How to Buy a New Home When You Don't Have a Lot of Cash

Information on mortgage options, help-to-buy schemes, and other financing options
Finding the right financing option is crucial when purchasing a new build property. Further we'll explore various mortgage options, help-to-buy schemes, and other financing alternatives that can help you secure your dream home.
Mortgage Options
Mortgages are the most common way to finance a property purchase. When it comes to new build properties, there are various types of mortgages available to suit different needs and financial situations. Some popular options include:

  • Fixed-rate mortgages: These mortgages offer a fixed interest rate for a set period, typically between 2 and 10 years. Fixed-rate mortgages provide predictability and allow you to plan your finances with certainty during the fixed-rate term.
  • Variable-rate mortgages: With variable-rate mortgages, the interest rate can fluctuate according to market conditions. These mortgages can be attractive when interest rates are low, but they may become more expensive if rates increase.
  • Interest-only mortgages: For these mortgages, you only pay the interest on the loan each month, with the principal amount due at the end of the mortgage term. While this can result in lower monthly payments, it's essential to have a plan in place to repay the outstanding balance at the end of the term.
  • Offset mortgages: Offset mortgages link your mortgage to your savings account, allowing you to offset the amount you owe on your mortgage with your savings. This can reduce the amount of interest you pay and help you pay off your mortgage faster.
Help-to-Buy Schemes
The UK government offers several help-to-buy schemes aimed at assisting first-time buyers and those with limited budgets in purchasing a new build property. These schemes include:

  • Help to Buy: This scheme provides an interest-free equity loan of up to 20% (40% in London) of the property's value. You'll need to provide a 5% deposit, and the remaining 75% (55% in London) will be covered by a mortgage.
  • Shared Ownership: With shared ownership, you purchase a share of a property (usually between 25% and 75%) and pay rent on the remaining share. Over time, you can increase your ownership share by purchasing additional shares.
  • Lifetime ISA: A Lifetime ISA is a government-backed savings account designed to help first-time buyers save for a deposit on a property. The government contributes a 25% bonus on top of the amount you save, up to a maximum bonus of £1,000 per year.
Other Financing Options
Besides traditional mortgages and government schemes, there are other financing options to consider when purchasing a new build property. Some examples include:

  • Guarantor mortgages: A family member or friend acts as a guarantor for your mortgage, which can help you secure a mortgage if you have a small deposit or limited credit history.
  • Bank of Mum and Dad: Many first-time buyers rely on financial support from their parents to help with the deposit or mortgage payments.
  • Developer incentives: Some developers offer incentives, such as cashback or discounted purchase prices, to attract buyers to their new build properties.
To sum up
When it comes to financing your new home, it's essential to explore all available options and choose the one that best suits your financial situation and long-term goals. Consult with a financial advisor or mortgage broker to ensure you make an informed decision and secure the best possible deal for your property purchase.

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