First time buyer
mortgages

As a first-time buyer, you may have already looked for information online or have asked friends and family about buying a property. It’s quite a lot to take in and you may wonder where to even start.

You’re trying to find out how much you could borrow, what first-time buyer options you have and how the whole process works.

During our initial chat, we can answer all your questions and guide you through the whole process to make sure your step onto the property ladder be a smooth and stress-free experience.

An important question to ask, not so simple to answer. It will depend on your income, outgoings, credit history, age, dependants, the property you’d like to buy and other factors.

There is no single rule that lenders follow when assessing your first-time buyer mortgage application. In fact, lenders tend to offer different mortgage amounts even when you present them with the same information.

For this reason, a mortgage broker can help you find out exactly how much you could borrow. We have the tools to check your maximum borrowing for Help to Buy, Shared Ownership or even just a “normal” purchase without using any scheme.

As a general rule, the more deposit you have, the better position you are in. Having a large deposit can potentially increase the number of lenders to choose from and could get you a lower interest rate as well.

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 lenders will consider the discount amount as a deposit without you 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 a minimum 5% deposit. This is true when lenders offer 95% mortgages and for schemes like the Help to Buy equity loan scheme or Shared Ownership.

The minimum deposit amount may also depend on the property, for example, several lenders require 15-30% deposit for a new build property or an ex-council flat.

Some lenders would cap your borrowing at 80-85% if you’re a contractor, or at 70-75% if you’re a visa holder.

The short answer: it depends on all parties involved, although we can give you some general guidance.

New build property

The developer usually asks for an exchange of contracts within 28 days after you reserve a property. You then complete the purchase and receive the keys to the property once it is ready to move in.

During those 28 days, the mortgage process and the legal checks have to be completed. However, if there is a genuine delay, the developer normally accepts an extended period.

Non-new build property

Lenders normally take 2 to 3 weeks to issue a mortgage offer, although we’ve seen lenders issue offers 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 complete the purchase.

Jargon buster: “exchange of contracts” is when you pay your deposit and the purchase becomes legally binding, while “completion” is when the lender pays the rest of the purchase price to the seller and in return, they release the keys to you and you can move in.

Being a first time buyer comes with a price tag and 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

This is the payment you make monthly to the lender.

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 of whether you buy a house or a flat. The good news is we can help you find the right insurance as well for free.

Ground rent and service charge

These are only applicable when 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. The housing association or the estate agent will normally specify the amount in the sales particulars, so you can build it into your budget.

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

As the rules around rental income taxation have changed a lot in recent years, you should speak to a tax advisor or an accountant before you pursue a buy to let mortgage.

Yes, although not from every lender and some banks may restrict the mortgage amount or ask you for a larger deposit.

If you don’t have a long credit history, it helps to make sure that your credit file is up to date and does reflect what you have: current account, mobile phone, utility account.

It would also help if you are registered on the electoral roll (voter’s roll), as this can earn you much-needed brownie points with lenders. Some lenders would, in fact, reject you if you are not registered, so we recommend that you check if your registration is up to date before you apply for a first time buyer mortgage.

Yes, although the lender options are limited, as most lenders would like you to be a British or EU citizen or have indefinite leave to remain.

Those lenders who offer first time buyer 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.

Building insurance

If you buy a house, then building insurance will be mandatory to ensure that in case the structure is damaged (e.g. by fire, flood or movement), the insurance will cover at least the mortgage amount.

Nothing else is compulsory, but of course, it makes sense to cover costly unexpected events.

Contents insurance

Contents insurance can pay for replacing your personal belongings if someone burgles your home, there is fire, you accidentally drop your new flat screen TV…and the list goes on.

Life insurance

Life insurance is a one-off payment if you were to die during the mortgage term, so the insurance can settle your mortgage. This would allow your family to stay in the property without worrying about mortgage payments at an already stressful time.

Critical illness cover

Critical illness cover would give you a lump-sum if you had a serious illness like cancer, heart attack or stroke as well as dozens of other conditions. This payment may or may not settle the mortgage, but it can help pay for treatment, let you take time off work while recovering or alter your home, if necessary.

Income protection

Income protection is designed to give you a monthly income for some time in case you can’t work due to an accident or a long term illness. This covers mental health issues as well.

Of course, all the insurances come with terms and conditions, optional features and your medical history can influence your options.

To find the right insurance cover that fits within your budget, speak to our team today. We can compare the whole market, find the most suitable cover and apply on your behalf free of charge.