First time buyers are just one of the many groups being affected by the recent credit crunch, with many shying away from such a large financial commitment or having trouble securing a mortgage. And due to the economy, having the opportunity to buy your first home is slowly decreasing too, with less homeowners selling their properties and developers struggling to get the financial backing they need to build new houses. Mortgage lenders are avoiding any unnecessary risks, which means first time buyers are facing large deposit payments or expensive monthly repayments.
To counteract this, the government have introduced a number of schemes to help first time buyers get their foot on the property ladder and along with developers are looking for new and simple ways to encourage people to buy. One of the things first time buyers can do is consider buying a house with other people. This could be family members, friends or partners and means sharing the cost of the initial deposit, monthly mortgage payments and even general household expenses.
It isn`t just the government who are looking for new incentives either, developers are in desperate need of new buyers – without them their properties sit empty and any possible investment thought too risky. Because of this, buying a new build house can actually be of benefit as there are many good deals to be had. Also known as the First Buy Scheme, buying a new build home can often mean being able to take advantage of lower deposits, wavered stamp duty payments or even subsidised loans, with many well known house developers also offering part exchange schemes.
This can also benefit parents who are looking to help their children buy their first property. In the same way, developers are offering to pay interest on money lent by parents for the property, though these deals only cover a certain amount of years, usually between two and five.
Other incentives include shared equity deals, where the government will subsidise a certain amount of the house price or deposit payment, making purchasing your first property slightly less daunting. However, these schemes are not yet widely available and to qualify you need to have a household income of less than £60,000.
As with all financial incentives, being able to invest in your first property sounds great but beware, the reality is that somewhere down the line you will need to pay any loaned or subsidised money back and you may end up struggling with payments in the future. Developer deals can also be restricting as you may have to ask for approval to make modifications to your home or if you plan to re-mortgage.
Doing your research, getting independent advice and reading all the details before you commit to any deals is essential. As is knowing you have the means to pay your mortgage or loan payments each month. Making use of a loans calculator can help you see how any repayments might impact your monthly in comings and out goings and help you plan for your future on the property ladder.