How to get on the property ladder: top tips and advice

Getting a foot on the first rung of the property ladder can seem a daunting prospect, but it doesn't have to be, once you’ve checked out our top tips and advice.  

If you’ve been dreaming of the day that you’ll pick up the keys to your first home, how do you make that a reality?

With UK house prices continuing to rise – official figures from the Office for National Statistics based on mortgage completions puts the average house price at a hefty £264,000 – and with demand outstripping supply, owning your own home is far from easy – but it’s not impossible. 

There’s no doubt that buying your first property has become increasingly difficult over recent decades. In 1981, nearly one in three 16-24-year-olds was a homeowner. By 2016, it was one in 10. Meanwhile, the proportion of renters in younger age groups has increased by 14% among 16-24-year-olds since 1996. 

This trend may mean you’ll have to wait a little longer to become a homeowner. Since 2007, the average age of first-time buyer in the UK has increased by six years, with people turning 34 by the time they’ve bought their first property.

However, with planning, research and a little know-how, one day you too can have a home that you own. 

The best place to start is by putting together a plan of action so you can break out of the rental cycle. After all, when you get a mortgage, every payment you make takes you a step closer to owning the property outright – even if the process does take 25 years. 

If you’re a tenant, every rent payment you make is income for your landlord. 

So, if you’re determined to make that leap from renter to homeowner and get on the property ladder, check out these six top tips:  

1. Pay off any outstanding debts 

• Put together a list of all your credit card, store card, overdraft and loan debts and check how much you owe on each and what you’re paying each month. It might be worth considering a consolidation loan to pay off everything you owe. 
• Work out a budget so you know how much you have left each month after paying your essential rent and utility bills and everyday living costs to cover food, petrol etc. What’s left is your ‘available income’. 
• Rein in luxuries such as takeaways on speed dial and pricey nights out, and check your standing orders – are there monthly subscriptions that you’ve forgotten about? Or membership to a gym you never go to? Use your available income to knock your debts into touch. And, once they’re gone, you can start putting the cash away towards your deposit. 

2. Improve your credit score  

• Before you think about applying for a mortgage, get a copy of your credit report (held by credit reference agencies such as Experian or Equifax) so you can see what lenders see when they review your application.  
• If your credit rating needs a boost, there are various ways to improve it, such as closing down credit card accounts which you no longer use, clearing outstanding debts, paying your bills on time and checking you’re on the electoral roll.   

3. Secure your job status  

• If you’ve got a steady job, great – that’s exactly what mortgage lenders are looking for. If not, put all your time an effort into finding secure employment as this really will pay off when you start filling in mortgage applications.  

• Most lenders will want to see that you’ve been with your employer for a reasonable length of time – at least six months before applying – so if you’re thinking of switching jobs, consider hanging on until you’ve got your mortgage in place. 

4. Sort out your deposit 

• When it comes to deposits, it’s a case of the bigger the better. The more cash you can put on the table, the bigger choice of best-rate mortgages you’ll have. 
• If you can’t see a way of raising enough of a deposit on your own, why not consider buying with someone else who’s in the same boat? This could boost your chances of securing a better mortgage deal, particularly if they have a good credit history and earn more than you. However, before you commit, you’ll both need to decide what would happen if one of you wanted to move in the future. 
• If you’re saving hard but it’s taking a long time to reach your goal, perhaps your parents or other family members would be willing to help you get on the property ladder? This is known as a ‘gifted deposit’ and you’ll have to prove the money is a gift and not a loan, with some lenders requiring a ‘gifted deposit letter’ to be completed and signed by the person giving the cash. It’s important to note that, If the person who gives you the money dies within seven years, you’ll have to pay inheritance tax on it. 

5. Research schemes designed to help first-time buyers 

Do some research and find out about all the latest schemes that are available to help first-time buyers such as: 

• 95% mortgages – reintroduced by the government in April 2021, these require a lower deposit of 5% of the property price and are now offered by a range of lenders. The average deposit that a first-time buyer needs for a 95% mortgage in England is £11,087, while the average salary required is £46,800 (according to Quittance Legal Service). However, buyers who earn less will need a bigger deposit to pass the affordability checks.  
• 100% mortgages – if you have no deposit, you’ll find that while 100% mortgages do exist, they’re usually dependent on parents agreeing to keep a percentage of the purchase price in a separate savings account with the mortgage lender. 
• The mortgage guarantee scheme – unveiled in the March 2021 Budget, this scheme aims to help first time buyers (and home movers) who’ve managed to save a 5% deposit but need some additional help to get on to the property ladder. Buyers can purchase a property costing up to £600,000 using their 5% deposit. The government will guarantee the mortgages offered, which means if the property is repossessed or sold for less than the value of the outstanding mortgage, some of the lender’s losses will be covered. The scheme is scheduled to run until December 2022. 

• The help-to-buy equity loan scheme – due to run until 2023, this is a loan from the government that you put towards the cost of buying a newly built home. In England you can borrow from 5% up to 20% of the full purchase price, or up to 40% in London. This means you’ll need a smaller mortgage, which will be more affordable. The scheme has regional caps on prices. In London it can be used to buy a property costing up to £600,000, compared to £186,100 in the north-east to £437,600 in the south-east, for example. The loans are interest-free for the first five years, can be repaid at any time, but must be settled when the home is sold, or the mortgage is paid off. Buyers typically pay a reservation fee of up to £500 and a 5% deposit on exchange of contracts. 
• A Lifetime ISA – If you’re a first-time buyer aged 18 to 39, you could get up to £32,000 from the government by opening a Lifetime ISA (LISA). You can save up to £4,000 a year into a LISA, either as a lump sum or by putting in cash when you can. Then the state will add a 25% bonus on top if you use it towards your first home (or retirement). So, if you save the full £4,000, you'll have £5,000 – and that's before interest or growth. 

6. Get help from the professionals  

If you’re struggling to find the best mortgage for your situation, uncertain about how much you can borrow, don’t have a deposit, or are unsure about your eligibility – something which can be a concern for people aged 40 plus – enlist the services of an experienced mortgage broker. 

Not only can they search for deals that are not available on the open market, but they can also improve your chances of being accepted for a mortgage as they'll know which lenders are best suited to your particular circumstances. 

In fact, if you’re a first-time buyer, then you have the most to gain from mortgage advice, as, not only is the whole process new to you – you’ll need things such as proof of income, or accounts if you’re self-employed – but the application process also tends to be more challenging. 

By helping you prepare for your application, a mortgage adviser can boost your chances of success. This is key because every unsuccessful mortgage application may harm your chances next time around, as each refusal will appear on your credit record. Using a mortgage broker will maximise your chances of being accepted first time. 

Why not get the ball rolling by using our Mortgage Calculator to find out how much you could borrow, how much it might cost a month and what your loan to value ratio would be. For more relevant tips and articles straight to your inbox, sign up to our emails. 

If this article is relevant to you, it might also be helpful for you to know more about financial coaching. What are the key differences between financial coaches and advisers? We can explain.

You might also find our articles on the cheapest and most expensive places to live in London informative, too.