One lender has unveiled a green mortgage, which offers reduced rates for first-time buyers who are investing into homes with high energy efficiency ratings, meaning that saving the ice caps has never been more attractive to young adults.
While these mortgages are currently limited to a selection of properties built by specific developers, they could be the answer to a solution which answers the struggles of both first-time buyers and those who are conscious that the planet could do with a rest.
It’s an interesting trend, and one which is bound to grow as we become more and more environmentally conscious, it’s likely that some lenders, especially building societies and banks who are looking to increase their environmentally-friendly credentials, will become more popular.
However, as commendable as that is, it doesn’t overcome the main issue facing first-time buyers; building a deposit.
So, how can you maximise your efforts to build your deposit and secure your first home?
Lifetime ISAs (Individual Savings Accounts)
These accounts are available for anyone aged 18 to 39 and have an annual deposit limit of £4,000. At the end of each tax year, a government bonus equal to 25% of the previous years’ deposits is added. That means that each year, you can save £5,000, £1,000 of which is free money.
Whilst you cannot open a Lifetime ISA after your 40th birthday, you can continue to pay into one until you are 49, and you will continue to receive bonuses each year until this age.
The money saved into a Lifetime ISA can be used to put a deposit on your first home or kept in the account until the age of 60 and used as retirement income. Withdrawing the money for any other use will attract a 25% penalty, which will eat into your original deposit, as well as removing your bonuses.
The bank of mum and dad
If they have the means, then asking your family for help to put a deposit on your first home will take a lot of the pressure off you. Make sure that all parties are clear on the terms here, though. This means knowing whether the money is a gift or a loan, and how it will be used and repaid, if applicable.
You may want to get these details in writing to protect both you and the family members lending or gifting the money.
Low-deposit mortgages
Some providers offer 100% mortgages, which require no deposit, or 95% mortgages, which only need a 5% deposit. These are usually approved with a caveat of a sum of money held in an inaccessible account as security.
Whether you use your own money for this or ask a family member for help will depend on your circumstances.
Help to Buy
Help to Buy is a government scheme which breaks a first-time buyer’s mortgage into three parts:
- A 20% loan
- A 5% deposit
- A 75% mortgage
This makes saving for a deposit easier, as you will require less capital in the first place. However, you will also have a mortgage and government loan to repay, so it is wise to carry out some calculations to see whether this will be affordable in the long run.
Taking financial advice
Talking to a financial planner will help you to see your situation from a different perspective. This can help you to make better and more confident financial decisions, which will enable you to maintain a more financially stable lifestyle.
A financial planner will be able to offer suggestions and advice to plan how you will buy your first home, as well as taking care of your financial plan beyond this.
To get started, contact us on 0800 612 8099 or request a call back by clicking here.