Buying your first home is an exciting adventure, but one of the biggest hurdles for many first-time buyers is saving for a deposit. Understanding your options and making the most of available resources can help you reach your goal of homeownership sooner. Here’s a guide to the deposit requirements and exploring the options available to you.
Saving for Your Deposit
For many first-time buyers, saving for a deposit is the initial step in the home-buying journey. Here are a few common ways people save for their deposit:
- Individual Savings Accounts (ISAs): Many first-time buyers take advantage of the Help to Buy ISA or the Lifetime ISA. These accounts offer government bonuses that can boost your savings. The Help to Buy ISA offers a 25% bonus on savings up to £12,000, while the Lifetime ISA provides a 25% bonus on up to £4,000 annually.
- Parental Contributions: It’s common for parents to assist with a deposit by gifting part or all of the amount needed. This support can make a significant difference, especially if you’re struggling to save the full amount on your own.
Gifting Deposits
If you’re fortunate enough to receive financial help from family, it’s important to understand how this gift can impact your mortgage application:
- Gifts from Parents: Many lenders accept cash gifts from parents or other family members as part of the deposit. Ensure that the gift is properly documented and that the donor provides a letter confirming it’s a gift and not a loan.
Lender Products and Options
Several mortgage products can help first-time buyers with deposit challenges:
- 100% Mortgages: There is one lender offering a 100% mortgage, which means you don’t need a deposit at all. These are often available to buyers with a strong rental history as well as being based on affordability. Lenders will evaluate your financial situation to ensure you can manage the mortgage payments.
- Low Deposit Mortgages: If you can’t manage a full deposit, many lenders offer mortgages with lower deposit requirements. For instance, some mortgages are available with deposits as low as £5,000, depending on the property price and your financial situation.
Shared Equity Schemes
Shared equity schemes can be a great option for first-time buyers struggling to save a large deposit. Here’s how they work:
- How It Works: With a shared equity scheme, you purchase a portion of the property (usually between 50% and 75%) while the remaining share is owned by a housing association, government, or developer. You’ll need a smaller deposit and a mortgage to cover your share of the property.
- Advantages: Shared equity schemes can make homeownership more accessible by reducing the deposit required and providing affordable housing options.
Renting and Stable Salaries
If you’ve been renting for a while and have a stable salary, some lenders may offer mortgages with minimal deposits. Your strong rental history and reliable income demonstrate your ability to manage regular payments, which can work in your favour.
Planning Your Next Steps
Before you start house hunting, it’s wise to:
- Check Your Credit Score: A good credit score can help you secure better mortgage rates and terms.
- Get a Mortgage Agreement in Principle: This will give you a clearer idea of how much you can borrow and strengthen your position when making an offer.
Saving for a deposit doesn’t have to be daunting. With various savings options, potential family support, and innovative mortgage products, first-time buyers have more opportunities than ever to get on the property ladder. Shared equity schemes and low or no-deposit mortgages can provide viable pathways to homeownership.
For tailored advice and to explore your mortgage options, get in touch with Ingrid Cairns & Associates. We’re here to help you navigate the process and find the best solution for your needs.
Your Home may be repossessed if you do not keep up repayments on your mortgage. Ingrid Cairns & Associates Limited is an Appointed Representative of The Right Mortgage Ltd, which is authorised and regulated by the Financial Conduct Authority.
