A helping guide to mortgages for the first time buyers

If you are going to be buying your first home by getting mortgaged then it comes with certain rules and consequences. If you fail to pay mortgage installments on time, you might lose your home.

How you will be qualified as a first time buyer?

If you are going to buy a residential property for the first time whether you are going to be the sole owner or you are buying it in a partnership, you qualify as a first-time homebuyer. There is a catch in this scenario that is if you own or once owned an apartment or house in the UK before then you might qualify for the first time buyer schemes that are designed to help such people.

Helping schemes for first-time homebuyers

  1. First time buyer scheme

This scheme is for first time home buyers and they will be able to get a 30% discount on the market value of the newly built homes. In this scheme, people with a military background and army veterans will get prioritized.

  1. 95% mortgage scheme

People who have only 5% of the total property worth will get 95% mortgaged and buy the property. This scheme is only available for homes above £600,000.

How you can apply for a first-time home buyer mortgage?

Here are a few very simple points that you need to work on and if you fulfill the eligibility criteria of a first-time home buyer mortgage, you can go for it:

  1. Your credit score

You need to check your credit score because the mortgage lender will also check it then approve or disapprove your mortgage application.

  1. Cash deposit

How much you have saved for the deposit of your first home. It would be better to make a large deposit so you don’t have to borrow a large mortgage amount.

  1. Get a mortgage broker advice

If you don’t have much experience because it is your first time home buying mortgage situation then it would be better if a mortgage broker advised you first. 

Deposit for first-time homebuyer mortgage

Deposit for first-time homebuyer mortgage

The bigger the deposit you are able to save for your first home, the less you have to borrow from the bank, which in its self usually results in getting a better interest rate.

If you are going to buy a property worth up to £250,000 and you have saved £25,000 for the deposit then it is 10% of the total amount you are going to pay by yourself. Now you will have to borrow £225,000 to pay for the rest of the property value.

How much do you need to pay for your first home?

There is a range of factors on which your affordability of getting mortgaged depends like the following ones:

  1. Your deposit size for the property
  2. How much money you are going to borrow
  3. Budget for home improvements or not
  4. Proof and Level of income
  5. Credit rating

Are you eligible for a first-time home buyer mortgage?

The mortgage lender will check your details ie how much you earn and whether you will be able to afford the mortgage installments, your credit score, and other loan debts. Depending on your credit history, your level of income, and your debt situation the lender will then calculate how much you can borrow.

As a rule of thumb first time buyer can generally borrow anywhere up to 5 times their net income, do consider any debts may be de be deducted from your income calculations. This will differ from lender to lender.

Best time to apply for your first time home buyer mortgage

If you feel all your finances are in order and you feel you are able to commit to getting onto the property ladder. You can start looking for a property and keep the documents ready for applying for your first time buyer mortgage. You need to get a mortgage in principle as it will give you an idea of how much mortgage you can get. It will also help you with dealing with estate agents It will be like an estimated mortgage offer.

More to Read: The Mortgage Chronicles: First Time Buyer Mortgage Advice

Various types of first time home buyer mortgage

There are various types of mortgage options for first-time homebuyers:

  1. Tracker mortgages

The mortgage rate will go and down as the base rates of the Bank of England fluctuates.

  1. Fixed-rate mortgage

There will be a fixed amount you will have to pay on monthly basis for one-two or five years it depends on your mortgage lender that how much flexibility they offer you when it comes to mortgage installments.

  1. Discounted variable-rate mortgage

This mortgage usually lasts up to five years. You will have to pay a fixed amount of installments, below then the SVR of your mortgage lendebut if the SVR increases the mortgage rate will also increase.

  1. Offset mortgage

You can link your mortgage with your savings account. You don’t have to pay for a higher interest rate if you go for this option. You will just have to pay for the interest debt because the saving account will keep balance the offset mortgage debt.

Stamp-duty in the UK you will have to pay

When you purchase a property in the UK you will have to pay for the stamp duty above a certain value. The amount of stamp duty depends on the worth of the property you are going to buy.

What other costs do you need to save money for while buying your first home?

If you are going to buy your first home then it doesn’t mean you will just have to pay the actual worth of the property. You need to have a budget for the following services as well:

  1. Property searching cost
  2. Property survey
  3. Mortgage arrangement fees
  4. Conveyancing services
  5. Stamp duty
  6. Home insurance

Other schemes for helping first-time homebuyers

schemes for helping first-time homebuyers

A new version of equity home loan has been introduced by the government for the people who have saved 5% of the deposit amount for buying their first home. If the cost of a newly built house is up to £600,000 you will get up to a 20% loan from the government if you live in England. This is also called the help to buy scheme.

You will get up to 40% of the loan amount if you are in London. If you pay the loan in the first five years then it is interest-free but after five years you will get charged 1.5% interest over your amount every year. The interest rate will increase every year with the increase in the inflation rate.

You have another option as a first time buyer that you can get Lifetime ISA in which the government will 35% of your cash deposit for your first home. It only applies to those whose age is between 18-39 and they have been saving money for buying their first home.

You can deposit a maximum £4,000 a year in the account which can be claimed as cash ISA and then you can claim for an annual government bonus of up to £1,000. you can buy this money for buying a property worth up to £450,000.

What options will help you to get your first-time home buyer mortgage?

There are three options for the first-time homebuyers who want to get a mortgage:

  1. Joint mortgage

You can apply for a joint mortgage and all the tenants living with you on the property will pay an equal amount of money every month as the mortgage installment.

  1. Shared ownership mortgage

If you want to buy your first home but with shared ownership then you and the other owner will pay for the mortgage amount equally.

  1. Guarantor mortgage

If you want quite a larger amount as a mortgage then you might need a guarantor who will sign the mortgage contract. If you fail to pay for the mortgage amount or installments on monthly basis then the guarantor will have to answer for it as well other than you.

What next?

If you are now feeling more prepared and want to move to the next step its best you start looking for the right mortgage broker for you, you can use MBD firstrungnow.com to search through hundreds of local mortgage brokers near you and who also specialize in getting the best deals for first time buyer. MBD also has a service where they will find the best-suited broker for you who has already been vetted and fully checked for all the relevant regulations and qualifications as well as reviews from existing clients who praise them and their work.

Just find their quick forms or chat to the team and they will do all the work for you completely Free of cost!