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Where do I start as a first time buyer?

  • Buying a property can be a daunting prospect for a first time buyer.
  • This guide will make navigating the buying process easier.
  • Our advisers are a call away to find out exactly what your options are.
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First time buyer

Buying your first home

Buying your home can be both an exciting and challenging time for a first time buyer. With so many things to consider, like “How much can I borrow?”, “How big a deposit will I need?”, going through the details can seem endless. With this in mind, we have put together an intuitive guide that will help you on your journey to home ownership.

Furthermore, our expert advisers are only a call away to answer any questions you have about the buying process and secure the best mortgage deal based on your circumstances.

Basics First time buyer schemes Homeowner costs Special circumstances

How much can I borrow?

This is one of the most important questions to ask when you are a first time buyer. The answer, however, will depend on your individual circumstances. Income, outgoings, credit history, age, dependants, the chosen property and other factors will all play a role.

Lenders tend to offer different mortgage amounts even when presented with the same information.

For this reason, a mortgage broker is best placed to give the answer to “How much can I borrow?”. This is especially true when you are a first time buyer, as you have potentially more options than a home mover.

At BlueWing Financials, we have access to all mortgage lenders’ suitability criteria. We will walk you through the whole application process, narrow down the lender options based on your circumstances and calculate the exact amount you can borrow.

In the meantime, you can start by getting an indicative figure of your potential borrowing by using our “How much can I borrow?” calculator.

How much will my mortgage cost?

There are 4 factors that determine your monthly mortgage payment. The mortgage amount, the interest rate, the mortgage term and whether the mortgage is on repayment or interest only basis.

Mortgage amount

Every lender has its own way to calculate the potential maximum mortgage amount, but as a rough guide, you can normally borrow max 4 to 5 times of your income. Please refer to our “How much can I borrow?” calculator for an indicative figure or contact one of our advisers for a more definitive answer.

Mortgage interest rate

This is the interest rate you pay on the mortgage loan. This rate will depend on the lender, the loan to value (LTV), the property scheme, whether it is a residential or buy-to-let mortgage, whether it is a 2, 3 or 5 year fixed rate deal and other factors.

Mortgage term

The minimum term is 3 to 7 years dependent on the lender, while the maximum is 35 to 40 years. The shorter the mortgage term, the higher the monthly payment, but you also pay less interest and vice versa, the longer the term, the lower the monthly payment, but you pay more interest overall. It is important to consider what monthly payments you feel comfortable with, how old you are and what your plans are in order to choose a suitable mortgage term.

Payment method

You can take out a mortgage on repayment or interest only basis. The repayment method ensures that you repay the mortgage amount in full by the end of the mortgage term, so you become mortgage free. With the interest only method, you only pay interest on the mortgage amount. The latter option, however, is not commonly accepted for a residential purchase, and when a lender does offer this option, various terms and conditions are attached to it.

Try our mortgage payment calculator. It is a great tool to estimate how much your monthly mortgage payments would be in different scenarios.

First time buyer schemes explained

If you are looking to buy your first home, then it may surprise you how big a financial commitment it is. There are various costs attached to your first-time property purchase, including the deposit, the valuation and solicitor fees and stamp duty land tax, to name a few. To ease the pain, the government, housing associations, and in some cases private developers have put in place various first time buyer schemes.

As a first time buyer, you may get confused with so many different property schemes on the market. The short summaries below may act as a guide, but you’ll find detailed information on the dedicated pages when you click through.

How Much Can I Borrow?
How much can I borrow?
Mortgage Payment Calculator
Mortgage payment calculator
Stamp Duty Calculator
Stamp duty calculator
Buy To Let Mortgage Calculator
Buy to Let mortgage calculator
Offset Mortgage Calculator
Offset mortgage calculator
Mortgage Overpayment Calculator
Mortgage overpayment calculator

How much deposit will I need?

As a general rule, the more deposit you have, the better position you are in. This is because you would potentially have more lenders to choose from and could get a lower interest rate.

However, in some cases, you don’t need any cash deposit at all.

For example, if you buy from a family member at a discounted purchase price, then the discount can be considered as a deposit without putting any of your own cash into the purchase. Another example is the Right to Buy scheme, where some lenders just accept the scheme purchase discount as a deposit.

In other cases, you would typically need minimum 5% deposit. This is true when lenders offer 95% mortgages and for schemes like the Help to Buy equity loan scheme and other Shared Equity schemes offered by developers.

Having said the above, the minimum deposit amount may also depend on the property, for example, several lenders would require 15-30% deposit for a new build property. Some lenders would cap your borrowing at 80-85% if you’re a contractor, or at 70-75% if you’re a visa holder.

Help To Buy

Help to Buy

There are different versions for England, Wales, Scotland and separately for London. However, they are all available both for first time buyers and home movers. All Help to Buy schemes accept a minimum deposit of 5%, provide a government loan and can be used on selected new build homes.

The Help to Buy ISA option offers a government bonus. This is paid based on the saved amount to increase your deposit by up to £3000 when you buy an eligible home as a first time buyer.

Shared Ownership

Shared Ownership

This scheme may be used to buy a new build or an older property. You could buy as little as 25% with the option to buy further shares up to 100% of the property. This progression is called “staircasing”. You may take a mortgage for the portion you buy and pay rent for the remaining part to the selling housing association.

When you sell the property, it will be in co-operation with the housing association and you’ll get part of the sale price in line with your share.

Shared Equity

Shared Equity

This scheme is designed to help those buying a new build home when, typically, the developer gives a loan to go towards your deposit. This loan would be a percentage of the purchase price and you’d repay it at a pre-agreed time in the future or when you sell the property.

Nowadays the most well-known example of this scheme is the Help to Buy scheme. In this case, it is the government giving the equity loan, not the developer.

Right To Buy

Right to Buy

Eligible council tenants can buy their rented home at a discounted price. The size of the discount will depend on the location of the property, the number of years you have been a tenant for and whether the property is a house or a flat.

The only caveat is that if you wanted to sell the property within 5 years of buying it, a portion of the discount received would have to be repaid.

Rent To Buy

Rent to Buy

With less rent to pay under this scheme, first time buyers can save up more easily for a deposit to buy their first home. You sign an agreement specifying a schedule for saving towards a deposit and it may also give you the option to buy your rented home.

If you can’t save up enough or decide not to exercise your option to buy, you can just leave and move elsewhere at the end of the agreed term.

Starter Homes

Starter Homes

First time buyers can purchase a newly built home below market value by using this scheme. The scheme has only just started in 2017, so its availability is currently limited. Once it is rolled out nationally, it should help more people who can’t afford escalating property prices in their area.

However, there is a restriction to be aware of. You will have to sell below market value to another eligible first time buyer if you decide to sell within the first 5 years of ownership.

What are the costs once I move in?

If you have been renting a flat or a house and now move into your own, you will be familiar with most of the expected costs. However, if you have been living with your family or in a house-share, it might come as a surprise how the various costs can add up.

To help you budget, we have put together a list of the typical costs that come with owning your home.

Mortgage

Try our monthly mortgage payment calculator or give us a call to understand your options and the likely monthly mortgage payments.

Household bills

As a first time buyer, you may find it useful to check the expected running costs for your dream home. Household bills include council tax, gas, electricity, water, landline + broadband, TV licence and perhaps satellite TV.

Insurance

Building insurance is compulsory when you buy a house, while contents insurance is optional. Contents insurance, however, can keep your belongings insured in case of a fire, flood, burglary or even accidental damage regardless whether you buy a house or a flat. For further information, visit our insurance pages or give us a call so we can arrange the appropriate insurance policies for you.

Ground rent and service charge

These are only applicable in case you buy a flat. While the ground rent is normally a relatively small sum, the service charge is often around £100-£200 per month.

Repairs and maintenance

There will be wear and tear, which will have to be tended to, even if you buy a new build home, which comes with a 10-year warranty and will likely require little maintenance. When buying an older property, you may wish to consider the costs of repairing/maintaining the roof, windows, replacing old fixtures and fittings, annually servicing the boiler and similar cost items. The price tag will depend on the property, but some cost will be inevitable from time to time.

Interest

If you are using a Shared Equity scheme, like the Help to Buy scheme, then remember to check what interest you’ll have to pay in relation to the equity loan.

Rent

This cost is applicable if you are buying your home using the Shared Ownership scheme. Under this scheme, you will have to pay some rent to the housing association in relation to the share you don’t buy. This amount is normally given in the sales particulars, so you can build it into your budget.

Can I buy a buy-to-let property, if I’m a first time buyer?

Yes, although only from a handful of lenders. You’ll have to be able to show that you could afford the mortgage on a residential basis and that the property is really for investment purposes.

As the rules around buy-to-let mortgages and taxation have changed a lot in recent years, it is important that you do your research before you buy.

Can I get a mortgage, if I don’t have a long credit history?

Yes, although not from every lender and some banks may restrict the mortgage amount or loan to value. If you don’t have a long credit history, it helps if you make sure that your credit file does reflect what you have: current account, mobile phone, utility account. In addition, register on the electoral roll (voter’s roll), as this can earn you much-needed brownie points with lenders.

Can I buy a property, if I’m a visa holder?

Yes, although the lender options are limited, as most lenders would like you to have residency permit / indefinite leave to remain granted. Those who offer mortgages to visa holders often require a minimum residency time in the UK, minimum time left on the visa or set a maximum loan to value limit.

How long does the process take?

Well, it depends on all parties involved, although we can give you some generic guidance.

New build property

  • The developer usually asks for an exchange of contracts within 28 days after you reserved a property and then completion takes place once the property is officially ready.
  •  During those 28 days, the mortgage process and the legal checks have to be completed. However, if there is a genuine delay for a few days, the developer normally accepts an extended period.

Non-new build property

  • It normally takes 2 to 3 weeks to get a mortgage offer, although we’ve seen offers issued after a few days as well as after a few months.
  • The legal process normally takes 2 to 3 months. However, if the seller is also buying a property and thus there is a chain, it can take several months before everyone in the chain is ready to exchange contracts and then to complete.
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