to-Buy include:
- Your first deposit of money into the account can be up to the value of £1200.
- Then, you are restricted to depositing up to £200 into the ISA every month.
Once the time comes to put down a deposit on a home, the government will grant you 25 percent of what’s already in the account, up to a maximum of £3,000. So, say you have £10,000 in the account when the time comes, you’ll be granted £2,500. But, for any value over £12,000, you’ll receive a fixed grant of £3,000.
So, you have an ISA, and the time comes to buy your first home… what now? In this case, you’ll need to get in contact with your conveyancer or solicitor to apply for this government bonus. Once received, the money will be added to your pot to put towards the overall cost of the home, but not the deposit.
Lifetime ISA
This can be used in a similar way to a Help-to-Buy, but is not specifically for buying a home. It’s also used as a way to save up for later life. However, there are a few more stipulations with this ISA than our Help-to-Buy, which include:
- You have to be between the ages of 18 and 40 to set one up.
- You can put up to a maximum of £4,000 a year into your Lifetime ISA, up until the age of 50.
- The government will give you a grant of 25 percent of your ISA savings.
- You cannot add any more money into the ISA, or claim the 25 percent bonus, after the age of 50.
- Once you’ve passed this point, your ISA will simply continue earning interest.
- You can only withdraw money from your ISA if you’re either buying a house, aged 60 or over, or are terminally ill. If you withdraw cash without these reasons, you will pay a 25 percent charge.
Loan from Family and Friends
It’s also possible for family members and friends to help you out with the deposit. In cases like this, you will have to prove where this money came from, so as to ensure it’s not for money laundering purposes. Then, you can pay them back as and when you can, without the stress of official loans.
Credit Card
In a similar way to the above, you could also use a credit card. However, this could be risky, as you have to ensure you pay the money back in good time, so you don’t receive penalties. You don’t want to cause any unnecessary deductions to your credit score, after all.
Guarantor Mortgage
Similarly, you may also be able to get a friend or family member to help you out with a guarantor mortgage. This involves someone close to you taking responsibility for the finance side of things, without taking ownership of the house.
This way, you’ll have to pay little or no deposit due to their help, but your guarantor won’t have any claim on your property. The only legal claim they have is to pay any outstanding payments on your behalf, just like with renting.
By the way, there is this type of mortgage called joint borrower sole proprietor mortgage (JBSP) that is not yet familiar to everyone, which is now gaining attention due to its simple application and easy qualification. JBSP is for those younger individuals who are still early in their careers and with lower salaries but want to own a house.
The requirements for JSBP application are (1) two (or more) borrowers use their joint income figures to apply for a mortgage; (2) only one will own the property (the ‘proprietor’); and (3) both are legally responsible for making sure the mortgage is paid. The catch with this mortgage is that JBSP solves the problem of someone trying to buy a home with a lower salary.
Loans
Borrowing money may seem scary, but this is actually a pretty sensible way to pay a deposit. For example, you can get a Federal Housing Administration (FHA) loan, which requires very small down payments and can simply be paid off in a similar way to the paying off of your mortgage each month. Do your research, find a loan that suits you, and you’ll be good to go!
Cash
If you’re lucky enough to have had an account set up for you from a young age, cash from this account could really come in handy. Just be aware that, in this case, you will also have to prove where the money came from. Then, if you purchase the house outright in this way, you will own the property straight away.
What You’ll Need to Get a Mortgage
Getting a mortgage these days isn’t as simple as just applying for one and getting the go-ahead straight away. Instead, much like renting a home, you need to prove a lot of factors, which are as follows:
Proof of a Solid Income
For starters, you have to be able to prove that you have a solid, and practically unchanging, salary, for at least a year. With this in mind, forward-planning is essential, as it’s best that you remain within the same job for a few years before applying for a mortgage. In order to prove this, you’ll likely to be asked for:
- Three to six months’ worth of bank statements.
- The last three months’ worth of payslips.
- A P60 from your current employer (which naturally requires you to have been there for a year).
- Utility bills.
With this in mind, if your ultimate dream is to become self-employed, hold off for now. This way, you can save up, get on the property ladder with ease, and then be able to save more money in the long run to focus on your venture.
Identity
Then, the more obvious factor you’ll need to prove is your identity. For this, you’ll require your NI number, and your identification cards, including an up-to-date ID and passport. This means ensuring they’re in date, and the addresses are all correct. It’s also important that you get on the electoral roll, as this can also be used as a way of verifying your identity.
Good Credit Score
It should go without saying, but your credit score is something that will really affect your chances of getting a mortgage. If you have a poor credit score, this shows that you’re not great at paying back loans or debts, amongst other things. So, without this, how can a mortgage lender trust you to pay it back successfully?
No Debts or Unsecured Loans
Similarly, it’s important to pay off any debts or unsecured loans you may have pending. Naturally, if you have other debts to pay off, as well as a mortgage, you’ll likely have a lot less capacity to pay it back.
Ready to Move House?
So, there we have it – the best ways to get a mortgage, both financially and practically. As a first time buyer, it really might seem like there’s no way to get on the property ladder. That being said, from this, it’s clear that there are a number of potential options.
Buying a house is an incredibly difficult process. Don’t add to that stress by doing the move yourself. Hire professionals instead. If you’re moving to Somerset, hire a removals company in Somerset to make your life easier. Bought an apartment in London? Look around for the best local removals company.
Have you got any experience as a first time buyer that you think would really help someone out? I’d love to hear your tips and tricks, and anything you discovered along the way, in the comments down below. Thank you for reading!
