First-time buyer mortgages are for you or anyone you are buying with – are purchasing your first residential property.

You cannot take out a ‘First Time Buyer’ Mortgage if you have owned a home or flat in the UK and also abroad.This is the case even if the property you owned was an entire property or a share in one, for example as a joint tenant or under a shared ownership scheme.

Different lenders and different schemes will have a set criteria prior to applying, so make sure to read the small print!

What Are The Latest Schemes Available To First Time Buyers?

  • First Homes Scheme – which offers a 30% discount on the market value of new build homes – but only to eligible first time buyers, with a priority for key workers and army veterans.
  • Mortgage Guarantee Scheme – Become more popular during lockdown when not many lenders would lend at 90% ‘Loan-To-Value’ let alone 95% ‘Loan-To-Value’. The way in which it works is mortgage lenders will lend to any home buyer who may only have a 5% deposit. This is under the 95% mortgage scheme where the government has agrees to underwrite a part of the loan. Eligibility criteria applies. 

How To Get A First Time Buyer Mortgage

  • Buying your first home can be a really exciting yet really daunting at the same time. Make sure to be well prepared prior to your application to make sure things go as smooth as possible for you. And remember this is one of the biggest purchase of your life, if a broker asks for information, you must provide it or you will be wasting yours and the brokers time.Before applying for your first mortgage you will typically need to have ticked of the following list:
    • Talked to a mortgage broker to get an idea of what you can afford. From there, you can work out what sort of property prices range you fit in to – ideally before your house search.
    • Checked your credit file and credit rating with one of the main credit reference agencies. Experian, Equifax and Credit Karma/Trans Union are the most common accepted by lenders.
    • Saved up a deposit. As a minimum most lenders require you to have at least a 5% deposit towards your property purchase, some lenders accept gifted deposit but remember it is non-repayable with most lenders. You may even want to consider ‘concessionary purchase’ if a family member is looking to sell their home to you. If they do so and therefore give you a discount on the home, the ‘discount’ acts as your deposit. Contact us on 01792 416260 if you have further questions on types of deposit.

How To I Know If I Can Get A Mortgage?

When you apply for a mortgage the lender will assess your affordability by looking at your annual salary if employed or usually last 3 years books if self employed as well as any other income you receive. Some specific types of Income are worked out differently but these are rare ‘quirky’ cases. The Immediate thing the lender will look at is ‘Guaranteed’ Income Vs Loan/Debt/Credit agreements. After that they will look at general outgoings, i.e. Energy, Childcare etc.

In most cases lenders allow for commission and overtime, however in how that is calculated will differ from lender to lender. Bonus is also viewed as different from commission with most lenders. In some cases, lenders will even take benefits.

The lender will check your general spending habits, i.e. Betting, overspending etc. If they feel you are spending unresponsibly they may reject you. It is important to manage these things prior to your mortgage application, any questions about this, ask your Mortgage Adviser.

Types Of Mortgages

  • Fixed-rate mortgage – Fixed meaning, repayment and rate will not change for at least 2-5 years depending on the option you choose. After this time you will revert to the ‘Standard Variable Rate’, it is at this point you can talk to your mortgage adviser about your options for the next 2-5 years and longer. In some cases people can fix for as long as 7 years or longer, however the longer the fixed you deal you could be seen as at ‘Fixed rate risk’ under the Financial Conduct Authority advice guidelines. This is because you could miss out on deals that are considerably lower if rates go down while you are tied in to your fixed deal. 
  • Tracker mortgages: This tracks the Bank of England base rate, meaning payments may go up and down when the rate changes.  It is important you factor in the risk of a higher monthly payment in the case of rates going up. The advantage of these Mortgages are that they often have no Early Repayment Charges, meaning if you plan to move or do home improvements sooner rather than later, this type of mortgage can be advantageous.
  • Discounted variable-rate mortgages: a discounted, variable-rate mortgage usually lasts for between two and five years and is fixed at a set percentage below your lender’s SVR. However, if the SVR changes, your mortgage rate will change too.
  • Offset Mortgage: With an offset mortgage you can use a linked savings account to offset against the amount you owe on your mortgage. So instead of earning interest on your savings it means you pay less interest on your mortgage. This is because your savings balance is used to offset the amount you owe in mortgage debt – and you only pay interest on the debt balance.

How Much Deposit Will I Need?

Your deposit is the amount of money you have available to put towards the cost of your first home. Lenders typically like buyers to put down a sizeable mortgage as security. The size of your deposit will help determine how much you need to borrow as a mortgage – the more money you’ve saved the less you’ll need to borrow from the bank.

Your level of deposit – expressed as a percentage of your property value – is important because this represents the level of risk to the bank or building society lending you the money.For example, if your first home purchase has a value of £250,000 and you’ve saved £25,000 to pay towards it in cash – that’s a 10% cash deposit. It means you’ll need to borrow £225,000 in a mortgage from the bank, so the loan to value – or LTV – of the mortgage is 90%.
In contrast, if you’ve saved £50,000 that’s a 20% deposit – so the mortgage (at 80% LTV) you need is less and this represents less risk to the lender.

A bigger deposit will usually also give you access to more competitive mortgage rates. While you can get a mortgage with a 5% deposit, if you can save up more, for example a 10% or even 15% deposit, you’ll usually have more choice of mortgage deals and at lower rates. This could save you a lot of money over the course of your mortgage.

Often family members, such as parents or grandparents, can help with a deposit towards a first home. This can be helpful for first time buyers struggling to get the funds together for their home purchase. But there can be potential legal and tax issues to bear in mind with a \
‘gifted’ depositAs well as a deposit you will also need funds to cover the various fees associated with property purchase, including mortgage fees, property searches, surveys, and conveyancing services. There could also be to pay depending on the purchase price of your first home, and you’ll need to pay for  on your home.

How much can I afford to pay for my first home?

The amount you can afford to pay for your first house or flat will generally depend on a range of factors, such as:

  • The size of your deposit
  • How much you can borrow from a bank or building society
  • Whether you need to budget for making home improvements

You can use our site to find out and to work out how much a mortgage will cost you each month by using our calculators.

Your home may be repossessed if you do not keep up repayments on your mortgage


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