Purchasing your first home can be overwhelming for first time buyers. It’s essential to ensure that your credit score is satisfactory and that you have saved enough for a mortgage. In this article, we will focus on the importance of saving for a deposit.
To determine how much you need to save for a mortgage, start by calculating your monthly disposable income. Deduct your expenses and monthly outgoings from your income to estimate the amount you can allocate towards your mortgage savings.
This approach allows you to set realistic goals for your monthly savings. Typically, when obtaining a mortgage from a high street lender, you will be required to provide at least 5% of the property’s cost as a deposit. However, some first time buyers aim to save a minimum of 20% or even more.
A larger deposit can result in lower monthly payments. If you have bad credit, your lender may request a larger deposit, possibly around 15% to 30%. Saving for a larger deposit offers several advantages. Firstly, it grants you access to competitive mortgage deals with lower interest rates.
Additionally, a larger deposit reduces your perceived risk as a borrower. Remember, a mortgage is borrowed money, and the more you borrow, the more interest you will have to pay back. For a precise calculation of your borrowing amount, speak with a mortgage advisor in Bournemouth.
It’s also advisable to save extra funds to cover additional costs associated with buying a property, such as insurance and protection.
There are various government schemes available that may be beneficial to first time buyers in Bournemouth. It’s worth exploring your eligibility for these programs.
One such scheme is the Shared Ownership Scheme, which allows individuals who cannot afford a mortgage on 100% of the home to purchase a share of the property (usually between 10% and 75% of its value) and pay rent for the remaining share.
Over time, you have the option to buy larger shares if financially feasible. For more information on these schemes, contact us or schedule a free mortgage appointment with our expert mortgage advisors in Bournemouth. You can also find further details on the government’s OwnYourHome website.
A gifted deposit from a family member can significantly help in buying your first home, potentially covering some or all of the required deposit. Unlike a loan, a gifted deposit does not need to be repaid.
Review your current bills and subscriptions to identify potential areas where you can reduce costs. Consider seeking cheaper deals for your mobile phone and broadband packages.
Additionally, assess leisure services like gym memberships and streaming subscriptions to ensure you are obtaining the best value for your money. By doing so, you can free up more funds for saving towards your deposit.
Buying a property with a friend or partner can be a suitable option for many first time buyers. This approach can expedite the process of saving for a deposit, as you can pool your resources.
However, it’s important to acknowledge that if one person defaults, the other may be responsible for the entire mortgage.
Several mortgage options cater to individuals purchasing with a friend or partner, such as Joint Tenants and Tenants in Common. These options offer different ownership rights and responsibilities.
Securing a mortgage with bad credit is possible, but it often necessitates a larger deposit due to higher interest rates. Hence, it may be advantageous to start by improving your credit score. Here are some strategies to consider:
At UK Moneyman, we understand the complexities of the mortgage journey, especially for first time buyers. We offer free mortgage appointments with our knowledgeable mortgage advisors in Bournemouth, who can guide you through the process and support your mortgage goals.