London Home Show Countdown: London and Country Mortgages
Your guide to buying a home
Getting on the property ladder is likely to be one of the most exciting moves you’ll ever make. But with so many different properties and mortgages to choose from, it isn’t always easy to know where to start. Here’s our guide to buying your first home.
Do your numbers
Your starting point should be to think about how much you plan to spend on your new home. Work out your budget carefully, thinking about the maximum monthly mortgage payments you could afford.
Don’t forget that as well as the cost of the property itself, you’ll need to factor in all the other costs of buying a home too, such as legal fees, survey, removal costs and potentially Stamp Duty.
Saving a deposit
You can put down as little as 5% of the property price as a deposit. However, if you can save more than this, you’ll have access to a wider choice of mortgage deals.
There are several savings accounts on offer specifically to help first time buyers build a deposit. The Lifetime ISA (LISA), for example, allows you to pay in up to £4,000 a year, with any contributions you make topped up by a 25% bonus from the government. You can use your savings to buy a property up to the value of £450,000 anywhere in the country.
Or there’s the Help to Buy ISA, into which you can pay in up to £200 a month, and the Government will again top up your contributions by another 25%. The maximum amount the Government will give you is £3,000, and to qualify for this you’d need to save £12,000 of your own money. Savings from your Help to Buy ISA can be used to buy a house costing up to £250,000, or £450,000 if you’re buying in London. If you want to take advantage of the Help to Buy ISA you’ll need to open an account by 30th November 2019, as after that date the scheme will be closing. Account holders will be able to continue to pay into the ISA until they choose to buy their first property.
If you have a Help to Buy ISA and a Lifetime ISA, you’ll only be able to use the Government bonuses from one to buy a home.
How much can you borrow?
As a general rule, you’ll usually be able to borrow around four times your income, but this can vary from lender to lender.
Lenders will also take into account all your outgoings when you apply for a mortgage, and they’ll want to check you’d still be able to afford your mortgage payments if interest rates rise.
It’s a good idea to check your credit score before you apply for a mortgage. Lenders will look at this when you apply for a mortgage so that they can see how you’ve managed your debts previously. If your score isn’t up to scratch, look at ways to improve it, such as checking you’re on the electoral roll.
The good news is that there are several schemes available to help first time buyers. The two main ones are Help to Buy and Shared Ownership.
Here’s how they work:
- Help to Buy
If you’ve only got a deposit of 5% to put down, the Government will lend you a further 20% of your property purchase price, so you’ll only need a mortgage for the remaining 75%. If you‘re buying in London, you can apply for a Government loan worth up to 40% of the property price. The property you are buying must be a new build, and cost no more than £600,000. It must also be your main residence, not a property that you’re planning to let out.
You don’t have to pay any fees on the Government loan for the first five years, but after that you’ll be charged a 1.75% annual fee. This will rise each year by the rate of inflation plus 1%. You’ll only have to pay back the loan when the mortgage is paid off in full, or when you sell the property, whichever happens first. The outstanding balance will be calculated at the original percentage of the current market value.
- Shared Ownership
Shared Ownership allows you to buy a share of a property from a housing association and pay rent on the remaining part, with an option to buy a bigger share later. The minimum share you can buy is 25% of the property and the maximum share you can buy is 75%.
If you are looking to purchase a Shared Ownership property in England (with the exception of London) your household income must be no more than £80,000. This goes up to £90,000 if you live in London.
Finding the right mortgage
Whichever scheme you use, you’ll need a mortgage to buy your property. That’s where we can help you.
We can advise on the best mortgage deals and lenders to suit your individual circumstances, and help you work out how big a mortgage you’ll be able to afford. We’ll guide you through all the paperwork, taking you from your initial application right through to completion.
And the best bit? Our service is fee free. Rather than charging our customers for advice, we are paid a commission directly by the lender. That means you don’t have to pay us a penny for our services.
So come and see us at the London Home Show Autumn 2019 – we’ll have advisers ready and waiting to help start you on your home buying journey.
Meet the L&C Mortgages team on Stand 8 at the upcoming London Home Show, Saturday 21st September! Book your free tickets to London’s no.1 first time buyer event at the QEII Centre in Westminster: sharetobuy.com/homeshow