Let’s start with two quick facts:
- The ice caps are melting.
- Buying your first home is difficult.
What if you could help the environment, while simultaneously saving yourself money and speeding up the journey toward owning your own home?
That’s the aim of ‘green mortgages’; new products being offered by some providers.
They offer reduced rates on mortgages for new-build homes with high energy efficiency ratings. Unfortunately, not all houses are eligible for the discounted rates. Only homes built by selected companies can be purchased with a green mortgage. These are designed to combine the need for more accessible mortgages, and a more conscientious attitude toward looking after the planet.
However, all is not lost if you cannot find a home that meets green mortgage eligibility criteria as there are other ways to make buying your first home more accessible:
Help to Buy
If you want a new-build, but your dream home isn’t rated highly enough to qualify for a green mortgage, your next option might be a Help to Buy loan. This is a government scheme which breaks the cost of the home into three parts:
- A 20% (40% in London) loan (from the government)
- A 5% deposit (supplied by the buyer)
- A 75% mortgage (from a bank or building society)
This means that you will be repaying both a mortgage and government loan, however, the loan is free from fees for the first five years, making it even more first-time buyer-friendly.
Low-deposit mortgages
Some banks and building societies offer mortgages which only require a 5% deposit. Further still, there are a range of 100% mortgages available, which do not need any savings from you at all. However, these usually need a guarantor to provide a sum of money as security instead. Whilst this money is not paid to the lender, it is held in an inaccessible account for a period and will be taken if you default on your mortgage repayments.
To access these mortgages, you are likely to have to rely on your parents or grandparents to help you.
Improving your saving methods
If you think you will need more than a 5% deposit, or if the bank of mum and dad simply isn’t an option for you, the way you save will have a huge impact on how long it takes to have enough to buy a home.
There are a variety of options available, but none is a one-size-fits-all solution. Determining which saving methods are best suited to you will depend on your current circumstances. Give us a call for help with this.
The two main factors to look at are:
1. How you are saving
For many first-time buyers, the most sensible account type for saving a deposit is a Lifetime ISA (Individual Savings Account).
Lifetime ISAs are designed specifically with first-time buyers in mind. Each year, you can deposit up to £4,000 into the account and at the end of every tax year, a government bonus equal to 25% of your annual contributions will be added to your total. That gives you the opportunity to save up to £5,000 per year, £1,000 of which is effectively free money.
Lifetime ISAs can be opened by anyone between the ages of 18 and 39, while contributions can be made and will attract bonuses until you turn 50. However, the earlier you act, the longer you will have to build your deposit.
2. What you are saving
If saving for a deposit seems to be taking too long, it might be time to look at your finances in more detail. It is likely that there are areas in which you can cut your spending, to put more toward your mortgage deposit each month.
If it is not possible to put more away, why not investigate ways to bring more money in? This may include selling things you no longer need or reassessing your employment options.
Talking to the professionals
As long-time champions of first-time buyers, we love giving advice and helping people like you to get onto the property ladder.
Engaging with us will give you three advantages in the housing market:
- Increased confidence in the decisions you make during your first-time buying journey
- The backing of mortgage advisers with years of experience in the property market
- Contact with an expert who can provide suggestions to make buying your first home more accessible and easy to understand
To get started, feel free to get in touch with us on 0207 808 4120.