More and more people are returning to their parents’ home after university, struggling to keep up with growing rental costs and lower incomes. Figures from the Office for National Statistics show that the number of home owners aged 16–34 has decreased by 34 percent over the last 20 years.
Buying a first home is a big step, and can often be confusing. However, according to David Gray Solicitors LLP, the limit placed on Stamp Duty for first-time buyers may be encouraging to people to buy their first property, with buyers not needing to pay Stamp Duty on the first £300,000 of their property.
For first-time buyers, mortgage brokers can be the difference between a mortgage incorporating the help of parents and government incentives, and an expensive mortgage that over time may become difficult to pay. Brokers can help find the cheapest rates, including products that aren’t available to you directly, and offer unbiased advice.
First-time buyers have a range of different government incentives available, such as the help to buy equity loan and help to buy ISA, where the government will add a 25 percent tax-free bonus to your ISA savings. ‘The scheme entitles the ISA holder to a 25 percent government boost on savings up to the value of £12,000, and is designed to assist first-time buyers purchasing a property up to £250,000,’ explain David Gray Solicitors LLP. Often, the logistics and rules behind these schemes can be hard to understand, but a mortgage broker will know how to incorporate these into a mortgage. It is important, for both the first time buyer and their parents, to find a mortgage that is right for their situation.
‘Some banks allow parents to be part of the mortgage, to help affordability for a child with lower income. For example, if the child is in a starting or training role at work, then parents can put down the deposit,’ explains Steve Jackson from Jackson Potter, an independent mortgage adviser. Gifting a deposit can help children successfully access a mortgage at more competitive prices, however, there must be proof that it is a gift with no repayment requirements.
‘Another option is for parents to be guarantors, and be liable for any missed payments, but this is more expensive as the mortgage term is based on parents’ age, and is usually only available to parents under the age of 65’, Steve continues. A guarantor mortgage allows the borrower to take out a larger loan, and requires the guarantor to become liable for the debt.
Apart from sourcing the best mortgage deals, a mortgage broker will also process the application, including the paperwork. ‘Brokers use their experience to shop around the market, saving clients time and money,’ explains Steve.
Better rates are generally available to mortgage brokers. A broker has access to all the information and far more products. Also, by taking unbiased advice from a broker, you are legally protected. If you take out a mortgage with no advice, you may not be able to receive compensation if something goes wrong.
Taking out a mortgage can be difficult for a number of reasons, lending criteria in particular. ‘It’s easy to look at rates on the internet,’ says Steve. ‘However, it is people’s individual circumstance that lenders use to assess mortgage availability. These are different for every applicant, and so it is crucial to know the lending criteria to have a successful application.’ An experienced broker will know the background criteria that a lender requires, they can then advise you on this before you process your application, to help you successfully secure an affordable mortgage.