In this day and age of low housing affordability, it is more difficult than ever for first-time-buyers to secure their first home. A shortage of housing stock has lead to a situation in which demand for housing far outweighs supply and this has, in turn, driven prices up and affordability down.
Because of this, many first-time-buyers no longer qualify for standard mortgage products even if they are in full-time, steady employment. Lenders have therefore been forced to invent specialized mortgages that are designed to help people take their first step onto the property ladder.
First-time-buyer mortgages are not a product of their own, but rather comprise a small set of products that are aimed at the first home buyer market. They include shared ownership, guarantor, no-deposit, key worker, and standard mortgage products that are only available to people who do not yet have their own home.
Shared ownership mortgages are fast becoming the most popular vehicle for first-time-buyer to buy their first property with. Shared ownership products allow people to purchase part of a property and rent out the other part, which is owned by the seller – usually a property developer. Over time, the buyer will purchase the remainder of the property from the developer one portion at a time.
A no-deposit mortgage is another product available to some first-time-buyers that is usually targeted towards individuals who have a steady income but who do not have enough savings to pay for a deposit. This type of first-time-buyer mortgage products is normally issued with 100% loan-to-value ratios.
Guarantor mortgages are simply home loan products for which a person signs up as a guarantor over the debt if the mortgagor fails to keep up with their repayments. Anyone who passes a lender’s lending criteria can become a guarantor although they are typically parents of borrowers who are helping their children get a foot on the property ladder.
Key worker mortgages are made available to workers such as nurses and teachers. They are designed to encourage key workers to buy properties close to their places of work.
Exactly which first-time-buyer mortgages are suitable for you will depend on the circumstances under which you are buying the property as well as your personal financial situation. A careful assessment of your personal circumstances may be required by an independent mortgage advisor in order to ensure that you select the right product for your situation.
It should also be noted that the property market is always changing and with affordability continuing to decline lenders are constantly assessing the needs of first-time-buyers. Because the first-time-buyer market is so important to lenders, they are constantly working hard to ensure they bring new and innovative mortgages to the market which can help them get a foot on the property ladder.
This is all the more reason to contact an independent mortgage advisor for an unbiased assessment of your borrowing needs and personal financial situation. Independent mortgage advisors have access to the entire home loan market and should be able to help you select the most appropriate product to suit your needs.
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