First Time Buyer Mortgages

Owning your first property is a difficult task, but it can be a relatively smooth ride if planned well. Let us look at some important facts about owning a property for the first time.

How do First-Time Buyer Mortgages Work?

The First-Time Buyer Mortgage Process.

1. Find Out How Much You Can Borrow.

Working out how much you can borrow with your current income and outgoing expenses is the best way to start when looking for first time buyer mortgages. Your borrowing capacity and your deposit will decide the property purchase price. To get a rough idea use our first time buyer calculator.

2. Get Your Mortgage Decision In Principle.

Having a mortgage decision in principle (DIP) puts you on the stronger side when you start property hunting. It is not a confirmation of a mortgage, but it helps you to know how much of a mortgage loan you could have.

The process of getting the decision in principle involves a soft credit search in order to know your income and credit commitments like any loans or credit cards you own. It does not however affect your credit scoring. In the best case the DIP is valid for 90 days.

3. Submit Your Mortgage Application

After you have found your future home you will submit the purchase offer to the seller. Once your purchase offer is accepted you can make a full mortgage application. During the assessment of your application your lender will run full credit check, which leaves a hard footprint on your credit score.

After a successful income and outgoing expenses assessment your lender will do the property survey. Your lender will use all the information available to make a decision on how much of a mortgage they will offer you.

How To Get The Best First-Time Buyer Mortgages ?

1. Check Your Credit Scoring

your credit score is the most important factor while applying for the mortgage. Having a good credit scoring can help you to secure the better rate. But if you have a low credit score it can be fixed before you apply for the mortgage.

2. Deposit

To secure the best mortgage rates your lender will need higher amount of deposit. The more deposit you have the lower is loan to value which reduces the lender risk in lending resulting lenders offer better rates on mortgages.

3. Work With A Mortgage Broker

Having a fee free mortgage broker by your side can help you to secure a better mortgage as a first time buyer. They can work on your affordability and tell you your borrowing limit, all while using their expertise to make your first property purchase a smooth experience, all for with out a broker fess! Mortgage brokers can also compare from the whole market to secure better rates.

How Much In Deposit Do I Need For A First-Time Buyer Mortgage?

Typically, many first-time buyers put a 10% deposit for their first purchase. Many lenders will allow a 5% deposit and a 95% loan to value mortgage. Generally, the more the deposit amount the better the mortgage rates. For example,

As showed, if a property is worth £300,000, your 5% deposit is £15,000. This will have a 95% LTV of £285,000, resulting in high rates. But, having a 10% deposit of £30,000 reduces the mortgage amount to £270,000, which can help to secure a better rate. A 15% deposit of £45,000 will help to secure an even lower rate as the mortgage amount will be reduced to £255,000.

What Are The Latest Schemes For First-Time Buyer Mortgages?

Shared Ownership

Under this scheme you partly own and partly rent from a housing association. Read more about how to get a shared ownership mortgages .
What are the latest Schemes for First time buyer mortgages?

Right To Buy

This scheme is for those who live as council tenants or a housing association’s tenants. Right to buy is also known as right to acquire. Read more about how to get a right to buy mortgage.

First Home Scheme

This scheme is only for new build homes that offer first-time buyers a reduced market price, upto 30-50%. The property will be sold with the same discount if they wish to sell in the future.

Mortgage Guarantee Scheme

This scheme allows a first-time buyer to purchase the property with a 5% deposit. Borrowers will need strong credit history to qualify for this scheme.

Low Deposit Mortgages For First Time Buyers.

Many lenders offer low deposit mortgages to first time buyers. To qualify for a low deposit mortgage you have to meet certain criteria, but most importantly, you must have a good credit score.

What Type Of First-Time Buyers’ Mortgage Is Right For Me?

The perfect mortgage for first time buyers will depend on the personal circumstances of the borrower. The most common type of first-time buyer mortgages can be seen as followed.

Fixed Rate Mortgage.

As the name suggests, fixed rate mortgages are when the interest rate charge is fixed for 2-3 years, or for a longer term. The most common term of a fixed rate mortgage is 2 or 5 years. This mortgage offers stability by charging the fixed amount every month for the term. At the end of the fixed rate mortgage, the client goes on a standard variable rate, known as an SVR.

Standard Variable Rate Mortgages (SVR)

This type of rate is the most expensive one as it follows the bank of England base rate plus the lender’s chosen basic rate. The variable rate does not have any discounts and can be sub categorized as: Tracker rates, Discounted rates, Capped rates and offset rates.

Tracker Rate Mortgage.

This mortgage tracks the Bank of England base rate which means it can go up or down depending on rate changes from bank of England. Trackers are usually set for a fixed percentage, and it can be offered for 2 or 5 years, fixed.

Discounted Rate.

The lender offers a discount on their standard variable rate for a specific period of time which is called a discounted rate mortgage.

Capped Rate Mortgage.

This mortgage tracks the lender’s standard variable rate, but it has a maximum level cap applied to it so the rate won’t increase after a certain level or won’t decrease after a certain level.

Offset Mortgage.

An Offset mortgage is used if you have savings that can be used to reduce the interest charged by the lender. Your savings account and mortgage account should be with the same lender.

How Much Can I Borrow As A First-Time Buyer?

Typically lenders lend from 4.5 times the income to a maximum of 5.5 times the income. this would depend on factors like,

What is your credit score.

Amount of your deposit.

Your income type and any other additional income.

Your monthly commitments like personal loans, credit cards.

After considering all the information provided your lender can confirm the amount you could afford.

What Is The Normal Mortgage Term For First Time Buyers Mortgages?

Most mortgage borrowers choose mortgage terms of 25 years to make monthly mortgage payments manageable. But in recent years higher mortgage rates and higher property prices forced many mortgage borrowers to go for even longer term mortgages. We have seen many first time buyers opting for 35 year mortgage terms to keep the monthly mortgage payments affordable.

For First Time Buyer Mortgages Should I Go Directly To The Bank Or Through A Mortgage Broker?

Working with experience mortgage broker can be a lot quicker than going direct to high street bank. Mortgage application through broker can help to reduce the time significantly as they offer quick appointments unlike banks. With access to whole market your mortgage broker can find the best mortgage deals suitable to you but high street bank do not compare the rates from other lenders. Mortgage broker like MariannaFS offer fee free mortgage advice which saves you time and money on broker fees.

Some FAQs

How To Get An Agreement In Principle?

A mortgage in principle is a preapproval version of your mortgage from the lender. By going direct to your bank, building society you can obtain the Decision in principle, or your mortgage broker can help you to get one.

What Is A Freehold And Leasehold Property?

Freehold property is the type of ownership wherein you own the property and the land it is built on forever. As opposed to a freehold property, a leasehold property involves a freeholder providing the ownership of the property to an individual on a lease. Here, the freeholder is also known as the landlord. The landlord gives their property on a lease for a specific number of years.

Can I Get A First-Time Buyer Mortgage If I Am On A Tier 2 Visa?

Yes you can get a mortgage on a tier 2 visa. Many lenders offer mortgage to foreign national working in on work visa.

What Are The Costs Involved With First Time Buyer Mortgages?

The first-time buyer will have to consider some of following coast in the buying process.

• Mortgage application fees charge by lender.
• Valuation fees charge by some lenders.
• Solicitors cost for legal work on property purchase.
• Stamp duty may be applicable.
• Mortgage broker fees if you are not using No Fee Mortgage Broker.

Do All Mortgage Brokers Charge Fees For First Time Buyer Mortgages?

No not all mortgage broker charge broker fees, many mortgage broker like MariannaFS do not charge broker fees for first time buyer mortgage.

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