You might be ready to buy your first home sooner than you think, but if you need a leg up onto the UK property ladder there are lots of ways you can find help. Our guide explains how to find out if you can afford the property you want.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
You could boost your chances of buying a home sooner by getting your finances in order. Before you apply for a mortgage you need to:
Clarify your income, this may take time if you’re self-employed
A mortgage is a loan that pays for a percentage of your home. With first time buyers, this loan usually only pays for part of the property. The ratio between the amount advanced by the lender (the mortgage) and the house’s purchase price is known as the loan to value (LTV). You have to pay for the remaining percentage of the house with your deposit.
For example, if you bought a house for £150,000 and got a mortgage with an LTV of 90%, the lender would put £135,000 towards the purchase and you would add in a 10% deposit – that is, £15,000. So how much you can borrow depends on how much of a deposit you can scrape together and the LTV that the mortgage lender is willing to offer you.
The first challenge in buying a house, therefore, is finding the deposit. This is not as impossible as it sounds and you may be able to find help. Most of the time, you need to save up for your deposit. Sometimes you may be lucky, however, and get some of the money from your family, either as a gift or through inheritance.
Our how to save for a mortgage deposit, offers more help on this subject, including revealing the type of help available.
Our how to get a mortgage with no deposit can help if you are unable to save but are still keen to buy a house in the UK.
To work out how much you can afford, you need to take stock of your financial situation and how much you earn.
This can affect:
How much you can afford to put towards a mortgage payment each month without stretching your budget too far
Whether lenders think you can afford a mortgage, and therefore if they will offer you one. It also dictates how much they will let you borrow
You can use our calculator to work out how much lenders may let you borrow based on your income.
Here is how to check your income and what you spend each month so you can find out how much it costs to buy a home.
Now you know the basics of how mortgages work and what you can afford, it’s time to check if this is enough to buy the house you want.
You can look at individual properties on sites like Zoopla to get an idea of property prices.
You can also use a tool like Zoopla's house prices calculator to check the average cost of properties in your local area or where you would like to live. Try looking at other areas to see if homes are more affordable elsewhere.
If you buy a home that costs £300,000 or more, you have to pay a tax known as stamp duty.
First time buyers do not pay stamp duty on properties that cost less than £300,000. First time buyers also pay a discounted rate on properties costing up to £500,000.
If you’re buying a property in Scotland, you will pay Land and Buildings Transaction Tax (LBTT), while in Wales you pay Land Transaction Tax (LTT).
Your credit report is an electronic record of your financial history. Lenders will check this to help them decide if they should accept your mortgage application.
If your credit report shows you have too much debt or have missed payments in the past, it could put off many lenders, but you may still be able to get a “bad credit mortgage”.
However, it would be better to improve your credit record over a few months before applying as it will increase your chances of being accepted for a normal mortgage. This will give you more choice and could prove far cheaper.
Your income helps lenders decide if they can offer you a mortgage and how much they will lend you.
To increase your chances of being accepted:
Make sure you include everything you earn, including your basic salary, bonuses, commission and income from investments
Keep documents that prove what you earn, like bank statements and payslips
Stay in the same job for a while because this makes your finances look stable
If you are self-employed, here is how to improve your chances of getting accepted.
Understanding how home loans work can help you choose the right mortgage deal, which could potentially save you thousands.
You do not need to be an expert, however. You can quickly learn everything you need to know for free using our guides.
Here are the types of mortgage you can get and how to work out which is right for you.
Start looking into the process of buying a house so you know what you need to do once you find a property that you like. Here is everything you need to know about buying a home.
It’s easy to think “I will never afford to buy a house” but by saving a little and getting help from family and friends it is still possible to buy your first home.
There are several ways your family could help you get on the property ladder, including:
Giving you money towards a deposit
Lending you money
Taking out a joint mortgage with you
Releasing equity from their home to help you with a deposit
Here are all the ways your parents could help you buy a home.
You could also consider a guarantor mortgage, which needs somebody else to be named on the mortgage as your guarantor, meaning that they agree to make any payments you miss.
There are several schemes that can help you get on the property ladder, including:
If you buy a home with another person you may be more likely to get accepted. Getting a joint mortgage could help you:
Save a larger deposit between you
Afford a higher monthly mortgage payment
Be offered a mortgage for a more expensive property
Here is everything you need to know about joint mortgages and buying a home with someone else. You could also buy a home with friends to help you get on the property ladder. Here are the pros and cons of buying with friends.