Category: First Time Buyer

Are you considering buying your first home? Navigating the process of getting your first mortgage can feel overwhelming, with statistics showing close to 50% of first-time buyers make two or more offers before being accepted.

Careful planning and knowing what to expect can make the process less stressful and give you the best possible chance of success.

This guide presents everything you need to know about how to get your first mortgage in the UK to help you get started on the property ladder.

What is A First Time Buyer’s Mortgage?

First-time buyer mortgages are designed for people looking to buy a home for the first time. You’re generally considered a first-time buyer if you’ve never owned a property anywhere worldwide, meaning you must not have owned your home or a buy-to-let property, with or without a mortgage.

Lenders will not consider you a first-time buyer if you’ve inherited a home, even if you never lived there. You’ll also be excluded if you’re buying a property with someone who owns or previously owned a house or a guardian or parent who already owns a property is purchasing the home for you.

Commercial properties don’t count, so you’ll still qualify as a first-time buyer when buying a home if you own or have owned an office, workshop, shop, or warehouse.

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How Can You Get Your First Mortgage in the UK?

The process of getting your first mortgage involves several stages. These include

Step 1: Determining How Much You Can Borrow

Find out how much you can borrow by looking at your income, regular spending, and any debts. Many providers allow you to borrow 4 to 4.5 times your income, provided you meet their affordability criteria, which usually considers your debt-to-income ratio.

Other factors that can affect how much lenders are willing to lend to you include your credit score, savings, monthly outgoings, and type of employment or profession.

Step 2: Save A Deposit

The deposit is the amount you put down as part of the property’s purchase price, and it will affect how much of a mortgage loan you’ll need. You’ll need a minimum deposit of 5% of the property’s price among most lenders.

A high deposit will make accessing the best deals with lower rates easier. A lower deposit will make you look riskier since the mortgage will cover more of the property’s total price.

Step 3: Get A Decision in Principle

After working out how much you can borrow and saving the deposit, get a decision in principle (DIP) and start looking at properties. A DIP is also called an agreement in principle. It gives you an idea of the type of property you could purchase, but it’s not a guaranteed mortgage offer.

The DIP involves looking at your income and performing a soft credit check. It lasts 30 to 90 days and helps show sellers and agents that you’re a serious buyer. Most will only arrange viewing once you have a DIP.

Step 4: Make an Offer

Once you find a property you want to buy, make an offer to the seller. Compare the price to the cost of other houses for sale in the area and decide on the maximum amount you can pay using the decision in principle.

Step 5: Apply for a Mortgage

You can make a formal mortgage application once your offer has been accepted. The lender will review affordability by examining your income and outgoings and conducting a hard credit check. The lender can also perform a stress test to determine if you can keep up with mortgage payments if something changes in the future.

Keep all your documents handy when applying for a mortgage. These can include:

• Proof of ID
• Proof of address, like your utility bills
• Proof of income like payslips or bank statements from the last three to six months or 2-3 years of certified self-employment accounts
• Your P60 tax form
• Evidence of your deposit

Step 6: Valuation and Conveyancing

Most lenders will complete their valuation of the property you’re buying to ensure it’s worth the purchase price. It’s worth getting your surveyor to inspect and survey the property and identify any issues or defects that may cost you more later.

You’ll also need to find a conveyancer or solicitor who will ensure all the legalities of buying a house are met.

It can include contacting the seller’s solicitor and checking their documents, performing local authority and drainage searches of the property, and checking the mortgage offer.

Step 7: Contract Exchange and Completion

After getting the mortgage offer and completing the legal work, your solicitor will exchange the contract with the seller’s solicitor, pay your deposit, and agree on a completion date.

The solicitor will arrange for the funds to be transferred from the mortgage lender to the seller on the completion day, and then you’ll get the keys to your new home.

Can You Use a Government Scheme on Your First Mortgage?

Yes! The UK government offers various home ownership schemes to make getting onto the housing ladder easier. These include:

• Shared Ownership – The shared ownership scheme makes it easier to buy a home if you’re finding it challenging to save a deposit for a home that meets your needs. The share you can buy can range from 10% to 75% of the home’s market value. You’ll then pay rent on the remaining share.
• First Home’s Scheme – The first home’s scheme allows first-time buyers to buy a house for 30% or 50% less than its market value. The scheme is only available in England, and you can use it to buy newly built homes or a home someone else previously purchased through the scheme.

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Final Thoughts

Getting your first mortgage can be smooth with the proper guidance and preparation.

Consulting a mortgage advisor or broker with knowledge and experience in arranging mortgages for first-time buyers can help take the pressure off and increase your chances of success with an affordable mortgage that’s right for you.

Call us today on 03330 90 60 30 or contact us to speak to one of our friendly advisors.

Sources and References

• https://www.statista.com/statistics/1250285/first-time-buyer-mortgage-experience-uk/

Statistics featured by Statista show us that when Covid 19 struck, home buyer levels plummeted to below 2016 levels, spurring on the government to introduce schemes like the Help to Buy scheme. 

One of the biggest perks of the Help to Buy mortgage scheme is that first-time buyers only needed to accrue a 5% deposit. The government would provide an equity loan to the value of 20% of the purchase price.

The mortgage was interest-free for five years, and the mortgage provided, thanks to the government contribution, was 75% of the property value. 

According to the UK government, Help to Buy mortgage schemes were introduced in 2021. A short-lived success, the scheme was closed to new applications on 31 October 2022.

Transactions part of the scheme were meant to be finalised by 31 March 2022, but some homebuilders were allowed to extend until 31 May 2023 to make it easier for buyers to complete the purchasing process. 

Now that the Help to Buy scheme is discontinued, people hoping to get assistance in buying a UK home may wonder what their options are.

What are the alternatives to the Help to Buy scheme in the UK?

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Alternatives to the Help to Buy Scheme

There is no official government alternative to the Help to Buy mortgage scheme, but several options can serve as viable alternatives to the scheme.

Some of the options you can consider, include the following:

• Deposit Unlock

Deposit Unlock is very similar to the Buy to Let scheme in that it focuses on funding the purchase of a new build with a 5% deposit as opposed to the usual 20% requirement.

With this scheme, the builder will insure the mortgage, which leads to the lender seeing the transaction as less risky when providing a 95% mortgage. 

• Deposit Boost

If you’re renting a property and paying high bills thanks to the cost-of-living crisis, it wouldn’t be surprising that saving a hefty deposit for purchasing a home can be challenging. 

If you’re in the process of saving a deposit and have family and friends who may be interested in helping you, a deposit boost could be the answer.

Deposit Boost mortgages are unlike guarantor mortgages. With a guarantor mortgage, the guarantor is linked to your loan, which means if you don’t pay, they become liable.

On the contrary, Deposit Boost options, the person assisting you can remortgage their property to release some equity for your deposit. If you default on your mortgage, it won’t have an impact on that person whatsoever. 

• Professional Mortgage

If you’re a doctor, accountant, lawyer, or nurse, the lender may consider you for a professional mortgage.

This type of mortgage allows the application to borrow around 5 or 6 times their salary and pay the lowest possible deposit of 5% if buying a property that’s not a new build.

Only applicants who have qualified in the last 10 years are eligible for a professional mortgage and will need to prove that they are registered and licensed with the required professional bodies in the UK.

• Income Boost Mortgage

Income boost mortgages are like deposit boost options. They increase buying potential by making it possible for a family member or friend to add their income to yours when making the mortgage application.

This makes it similar to a joint mortgage, too. As mortgage providers generally only allow mortgage totals of 4 or 5 times a person’s salary, adding an additional income to the application can make it possible to afford a home that better suits your needs.

One of the perks of this type of mortgage is that you can add more than one booster to the mortgage to increase your buying power.

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• Springboard Mortgage

These mortgages are sometimes referred to as “Savings as Security” mortgages and are another way family members can help buyers purchase the property they want.

Instead of remortgaging their home or adding their income to your application, the springboard mortgage enables family members to use their savings as security on your application.

This is usually based on willing family members putting up a 10% percentage of the property’s value into a savings account held by the lender.

The money stays in the savings account for a set period, and as long as you make your regular monthly payments, the amount will be returned to them with interest, as you will then own a certain amount of equity in the property.

• Shared Ownership Mortgage

Buyers who can’t afford the mortgage they need to purchase a property can choose to buy a share in the property and pay rent on the amount they cannot afford.

Most homeowners can buy between 10% and 75% of the home’s value.

In such an instance, the balance of the property will be owned by the local council, a housing association, or a private company.

This entity will be the landlord and charge rent on the portion of the property that they own.

If you want to eventually own the entire property, you can choose to do something called “staircasing” which means you gradually increase your share in the property until you own it outright.

• Dynamic Ownership Mortgage

If you have a group of trusted friends or family members that would be willing to purchase property together, a dynamic ownership mortgage may be the right choice for you.

This type of mortgage allows the purchase of a property with up to 5 other people.

What’s great about this mortgage is that everyone contributes to paying the property off and individual contributions can be tracked.

If you ever choose to sell the property, your share will be determined by what portion of the property you paid off. 

• Deposit Loan

You can boost your deposit with the help of a close family member or loved one. This person’s money is not a gift but a contribution in exchange for a share in the home.

Of course, if you don’t want to give the person a share in your property, you could look for a close family member willing to give you an interest-free loan that can be repaid when the property is sold. You’ll both be considered co-owners.

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What Will Replace Help to Buy? Conclusion

Each of these mortgage options would be a viable alternative to the Buy to Let scheme that is no longer available.

If you aren’t sure which option is best suited to your financial situation, it’s recommended to consult with a mortgage advisor who can give you unbiased and sound advice based on your situation and how viable each mortgage option is.

Call us today on 01925 906 210 or contact us to speak to one of our friendly advisors.

Saving to buy a house can be challenging for many people, and a fixer-upper can be an enticing option.

Fixer-upper properties feature steeply-discounted prices, making them very affordable.

Renovating your own home can also be exciting, but it’s wise to have all the facts before taking the plunge.

Here are a few things to consider when deciding whether to buy a fixer-upper for your first home and how to get a fixer-upper mortgage.

What Is A Fixer-Upper?

A fixer-upper is simply a house that needs repairs before it’s comfortable or appealing.

These can vary from significant renovations like structural repairs or replacing walls, roofs, or floors to more straightforward and less extensive work like redecorating and painting.

You can buy a fixer-upper house for less than the market rate of similar homes in better conditions because of the extra costs and time required for upgrades on the property.

It can allow you to own your first home in your desired area at a lower price and even save money.

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Are There Fixer Upper Mortgages?

Yes. Also called buy-to-renovate mortgages, fixer-upper mortgages are designed for borrowers who want to buy a property needing work.

They can vary depending on your needs and whether the house needs cosmetic refurbishments or substantial building work.

Fixer-upper mortgages differ from conventional ones as the lender will consider more than the property’s market price.

They’ll look at the estimated property value once the work is complete, and the amount you can borrow is usually based on the projected value instead of the current value.

As a result, you can borrow more than standard mortgages would allow with fixer-upper mortgages.

Buying A Fixer Upper Using A Conventional Mortgage

Based on your finances and the scale of work involved, you can choose to go for a conventional mortgage to cover the purchase only without renovation costs.

It’s an affordable way to get on the property ladder.

It’s suitable if you plan to renovate the house long-term, can afford it, and have building skills or financial and practical support from your family to help carry out the work.

This route allows you to apply for additional funding when buying or later when your financial position is more substantial, or the property’s value has increased.

Considerations When Buying A Fixer Upper

Property Condition

The ease of getting a fixer-upper mortgage will mainly depend on the condition of the property you want to buy.

The property may be unmortgageable if it’s unsuitable for living in, so ensure it has some basics to make it habitable, such as a kitchen, bathroom, and water access.

Lenders may not offer mortgages if the property is derelict, uninhabitable, or needs a conversion.

The lender will run extra checks than standard mortgages to ensure the work required isn’t too risky, so conduct your survey before applying to confirm lenders can approve it for a mortgage.

Unexpected Costs

Property development is never straightforward, and it can be challenging to keep costs within budget.

A renovation project can quickly surpass your budget, so ensure you have a good contingency for unexpected costs.

Set a realistic budget with an extra 20% or more for unforeseen issues that may spring up.

Planning Permission

If you’re working on a small renovation project, you can get cracking straight away under permitted development and don’t need planning approval.

However, if you need to make extensive changes or want to buy a listed building, you’ll need consent from the local authority.

Ensure you check how easy it is to get planning permission for the house, as it can be time-consuming and a positive result isn’t always guaranteed.

It can take up to 12 weeks for the council to decide and allow neighbours to have their say after submitting your application.

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Your Skills

Assess your abilities in terms of actual DIY and project management. Will you manage the project or employ a project manager?

Think about how much work you or your family can take on and the practical expertise required, as it would be misguided to try and do things you’re not confident about.

Hiring an expert can ensure the work is done to the required specification.

Their experience can save you from unnecessary costs and delays, and you’ll not have to be on-site all the time.

Timeframe

Renovating a house can be lengthy and stressful.

Five years or more can quickly go by while still living on a building site so ensure you work out a realistic timeframe before committing.

A project can run longer than expected and strain your work and personal life.

Seek advice from experts with experience in fixer-upper houses and leave some wiggle room for unexpected jobs.

Don’t forget to factor in other demands on your time, like family, a busy job, and breaks from the project to relieve the pressure.

Types of Fixer Upper Mortgages

There’s no one size fits all fixer-upper mortgage since all renovations are different.

Available options include:

Construction Only Mortgage

It involves committing to an initial mortgage for the renovation, and once it’s finished, you apply for a second, standard mortgage that pays off and replaces the first.

Construction to Permanent Mortgage

It involves two stages agreed to from the beginning.

The initial stage consists of a mortgage for renovations, usually on interest-only terms, and after the renovations are complete, it reverts to a conventional mortgage.

Most lenders release funds for fixer-upper mortgages in stages as you work on the property and conduct interval inspections to check progress.

Others withhold part of the funds until renovations are complete and the property is valued.

Ensure you find out whether the mortgage offers payments in advance or arrears to determine whether you need to find a way to fund the project while waiting.

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Should You Buy A Fixer Upper For Your First Home? Final Thoughts

Buying a fixer-upper can be an affordable way to get on the property ladder and live in a desired area, but it can come with plenty of hurdles.

Ensure you work with a mortgage advisor with expertise in fixer-upper mortgages to help you compare costs and rates across the entire market and guide you on suitable options.

Call us today on 01925 906 210 or contact us. One of our advisors can talk through all of your options with you.

When it comes to mortgage deposits, it’s important to be informed. One of the first things to know is that the higher your deposit amount, the less you have to borrow to cover the cost of owning a home.

You may also get better interest rates and more favourable terms if your deposit is a decent amount.

However, saving as you balance other financial needs like living costs or rent can be challenging and tedious, making heft mortgage deposits difficult to achieve.

Fortunately, various government schemes and non-government options in the UK can help with mortgage deposits as you save up for a home.

Read on to learn about the plans and options available to help boost your savings and make your mortgage deposit as big as possible.

Government Mortgage Schemes

Help To Buy: Equity Loan

The Help To Buy Equity Loan is a shared equity scheme only available in England for first-time buyers and current homeowners who wish to move.

You can only use this scheme for newly built homes with a maximum value of £600,000.

To qualify, you need to have a minimum 5% deposit saved. The government will give you an equity loan of up to 20% of the property’s value. Add this to your 5%, and you’ll only need to secure a 75% mortgage.

The loan will be interest-free for the first five years. A 1.75% fee is payable from year six, and it rises annually by inflation plus 1%.

The repayments are interest-only, and you can repay the loan anytime or when you sell the property.

London features high property prices. The government increases the loan’s upper limit to 40% of the property value if you purchase in London.

This means that after you add the 5% you’ve saved, you’ll only need to take out a 55% mortgage to cover the rest.

Related reading: 

• Mortgage for concessionary purchase.
• Family assisted mortgages explained.

Shared Ownership

The Shared Ownership scheme is available in England only, and it allows you to buy a share of your home if you can’t afford a 100% mortgage.

You can buy between 10% to 75% of the home’s value and pay the remaining share as rent. You’re also allowed to buy more shares later on when you can afford to with a gradual staircasing model.

Properties in Shared Ownership are always leasehold, and you can buy a newly built home or an existing one through resale programmes from housing associations.

You can take out a mortgage to pay for your share of the home’s purchase price or fund it with your savings.

Your household earnings must be £80,000 a year or less, and you have to have saved a minimum of 5% of the property’s value to buy a home through shared ownership.

If you’re in London, household earnings must be £90,000 a year or less. You can also qualify if you’re a first-time owner, used to own a home but can’t now, or are a shared owner wishing to move.

Lifetime Individual Savings Account (LISA)

A LISA can be opened by anyone aged between 18 and 39 years, and you can use it to buy your first home provided it costs £450,000 or less.

You must make your first payment into a LISA before you turn 40, and you can put in up to £4,000 annually until you turn 50.

The government will add a 25% bonus on whatever you save with a maximum of £1,000 per year if you save the full £4,000. Additionally, if you’re buying a home with someone else, you can both take advantage of separate LISAs.

Keep in mind that there’s a penalty if you take money out of a LISA and fail to put it towards a home deposit.

Only first-time buyers can use LISAs to buy a home. This means you can’t use LISAs to purchase a home if you own or have owned a home in the UK or anywhere else in the world.

However, you can still use LISAs to save for later life. You also have to ensure you use a traditional repayments mortgage and buy a home you plan to live in or occupy. LISAs are not eligible for buying holiday homes or homes you want to rent out.

Recommended: Learn more about the different types of mortgages and the fees involved in buying a home.

Right To Buy

The Right to Buy scheme is available if you’re a housing association or council house tenant in England or Northern Ireland.

It can help with your mortgage deposit by allowing you to buy the property at a discount or less than its market rate.

To qualify, you must have been a secure tenant for at least three years. The discount you get on the property’s price will depend on the length of your tenancy, the property type, and its market value.

If you live in an eligible house in England, the discount will be between 32% and 60%, depending on your tenancy length. For flats, you can get a discount between 44% and 70%.

The maximum Right to Buy discount you can get in England is £84,200, £112,300 in London, and £24,000 in Northern Ireland. You’ll not have a right to buy if you’re under the threat of eviction, have large debts, are bankrupt, or your home is for the disabled or elderly.

Keep in mind that you have to use the home you want to buy as your new home, and if you sell within five years, you’ll have to repay the total discount or some of it plus a share of the profits.

Right To Acquire

The Right to Acquire scheme is available in England if you’re a housing association tenant who doesn’t qualify for a Right to Buy option. You must have at least three years of tenancy and purchase the property as your main home.

The discounts for the Right to Acquire scheme are usually lower than for the right to buy and typically range between £9,000 and £16,000.

The house must have been built by public funds or taken over from a local council, and your landlord must be a member of a housing association or be on the social housing providers register.

For a more in-depth look into some common types of first time buyer mortgages, check out our following guides:

• Family deposit mortgages. 
• Shared ownership mortgages.
• Gifted deposit mortgages.

Other Schemes

Guarantor Mortgage Schemes

In this scheme, a family member or friend can use their home or money as security or deposit on your behalf. The guarantor has to own their property or have enough equity to satisfy the lender to qualify. Proof that they can cover your payments when you default and good credit is also needed.

Many lenders accept guarantor mortgage arrangements, and some may even allow taking a 100% mortgage with a guarantor. However, it’s better to use some of your savings if you want the best rates.

Bank Schemes

Some lenders and banks offer special mortgages aimed at helping first-time homeowners who are short of funds. Some even allow relatives to leverage their savings to help you buy a home.

You may be required to contribute a minimum of 5% of the property value while your relative provides a 10% deposit.

Remember, each lender will have different requirements on the minimum deposit together with different rates and terms. However, it’s a viable option to consider if you have a friend or relative willing to help contribute towards your mortgage deposit.

Help With a Mortgage Deposit Final Thoughts

The above schemes are intended to help boost your deposit and enable you to get competitive rates and terms from various lenders. A mortgage adviser can help you find the most suitable deal for your situation.

First Time Buyer – Ready to get on the property ladder?

If you’re ready to take the leap, we’re ready to help you with your first time buyer mortgage application.

As a first time buyer, it’s natural to have a lot of questions. Ask away, one of our friendly advisors would love to talk things through with you.

Call us today on 01925 906 210 or complete our quick and easy First Time Buyer Mortgage Application.

Mortgage lenders are continuously adapting to the challenges facing the property market including increased property prices, which have led to the creation of various government schemes to assist home buyers.

Lenders have also acknowledged that in many cases family members provide assistance by helping the younger generation get into the housing ladder and therefore some lenders have different family assisted mortgages to assist this.

Throughout this article, we will explore some of the mortgages available including their criteria and purpose.

What is a family assisted Mortgage?

A mortgage product enabling borrowing for the purpose of purchasing a property with the help of family members.

The mortgage enables the utilisation of family savings to enable the purchase of a house and can be suitable either for first time buyers or existing homeowners looking to move.

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How Much can be Borrowed via a Family Assisted Mortgage?

As with most financial products, the terms offered will depend on many factors including the applicant’s financial background. If there are two applicants, both salaries are included within the calculations.

Related quick help guides:

• How long does a mortgage application take to approve? 
• Mortgage for concessionary purchase.
• Family assisted mortgages explained.
• Different types of mortgages.

What are the Typical Mortgage Lending Rates?

The mortgage interest rates offered will usually depend on the product and applicants’ credit history as well as the market conditions, however, there will also be some differences between lenders and therefore it is always useful to shop around to compare lending rates.

Currently family assisted mortgage rates are typically between 2% and 4%. The rates are generally higher than standard mortgage interest rates as the lenders ultimately are providing 100% loan to property value products that carry more risk.

Differences between Family Assisted Mortgage Terms and Conditions

In addition to differences in interest rates between lenders, terms and conditions can also vary. For example, Halifax have been known to offer a reduced duration of time that family members would need to secure their savings to the mortgage for, down to three years compared with the usual five.

This may be useful in some personal circumstances although the mortgage repayments tend to be higher to ensure that enough provision is being made to cover the savings over the shorter term.

Wondering how much buying a house costs? Read all about the fees involved in buying a home.

Some lenders will only offer assisted mortgages to existing mortgage customers, such as Nationwide. In this case, savings are not required to secure a family mortgage as the equity is used from the family member’s home instead.

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The Post Office currently offer similar family mortgage terms to Nationwide named a ‘family link mortgage’, however, they are slightly stricter in the sense that the helper must be a family member rather than a friend, and also, that the helper’s property must be mortgage-free.

The Post Office does not differ from the five-year minimum term, and also prescribe that the mortgage applicant must earn a minimum of £20,000 salary to be eligible for their family link mortgage product.

Lloyds currently offer a ‘lend a hand mortgage’ product which provides slightly more flexibility than its competitors. They can offer the reduced fixed-term option of locking away savings for three years instead of five, as well as providing an option to the applicant of putting down a 5% deposit in addition.

Also, Lloyds appear very generous with incentives offered to the helper, providing a 10% reward as well as interest payable for securing the savings linked to the mortgage product.

In addition to the terms mentioned above, some lenders may also provide other incentives to encourage applicants to sway towards borrowing with them. The incentives could include cashback or a slight reduction in rates offered depending on the circumstance of the relationship between the parties and the lender or the credit history of the applicant.

Types of First Time Buyer Mortgages

For a more in-depth look into some common types of first time buyer mortgages, check out our following guides:

• Family deposit mortgages. 
• Shared ownership mortgages. 
• Gifted deposit mortgages. 

Family Assisted Mortgages Summary

There are many benefits of family assisted mortgages, including helping younger family members get onto the housing ladder without saving such large deposits that can otherwise be required for standard mortgage applications, however, there are considerations too such as locking away large sums of money for a set period of time.

Obviously, with all these types of mortgages, a lot of trust is required between all parties as either the savings or any additional property secured to the family mortgage are at risk should the loan repayments not be made.

Therefore other options may wish to be considered such as the use of a guarantor for a mortgage application, acting as the security for the lender.

Other traditional methods such as gifting a cash sum towards a deposit can also still be useful however in some circumstances inheritance tax may be applicable.

Each case is unique depending on the individual circumstances and therefore it’s is often worth seeking specialist financial advice before committing to any decision or the financial avenue.

Call us today on 01925 906 210 or contact us. One of our advisors can talk through all of your options with you.

Although there are many challenges faced by first time buyers, there are also more options than ever before to help enable the first steps onto the property ladder from government assistance schemes to an increased range of financial products enabling help from friends and family members in different ways.

Mortgage lenders are continuously adapting to the property market conditions, offering various methods of borrowing finances to purchase a property.

This guide will explore everything in connection with concessionary purchases including the finance options available.

What is Concessionary Purchase?

A concessionary purchase occurs when a property is purchased for less than the market value. Another term used to describe this scenario is below market value or BMV.

Therefore, a concessionary mortgage is a financial product used to purchase a property at less than the market value.

There may be a variety of reasons why a property would be sold at less than the market value, for example;

• Discounts may be offered due to the property transaction due to take place between family members.
• There may be an existing relationship between the vendor and purchaser such as previous landlord or employer and therefore a discount may be offered.

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Benefits of Concessionary Purchasing

Purchasing property from family has a variety of benefits including family providing assistance with financing property, as well inside knowledge of the property history, reducing surprises than can occur with property ownership such as broken boilers or planning permission issues.

Also, this option provides a method of retaining property within the family for sentimental reasons.

How do Concessionary Mortgages Work?

Instead of alternative methods such as a family assisted/guarantor mortgage or cash gifts from relatives to help towards deposits, a concessionary purchase could be undertaken by a parent, for example, offering to sell their property to their child at a reduced rate.
The difference between the market value and the reduced price, therefore, acts as a gifted equity deposit.

Some lenders will be willing to offer mortgages at 100% of the property value however, others will also require a deposit of between 5% and 10% of the property value. Most mortgage terms offered will depend on the mortgage applicants’ credit record as well as other factors such as market conditions and competitiveness between lenders.

Interest rates on concessionary mortgages

Concessionary mortgage interest rates often do not differ from interest rates on standard market-wide mortgages, however alike most financial products, the actual rates offered are usually dependent on the applicants’ credit history.

In addition, the rates offered on a concessionary mortgage can vary due to the following factors:

• The level of discount that the property was purchased for against the market value.
• If an additional deposit is being put down towards the mortgage.
• Affordability factors of the applicants.

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Buying a house from a family member at a discount

Some lenders may require that the property transaction related to a concessionary mortgage is between close family members only such as between parents, grandparents and children. Whilst other lenders may have more relaxed definitions of the family members to include Aunts and Uncles.

There are other factors to consider when reviewing methods of purchasing a property with the help of family members. For example, some lenders will not allow for the parents to live within the property once it is sold, and therefore funding additional property for the parents to reside within then becomes a supplementary concern.

Related quick help guides:

• How long does a mortgage application take to approve? 
• Mortgage for concessionary purchase.
• Family assisted mortgages explained.
• Different types of mortgages.

Should a lender allow parents to remain living within the property that has been sold, often a condition is added to the mortgage that the parents must sign a ‘waiver of rights’ which, if their circumstances change, later on, it may leave them in a vulnerable position?

Therefore, it is strongly advised that all parties seek both independent financial and legal advice before committing to a concessionary property transaction.

Other Considerations in Relation to Concessionary Mortgages

Obviously, with all family-related transactions, a lot of trust is required between all parties concerned. It has been known that later on down the line following concessionary purchase issues have been raised regarding disputes over ownership and rights to the property.

Therefore, it is vital that the legal side of the property transactions are covered entirely, not leaving any doubt of the intent of the transaction.

It is worth noting that stamp duty works in the same way as standard property purchase and therefore this tax may be payable depending on the purchase value and the government rules and tax band levels at the time of purchase.

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Concessionary Mortgages between Landlords and Tenants

After many years of living within a rented property, tenants may wish to purchase it, and in certain circumstances, landlords may be willing to accept such requests.

By transacting between known parties, there can be time and money saved but also reduced the stress involved as both intent and often affordability factors are more known of the purchasers/tenants and therefore property purchase chains are less complicated and less likely to breakdown.

Landlords can save money by not using estate agents, and therefore may be willing to sell the property to the tenants at a reduced rate. There are common conditions that landlords must meet to sell directly to tenants, at a below market value rate such as:

• Discounts usually should not exceed 10% of the property price.
• The tenants may be required to also pay a deposit.
• Tenants must have lived within the property for at least one year.

Wondering how much buying a house costs? Read all about the fees involved in buying a home.

However, some lenders may be more lenient regarding these conditions depending on other factors such as affordability and cash deposit level of the mortgage applicants.

Concessionary transactions between Landlords and Tenants are fairly rare and therefore there are fewer mortgages offered in this way, however, a mortgage advisor would be able to advise on the lenders that are most likely to offer such terms.

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Types of First Time Buyer Mortgages

For a more in-depth look into some common types of first time buyer mortgages, check out our following guides:

• Family deposit mortgages. 
• Shared ownership mortgages. 
• Gifted deposit mortgages. 

Concessionary Purchase Summary

There are many benefits of concessionary purchasing including family members providing financial assistance enabling the purchase of property, however, there are considerations to review such as the legal position of the parents involved as well as where they will live once the transaction is complete.

Each case is individual and therefore its is strongly advised that specialist financial advice is sought during the investigation stage before any decisions are made.

Call us today on 01925 906 210 or contact us. One of our advisors can talk through all of your options with you.

Is a Family Deposit mortgage an option?

So, as a First -time buyer who wants to own their own home, you’ve started house-hunting, but you are struggling to get that all-important deposit together.  What options do you have? One realistic option may be a family deposit mortgage.

That is of course if realistically you have family members who want to help you get that deposit together. Something you may need to check first before you go foot-first into this!

It’s different than a Gifted Deposit because they get the money back and in effect, you are getting a 100% mortgage on the property you are buying.

Not all family members are in the financial position to gift away thousands of pounds but if they do have savings themselves and they are comfortable with saving it with a mortgage lender using an alternative account and way of investment, they could still provide the help that you need on the understanding they get that money back.

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What is a Family Deposit Mortgage?  

The principle of the Family Deposit Mortgage is quite simple, with the assistance of your family member(s), this means you could apply for a mortgage even if you haven’t managed to save any deposit yourself. Therefore, you can still get your all-important foot on the property ladder.

However, the criteria of the scheme differ from lender to lender and it is also worth considering that not all lenders actually offer this type of product.

The helper of the deposit provides their contribution which is held in a savings account with the lender and they earn interest on the money.

This needs to be held for a certain time set out by the lender and after that time period, they get their money back with interest.

With some lenders, the Family Deposit may have to be 10% and with some lenders, their criteria may be 20%.

1 lender may need the money to be held in a savings account for 3 years and another may require it to be held for 5 years.

The mortgage product you have will tend to be fixed for the duration of the time the helper’s money needs to be tied up.  So if it’s 5 years, you would have a 5 year fixed product.

A mortgage application can take some time to be approved, so make sure you are well prepared, which means ensuring you have your credit score meeting the requirements of your lender. Also, it’s a good idea to familiarise yourself with the fees involved when buying a property.

There are different types of mortgages too, some other common types of first-time buyer mortgages include the following:

• Shared ownership mortgages 
• Gifted deposit mortgages 

Things for the person providing the Family Deposit to consider.

The amount of deposit as a % of the property being purchased is set out by the lender and as already mentioned lenders have different requirements.  This money is invested in an account with the lender and interest will be earned at a certain rate.

Again, these rates of interest will differ depending on the lender.  What is really important is the person who is providing this deposit will be investing it for a set period of time and will not be able to withdraw this money before the end of that fixed agreement.

This is usually either 3 or 5 years, depending on the lender.

Very importantly, some lenders have restrictions on the amount of investment being returned or interest earned. i.e. there must not have been any missed mortgage payments for example.

The Person providing the deposit money should seek independent advice once they have the full terms of conditions from the lender regarding their investment.

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Do they have a legal interest in the property?

The property is owned by the borrower.  Only those that are named on the mortgage have any legal right over the property. The person who is assisting with the Family Deposit has no legal interest in the property.

Does the property I am buying affect a Family Deposit Mortgage?

In some scenarios yes it may do.  Some of the lenders offering these types of mortgages, for example, may not lend on new built properties.

Related reading? 

• Repayments on £80,000 mortgage. 
• Interest-only mortgages.
• Zero deposit mortgage.
• The first mortgage explained.
• What stops you getting a mortgage in the UK?

I have a family member that wants to help, what are the next steps?

This is where talking to an independent Mortgage Broker will certainly bring you added value and save you lots of time. We have access to over 90 lenders currently and the products that they offer differ from Lender to Lender.

As I have mentioned earlier on, Family Gifted Deposit mortgages are only offered by a handful of lenders and their criteria are different with each one.

We want to establish what your individual circumstances are, discuss with the person who wants to assist with the Family deposit mortgage how much they are happy to invest and for how long and then we will discuss the best options with you.

It is a regulatory requirement that we get from you all the information we need in order to give you the best advice possible.

This means we will go through your personal details, income, credit commitments, monthly outgoings, check affordability and also consider your overall creditworthiness.

Our expertise will mean we will ensure we place you with the right lender for your individual circumstances.

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What is a Shared Ownership Property?

When searching the property websites, there will be Shared Ownership properties which catch your eye as they are often very reasonably priced compared to similar properties within that area.

Read that property advert in a little more detail and in fact you see in the write-up that the price advertised on the property is for “Shared Ownership” and the sale price will be for a percentage share. Usually between 25% and 75%.

The remaining percentage will be owned by a housing association.  It’s a kind of somewhere in between buying and renting which appeals to some people who want to get on the property ladder.

The property may very well be a new build property where the developer is working in conjunction with a housing association and offering the Shared Ownership properties as a way of affordable housing.  There are also re-sale Shared Ownership properties, in other words, used or 2^nd hand properties.

Who can buy a Shared Ownership Property?

Shared Ownership properties are often attractive to people who may not be able to afford to buy a property in the usual way with a deposit and a mortgage and own the property outright. You will still need a deposit though and I will go through this a little further on.

The Government set out guidelines for local housing associations as to who is eligible to purchase a Shared Ownership property. The current guidelines are as follows.

The Household income is £80,000 or less.  (This is different in London where this figure is £90,000 or less).  In addition to this earnings cap, the following also applies.

You are either a First Time Buyer or a current non home-owner who cannot afford to buy a new home in the standard way.

You are an existing shared owner.

If you are over 55 there is a slightly different scheme called the Older Persons Shared Ownership Scheme.  The difference with this scheme is the maximum percentage you can own of the property is set at 75%.

If you’re wondering how long a mortgage application takes to be approved, the answer is that it depends, you can improve your chances by ensuring you meet your lender’s credit score requirements.

It’s also a good idea to familiarise yourself with the different types of mortgages and the fees involved with buying property.

Types of First Time Buyer Mortgages

For a more in-depth look into some common types of first time buyer mortgages, check out our following guides:

• Family deposit mortgages 
• Gifted deposit mortgages 

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Can I buy a bigger percentage of the property?

Yes, you can! This is known as “Staircasing”. However, you will have needed to have had your Shared Ownership property for a specific amount of time before you can look to buy a further percentage.

This qualifying time period will be set out in the terms of your lease.  If you want to buy an additional share in the property, the share value will be based on the current market value of the property.  Each time you want to buy a bigger share, you are likely to incur the cost of the valuation fee.  Your mortgage requirements are likely to change also so you will need to get advice from your mortgage adviser on this.

Of course, one benefit of buying a bigger share is that your rent will reduce with the housing association.  If you get to the stage where you own 100% of the property, then you will have no rent to pay at all and you will be a fully-fledged homeowner!

Pros and Cons of Shared Ownership?

If you are fed up with renting or the prospect of owning your own home seems a million miles away, then it can help you get on the property ladder. Also, as it is just a share of the property you will own, then your mortgage amount will be much smaller, your deposit amount is likely to also be smaller.

You do have the option to buy the property outright as I mentioned earlier by Staircasing, so as your financial position changes this can be something that is achievable in the future.

Although you do not own 100% of the property, you are responsible for the full maintenance costs of the property, whereas if you rented you are likely to have your landlord to deal with these.  As mentioned earlier the valuation fees incurred should you wish to increase your percentage share can be seen as a downfall.

The staircasing share will depend on the market value of your property at that time, which may mean it is beyond your affordability to buy that extra share.  The rent charged by the housing association can also mean, in addition to your mortgage payment – it could work out less attractive cost-wise as you initially thought.

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How does a Shared Ownership Mortgage work?

You will own a percentage of that property using your deposit and a mortgage to purchase it and you will pay rent to a housing association on the remaining amount.  The percentage share that you own is usually between 25% and 75%.

An example being:

• Property advertised £75,000 which is a 50% shared ownership property. (Full value of the property being £150,000).
• You have 10% deposit to put down (10% of your share price) £7,500
• Your mortgage borrowing amount is £67,500
• You will pay a monthly mortgage amount to your mortgage lender and in addition, you will pay a rent to the housing association.

It is worth noting, the rent can differ greatly on property to property and it is set out by the housing association.  One of the first questions you should ask when considering a Shared Ownership property is the monthly cost of this rent.  Also, as the property is likely to be leasehold you will also need to know how much the ground rent and the cost of any service charges applicable.

How do I look into a Shared Ownership mortgage?

Not all lenders offer Shared Ownership Mortgages, so this is another area where a Mortgage Broker will offer added value and save you lots of time. We will discuss your requirements and very early on in the process discuss your deposit, the percentage share you are looking to obtain a mortgage for and assess your affordability.

To accurately do this and to avoid disappointment further down the line we will need to include accurate costs such as rent, ground rent and any service charges so the more information you can obtain from the housing association the better as it helps us paint the clearest picture to the lender with the aim of getting your mortgage accepted.

These will all be included as monthly commitments and will form part of the affordability check.  There are some lenders that will require a larger deposit than others so this is certainly one key factor that we will look at to ensure we place you with the right lender for your individual circumstances.

Should you have any further questions about a shared ownership mortgage, please get in touch and we will do our best to help.

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