Purchasing your first home can be a tricky situation, but it can also mark a very exciting time in a person’s life. There is a lot to understand about mortgages, but this should not be the reason why you shy away from this big step in your life. We’ve compiled the key components to help you, as a first-time buyer, make that dream home yours. Additionally, in so many ways, we are find ourselves in the convenience of this digital age where you can submit your application as a first-time buyer for a mortgage online.
The First-Time Buyer Profile
✅ You’ve never owned residential property in the UK or abroad.
✅ You have owned (or currently own) commercial property with no living space included.
What Makes A Non-First Time Buyer?
✅ Someone who is in process of buying any property with someone who now owns (or previously owned ) a home.
✅ A person who inherited a home – even if it has been sold and the person never occupied the property.
✅ A non-first time buyer is also someone who had property purchased for them on behalf of another party who also owns a home (parents for guardians).
The information above should help you discuss your financing options with a mortgage lender. Either way, you will always have alternatives available depending on your financial situation and credit score.
How Do I Get A Mortgage As A First-Time Buyer?
First things first…You will have to break down your income to see how much of it is disposable. You should also work out how much you can put down for a deposit. This will help lessen the amount you borrow and will also determine the amount a lender will be able to give you access to as a first-time buyer for a mortgage online.
Your mortgage application and approval will usually include these steps:
✅ Once you’ve submitted your mortgage application, you will be subjected to an affordability review and a credit check. The mortgage provider will take a peek at your annual income, additional income, outgoing household bills and debt from loans and credit cards. Your credit history is a way for mortgage providers to determine your reliability as a borrower.
✅ Once approved, you will either opt for a variable or fixed-rate mortgage of fewer than five years. First-time buyers are usually ‘stress tested’ to gauge their response to matters such as increased interest rates, repayment abilities during unemployment periods and so forth.
Now that the mortgage provider informed you about the amount you’ll have access to, you can start shopping around for a house within your budget. But first, let’s dig into the deposit blueprint.
Your Deposit As A First-Time Buyer For Online Mortgages
The general rule of thumb for deposits is that first-time buyers put down a 10% deposit of the property’s purchase price. This is one way for lenders to secure the mortgage. Should you have less than 10% available for a deposit, you may still process with the process, but it’s important to note the risks that are involved.
The best thing to do is to save towards that 10% deposit because that will ensure that you are subjected to higher equity (or ownership) when you settle down in your very first home. In short, the higher your deposit percentage, the lower your monthly repayments.
Essentially, if you have £7,500 available, you would be paying a 5% deposit on a home of £150,000. For the very same property cost, your deposit of 10% would total £15,000, while a 20% deposit would amount to £22,500.
Types Of First-Time Buyer Mortgage Plans
Both your personal and financial circumstances will determine the route you should take in terms of mortgage structures. Let’s get started with the basics:
- Fixed-Rate Mortgages means that the interest rate on your mortgage is fixed for a specified amount of time. This can be anything between 2 to 15 years, but most mortgage providers will offer fixed-rate plans between 2 and 5 years. This is an option that offers more stability, so you are able to plan. Once these fixed-rate term ends, you’ll have to consider the bank’s standard variable rate mortgage, which does mean a higher interest rate. You may still opt-out by switching your mortgage to a deal that is better suited to your financial situation.
- Standard Variable Rate Mortgages are set at the lender’s basic rate of interest. These mortgages do not mean reduced interest rates and increase at any given time.
- Tracker Mortgages have variable interest rates which follow the external rate of an institution like the Bank of England’s base rate. Your mortgage payments (inclusive of the interest you pay) could change every month.
- Discount Rate Mortgages are quite similar to tracker mortgages and track at a lower level which is the lender’s standard variable rate at a set amount. The discounts on these mortgages won’t change, but the interest rate may.
- Capped Mortgages are also linked to the lender’s standard variable rate, but the rate does not go above a capped level. This is the type of home loan where the interest rate doesn’t drop below the specified limit.
- Offset Mortgages are the best route to take if you have a savings account and mortgage with the same provider. Your savings can be used to offset the interest that is applicable to your mortgage. This way, you won’t pay interest on your mortgage to the same value as the amount in your savings account. Generally, you may also make regular or lump sum overpayments which helps with paying off the mortgage sooner.
HOT TIP
Borrow an amount that you know you can afford to repay and always leave an amount at your disposal for savings, unexpected expenses and even renovations of your home.
What Is The Next Step As A First-Time Home Buyer?
So you’ve been doing a bit of window shopping and now you need to get an ‘agreement in principle’ from a few lenders who speak your money language.
While this may not yet mean that your application is approved, but it does provide you with insight into what you can afford. The agreement in principle is what an estate agent will ask for before you make an offer on the property. You are under no circumstances obligated to take the mortgage if you change your mind before or after the approval process, but do note that an agreement in principle is usually valid for anything up to 90 days.
If you found the place you love, you can check the fine print and set the official mortgage offer in motion.
Apply for your first mortgage today!
What Else Should You Consider?
Before you take the plunge, take note of these pointers to help you make that final call.
- The mortgage application process depends on when your offer on the property had been accepted. Once comes through, you should make your formal application for a mortgage. From the lender’s end, they will carry out a valuation of the property you have in mind and keep you in the loop of anything that may seem out of the ordinary.
- Your monthly repayments will always kick off with a first payment that may be higher than the ones that follow. Don’t fret – this amount includes interest for the days between your move-in date and the end of that particular month; inclusive of the agreed monthly payment for the following month.
- Location, location, location. This has always been a massive deal-breaker for anyone who wishes to buy their first home. But in the end, it’s all about preference. Think about your daily commute, your lifestyle and what matters to you most? Do you wish to be closer to schools or your office? Do you want to be within walking distance of a decent pub? Or do you want to live in an area where you have easy access to public transport?
- Your budget will have to be revised and to make those monthly mortgage payments, you will have to consider additional costs when buying your first home. This can include solicitor’s fees, building insurance and survey costs. You’ll have to remember the household bills that move in with you and the ones that you’ll need to make your house a place you can call home.
About Us
Your Prosperity is a collective of mortgage brokers who have refined the mortgaging process to be simpler, easier to use and more accurate.
As the world moves into the online era, a network of brokers who have been in the industry for 15+ years, using their own personal and industry experience, have created this online platform to make life so much easier for all parties.
Whether you’re looking at your affordability, first purchase, next home, finding a better deal or looking at investments we are here to guide you along the way.
By doing this, we have eliminated the need to charge broker fees, making our service completely free to use.
Information is at hand within minutes on borrowing amount, term, monthly payments and if you have any, how your current commitments may be affecting your borrowing amount.
Our network of advisers are connected to a wide spectrum of sources within market, meaning they can approach lenders on the open market to source you the best deal and save you money.