First Time Buyer Mortgage Advice

HELP IS AT HAND FOR FIRST TIME BUYERS

"First time buyers finding it more and more difficult to get on to the property ladder!"

"Average house prices expected to continue to rise”

"Deposits nearly four times bigger than five years ago."

Most of us are familiar with these sorts of headlines and are aware of the air of despondency hanging over those trying to buy their first home, but are things really that bad?

The current perception that obtaining a first time mortgage is difficult is, in many ways, misguided. It is probably no more difficult now than it was 25 years ago indeed, with the increased flexibility offered by many lenders it could be said to be easier.

According to Nationwide the house price income ratio, based on the number of years annual income needed to buy a house is almost exactly in line with its historical average. Lower mortgage interest rates mean mortgages take up just 20% of gross income, compared to almost 50% at the height of the housing boom.

Many potential first time buyers, attempting to obtain a mortgage give up far too easily this is often because they have approached a single lender and not approached a specialist company who will have a detailed knowledge of the whole market. A recent example is an enquiry received where a client had been offered a maximum loan of £85,000, while we at Westexe, were able to achieve £107,000

If you're stuck in rented accommodation and you're becoming increasingly irritated listening to smug homeowners boasting about how much their property has increased in value what can you do? Whether you're living alone or sharing with friends, it's hard to avoid comments about how much better off you'd be if you bought. This is far easier said than done if you're single and even if you're on a relatively good salary it can be almost impossible to get the deposit together, let alone borrow enough to buy a property

It's a different matter for those lucky enough to have parents who are financially secure enough to help out with deposits or act as guarantors. Couples have it a little easier. Single earners can usually borrow up to three or possibly five times their income whilst couples can expect to borrow up to three or possibly five times the JOINT income.

One way out of the rental trap is to buy with friends or family. An increasing number of people are clubbing together in order to get on the property ladder instead of struggling to get a one-bedroom cupboard on a single salary, some first time buyers are joining forces and managing to secure a larger property against a combined income. Whilst this may seem a logical solution, there are a number of areas where caution should be exercised

Taking on a mortgage together, either as tenants in common or joint tenants, is a serious financial commitment, which needs to be drawn up in law. You need to draw up a legal agreement in case one party wants to sell or loses their job: such agreements can specify that if one stops paying, they lose their rights in the property. But for friends or partners prepared to make the commitment, buying together is one easy and affordable way onto the property ladder

Legally, up to four people can take out a mortgage together but that does not mean that they can raise four times as much money as a single person or a couple. Very few UK financial institutions will consider lending against all four incomes and only a few will take three incomes into account. Most lenders will usually allow three times the main income plus the sum of the other incomes.

It should be stressed that everyone involved is jointly and separately liable for the mortgage. That means that if something goes wrong, for whatever reason and whoever's fault it is, it may fall on the others to make up the balance of the mortgage repayments in the event of arrears, everyone will be tainted with the same bad debt record, even those who have been good payers.

Shared ownership and shared equity can also be an avenue worth exploring for the first time buyer.  Housing associations such as Devon and Cornwall Housing Association, Sovereign Housing Association and Signpost are working to make homes available to first time buyers.

Under the shared ownership scheme, you buy a share of the property and pay rent on the remaining share you do not own. You can then go on to buy further shares, and eventually own your home outright. On shared equity (Home Buy Direct) a government sponsored deposit of up to 30% of the purchase price is provided on a nominal interest rate for five years.

So are you going to remain on the fence or, like many others in your situation, look back in years to come and wish you had been more active in seeking out a mortgage and getting your foot firmly on the property ladder? Remember, your landlords probably struggled to get on the property ladder themselves but now its possibly you that's paying their mortgage, why not pay your own?

Click here to contact Westexe Mortgages for free, no obligation advice on first time buyer mortgages.

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