Business & Finance Finance

First Time Buyer Mortgages Are Not As Complicated As They Seem - But What Are The Different Options?

Before I start explaining the main different types of first time buyer mortgages I must make it clear that whilst there are a great deal of mortgages for first time buyers, the question of which one is the one for you is an important one.
In describing them I can't tell you which one is the best one for you as that all comes down to what sort of property you are looking for and what your personal financial situation is.
By this I mean what your income and out-goings are and how secure they are.
Joint ownership mortgages are meant for those who buy a property in conjunction with a partner, friend or family member.
The main advantage is that the deposit and costs are shared.
This can make taking that first step more affordable and can even mean you can leap the first rung of the property ladder, perhaps being able to afford an extra bedroom you can rent out (tax-free up to a certain amount).
One thing to take into consideration is that you will need to have an agreement stating what will happen if one of you needs to sell up (there are plenty of options).
Whatever happens, that mortgage payment needs paying, and the lenders don't really care who pays it! The shared ownership mortgage has been one of the most popular first time mortgages allowing a lower value entry point.
With shared ownership you buy a proportion of the property with such as a Housing Association, paying rent to them for the portion you do not own but occupy.
Buying a share of the property means the start-out deposit and mortgage are lower but you can creep up over time which is called stair-casing.
Typically, shared ownership properties are new or refurbished.
Make sure you know how you can sell this on and you know all the ins and outs of the contract in the event of a change of personal circumstances, particularly if you combine it with joint ownership.
Shared equity is a new-ish way of buying your first home and is the basis of one of the government schemes to help first time buyers.
Allowing a small deposit and then combining a mortgage with a free or low-cost equity loan makes your first home accessible to many, but it is only available on certain new build properties which come at a premium.
The most recent of first time buyer mortgages is the mortgage indemnity product which means that in the event of you defaulting on mortgage payments, first time buyer mortgages will be partially guaranteed by the government and partially by the house builder.
Unfortunately this scheme, again, is only available for new build properties.
Other first time buyer mortgages do exist, such as those using parents' savings as a guarantee or those where the lender will pay the stamp duty.
If you are thinking of taking buying your first home, seek independent advice from an independent source.

Leave a reply