PARENTS are handing over billions of pounds to get their children on to the property ladder, but if you can’t call on family for cash, there are other ways to get help.
Gifts and loans to first-time buyers from the ‘Bank of Mum & Dad’ totalled a whopping £9.4billion in 2023, and a total of £30billion is expected to be paid out over the next three years, according to research by estate agent Savills.
In total, 164,000 first-time buyers had family assistance to buying their home in 2023, accounting for 57% of all mortgaged first-time buyers – the highest proportion of first-time buyers receiving help since 2012.
The average amount received from parents is £5,731, according to the stats.
Frances McDonald, director of residential research at estate agent Savills, said: “While many homebuyers enjoyed record low interest rates during the early part of the decade, more stringent mortgage requirements which have been in place since the start of the pandemic have impacted higher loan-to-value lending, which is most commonly used by first-time buyers.”
However, not everyone has parents who can spare thousands of pounds to put towards a deposit for their grown children.
If that’s your situation, don’t despair – there are plenty of other ways to get a helping hand on to the property ladder.
If you live in England, you could use the First Homes scheme to buy a property with up to 50% discounted from its market price.
To use the scheme you must be a first-time buyer and be aged 18 or older.
You must earn less than £80,000 a year before tax or £90,000 if the property is in London.
The discount stays with the property, so is available to any future buyer too.
The homes are usually offered on a small number of properties within new developments, so look for local builders advertising the scheme and apply through them.
Anyone struggling to save a deposit needed to buy a home could benefit from a Shared Ownership scheme.
Instead of buying the whole property, you instead buy a portion from as little 10% and pay rent to a landlord on the rest.
Only buying a share of the home means the deposit and mortgage payments are much smaller.
However, you will need to able to afford rent on top of the mortgage repayments.
You can then start to increase your stake in the property by buying a greater share of the home when you are able to until you own it outright. This process known as staircasing.
You can also resell your share of the property if you want to move.
Availability of shared ownership homes vary depending on area and you may have to show you have a job or links in the location where you want to buy.
Housing associations are a good place to start searching for shared ownership properties.
You can use the scheme in England if your household earns £80,000 a year or less when you’re buying outside of London, or £90,000 a year or less when you’re buying in London. There are different rules for the scheme in Scotland and Wales.
Buyers who save a small deposit of 5% can use the government’s mortgage guarantee scheme to get a 95% loan to value (LTV) mortgage.
Under the scheme, the government covers some of a lender’s losses if a borrower defaults on the loan and the property is repossessed. The backing was designed to give banks more confidence to offer loans to those with small deposits.
First-time buyers can use the scheme as well as home movers – but the property you want to buy must be below £600,000.
The scheme was designed to boost the availability of low deposit mortgages and is running until 30 June 2025.
The mortgage market is now more competitive for buyers with a small 5% deposit than when the scheme first launched.
In fact, you’ll likely find that if you can save a deposit of 5% you will be able to find a mortgage without the help of the The Mortgage Guarantee scheme.
If you can pull together £5,000 for a deposit, you could qualify for Yorkshire Build Society’s specialised mortgage for first-time buyers.
Borrowers can get a mortgage on properties up to £500,00 with the deal.
The mortgage is not available for new-build properties or flats and applicants will have to pass credit scoring and affordability checks.
An independent mortgage broker can help you apply for the deal and also compare other mortgages available on the market to you.
If you rent a home and have a good track record of paying the bill each month, you could qualify for a specialised deal from Skipton Building Society – and you don’t need to save a deposit at all.
The Track Record 100% mortgage from the lender is available to renters buying their first property.
The amount you can borrow is capped as your monthly repayment can’t be more than you currently pay in rent.
As well as first-time buyers, renters who owned a property more than three years ago can also apply for the deal.
You need to show a strong track record of paying your rent on time and in full.
An independent mortgage adviser can help you apply for the deal and compare it to others on the market.
Even if your family doesn’t have cash to loan or gift you for a deposit, they can help you in other ways.
Joint Borrower, Sole Proprietor mortgages take into account the income of another person to boost affordability. The additional applicant is liable for the mortgage, but they do not own the home.
Getting family help requires a large degree of trust and it is a good idea to work out a plan of what would happen if the buyer is struggling to repay the mortgage as all parties will be liable.
A mortgage broker can help you to find lenders offering these deals to buyers in your circumstances.
If you want to buy a new-build property with a small deposit, the Deposit Unlocked scheme could help.
Buyers can own a brand new home with a deposit of 5% using the scheme.
Several big builders are signed up, including Barratt and Redrow, while partner lenders include Nationwide and Accord.
It is available on new-build properties up to the price of £833,250 but you will need to pass mortgage affordability tests.
You will first need to find a participating developer and a property you want to buy before proceeding.
Find the full list of developers at deposit-unlock.co.uk.
IF you're looking for a traditional type of mortgage, getting the best rates depends entirely on what's available at any given time.
There are several ways to land the best deal.
Usually the larger the deposit you have the lower the rate you can get.
If you’re remortgaging and your loan-to-value ratio (LTV) has changed, you’ll get access to better rates than before.
Your LTV will go down if your outstanding mortgage is lower and/or your home’s value is higher.
A change to your credit score or a better salary could also help you access better rates.
And if you’re nearing the end of a fixed deal soon it’s worth looking for new deals now.
You can lock in current deals sometimes up to six months before your current deal ends.
Leaving a fixed deal early will usually come with an early exit fee, so you want to avoid this extra cost.
But depending on the cost and how much you could save by switching versus sticking, it could be worth paying to leave the deal – but compare the costs first.
To find the best deal use a mortgage comparison tool to see what’s available.
You can also go to a mortgage broker who can compare a much larger range of deals for you.
Some will charge an extra fee but there are plenty who give advice for free and get paid only on commission from the lender.
You’ll also need to factor in fees for the mortgage, though some have no fees at all.
You can add the fee – sometimes more than £1,000 – to the cost of the mortgage, but be aware that means you’ll pay interest on it and so will cost more in the long term.
You can use a mortgage calculator to see how much you could borrow.
Remember you’ll have to pass the lender’s strict eligibility criteria too, which will include affordability checks and looking at your credit file.
You may also need to provide documents such as utility bills, proof of benefits, your last three month’s payslips, passports and bank statements.
