28 February 2023

Supporting first time buyers in new build

By Stu Bryce, Head of Business Development at Chorley Building Society

We all know that deciding to buy a house can feel overwhelming, particularly if it’s for the first time, it may seem even tougher still.

Not only has the Help to Buy scheme come to an end, cost of living and interest rates have increased too, making it even harder to save for a deposit or borrow the desired amount. But it's not all doom and gloom, The Chorley has a wide range of options to help different circumstances and support government schemes too.

Let's start with 'the computer says no' - for many purchasers they simply fail the credit score. So what's the difference between a credit search and a credit score? For many large lenders the applicant is assessed and scored by a computer on various attributes, including credit profiles and if the 'score' isn't high enough the case is declined. Many people don’t fit the mould, whether it is because of a historic life event or, especially first time buyers, through a lack of credit history. The Chorley take a real life view, so whilst they do a credit search, an underwriter will assess it on its own merit, without a score card!

The Bank of Mum and Dad have been providing the deposit for their child’s new home for as long as we can remember and it will come as no surprise that option remains valid.

Affordability to borrow the desired amount could still be restrictive, the option of Joint Borrower Sole Proprietor (JBSP) could be a perfect option to allow parents to help. JBSP allows a parent or both parents to be named on the mortgage to assist affordability and borrowing capacity, without being named on the Deeds.

Unlike so many lenders, Chorley Building Society has no age limits, they'll allow up to 4 applicants on a mortgage and use all 4 incomes to calculate the lending limit. This is great for friends buying together. It is also an increasingly popular option for parents and children buying and living together.

There are also Government and Local Authority schemes to support home ownership.

The Government First Home Scheme is primarily available on new build homes in England, allowing First Time Buyers to buy a home for 30% to 50% less than its market value.

In areas where house prices rise quicker than salaries, there is a fear that local people can't stay in the area they call home. Increasingly, local authorities will approve developers planning applications, with a condition, within the Section 106 Agreement in England or the Section 75 Agreement in Scotland, stipulating that properties must be sold to local people at 20% or 30% below market value. This is known as a Discount Market Sale (DMS)

With both DMS and the First Home Scheme, The Chorley have 95% mortgage products, helping the purchase with a deposit of 5% of the reduced price.

It is important to note that these 95% mortgages are only available for properties allocated under the schemes for qualifying applicants.

When the property is sold in the future, the same rules apply, it must be sold at the reduced value to a qualifying applicants.

There are lots of opportunities and The Chorley is here to help with a common sense approach.

For adviser use only. Please note this content has been supplied by our lender partner and as such, is their responsibility. No party shall have any right of action against Legal & General in relation to the accuracy or completeness of the information in this article.