First Time Buyers: If you have a £20,000 salary you could buy a home for £60,000!

publication date: Jul 8, 2011
author/source: Kate Faulkner, Designs on Property and Author of Which? Property Books

Loans for First Time Buyers

First Time Buyers: If you have a £20,000 salary you could buy a home for £60,000!

"There is so much rubbish put out by the media about first time buyer affordability" says Kate Faulkner, Managing Director of independent advice site Designs on Property.

Kate continues "The problem is the media want to sell you papers or get people viewing news headlines or reading articles on the web, so they go for ‘heart stopping' titles such as ‘First Time Buyers need £29,000 deposit to buy a home'." According to Kate this kind of deposit is only an ‘average' figure and may apply to the places where most the ‘national media' live such as London and the home counties, but as soon as you leave the capital, the amount of money first time buyers actually require is alot different.

For example, just 45 minutes away from London by train is Peterborough. Prices in Peterborough for a home within walkable distance to the station start from just £80,000 including this one bed flat in a new development called Fengate.

In other towns and cities across the UK it's perfectly possible to buy a decent one or two bed property for around £60,000. Don't believe me? Then why not take a look at these! Some of the properties may be repossessions up for sale, so you have to be quick to put offers in, but even if you miss out on these, there are likely to be more at the next local auction!

Nottingham:City Centre one bed flat
Manchester:One bed flat near the City Centre
Birmingham:One bed flat in Erdington
Leeds:Stunning studio near the centre
Edinburgh:Shared ownership two bed home
Reading: Shared ownership one bed home (watch the service/ground rent charges though!)
Southend on Sea:Studio flat near the sea!

We spoke to our mortgage expert and broker Andrew Montlake (does lots of interviews for the BBC and has just won the British Mortgage Awards "Press Spokesperson of the Year") and asked him whether there were any reasonable first time buyer mortgages available for someone wanting to buy a property for £60,000.

Quick 30 Second First Time Buyer Mortgage Update June 2011

Q. What sort of salary or joint salary would first time buyers need to purchase a home for £60,000?

Nowadays lenders tend to work on an affordability basis rather than straightforward multiples of income. Therefore, dependent on the lender, your current circumstances, (even the number of children you have has a bearing), and your credit rating, it tends to work out at anything between three and five times your current earnings. In other words, you would need a joint salary of around £20,000 per annum.

Q. What ranges of deposits would first time buyers need (highest to lowest) to buy a home for £60,000?

A. There are very few lenders offering 95% mortgages at the moment and those that are tend to have very tough criteria and the rates are expensive. However, there are an increasing number of competitive 90% loans available, so if you can put down at least a £6,000 deposit that would make an enormous difference. The very best rates are available to those with a whopping 30% or 40% deposit; so if you have £24,000 available you have the pick of the bunch.

Q. How much would the monthly mortgage payments be for a property worth £60,000?

At the high end on a 90% mortgage you would be looking at monthly payments starting from around £309 per month with a two year fixed rate on a repayment basis over 25 years. On one of the very few 95% loan-to-value mortgages through Halifax, you would be paying £367 per month. If you did have a 40% deposit then you could reduce the payments right down to £165 per month on a similar basis.

Q. What could first time buyers do mortgage wise to protect from future interest rate rises?

The only way to really protect against interest rate rises is to look at fixed rates. Everyone agrees that the next interest rate changes will be upwards, but there is a lot of disagreement over when this will occur and by how much.

For many, paying a little bit more now to protect against this could help to protect against many a sleepless night in the future. For me, five year fixed rates look good value as we expect the real rises to come in two to three years from now, but as with any mortgage loan it is imperative you take full independent advice, as what may be good for one person may not be good for you.

Andrew concludes "There is so much more to take into account nowadays apart from the initial rate. Lenders have a bewildering array of fees and conditions that may suit you now, but not in the future. Speaking to a specialist adviser will help to ensure you do not end up counting the cost later."

Talking of which, if you want to speak to Andrew and his team at Coreco, Andrew can be contacted on 020 7220 5100 or via email.


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