First-time buyer mortgages are specially designed for people who are new to the housing market. Some companies may use stimuli such as cashback schemes, to entice you to get a mortgage with them. They may also contribute 95% or 100% mortgages, which only require a 5% deposit or none at all. But remember that you’ll still be required to meet strict affordability criteria to obtain approval. Some people want to know What Is A First Time Buyer Mortgage.
How can I get a first-time buyer mortgage?
To get a mortgage, you must persuade lenders that you’re a low enough risk. There are several modes you may be capable of to enhance your chances of acceptance:
- Putting down a proper deposit – e.g. by saving up, acquiring help from a relative, or using a Help to Buy scheme
- Using a guarantor – this is someone who pledges to make your payments if you can’t
- Showing you’ve handled credit responsibly in the past – uncover how your credit score may affect your mortgage eligibility
- Showing you’re capable of comfortably completing the monthly repayments – e.g. by only applying for a mortgage you can afford, boosting your revenue, or reducing how much you spend
- Applying correct and up-to-date information – allows the lender to assess your affordability accurately
How much do I need for a deposit?
A deposit is a lump sum you pay towards the cost of a property when you purchase it. It’s usually represented as a percentage of the property price, e.g. a £20,000 residue on a property that costs £200,000 would be a 10% deposit.
So how much do you require as a first-time buyer? There’s no one-size-fits-all answer – it can count on things like the lender’s criteria, the cost of the property, your financial status, and your credit score.
You may be capable to get a mortgage with a 5% deposit – or, rarely, no deposit at all. These are called 90% and 99% mortgages. They typically come with higher interest rates or need a guarantor, to diminish the risk for the lender.
A larger deposit usually means shorter monthly payments and lower interest rates – it’s worth bearing this in a sense when deciding what property you can afford. Generally speaking, you should be capable to get a good deal with a 15% deposit, and the most reasonable rates are usually available to people who can set down 25% or more.
Can I afford a mortgage?
Already scanning homes for sale? Before you get connected to a country manor, a modern city flat, or that cool lighthouse with views, it’s essential to understand what’s within your funding.
Review your savings, income and expenses, and work out how much you can afford for a deposition and monthly payments. Getting a ‘Decision in Principle’ (DIP) or ‘Agreement in Principle’ (AIP) from a direct lender or mortgage broker can assist you to decide a property budget – but remember, this doesn’t ensure you a mortgage.
Also consider how your financial and lifestyle circumstances may vary in the future, and how a variable interest rate mortgage could rise – so it’s most useful if you can afford a bit more than what you get. Of course, you may be able to change to another mortgage in the future, but there are dangers and potential costs involved in this.
Remember, you must complete your monthly mortgage repayments on time and in full, or you may forfeit your home. You also need to consider the associated costs of buying a home, besides the home purchase itself. This can include legal and valuation costs, stamp duty, and removal costs – as well as more optional costs like trimming and buying furniture.
What should I do when I get a first-time buyer mortgage?
A mortgage is a step up in responsibility from leasing or living at home. Here are our top recommendations for first-time buyers:
- It’s vital to maintain up with your repayments, or you could lose your home and hurt your credit report.
- Making payments on time and in full should boost your credit score over time, while late payments can hurt it.
- Remember to budget for the ongoing costs of holding property, such as repairs, maintenance, ground rent, council tax, and utility bills.
Who qualifies for a first-time buyer mortgage?
You’ll be classified as a first-time buyer if you – and anyone you are purchasing with – are purchasing your first residential property. If you’ve held a house or flat before – in the UK or abroad – you’re unlikely to be suitable for many of the schemes created to help first-time buyers onto the property ladder.
This is true whether you owned an exclusive property or a share in one. For example, as a joint tenant or under a shared ownership scheme. What’s more, you may not allow as a first-time buyer if you’ve inherited a home, even if you’ve never lived there and it’s since been marketed.
Likewise, if someone else – who already owns their own home (i.e. a parent, or guardian) – is buying the house for you, you won’t be categorised as a first-time buyer. That said, other schemes will differ in their rules and criteria, so read any little print before applying.
When’s a good time to buy my first property?
There’s a great deal of personal and financial responsibility involved in buying your first home, so it’s essential to have stability in your life.
For example, it’s usually best to be in an endless job. A steady income can show businesses you’re more likely to complete the monthly mortgage repayments – and remember, if you can’t keep up with the payments, you may lose your home. Obtaining a mortgage when you’re self-employed can be a lot harder, since your payment may be surprising.
Lenders often like to see that you’ve been living at a long-term, enduring address. You can use your parents’ address if you’ve been waiting in student housing or other temporary housing. Make sure to register on the electoral roll with it.
It can be beneficial to stay until you’ve built up your credit history. If you don’t have much of a credit history, it can be more difficult for companies to assess the likelihood of you paying them back, so they may deny you a mortgage.
Finally, the economic climate may impact your decision, as this can impact house prices and mortgage curiosity rates. If you buy a property just before a dip in effects prices, you may get into negative equity – this is where you owe more on your mortgage than the current worth of the house, making it very difficult to drive home again.
What Are the Advantages of First-Time Buyers Mortgage?
First-time buyer mortgages are designed to help people who are purchasing their first home. These mortgages often come with several advantages, including:
- Lower Deposit Requirements: First-time buyer mortgages may require a smaller deposit compared to standard mortgages. This can make it easier for buyers to get on the property ladder, as they may not need to save up as much money for a deposit.
- Help to Buy Schemes: Some first-time buyer mortgages are linked to government schemes that provide financial assistance to buyers. For example, the UK government offers a Help to Buy Equity Loan scheme that allows buyers to borrow up to 20% of the purchase price of a new build home, interest-free for the first five years.
- Reduced Interest Rates: Some lenders may offer reduced interest rates for first-time buyers. This can make monthly mortgage payments more affordable, helping buyers to manage their finances more effectively.
- Flexible Repayment Terms: First-time buyer mortgages may offer more flexible repayment terms than standard mortgages. This can include longer repayment periods or the ability to make overpayments without incurring penalties.
- Specialist Advice: Many lenders offer specialist advice to first-time buyers, helping them to navigate the buying process and understand the options available to them. This can be especially useful for buyers who are unfamiliar with the process of buying a home.
In conclusion, a first-time buyer mortgage is a type of mortgage designed specifically for those purchasing their first home. These mortgages offer several advantages, including lower deposit requirements, reduced interest rates, flexible repayment terms, and access to government schemes that provide financial assistance. First-time buyer mortgages can be a great option for those looking to get on the property ladder and make their first home purchase. However, as with any financial decision, it is important for buyers to carefully consider their options and seek professional advice before committing to a mortgage.
FAQS About What is a First Time Buyer Mortgage
What is a first-time buyer mortgage?
A first-time buyer mortgage is a type of mortgage that is designed specifically for those purchasing their first home. These mortgages often offer reduced deposit requirements, lower interest rates, and more flexible repayment terms compared to standard mortgages.
How much deposit do I need for a first-time buyer mortgage?
The amount of deposit required for a first-time buyer mortgage varies depending on the lender and the property being purchased. In some cases, a deposit of as little as 5% may be accepted, while in other cases a larger deposit may be required.
Are there any government schemes available for first-time buyers?
Yes, many governments offer schemes to help first-time buyers get onto the property ladder. For example, in the UK, the Help to Buy Equity Loan scheme provides financial assistance to buyers purchasing a new build home.
Can I get a first-time buyer mortgage if I have a bad credit score?
It may be more difficult to obtain a first-time buyer mortgage with a bad credit score, but it is still possible. Some lenders may offer specialist mortgages for those with poor credit, while others may require a larger deposit or higher interest rates.
Can I get a first-time buyer mortgage if I am self-employed?
Yes, self-employed individuals can still apply for a first-time buyer mortgage. However, the lender may require additional documentation, such as tax returns or bank statements, to verify income and affordability.