A Young Person’s Guide to Getting on the Property Ladder

Guest blog by: FirstHomeCoach
Published 19th November 2019

Student debts coupled with stagnated wages haven’t exactly left millennials in the best position for jumping up onto the property ladder. This generation of avocado toast and coffee lovers often feel as though they are left with little or no options when it comes to home ownership. And it certainly doesn’t help that buying your first property is a very complex and stressful process.

But it’s not all doom and gloom! Despite the fact that there are some obvious obstacles to overcome, there are some tricks and tools out there - from government schemes to new technologies - that can give you a helping hand.

The Basics:

What’s the Deal With Deposits?

You might be aware by now that, in order to buy a house, you’ll need a hefty sum of money for your deposit. The deposit is worked out as a percentage of the value of the overall property you hope to buy and usually ranges between 5% and 20%. So, if your house costs £140k then to put down a 10% deposit you’ll need £14k. But don’t forget about all the other costs! You’ll need to also save some cash to cover the solicitor fees, stamp duty, insurance and any moving and renovation expenses.

Try out FirstHomeCoach’s Deposit Builder and in just two minutes it will calculate:

What the best savings strategy is for you
If you’re eligible to get money from the government towards buying your home
How much sooner you could buy

What About Getting a Mortgage?

A mortgage is the money you borrow to help you buy your property. There are many different types of mortgages on the market, with varying interest rates and different costs involved. Speaking to a mortgage broker and looking at price comparison sites such as MoneySupermarket can be a great start for getting to know what could suit you. There are quite a few mortgages specifically for first-time buyers that may be worth considering too. You can check these out at https://www.moneyadviceservice.org.uk/en

To get a mortgage you’ll need to prove to the lender that you’re able to afford the repayments. This is usually assessed by looking at your credit score and salary. The higher these are, the better your chances are of getting a good mortgage deal.

FirstHomeCoach can help guide you so you’re credit ready when the time comes to take out a mortgage - which will mean you’re all set to move fast when you most need to.

Getting to Grips With Government Schemes

The government has got some good schemes in place to help out first-time buyers. Making use of them could really make a difference to your property buying journey, so it’s worth familiarising yourself with what’s on offer.

Unity Mutual Lifetime ISA - Up to £1,000 bonus each year!

The Unity Mutual Lifetime ISA is a tax-free savings account for UK residents aged between 18 and 39. Here’s how it works:

You can put in up to £4,000 each tax year until you turn 50.
The government will add a 25% bonus to the amount you’ve saved each tax year. AKA - up to £1,000 dropped into your Lifetime ISA account!
You can only use the money for buying your first home up to the value of £450,000 or for your retirement.
You cannot use the money saved on a Buy to Let property.
With the exception of special circumstances you will be charged a fee if you withdraw the funds for purposes other than to buy a property or for retirement.

Check out the Unity Mutual Lifetime ISA which offers the best interest rate (1.5%)* in the market.

Help to Buy Equity Loan

The Help to Buy Equity Loan is a government loan designed to help first-time buyers or existing homeowners who want to buy a new build property but are struggling to raise a deposit. Here’s the lowdown on this scheme:

Help to Buy Equity Loan Scheme - A government loan which is interest-free for 5 years!
Depending on where you want to buy, the Government will lend you between 15% and 40% of the value of the property.
You’ll only have to put down a 5% cash deposit and then get a mortgage to cover the rest.
The money you borrow with a Help to Buy equity loan is interest-free for the first five years.
After 5 years, you’ll have to start paying off your debt at a rate of 1.75% of the loan’s value.
This rate will then increase every year in line with rises in the Retail Price Index (RPI) plus 1%.

Shared Ownership - Buy a share of a property to live in

Shared ownership is a way to buy between 25% and 75% of a property you will live in. This is how it works:

You pay rent on the rest of the property you don’t own.
The other part is usually owned by a housing association.
If you want to buy more shares later down the line, you can do so via a process known as ‘staircasing.’
The main benefit of this scheme is that you can apply for a smaller mortgage, and the deposit you will need will also be a LOT smaller.
Please check both availability and the eligibility rules in your area.Here’s a little breakdown, for example: On a 25% share of a £200,000 property:- The deposit would be 5% of £50,000, which is £2,500
- The rent would (typically) be 2.75% of £150,000 (the value of the share of the property not owned), which is £4,125 a year, or £344 per month.
- A 25% share of £200,000 is £50,000

Tools for the Tech-Savvy

Millennials are known to be digital natives, so when it comes to buying your first home, why not use this to your advantage? There are tonnes of apps out there that can give you a better overview of your finances, help you save and even track your progress.

Of course, there’s also the FirstHomeCoach app which guides you through the entire house buying journey, step by step, helping you figure out how much you can afford and all the costs involved in buying your dream home. Plus it has loads of handy tools - such as building your deposit, getting credit ready or discovering your borrowing power - to help you get more prepared.

We hope you’ve found this short guide useful and reassuring. For more tips and guidance on getting onto the property ladder follow FirstHomeCoach on Instagram, Facebook and Twitter, or download the app on the App Store or Google Play Store.

Please note the information within this article does not constitute financial advice, it is important you conduct your own research before entering into any financial contract to ensure it is suitable for you taking account of your specific circumstances.

If you’re in any doubt about whether these products are right for you, it’s a good idea to talk to an Independent Financial Advisor (IFA). You can find a local financial advisor by visiting www.unbiased.co.uk. You may need to pay for a financial advisor’s help, so make sure you ask them about their fees first.

*Sources - Lifetime ISAs How they work, who they're for & all best buys 12 March 2019 https://www.moneysavingexpert.com/savings/lifetime-isas/