First Time Buyer Mortgages
Our useful guide on everything you need to know about first time buyer mortgages if you’re eager to buy your first home. We look at:
- How to begin looking for a mortgage
- How to get a decision in principle
- How to find out about council tax brackets, surveys, and mortgage types
- Different rates discussed
- See how much you could potentially borrow and how much a mortgage will cost
… and much more.
Buying a new house for the first time was daunting to say the least however, clever mortgages were very helpful and supportive. They explained clearly the process and kept me updated at every stage. I would certainly recommend using them to help secure a mortgage.
Table of Contents
Our Clever Mortgages advisers can help guide you in the right direction with a first time buyer mortgage
Buying your first property is an exciting step – and a big one too. If you’re feeling overwhelmed by it all, that’s also completely normal. There’s so much to think about and decide. That’s why our advisers can help demystify the process by explaining everything and answering your questions.
We’ve created this handy guide to first time buyer mortgages and the process involved.
How much can you borrow for a first-time buyer mortgage?
This depends on several factors, including:
- Your income
- Your credit rating
- How much you spend each month
- Whether you have a deposit and if so, how much
Lenders want to be certain you can afford a mortgage, so they’ll look at how much you earn, how much you spend, and consider the added cost of running a home. This helps them work out how much you could potentially afford for a monthly mortgage repayment.
The lender you borrowed from will secure the mortgage against the property you buy, until you have repaid it in full (plus interest).
How much could you borrow?
Wondering how much you could potentially borrow and how much a mortgage might cost you?*
Use our free interactive mortgage form to tell you.
Our mortgage advisors will then speak to you in more detail for a free, no obligation mortgage quote.
How much deposit do you need for a first time buyer mortgage?
With a first time buyer mortgage, or any mortgage for that matter, the basic rule of thumb is to put down as much as you can toward the purchase price. Deposits are viewed as a percentage of the property value. The smallest deposit you can expect to find is just 5% of the value, although this is likely to create only a small pool of lenders willing to lend 95% of the purchase price.
The loan to value (LTV) should be as low as possible for you to access the most competitive mortgages. For example, if you can supply 15% of the purchase price as a deposit, lenders will view you as a lower risk candidate for a mortgage. You could think of it as you sharing the risk with the lender, you are putting down your own money and the lender the rest.
How can your credit score affect your chances of getting a mortgage?
Your credit score can be crucial when taking out your first time buyer mortgage. It shows lenders whether in the past, you’ve been able to maintain full payments on time.
As you haven’t previously taken out a mortgage, lenders look at other forms of credit you may have had, such as:
- Car finance
- Personal loans
- Credit cards
- Phone contracts
Repaying any form of credit on time will help boost your credit score. This can make it easier to get approval for a mortgage, especially when you’ve never had one before.
If you’ve not had any loans or credit cards before, you may have a low credit score as there hasn’t been any debts to assess your payment history. We can look at low credit score mortgages for you.
If you have a history of bad credit, you may wish to consider looking at bad credit mortgage options. Our advisers can guide you on that topic and suggest lenders who focus on people with bad credit scores.
How long do first time buyer mortgages run for?
Mortgages traditionally run for 25 years, although they can be longer (some up to 40 years) or shorter depending on your situation. However, few first-time buyers stay on the same mortgage deal for the life of the mortgage. It is common to switch deals or even lenders partway through – and sometimes a homeowner will do this more than once.
Mortgage rates explained
Mortgage types explained: 6 mortgage types you may come across
The mortgage market can be confusing, especially for first-time buyers who have never bought a property before and haven’t ever considered getting a mortgage. Here are six main types of mortgages that you’ll find on the market today.
Your mortgage adviser will help you by making a recommendation on the most appropriate product and expiry period, based on your needs, preferences and requirements.
A fixed rate mortgage means the interest rate given will stay the same over a fixed period. The length of the fixed rate is set by the lender. Your repayments stay the same each month, regardless of what happens to other mortgage rates.
These mortgages are popular with first-time buyers and people looking to budget with confidence each month. They can also work well for those with a poor credit history.
The downside is that if mortgage rates go down, you could end up paying a higher amount than you would on a variable rate mortgage. Conversely, if rates increase, you could have the advantage of paying less than you would on a variable rate deal.
Be aware that some lenders will penalise you with an ERC (Early Repayment Charge) if you decide to exit the deal before the end of the agreed fixed term. Always assess the possible savings you might make from switching and look at the penalties that you could incur, to see if a cheaper deal still makes sense.
Every lender has their own standard variable rate (SVR). This is their basic mortgage rate. This can go up and down, usually in line with the Bank of England’s rate changes. However, the lender is free to raise or lower this at any time, as its their lending rate.
This means your monthly payments can go up or down, depending on the interest rate at any given time. Some months may see you pay more while you might end up paying less at other times.
A discount mortgage gives you a reduction on the lender’s standard variable rate for a specific time, usually two to three years. Discount mortgages are attractive as they can allow you to make lower repayments. However, as the SVR can still fluctuate, they’re not ideal for people who want to stick to a strict long-term budget.
This is like a variable rate mortgage except that it tracks a pre-agreed interest rate instead of the lender’s SVR. Tracker mortgages are typically linked with the Bank of England’s interest rate, plus a few per cent on top.
This mortgage is linked to your savings and current accounts. The value of your savings is offset against the value of your mortgage. This means you’ll only pay interest on the ‘net’ mortgage balance.
For example, you might have a mortgage worth £200,000 and £50,000 in savings. An offset mortgage would see you paying interest on £150,000 rather than £200,000.
If you don’t keep up with your mortgage payments, your lender has the right to repossess your home to sell it and get their money back. Its therefore important to ensure you have the most affordable mortgage for your circumstances on the right product.
Where to start
How to begin looking for a first-time buyer mortgage
It’s a good idea to think about the type of mortgage that you want first. You can then look for that specific type rather than searching more generally.
Our advisers can help search the market for a competitive mortgage, based on your personal details, background, and affordability status. They have extensive experience of the marketplace, enabling them to assess the best lenders and mortgages for people in your situation.
DIP / AIP
How can you get a decision in principle?
It’s best to get a decision or agreement in principle on a mortgage before you begin looking at properties. Having this agreement can help put you ahead of other potential buyers who may not have one, thereby making you more attractive to someone looking to sell their property.
This also gives you an indication of your maximum borrowing amount, which added to your deposit, tells you the property prices you can look at. There’s nothing worse than finding a dream home to realise you can’t afford to buy it.
You can apply online, and a lender will look at certain aspects of your financial history to see whether they may, in principle, lend you a certain sum for a mortgage. They’ll look at your credit score and history and ask you to supply some other basic financial and personal information to be able to consider you.
This is not official confirmation of a mortgage offer, as the lender does not go into depth when assessing your financial situation. This only occurs when you formally apply for a mortgage.
Most lenders place a limit on how long the decision in principle is valid for, with most opting for around 60 to 90 days. It is possible you could have it extended if required, although this is again down to the lender.
How to find out which council tax bracket a property is in
One of the biggest bills you’ll pay as the owner of any property is Council Tax. This can vary from one area to another and depends on the individual property size as well.
It’s easy to find out which bracket a property is in. Visit the official gov.uk website or search for ‘how to find out Council Tax band’ online or click here. You must know a portion of the post code to be able to find the answer. Postcodes are split into two sections – the first with two, three, or four letters and numbers and the second with three. You must have the entire first part of the postcode and the first digit of the second part.
When looking for properties online, you will usually have the road or street address and the first part of the postcode. You can then look that up on Google to find the additional digit(s) you need. You can also use the Royal Mail postcode finder.
Make an offer
How to make an offer on a property
You can make an offer in writing, which can include email, but make sure the estate agent will recognise an offer made this way. Some agents will also take offers made by phone, but make sure they are clear on the amount offered in this case, so there are no misunderstandings.
Making an offer in writing has the advantage of being more formal and clearer to understand. This is also a good opportunity to list other pointers that may make you a more attractive prospect to sell to. For instance, as a first-time buyer, you won’t be waiting on someone to buy your current property, so there’s no chain your end to worry about.
How to organise surveys and conveyancing
When you’ve made an offer on a property and it has been accepted, as part of the mortgage application, the lender will arrange for a basic property valuation for mortgage purposes to be carried out, you may have to pay for this. This tells the lender what they want to know, to ensure it’s a suitable property to lend on.
You may want to arrange your own, more in depth property valuation, the two most popular types are the Homebuyers Report and the more in-depth full structural survey, otherwise known as a Building Survey.
You can ask for quotes from qualified surveyors and choose one who is a member of RICS (Royal Institution of Chartered Surveyors). The sooner you get the survey done, the faster you can move through the buying process. The surveyor should give you an idea of when they’ll complete the survey and report back to you.
Conveyancing covers all the legal aspects of home buying. You’ll need to find a conveyancer or conveyancing solicitor to handle all this on your behalf. They’ll take care of searches on the property you intend to buy, and let you know of everything they come back with. They’ll also handle contract paperwork, so they cover all legal aspects of a move from start to finish.
What to do next
Speak to a broker
See what you could borrow
Why choose Clever Mortgages?
We can offer you the support and in-depth advice you need to help you get the right mortgage for your first home. We have a comprehensive range of trusted mortgage lenders to rely on, so we can help you choose the right lender to match your circumstances.
Call today on 0800 197 0504 to discuss how we can help you get the right first-time buyer mortgage to make home ownership a reality. Our fully qualified/experienced advisers will treat you with integrity and offer you only those products that meet your needs.
First time buyer mortgages
Whilst buying your first property is an exciting time, it can also be quite daunting. As a first time buyer there are many available options and you may feel overwhelmed with the choices and requirements. Advisers at Clever Mortgages will talk you through these and ensure everything is clearly explained throughout. Getting a mortgage approved is the first step to getting onto the property ladder and it’s important to get the right mortgage to suit your current and ongoing needs.
What you can borrow for a first time buyer mortgage
Your first time buyer mortgage options will depend on a number of factors including; your income, your credit rating, your average monthly spend and whether or not you have a deposit to put down.
As a first time buyer you can expect a lot of questions around what you can and can’t afford to borrow.
Lenders will take a look at your income, spending and the added expenditure of running a home to see what you can potentially put towards a mortgage each month.
In this section, advice on
- First time mortgages
- Credit Score
- Fixed v Variable mortgage
- How much can you borrow based on salary
- Apply for a mortgage
Your credit score is particularly important when it comes to taking out your first mortgage as it indicates to lenders whether you can be trusted to borrow money based on what you have borrowed in the past.
As you won’t have previously taken out a mortgage, lenders will base this decision on other credit you might have taken out including; car finance, personal loans and phone contracts.
If you do have a history of bad credit, then you might want to consider looking at bad credit mortgage options.
Guide to first time buyer mortgages
Mortgages typically run for 25 years but can be made longer or shorter depending on your situation. The loan is paid back monthly with interest added, so the more you have to put down as a deposit the better as it will reduce your monthly payments.
Interest rates also vary, especially if you are a first time buyer, so it’s crucial you get the right deal for you.
The lender you are borrowing from will secure the mortgage against the value of your property until you’ve paid it off. This means that if you fail to keep up with payments, your lender has the right to repossess your home in order to sell and get their money back.
Fixed rate vs variable rate mortgages
Although there are many types of mortgages, they broadly fall into two categories; fixed rate and variable rate.
A fixed rate mortgage is exactly how it sounds; you pay the same fixed amount back to your lender each month without needing to worry about changes in interest rates.
You can usually fix your mortgage for 2-5 years, but some lenders will penalise you with an ERC (Early Repayment Charge) if you decide to get out of the deal before the end of the agreed fixed term.
So it’s a good idea to consider how long you’d like to be in a mortgage for before agreeing to anything. First time buyers typically opt for a fixed mortgage as they allow you to budget and consider what you can afford to spend each month.
Variable rate mortgages can either be tracker mortgages or standard variable mortgages. Tracker mortgages follow another rate, for example the Bank of England Base Rate, which means your mortgage repayments could increase or decrease in line with any changes to the tracked rate.
Discounts can be agreed and included on the trackers by decreasing a percentage off the tracker rate to make your repayments lower for a set period of time.
Standard variable rate mortgages follow the same principles as a tracker mortgage but the rate is decided by the mortgage lender, rather than the Bank of England.
Using the income mortgage calculator below you can find out your estimated monthly repayments to enable you to buy your first home with Clever Mortgages.
Why Clever Mortgages?
At Clever Mortgages we can offer you the support and advice required to ensure you get the right mortgage for your first home. We have a panel of trusted mortgage lenders and will help you choose the right provider for your circumstances. We are also authorised and regulated by the Financial Conduct Authority (FCA) and adhere to the Treating Customers Fairly (TCF) guidelines, so you can be confident that we will treat you with integrity and only offer you products that meet your needs.
Mortgage types explained
A fixed rate mortgage is where your interest rate stays the same for a set time period (usually between 2-10 years). As a result your repayments are exactly the same each month, regardless of what happens to other mortgage rates. These types of mortgages are popular with first time buyers and people looking to budget each month, especially those who have suffered from a poor credit history.
The main downside to a fixed rate mortgage is that if mortgage rates go down you can be paying a higher amount than you would on a variable rate mortgage. However, this can also go in your favour and if interest rates increase you can be paying less than you would on a variable rate.
Every lender will have their own standard variable rate (SVR), which is considered their basic mortgage. This interest rate goes up and down, usually in line with the Bank of England’s interest rates but the lender is free to raise this at any time.
This means that your monthly payments can go up or down depending on what the interest rate is at a given time. Some months you could be paying more whilst other months you could be paying much less.
A discount mortgage is when a reduction is applied to the lenders Standard Variable Rate (SVR) for a certain length of time (typically 2-3 years). Discount mortgages are attractive as it can allow you to make lower repayments, however as the SVR can still fluctuate they are not ideal for people who are looking to stick to a strict long term budget.
A tracker mortgage is similar to a variable rate mortgage (where the interest can move up and down); but these instead track a nominated interest rate rather than the lenders SVR. Tracker mortgages are usually linked with the Bank of England’s interest rates (plus a few percent).
A capped mortgage is the same a variable rate mortgage; however the interest rate can never rise above a set “cap”. These mortgages can work well for people who can budget for different mortgage repayments each month but want the reassurance that their payments will never go above a certain amount.
Offset mortgages are linked to a savings account as well as your current account. Your savings will be ‘offset’ against the value of your mortgage, and you’ll only pay interest on your mortgage balance minus your savings balance. These types of mortgages work well for higher earners or people who have a good amount in savings that they want to use towards paying their mortgage.