Category: First Time Buyers

Getting on the property ladder
August 8, 2017

Getting on the property ladder

First Time Buyers

With increasing numbers of people struggling to raise a large enough deposit to purchase their own homes, many are having to turn to their parents, relatives or close friends, to help get them onto the property ladder. If you are thinking of accepting financial help from a family member or close friend to help fund your home purchase, there are a number of ways in which they can help, which we have handily compiled for you below.

Receiving monetary gifts

You can receive a sum of money to form all or part of your mortgage deposit. However, to improve your chances of being accepted, mortgage lenders prefer it to be an outright gift from a family member, with no requirement for future repayment – but watch out for inheritance tax!

An individual can give away £3,000 per year tax free, and carry over any of their leftover annual exemption from one tax year to the next, up to the value of £6,000. However, if you are due to be married, you can also give receive an additional; £5,000 if you are the giver’s child, £2,500 if you are their grandchild or great-grandchild, and £1,000 for anything else.

Borrowing money

If your family member or close friend has a few pounds tucked away, there are a number of ways in which they can help you and benefit at the same time!

  • Family Springboard Mortgage: A popular option with families, enabling a relative to provide 10% of the purchase price as security. But, if you keep up your mortgage repayments, they will receive their money back with interest!
  • Joint Mortgage: Your family member or close friend legally own a share of the property and are jointly liable for the mortgage repayments.

Getting a guarantor

To help improve your chance of being accepted for a mortgage, a relative or close friend can either guarantee a proportion of / or your entire mortgage debt. In order to do so, they will need to:

  • Be able to cover any of your missed mortgage repayments
  • Pay their own mortgage
  • Have a number of years left in employment

However, if they are already a homeowner, acting as guarantor for your mortgage could result in you having to pay an additional 3% in Stamp Duty Land Tax!

Buying from family or friends

If you want to buy a property belonging to a relative or close friend, they can sell it to you at a discounted rate from the market value. This is known as a concessionary purchase, and many mortgage lenders will accept this and either base the value of the property on the agreed purchase price, or accept the discount as the buyer’s deposit.

Need help?

As expert mortgage advisors, we can help talk you through all of your available options and ensure that you get the right mortgage deal for your mortgage deposit type. We will also complete all the necessary paperwork for you, and liaise with your lender, estate agent and solicitors to ensure that your application is a complete success!

Student Mortgages
June 16, 2017

Mortgages for students

Buy to Let / First Time Buyers / Mortgage

Are you are an undergraduate or parent trying to avoid paying a fortune for poor student accommodation? Some mortgage lenders are now looking at university students as potential customers, which could help you to get onto the property ladder and earn whilst you learn through renting out your spare rooms!

It may seem unrealistic, but with today’s high rental prices and relatively stable housing market, many are finding properties with mortgage repayments are costing less than monthly rental rates, making it a more feasible option.

A sound investment?

Many students choose to arrange a mortgage in partnership with their parents, so that both parties can benefit from the venture. But, which mortgage is best suited to your needs?

Student Mortgages

With a Buy for Uni Mortgage, students aged 18 and over living in England and Wales, can borrow 100% of a property’s value up to £300,000 to purchase a home within 10 miles of their place of study. However, if you borrow more than 80% of the value of the property, you will need to consider the following:

  • A parent or close family member will have to act as Guarantor
  • You will likely have to pay a higher interest rate initially. However, if you keep up your repayments, you should be able to move to a standard mortgage, once your deal comes to an end.

If your parents already own their own home, they can also save by not having to pay Stamp Duty Land Tax on the purchase of additional property, as it will be in your name!

Family Buy to Let Mortgages

If you are a parent who either pays or is looking to cover the cost of your child’s accommodation, you could benefit from investing in a property for them to live in instead. You will need a Regulated Buy to Let Mortgage, which can be difficult to find on the high street. But, we can help you find a mortgage deal that suits your needs perfectly! – Remember, if you buy a larger property and rent it out to other students in addition to your own child, you will also need a Houses in Multiple Occupation licence!

Want to learn more?

Our expert mortgage advisers can talk you through all of your available options and compare a range of student mortgage deals, to ensure that you get the right mortgage product for your investment plans and individual circumstances, completely free of charge and obligation!

 

Young couple
March 27, 2017

The Lifetime ISA – Your new friend for life!

First Time Buyers / Mortgage

If you are looking to get on the property ladder or want to start putting a bit of extra cash away to support you in your retirement, you could get a free 25% cash injection to help you on your way!

Savers aged between 18 and 40, who open the new Lifetime ISA when it launches on 06 April, can put away up to £4,000 a year and receive an additional 25% tax free, government bonus until they reach the age of 50. By this time, you could have received as much as £32,000 in free cash! – Who doesn’t want free money?

Take note!

  • Contributions to a Lifetime ISA will count towards your annual tax free savings limit of £15,240 – Fortunately, this will rise to £20,000 for the 2017/18 tax year
  • If you withdraw cash for anything other than buying your first home or before you turn 60, you will incur a 25% penalty! – Be wise and only use it for home buying or retirement

Is it better than a pension?

The Lifetime ISA can be used to save for your retirement in addition to your pension. But, the rewards of only saving in a LISA are not as attractive and here’s why:

  • You can only withdraw cash from a LISA once you turn 60 – Not great if you plan on soaking up the sun and retiring early
  • For most, having a pension is just as beneficial, as you save from gross (pre-tax) income – Certainly wouldn’t be attractive to high earners
  • If you’re employed, the workplace pension scheme requires that your employer has to pay in as well – You won’t get this from a LISA 

What wins, Help to Buy ISA or Lifetime ISA?

You can save in both schemes, but will only be able to use the government bonus from one of them to buy your home. If you are looking to buy a property within the year, the Help to Buy ISA will enable you to get the government bonus faster, with a minimum deposit of £1,600.

But, for those looking or thinking to buy over the next year or so, the Lifetime ISA is far more attractive! Plus, if you already have a Help to Buy ISA and transfer your savings to a LISA before 06 April, the 25% bonus will be applied to the entire amount saved! – Now that’s certainly worth considering!

We have compiled a handy breakdown below to help you quickly see how each compare:

 

Question Help to Buy ISA Lifetime ISA
How much can I pay in? £1,200 in the first month, followed by £200 a month thereafter £4,000 a year
How does the Government bonus work? Maximum bonus of £3,000, which you receive upon completion of buying your home 25% applied to your savings at the end of the first year, monthly after that
What’s the maximum property purchase price? Can be used by First Time Buyers to purchase a home up to the value of £250,000 (£450,000 in London) Can be used by First Time Buyers to buy a residential property up to the value of £450,000
How long will I need to have it before I can use it? No time limit 12 months+
How can I use it? For a mortgage deposit only Can be used for your mortgage deposit and home deposit
Where can I get one? From most banks and building societies Stocks and shares providers at present. But, Skipton will have one for launch, and it is expected that other high street banks will follow

 

Ready to get moving?

Do you think the new Lifetime ISA will help you reach your savings target much sooner than expected? Are you thinking of buying a property in the near future and would like some advice? Our professional mortgage advisors are at hand to help you with all your mortgage related questions!

They will assess your personal circumstances and explain all your available options, so you can get a good idea of how much you can borrow and/or start searching for your dream home. Their advice is completely free, so get in touch!