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The Mortgage Minefield: Six Ways to Buy a Property

7th March 2016

Buying a property, whether you’re looking for your first home or moving up the ladder, has become a mine field of options in recent years! There are now many different ways you can get support with buying a property, some options are suitable for first time buyers and others are for people who already own a home.

There’s lots to take into consideration when finding out which scheme is best suited for you, so to help you decide here’s an overview of the different schemes, what they include and who is eligible.

Help to buy: ISA

If you’re saving to buy your first home, you can open a Help to Buy: ISA account. If you save your money into one of these accounts, the Government will boost your savings by 25%.  You can save a maximum of £200 every month and the Government will give you a bonus of £50 on top of that. The maximum you can save in a Help to Buy ISA is £12,000, meaning you get an extra £3,000 from the Government and would have £15,000 in total to put towards your first home. You must have saved at least £1,600 into your ISA before you can claim your bonus and when you buy your first home, your solicitor or conveyancer will apply for your Government bonus. There are various factors that determine whether you’re able to have a Help to Buy: ISA, including your age, the location of the property, and more. To find out if you’re eligible for a Help to Buy: ISA, see here.

Help to Buy: Equity Loans

When taking out a Help to Buy: Equity Loan, the Government will lend you up to 20% (40% on London properties) of the total cost of your home. This means, if you’re outside of London, you will only need a 5% cash deposit and a 75% mortgage to make up the rest of the cost. Through an Equity Loan, you will only be charged loan fees after the first five years of owning your home. For example, if you want to buy a home with the total cost of £200,000 through the use of an Equity Loan, you will have to put down a cash deposit of £10,000 (5%). The Government will then give you a loan of up to £40,000 (20%) and you will have to pay off the remainder with a mortgage of £150,000 (75%). To find out if you’re eligible for a Help to Buy: Equity Loan, please visit Helptobuy.gov.

Help to Buy: Mortgage Guarantee

The Government’s Help to Buy: Mortgage Guarantee scheme works in a very similar to way to any other mortgage, the main difference being that under this scheme the Government will offer lenders (such as Barclays and NatWest) the option to purchase a guarantee on mortgage loans. Due to this support, the lenders can offer you higher-loan-to-value mortgages of up to 95%. Not everyone is able to qualify for a mortgage that’s supported by this scheme, to find out whether you’re eligible visit Helptobuy.gov.

Shared Ownership

Shared ownership is designed for people who aren’t able to afford a mortgage on 100% of a home. This gives you the opportunity to buy a percentage of your home, from 25% to 75% of the home’s value, and then pay rent on the remainder of the share. After this, you’re able to buy bigger shares as and when you can afford to. In order to buy a home through a Shared Ownership scheme, you must be a first time buyer (or previously owned a home but can’t afford to buy one now) and you must not have a household income of over £60,000 a year (in London, this limit is £71,000 a year for a 1 to 2 bedroom property and £85,000 a year for a 3+ bedroom property). You will have to take out a mortgage to pay for your share of the home’s value, or alternatively fund it through your savings. For more information on Shared Ownership, please see here.

Right to Buy Property

If you are renting a council or housing association home, and have been a tenant for at least five years, you may be able to buy your home at a substantial discount of up to £77,900 (£103,900 in London) through the Government’s Right to Buy scheme. There are various factors that determine whether you’re eligible to buy your council or housing association home and how much of a discount you’re entitled to. Find out whether you qualify for the Right to Buy scheme with this online quiz.

Buy to Let Mortgage

Buy to Let mortgages are catered towards people who are planning to buy a property in order to rent it out. If you are considering buying a property to let, a Buy to Let mortgage is definitely something to think about. You won’t be able to take out a residential loan, but many banks and building societies offer Buy to Let mortgages, specifically for landlords. In many ways, these mortgages are similar to normal home loans, although there are some important differences. For example, the interest rate is usually higher, but you will have to put down a larger deposit (Normally a minimum of 25%). On many of the best deals, a 40% deposit is required. In order to qualify for a Buy to Let mortgage, there is usually a minimum age (25 years old) and a minimum income (around £25,000). For more information on Buy to Let mortgages, please see here.

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