The property market has been thriving for the past twenty years. In fact, during this time the average house price in London has risen from £103,000 to £485,000 – that’s a 370% increase. But do not retreat in despondence at the sight of this scary statistic. First-time buyers have several options to help them to get a foot on the capital’s housing ladder. The market has seen a generation of renters feeling increasingly cut off from the property ladder which is why we have written this helpful five step guide. We want to help fellow Londoners to get a foothold on the property ladder.
Join the Share to Buy Scheme
Getting on the property ladder is costly wherever you buy but even more so when looking in sought after places like capital cities. If you cannot afford the mortgage on 100% of a home just yet but you have a healthy sum of savings, this is a good option for you. Through this scheme you can buy a share of 25-75% in a London property. The scheme also gives you flexibility because you can buy bigger shares later on when you can afford to. You part-own, part-rent so including other financial responsibilities in your calculations such as rent for where you currently live is important. There are various lenders offering mortgages on shared ownership homes. So long as you are a first-time buyer in London with an income of sub £90,000 you can apply to join.
Open a Help to Buy ISA
Whether you have savings or need to begin saving for your deposit, Help to Buy ISAs not only encourage you to put money aside from your current earnings, they help you to save due to their high interest rates. The state add 25% tax-free to whatever is in your ISA so long as you use it to buy a home. Every first time buyer aged sixteen and over can open one. They can be used for any property costing under £450,000 in London (less outside of London) and any mortgage. If you have bought property before, you cannot open this type of ISA.
Apply for a Help to Buy Loan
If you are looking to purchase a new-build and will be in a better financial situation in five years time, the Help to Buy Loan is a good option. You can borrow 20% of the property cost from the government. This leaves 5% and 75% of the deposit and mortgage cost respectively for you to pay for now. The loan is free for the first five years. You just need to have paid it off after 25 years and will pay a loan fee after the first five years.
Bank of Mum and Dad (BOMAD)
The average amount that parents give to their children to help them buy is £18,000. Not everyone has this option of support and it is preferable to avoid relatives having to substitute with their own savings if possible. However, do not feel guilty if the option is available. According to recent data, a third of people taking not their first but their second step onto the property ladder need over £20,000 support from family friends, or Mum and Dad to make their next move.
Your Mortgage: Build a Credit Rating
This catches a lot of people out and often the most financially responsible ones. If you have avoided opening and using a credit card to avoid overspending and debt – good for you. In terms of building up a credit rating however, this is not ideal. When you apply for a mortgage, lenders usually create a credit score for you that represents their estimated risk or reliability of you as a borrower. If you are one of those sensible people who has not built up a credit rating, start doing so now. Credit Ladder is a brilliant scheme enabling you to build up a credit rating not by splashing out on your credit card but by paying your rent on time. If you have savings with the same lender as your mortgage, you can also apply for an offset mortgage to reduce the amount of interest you’re charged on your mortgage.
Building sufficient funds to buy property in today’s market can seem out of reach but there are plenty of options available to help you buy your own home either independently or with the support of family and friends. If you need help getting on the property ladder, or you are looking to rent in South West London in the meantime, James Anderson can help you find the ideal home.
Buying your first property can be a daunting prospect but our friendly team provide honest and reliable advice and will be on hand every step of the way. Find your ideal property in South West London with the longest established independent estate agents of this area.