I wrote last month about the encouraging increase in first time buyers in the UK housing market. There was more heartening news recently when research from a report in February by the Bank of Scotland revealed that in terms of monthly costs it is cheaper to buy than rent.
The report goes on to say that first time buyers save an average of between £590 and £2,190 a year compared to renters, depending on the area they live in.
The big question remains; how to become a first time buyer and get to that vital first rung of the ladder?
In my opinion, the first step is simple enough. You need to save. As a bare minimum you will need to provide a cash deposit of 5% of the purchase price as well as legal fees. The amount you can borrow is also crucial. As a rule of thumb you will be able to borrow four times your annual salary, so if you earn £30,000 that means you could expect a mortgage of £120,000.
The government’s ISA schemes have proved invaluable help with savings for first time buyers. The help-to-buy cash ISA offers a 25% government bonus after you have saved a minimum of £1,600.
There is also a Lifetime Isa which allows you to save up to £4,000 a year on which you earn a government bonus of 25%. I don’t claim to be an expert in financial fields and would recommend you speak to an independent financial advisor to get the latest advice.
One final tip is to make sure your financial credit rating is in good shape as it will be looked at closely by your mortgage provider. A couple of well-managed credit cards will also be a great help and steer clear of those payday loans if at all possible.
