Securing a spot on the property ownership ladder is becoming increasingly challenging for individuals looking to buy their first home. However, there are positive signs indicating potential changes in the current scenario.
Although the exact details of the Chancellor’s upcoming Budget announcement on November 26 remain uncertain, it is evident that housing will be a significant focal point with anticipated adjustments.
Yet, the impact of these alterations may be limited for those struggling to accumulate funds for their initial down payment. To aid in this process, below are strategies to help individuals save £5,000 within a year – potentially sufficient for their debut home deposit.
Several mainstream banks are now introducing mortgage options tailored for first-time buyers, offering loan-to-value (LTV) ratios of up to 99%. This means borrowers can access larger sums with a comparably smaller initial deposit.
For instance, the Yorkshire Building Society provides a mortgage requiring a £5,000 deposit for properties valued at up to £500,000. In a joint application, two individuals would only need to save £2,500 each to meet this requirement. Nonetheless, the more funds saved for the deposit and associated moving expenses, the better.
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While high LTV mortgages can facilitate entry for first-time buyers into the housing market, there are associated downsides to be mindful of.
These mortgages could potentially constrain homeowners if property values suddenly decline, leading to a situation known as ‘negative equity.’ In this scenario, the outstanding mortgage exceeds the property’s market worth, leaving the homeowner with a deficit even after selling the property.
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