PLEASE NOTE – Applications for Help to Buy were to be submitted by 31st October 2022, and is no longer available to new applicants.
First Time Buyer Series: Deposits, with Co-Host and Senior Broker, Sonya Matharu
And a very warm welcome to this very special and different episode of The Mortgage Mum Podcast, because I have a co-host, welcome to Sonya who is one of our senior brokers in The Mortgage Mum team and also one of our mentors in The Mortgage Mum team so Sonya is here to help us train some of the trainee brokers but make them confident all the while also mortgage brokering. So she’s a great person to have on the podcast.
How much deposit would I need as a first time buyer?
Typically you need a minimum of 5% that’s your start but again that does depend on whether you can afford to have a 95% mortgage. So really getting an idea of what kind of mortgage amount is achievable for you will really help determine what the deposit size that you’re looking at is personal to you. Just because they’re available might not necessarily mean they’re suitable for you, typically just to give you an idea, starting from 5% and it can be anything from that really. So you can have 5%, 10%, 15% anything in between those figures as well; it doesn’t always have to be a multiple of five. That’s a question I get asked a lot, does it have to be either one or the other, or can I go somewhere in the middle, you absolutely can.
Do you need the full deposit in your bank before applying for a mortgage?
Okay so no you don’t really, if your deposit is coming from savings and obviously we will need evidence that there is savings there and that you have built up those funds over a period of time. But you don’t necessarily need the full amount when you’re applying, so say for example, you’ve required a deposit of £20,000 and at the time of application you’ve got £15,000 saved up in your bank account but you’re not planning on exchanging or completing for a few more months, you know, that is plausible that you will have that full £20,000 ready for exchange. So that’s fine, with gifted deposits as well you don’t necessarily need to have received them, you can get a letter and then evidence of the funds from the person that’s gifting you that money and then obviously they will transfer that at the appropriate time, usually nearer towards exchange.
What is a gifted deposit?
So you’ve got your savings then it’s being topped up by a relative or like I said a generous friend. It’s very, very common these days but the key is that it is gifted, they do not expect the money back. Otherwise that would be a loan and could impact things.
What is a Family Springboard mortgage?
In essence, it’s from Barclays and they say that saving for your home isn’t easy so this is the way of people helping. You will own the property, and that’s the bit that’s really key for people. You won’t need a deposit, you can obviously contribute but you don’t need a deposit and the way it works is your family member would put the equivalent of 10% deposit into the bank account and that bank accounts linked to the mortgage, they can’t touch it. That is held in a helpful start account for 5 years and it acts as your deposit it acts as security for the loan. Then after 5 years they get their money back with interest so if they’ve got that money sitting in savings, potentially they’re not investing it they’re not using it then this is a way of them using that money to help you get on the property ladder. The mortgage is competitive, you can borrow it over 35 years and you can pay it over that longer term to make it more affordable for you. The fixed rates are competitive, so it’s a really great way of somebody helping, and nice that people get their money back it’s secure. But obviously it can make such a difference to the person that they’re helping. I love that lenders are doing these things because they understand the struggles of first time buyers and that it is hard to save for a deposit and thinking a bit outside the box ways to help. So there’s lots of different schemes and tools available, it’s just trying to find what suits you.
What is joint borrower/sole proprietor?
In essence joint borrower/sole proprietor is where there’s more of you on the mortgage, there’s more of you on the mortgage than owns the property. So you could go on a mortgage with your mum or your dad but your property will be owned by you. So you will be on the deeds and they are purely on the mortgage to help you with affordability. We see this a lot, not just with first-time buyers but with people that have broken relationships, so people that are going from a joint mortgage and then buying on their own and they might have children, so they might need to really keep the size of their house the same. That can really often help because the parent obviously will help them make that transition into having a property of their own outside of what they had before. So it can be a really good solution for both, but certainly first time buyers as well which is good.
Can you explain more about the recent Help to Buy changes?
Help to Buy has recently changed and it used to be so much easier to get people Help to Buy, but now it’s only for first time buyers.
Now it also depends on where you live, the region that you live and that’s something to bear in mind if you are considering Help to Buy. But Help to Buy is still such a great scheme, I think it’s one that is misunderstood. People tend to think ‘I don’t want that’ but once they actually find out more about it they think it’s not such a bad thing that I think it’s portrayed to be in some cases.
I think some people think if they take help, that that’s not real and they haven’t actually got on the property ladder because some of the government owns 20%. The government are giving you an interest free deposit to top your deposit up to allow you to get a property much bigger than you would have potentially been able to get without it interest free for 5 years. So as long as you work with us to make sure you’re thinking about paying that off and we can work with you to make sure you’ve taken all the steps to do that it’s actually very effective because you’re not paying interest on that bit.
I think that is actually what tends to scare people is they don’t know what to do after, once they’ve got it, it’s like “ok great so I’m on the property ladder, but now I’ve got this loan that I owe the government, so now what” but I think once you start talking to people about it and it is all about the exit. So what happens with that loan that the government has helped you to purchase the property and you know once you’re clear on that, it tends to alleviate that fear of having it because you’ve got a plan and it’s knowing that. I think people are scared when they don’t know what’s going to happen or what to do, So walking you through it and any one that is signing you up for that they should be doing that just as an FYI, if you are speaking to someone about Help to Buy and they haven’t spoken to you about your exit plan or what that would look like bring it up with them because they should be talking you through that, it’s key really.
How important is it to find the right Broker?
We noticed a lot of pressure coming from some types of sales to use a particular broker and that will get you the property and sometimes they even throw in free carpet upgrades etc. But your broker is such an important role in buying property and this isn’t just us doing a little you know ad break in the middle of the episode, whether you use The Mortgage Mum or whether you use whoever please make sure that you trust them, that you trust that they’re going to give you the service that you need because there’s a reason why they say that buying property, getting married and death are the three most stressful things that you can go through.
You think it’s not because it’s exciting going on RightMove and viewing properties, but that desperation you feel once you found the one and you don’t understand what’s going on or what needs to happen next. Which is why we’re doing these podcast episodes by the way, that can create real anxiety and stress and it’s so important to you when you find the one that you get it. So make sure that broker, that when you turn that switch on that they’re going to be right there with you because not everyone is built like that and it’s really important that you feel like you’re going to get that type of service. Don’t feel pressured by any agent to use a particular broker, you are always entitled to use whichever broker you choose.
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So what was your routine, what did you do when you bought your first place?
So my parents helped us with the move, actually Dan’s parents helped as well. Our parents stayed and had a little drink, had some champagne and then they all went and we just sat there thinking “oh my goodness we have done it” and we ordered a take away. I can see it sat at our dining table because it was all set up where it is still now, which is quite funny and had our first meal in the house. Probably not that dissimilar to everyone else’s really.
What is your number one tip for moving day?
You need those easy access essentials don’t you like skincare number one always and then comes your plates, my priority is skincare, but you need your box of easy access essentials as you don’t want to be digging around boxes for things you need immediately.
How money do I need to save before I can buy a place?
We’ve looked at the average house prices in our area is around £200,000 seems sort of on the lower side actually for where we are, but certainly for first-time buyer you would like to think you can get something for £200,000 at the moment. So we worked out and if you look in the show notes there’ll be a full breakdown, but worked out £15,000 pounds will be enough for your deposit. So we’ve based a deposit of being 5% so that is £10,000. Solicitors we’ve estimated at £1,500 to £2,000 pounds, we personally work with a panel so we could get you a quote once we know the details but that’s just a rough figure. Then you’re going to have potential removal fees, Your survey, you are likely going to get a free survey as part of your mortgage but a lot of people, especially if they’re buying a house will want to upgrade the survey and we’re going to do a whole episode on surveys so we’ll go into more detail then, but we’ve estimated that about £500 and then we’ve left a couple of thousand pounds for a contingency. I think that’s important just to have a little bit of money in the bank because, the boiler or things can happen you don’t want them to but you do want to get in the habit of having a rainy day fund from day 1.
How important is mindset and habits in the saving process?
The message that we really want to get across is however small it is just start saving today, make a commitment to yourself even if it’s £1 the mindset shift that happens when you start to save money is a big one and when you start to see that go up however long it takes it’s important to start and set your intention and believe in the impossible because things can happen can’t they, money can turn up from random places when you’ve got your heart set on something.
it doesn’t necessarily matter the amount, it’s all about that habit. I’ve spoken about this before in the past, I am such a believer in that. I think what tends to happen is you think ‘oh I can’t save as much as so and so is saving, so I’m just not going to bother’, but it’s like it doesn’t matter what they’re doing as long as you’re focused on you, and what you want to do and what you’re able to do that’s all that matters. Whatever you’re able to save now that is amazing, save it, do it and watch that fund build up and that will be your incentive to continue. If anything happens with your job or you get a promotion which means a pay rise or something like that you’re already in that mindset of savings so then you’re going to look at things and think ‘oh, actually I can now increase the amount to such and such’ and that’s not going to be an effort or a chore because you’re already in that mindset and then you’re on your way then.
Thank you so much for listening to The Mortgage Mum Podcast and I hope you learned something new today and felt inspired in some way. Here at The Mortgage Mum we really believe in people supporting people so if you’ve enjoyed this episode of The Mortgage Mum Podcast please share and subscribe and rate and review this podcast and let’s keep supporting each other. And of course, if you would like help with your mortgage or your insurance head over to www.themortgagemum.co.uk or contact any one of the team on social media, we would love to help you. Thank you for listening.