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Getting your foot on the housing ladder

29th May 2018


It’s something that everyone aspires to have. A dream that feels so close, yet oh so far. It is, of course, moving into a house all of your own. Many people, particularly the younger generation, often lament the difficulty of making this first step. However, it’s not all doom and gloom, as with all journeys, starting it is often the hardest part. Fortunately, IMC have compiled a guide to help you pack your metaphorical bags and get moving in the right direction. So your dreams don’t have to stay dreams.


Decide if ownership is right for you


It’s often easy to be swept along in visions of home ownership, yet upon further consideration it may not be suitable for everyone. If you’re a traveller at heart or face an unsteady income stream then renting may well be the better option. Likewise, taking out a mortgage is likely to be one the biggest commitments you’ll make, financially and relationship wise – should you move in with someone else in a joint tenancy. Using our mortgage calculator can help you work out if buying truly is the right option, giving an indication of just how much you’ll likely be able to borrow.


Preparing a traditional mortgage application


Since the financial crash of 2008, it’s become harder to secure a first-time mortgage. However, if you have your house in order it’s not so difficult to, well, order your house. There actually a few ways to go about getting a mortgage, with a few packages specifically designed with first-time buyers in mind.


If you want to go down the traditional road you’ll require a deposit of some sorts. Fortunately, this amount tends to be lower for first-time mortgages, with more lenders offering up to 95% of a properties value in their packages. It’s worth noting though, that a higher deposit percentage will generally unlock better deals with lower interest rates. With this in mind, saving up to 10% is often a smart move. Should you be fortunate enough to have a 40% deposit then there will be the biggest variety of mortgages on offer. It’s also important to consider the different kinds of mortgages available, from interest only, to capped rate varieties – these can be simply compared with this rather helpful resource.


Help-to-buy schemes


For people without considerable savings in their back pocket, government backed help-to-buy schemes can be the vital helping hand onto the property ladder. Covering up to 20% of the cost of a new-build home, they mean that you only require a 75% mortgage and a 5% deposit before you can start planning where to hang the picture frames. Within greater London this picture is slightly different. To reflect current property prices in the capital the government will lend up to 40% of a cost of a mortgage. The 5% deposit still remains the same, but as of 2016 you only need to secure a 55% mortgage from a commercial lender.


These schemes are brilliant for first-time buyers and the data backs this up. Indeed in October of 2017 the chancellor, Philip Hammond, reported that, since it’s introduction in 2013, more than 130,000 households have made their way onto the ladder.


Shared ownership schemes


Shared ownership housing schemes effectively combine renting with partial ownership. You can normally choose to own equity between 25% to 75% of a property, only paying rent on the shares you do not own. This allows first-time buyers to move towards purchasing a home, even if they do not make enough to buy one outright. To be eligible for these schemes you normally need a combined income below £80,000 per year, with this figure £90,000 in London. These requirements are for England only and some criteria vary from county to county. It’s therefore extremely important to check first.


It’s also vital to find which kind of properties shared ownership schemes apply to. Most of these are new-builds, but a few are re-sales from housing associations. A key aspect to these schemes is the possibility to acquire the remaining shares at later date, giving you full ownership of the property once you are in a position to pay for it.


Shared equity loans


Although they sound similar, shared equity is very different from shared ownership. Unlike the latter, shared equity schemes mean you still own 100% of a property. The slightly misleading name stems from the fact an equity loan is taken out on the deposit itself, enabling would-be buyers to get enough money to put down the cash needed to unlock lower rates. While these can cost more in the long term, they are a useful way to keep pace with rising property prices, especially when you consider that it can take decades to save even a 10% deposit on a home.


The main drawback to these arrangements is that a rise in property prices means a rise for your loan too. However, these can be used in conjunction with the 20% government help-to-buy loan, meaning that the dream of homeownership is far more achievable than most people would believe.


Mortgages can be complicated at the best of times, and no more so than when you’re dealing with one for the first time. That’s why IMC have dedicated experts on hand to help guide you through the process, all you need to do is get in touch. We’d be delighted to help.


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