Are you a first time homebuyer?

If you are, then you will need to consider how much you can comfortably borrow to purchase the property.

With the continued rise of property prices across the UK, many first time homebuyers have had to consider one of several options: shared ownership, guarantor mortgage, saving for a large deposit, or a 100 percent (no deposit) loan.

Aside from the mortgage repayment fees, you will need to consider these additional costs in purchasing the property.

• Solicitors’ fees and insurance costs
• Searches and Land Registry Fees
• Structural surveys and valuations
• Stamp Duty - fees levied on properties costing over £120,000.00

Luckily, with high costs of building homes and slow returns, many developers are now offering purchase incentives to first time homebuyers.

Purchase Incentives

Shared equity or equity appreciation
Under this scheme, you may buy a property that costs £120,000 property for £100,000.00. The developer will share in the appreciation in value.

Builder pays a percentage of the deposit
In this scheme, the builder pays for 5-7 percent of the buyers’ deposit.

Interest-free loan from the Builder
The homebuyer takes out a mortgage for a percentage of the property’s allotted value, say 75 percent. This results in lower repayment fees. The builder then offers the remaining 25 percent as an interest free loan to the buyer. Depending on the agreement, the buyer has the option of paying within 10 years or when they sell.

Affordability
Lenders have realized climbing the housing ladder is still an issue for many first time homebuyers because of high interest rates. With this fact, more mortgage lenders are responding by launching specialized mortgage plans to help first time home buyers obtain the property they want.

Before applying for a mortgage, you should calculate the size of the loan you can afford. This will aid you in choosing a property that you can afford. Then shop for a lender, who will help you establish how much you can comfortably borrow.

Different Mortgage Plans

Joint Mortgages with Your Parents
Your parents act as the guarantor for the shortfall. However, even if your parents name does not appear on the mortgage agreement or property deeds, they are still jointly and separately liable for the loan. Most times you will not need a deposit as security.

Graduate mortgage
A degree often means you will have higher earnings in the future. There are mortgage lenders who will consider this aspect.

Professional mortgage
The possibility of your earnings increasing considerably is one mortgage lenders will take into consideration. You could borrow up to 110 percent of the property 2 to 4x your income.

High loan-to-value mortgages or No-deposit Loan
This loan is for homebuyers who have secure earning potentials as well as those who are unable to give a deposit. With a loan of over 100 per cent of the value of the property, the borrower can use some of these funds to pay for the additional cost of the property, such as the Stamp Duty Land Tax, or legal and insurance fees.

Offset mortgages
An advantage for borrowers with considerable savings, for the debt of the mortgage is off set against their savings. They pay interest on less money.

For example, your mortgage was £140,000 and your savings totaled £40,000, you would only pay interest on the remaining £100,000.

Shared ownership
The borrower shares the cost of purchasing the property with the mortgage lender, developer, or housing association. You have to qualify before you can borrow a percentage of the property.

Mortgages for friends buying together
There are mortgage lenders who will let you buy with friends, up to three other people. However, they tend to base the decision to lend on the outgoings as well as the two highest incomes of the borrowers.

For the borrowers, this enables them to solve accommodation problems, and the group benefits when the value of the property increases.

This kind of mortgage plan can be complicated. Ensure that your solicitor draws up a watertight agreement.

This is the optimum time for first time buyers to purchase a property. For mortgage, interest rates are at a record low and many developers are offering creative purchase incentives.