First time buyer mortgages

If you are looking to buy your first property then there are numerous options available with a variety of different lenders. You will want to know what is the best route forward for you. Have a look to see what is on offer and how it works.

Get started

Buying a property is almost certainly the biggest purchase you will ever make. As a first time purchaser, buying a property can seem very daunting and complicated, but that needn't be the case. Using an experienced mortgage advisor will help you get answers to all of those questions. We are often asked things like how much can I borrow, how much of a deposit do I need, how much a month will it cost, how best to put an offer in on a property, or how do I find a solicitor along with many other questions.

Knowing the answers to these questions will help you make the right decisions and will minimise the risks involved and finding the best deal could save you a considerable amount. We will run through the house buying process, and explain how to get a mortgage and also avoid some of the common pitfalls.

Getting started

The first thing anyone needing a first timer buyer mortgage should do is to speak to a mortgage advisor who has access to the whole of the market. They will be able to advise you on what is going to be available to you and will be able to compare lenders rates and criteria to get you the best deal possible. It will give you the opportunity to get answers to any questions you may have.

Are there specific deals available for first time buyers?

There are specific schemes aimed at first time buyers which may need a smaller deposit, or have lower fees, but you will also have access to the majority of other mortgages.

How much of a deposit do I need?

Generally the more deposit you are able to put in the cheaper the interest rate you will have access to. A number of years ago there were several lenders that would look to lend without you needing a deposit, but they were removed and as a rule a deposit of at least 5% has been required.

There has recently been a 100% mortgage launch for those first time buyers who are renting, so if someone has 12 months track record of renting it is possible that you could purchase a property without needing a deposit. There are terms and conditions applicable and the rate of interest may be higher than other deals where a deposit is used.

There are other specific occasions where no deposit may be required, for example:

  • Right to Buy – If you are buying the property you rent from a Council or Housing Association tenant at a discount. The discount will be counted as the deposit by many lenders
  • Shared Ownership – This is a scheme whereby you buy only a portion of a property, and rent the remaining part. There are only certain properties which are available to buy on this basis
  • Using family members as guarantors – If a member of your family owns their own property,with or without a mortgage, and they are happy to help out, then they can use the equity in their property to guarantee the deposit
  • Buying the property you currently rent at a discount – If your landlord is prepared to sell you the property at below it’s market value, then that figure can be used as the deposit by some lenders
  • Buying a property from a family member at a discount – If a member of your family is prepared to sell you a property at below it's market value, then that figure can be used as the deposit by some lenders

How long should I take the mortgage over?

Traditionally mortgages were taken over a 25 year period, but changes in property prices has resulted in the terms being extended to fit a purchasor's individual affordability. Many lenders are happy to lend over a 35 or even 40 year term.

What type of mortgage should I take?

The main types of mortgage rate are Fixed, Discount, Variable and Tracker. Which type of rate you go for depends on your situation, and your mortgage advisor will look at your circumstances and recommend the best for you.

Fixed rates

A fixed rate mortgage is one where the rate of interest charged for is fixed for a period of time at a rate set at the beginning of the deal. The benefit of this is that in periods where interest rates are rising your payment will not change and helps with budgeting. The downside is that if rates drop you may be paying more than you need to. The period of time you have your rate fixed for can be from as little as 1 year, with the most popular being 2 years and 5 years.

Discounted rates

A discount rate mortgage is one where the interest charged is a variable rate and is linked to the lenders variable mortgage interest rate, but is a set amount below this for a period of time. The benefit of this is where lenders variable rates are reducing, you will see your payments reduce, but you need to bear in mind that they will increase if rates increase.

Variable rates

A variable rate mortgage is where you are charged the lenders variable rate, which could increase or decrease. You might consider this if you are looking to pay the mortgage off quickly as it may have no penalties to do so.

Tracker rates

A tracker rate mortgage is where the interest charged is a variable rate but the rate is a certain percentage above the Bank of England base rate. So if Bank of England rate changes by 1%, so will yours. There is often a discount of this tracker rate for a period of time.

What fees are associated with buying a property?

Valuation fee

When buying a property you want to know that the property is worth what you are paying for it, and if any repairs are needed, you can then make a decision on whether you want to proceed with the purchase and whether you want to reassess your offer to take into account any repairs needed.

Traditionally, lenders have instructed a surveyor to undertake a basic valuation, but this is now often replaced by a desktop valuation where information is gathered online on the likely value of the property. Whilst this may be acceptable to the lender, it does mean that nobody has been into the property to see and assess any particular issues. Both of these scenarios could leave you owning a property, which you may wish you had never bought, for example, structural issues or damp problems would not have been brought to your attention and you will have little chance of recovering any costs from anyone.

With some mortgages this valuation may cost you £200-£300, however in some instances it is provided free of charge. A more in depth survey is a Homebuyer or Level 2 Survey, this will cost from around £450 and will go into far more detail. This type of survey is suitable for most conventional or standard properties. For larger, more unusual properties or those in a state of disrepair there is a Full Structural or Level 3 Survey.

We would always recommend that first time buyers go for more than the basic valuation, it will help identify problems and can aid you in negotiating a lower price for the property.

Lender Arrangement fee

Some mortgages have arrangement fees and others don't. In many instances, these fees can be added to the advance, but it will mean that you are paying interest on a larger debt.

Whether it is worth paying a fee for a mortgage depends on the interest rates, the size of the mortgage and the size of the fee. Your mortgage advisor will be able to compare the deals and calculate which is the most economic route for you.

Broker fee

Your mortgage advisor may charge you a fee to undertake the research, make a recommendation and submit an application. Make sure you know what this figure is before committing to proceed.

Legal fees

You will need a solicitor or conveyancer to deal with the legal work involved in your purchase. If you would like a quote for this then please ask, as we have arrangements with a number of solicitors.

Stamp Duty

This is a tax paid when you purchase a property. Eligible first time buyers won't pay Stamp Duty on residential property purchases up to the value of £425,000. On purchases over this and up to £625,000 the tax is 5% of the amount over£425,000. Over £625,000 then normal Stamp Duty rates apply.

FAQs

How much deposit do I need?

Mortgages are generally available with only a 5% deposit, although increasing this to 10% or more will bring greater choices and generally lower rates of interest.

How much can I borrow?

All lenders have complex affordability calculators which take into account not just your income, but also among other things the number of people living in the property, the cost of any credit commitments and the length of time the mortgage is over.

There are many different calculators, meaning the amount a lender will consider lending will vary from one lender to another. Often these tend to work out around 4.5 to 4.75 times income, although there are some that will consider up to 6 times income.

Can I get a first time buyer mortgage if I have bad credit?

This is far more complicated to answer, but it is still possible that there will be a mortgage available to you. Which lenders will consider lending will depend on what is registered and when it was registered. There are lenders that will ignore adverse information if it is registered a while ago.

This is where the value of an expert mortgage advisor will really come to the fore. We would always recommend, if you have any adverse information registered, that you obtain a copy of your credit report. We've teamed up with Checkmyfile to give you 30 days access to your multi-agency report. Click here to get started.

How much Stamp Duty (SDLT) will I pay?

As long as one of the purchasors has not bought a property previously, then you will be eligible for a lower Stamp Duty Land Tax, this is calculated on the following basis:

  • Stamp Duty is exempt up to £425,000
  • 5% Stamp Duty payable on the portion between £425,001 and £625,000
  • If the purchase price is greater than £625,000, then you will be subject to the standard SDLT rates. The calculation is zero on the first £250,000, the next £650,000 is charged at 5%, 10% on the next £575,000, and 12% on any portion above that.

Can I get a buy to let mortgage as a first time buyer?

There are schemes and lenders that will consider lending to allow someone to buy a property and rent it out even if you are living with family or renting a property.

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In 2022 we celebrated 30 years of providing first-class whole of market mortgage advice to clients across the UK surpassing £2 billion pounds of client borrowing with the UK's most respected banks, building societies and specialist mortgage lenders.

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Premier Mortgage Services is an Appointed Representative of Stonebridge Mortgage Solutions Ltd which is authorised and regulated by the Financial Conduct Authority.

There may be a fee for arranging your mortgage and the precise amount will depend on your circumstances. Our initial consultations are free, always.

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

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