First time buyer mortgage
Your first time home buyer guide
First time buyer mortgage advice
If you are buying your first home, seeking advice from an independent mortgage advisor to ensure you get the best first time buyer mortgage deal available could be worthwhile. As a whole of market mortgage broker, we have access to thousands of deals from the UK’s leading mortgage lenders, including exclusive deals that cannot be obtained on the High Street.
If you have a history of bad credit and are worried about your chances of being approved for a mortgage, we also have good relationships with a number of specialist mortgage lenders, who could help you to get moving.
When you are ready to apply for your new mortgage, your dedicated case handler will also guide you throughout the process; handling all the necessary paperwork, liaising with your lender, solicitor and estate agent and answering any questions you may have along the way.
We want you to enjoy your experience of buying your first home, so if you are interested in discussing your mortgage options, get in touch and book a free consultation with one of our mortgage experts!
What do you need to buy a house?
To get a first time buyer mortgage, you will generally need a to have saved at least 5% towards the cost of the home you are looking to buy. However, the more you can save, the better your mortgage options will be.
You will also need to have enough money saved to cover the additional costs of buying a home. The exact amount you will need to pay, is dependent on your mortgage lender and the type and value of the property you are buying.
Survey costs: The cost of a home survey starts from £250 for a basic home condition survey to £600 for a full structural survey. A good survey is vital in helping to identify any potential problems and could save you money in the future.
Mortgage fees: Some mortgage lenders will charge a fee for arranging your new mortgage, which can include; a booking fee (£99 – £250), an arrangement fee (£1,000 – £2,000) and a valuation fee (£150 – £1,500 based on the value of your property).
Electronic transfer fee: Typically costs between £40 – £50 and covers the cost of transferring the money you borrow from a mortgage lender to your solicitor.
Mortgage broker fee: If a mortgage advisor arranges your mortgage for you, you will probably have to pay them a fee. The amount is dependent on the broker you use and whether you need to use a specialist mortgage lender.
Legal fees: A solicitor will need to handle all the legal work involved in buying your new home, which will cost between £850 – £1,500.
Stamp Duty Land Tax: This is charged on all UK land and property purchases. As of 8th July 2020 all main home purchases up to £500,000 are exempt from paying stamp duty until 31st March 2021. All purchases over this amount will be taxed as follows; 5% for the portion from £500,001 – £925,000, 10% for the portion from £925,001 – £1.5 million, and 12% for the portion above £1.5 million.
Searches: Your solicitor will need to check that there are no issues that could affect the value of the property you are looking to buy, and your local council can charge between £250 – £300 to perform these searches.
Removal costs: If you need help moving your possessions to your new home, removal firms usually charge between £300 – £600.
How long is the process of buying a house?
On average, it takes approximately six months to move home. However, this varies according to whether you are buying a new or existing property and if the seller is also moving to buy a new home.
To help you get ahead, you should speak to a mortgage broker or your bank to discuss your mortgage options before you begin your home search. They will tell you how much you can afford to borrow for your new home and if there is a suitable mortgage product, they will also secure a mortgage agreement in principle to help you make an offer on your new home.
- First time buyer government schemes
- Family mortgage
Help to Buy ISAs
If you are a first time buyer and save for your deposit in a Help to Buy ISA, the government will top up any contributions you make by 25%. The maximum amount you will receive from the government is £3,000 and your savings can be used to purchase a property up to £250,000 or less (£450,000 if it is in London).
Help to Buy ISA accounts closed to new savers on 30th November 2019. However, a Lifetime ISA can also be used by first time buyers to purchase a home in the UK up to the value of £450,000. You can save up to £4,000 a year and the government will top up any contributions you make by 25%.
If you have a Help to Buy ISA and a Lifetime ISA, you will only be able to use the government bonus from one of these accounts to purchase your new home.
Help to Buy equity loan
The Help to Buy equity loan enables first time buyers and existing homeowners to borrow 20% (40% if you are buying a home in London) of the cost of a new home. The loan is interest free for the first five years and will enable you to buy a home with just a 5% deposit and 75% mortgage. An equity loan can only be used for a newly built property and the purchase price cannot exceed £600,000.
Share to buy mortgage
Under the shared ownership scheme, you can buy a share of a home and pay rent on the remaining part. You can purchase between 25% and 75% of the property’s value and buy additional shares when you can afford to.
To qualify, you must be either a first time buyer or a previous homeowner struggling to get back onto the property ladder. Your household income must also be £80,000 or less per year or £90,000 a year if you live in London.
Right to buy
The right to buy scheme enables council tenants to buy their home for less than its market rate. You must have lived in your council property for at least three years, and if you sell it within five years of purchasing it, you will need to pay either all or part of the discount your received back, plus a share of the profit you make.
Right to acquire
The right to acquire scheme enables housing association tenants who do not qualify for the right to buy scheme, to purchase their home at a discounted price. To qualify, you must have been a tenant for three years and cannot have any large debts or be at threat of bankruptcy or eviction.
If you are struggling to get a mortgage on your own, there are a variety of ways your family or friends can also help you to get moving.
A gifted deposit is a sum of cash received from a family member or friend to fund either part or all the money for your deposit. The money must be a gift with no obligation to repay it later, as it will effectively be viewed as a loan. You will also need a clear paper trail of where you have obtained the funds from, as your solicitor and lender will need to prove that it has come from a legitimate source to satisfy anti-money laundering regulations.
A guarantor mortgage enables a parent or close family friend to take on some of the risk of your mortgage by acting as a guarantor. They will usually have to use their home or savings as security against the loan and must agree to cover any mortgage payments you may miss. However, if you keep up your repayments, there are mortgage products which will enable them to get their savings back with interest after an agreed number of years.