With the rent escalation, many are asking, “How much can first time buyers borrow?” and evaluating if taking that leap into homeownership is within their grasp.

It’s undeniable purchasing your first home is a monumental financial undertaking. There are uncertainties, such as potential dips in house prices or the unpredictability of needing to move. 

So, for first time buyers, how much money to save up? What should you be aware of when considering mortgages for first time buyers? This article aims to clarify these pressing questions and guide you in making an informed decision.

Buy or Rent?

When considering the step into homeownership, many potential buyers wonder, “How much can first time buyers borrow?” This question is especially pertinent for first-time buyers trying to gauge how much money to save.

A vital aspect to consider is the comparison of costs between owning and renting. According to Halifax’s latest Owning vs. Renting review, it might be more affordable to buy than rent for many. The study indicates that, on average, the monthly mortgage costs for a three-bedroom home are £42 lower than renting a comparable property. So, when considering “How much can first time home buyers borrow?” It’s essential to factor in these potential savings.

However, the affordability landscape is unique throughout the UK. For instance, first-time buyers in Scotland enjoy significant savings as homeowners when compared to their renting counterparts. But the narrative shifts in the east of England, where renting can sometimes be more economical than owning. Thus, the question of “How much can first time buyers borrow in the UK?” can have varying answers based on location.

First Time Buyer Mortgage Types

This largely depends on individual financial circumstances and the prevailing mortgage landscape. First-time buyers in the UK can access the same mortgage deals as seasoned homeowners. However, it’s essential to note that lenders will often scrutinise a first-time buyer’s financial stability and credit history with greater intensity.

Expert mortgage brokers, like Riz Malik from R3 Mortgages, suggest that securing substantial loans can be challenging for newcomers in the housing market. This is because lending institutions are becoming more stringent on their affordability criteria.

In summary, if you’re pondering “What mortgages are available for first-time buyers?”, it’s crucial to thoroughly explore the diverse mortgage deals available and assess your financial position. This will ensure you make informed decisions and embark on this exciting journey with clarity and confidence.

Mortgages For First Time Buyers How Much Can I Borrow?

Navigating the property market as a novice can often raise the question: how much can first time buyers borrow? Most commonly, financial institutions in the UK may offer loans ranging from four to five times your annual income. But remember, it’s not solely about income. The equation also factors existing debts such as car loans or student debt.

Before making any commitments, first time buyers should understand how much money to save. Many online financial advice platforms provide calculators to understand better what’s achievable.

Additionally, seeking guidance from mortgage brokers can be invaluable; They can pinpoint deals tailored to your financial landscape.

To provide some perspective, the average house price for newcomers in the UK’s housing market hovers around £300,000. So, when pondering, “How much can first time buyers borrow in the UK?” This figure might offer some insight.

Mortgage Deposits

Deposits play a vital role in the mortgage landscape. For many aspiring homeowners, accumulating an adequate deposit is the most formidable challenge. This is evident as the average age for a first-time home buyer has ascended to 32. 

Generally, prospective homeowners require a deposit of at least 10% of the property’s value. However, the principle here is simple: the larger your deposit, the more favourable terms you can expect from the lender.

Halifax says the average deposit benchmark for first-time buyers is £62,470. This figure is nearly twice the average annual salary in the UK. Most first-time buyers typically pay roughly 20% of their chosen property’s price.

Yet, there’s hope for those struggling with this initial amount. Some lending institutions might be willing to accommodate a mere 5% of the property’s total value. Since the financial upheaval, Skipton Building Society has reintroduced a no-deposit mortgage, marking it the first to offer a total 100% value since the economic turmoil. This innovative approach utilises an individual’s rental history to gauge their creditworthiness.

For those in the 18-40 age bracket diligently working towards their deposit, here’s an exciting piece: The government will bolster your savings with a 25% match if stored in a Lifetime ISA. This is a significant boost for first time buyers in the UK.

The Trend of Joint Ownership: Is Sharing More Economical?

Interestingly, Aneisha Beveridge, the head of research at Hamptons Estate Agency, notes that over 60% of first-time buyers now lean towards joint ownership. And it’s not limited to romantic partners. The trend shows a growing number of friends exploring the possibility of buying together. This prompts another question for prospective homeowners: “Is it cheaper to share?”

If you’re contemplating a joint investment, Beveridge emphasises the importance of drafting a robust legal contract. After all, in joint arrangements, each participant can be held responsible for the entirety of the mortgage.

By understanding and recognising the potential benefits of sharing, you can make an informed decision about your property venture.

What is a First Time Buyer?

A first-time buyer has not had any or partial ownership of a property in the past. Besides the thrill of owning your first home, there’s also a tax advantage as long as the property is your primary residence.

In England and Northern Ireland, first-time buyers can enjoy an exemption from stamp duty on properties priced below £425,000. This stamp duty is a tax determined by the value of the property you’re investing in.

In Scotland, first-time purchasers are in luck; The Land and Buildings Transaction Tax, Scotland’s counterpart to the stamp duty, is waived for properties under £175,000. 

However, a point to note is that the Wales’ Land Transaction Tax doesn’t offer any relief for first-time buyers.

What Other Support is Available for First-Time Home Buyers?

While the renowned Help to Buy government initiative primarily aimed to bolster home buying, it’s now ended, except in Wales. Despite its termination, recent murmurs suggest that there might be a revival on the horizon.

But if not Help to Buy, then what? For those asking, “Mortgages for first time buyers – how much can I borrow?” the First Homes scheme is worth exploring. Specifically designed for first-time buyers and crucial workers, this scheme caters to households earning below £80,000 (or £90,000 if you’re in London). Its primary objective is to facilitate the purchase of new-build properties.

Another avenue to explore is shared ownership schemes – Instead of purchasing the entire property upfront, you can buy a portion and rent the remaining. Over time, as finances allow, you can increase your stake.

How Percom Financial Can Help

Navigating the world of property and finances can be complex, but you can do it with others. At Percom Financial, we’re dedicated to guiding you every step of the way. 

Whether you’re a first-time buyer or looking to diversify your portfolio, our team of experts is here to provide the insights and solutions you need. 

Don’t leave your financial journey to chance. Reach out to Percom Financial today, and let’s chart your path to success together.