First time buyer mortgages

Tips for first time buyers

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If you're a first-time buyer, you'll probably have to jump through a number of hoops before you get a mortgage. It's not just a case of sniffing out the best mortgage deal, you also need to look at how you can improve your chances of getting accepted.

First time buyer mortgages

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Buying your first home

Buying your first home is an exciting prospect, yet it can feel overwhelming knowing where to start to get onto the property ladder. Whether it’s a Help to Buy ISA, Help to Buy equity loan or a shared ownership mortgage, there’s plenty out there to help you on your way.  

Here, we explain all you need to know to help you buy your first home.

Housing schemes for first time buyers

There’s a range of Government schemes designed to help first time buyers. Equally, there’s thousands of mortgages on the market and they are all theoretically available to first time buyers. Banks and building societies also package specific deals for first time buyers, which may include incentives such as cashback, low fees or a contribution towards legal costs.

How much can I borrow?

It's a good idea to work out roughly how much you can borrow before you go house hunting. There is no point in picking your ideal home only to find that it is beyond your financial reach.

In the past, lenders traditionally calculated the amount you could borrow as a multiple of your salary. So, you might typically be granted a mortgage of three times your gross annual earnings. But most banks and building societies these days advance funds according to affordability and will ask for details of your incomings and outgoings before they decide on a figure. They will also take into account the impact of future interest rate rises.

Our mortgage calculator will give you a rough idea as to the amount you should be able to borrow.

However, your ability to get a mortgage isn't down to your salary and outgoings alone, your credit score is important, too. If you have suffered from bad debts in the past, your application for mortgage finance might be turned down.

Save for a deposit

You will almost certainly have to save up for a deposit because the days of a 100% mortgage are gone. Some banks and building societies will lend up to 95% of the property's value - this will be described as the loan to value of LTV. In other words, you will need a minimum deposit of 5%. You will have a wider choice if you can put down a 10% deposit. However, the very best rates are reserved for borrowers with a big deposit - in some cases you'll need as much as 40%.

Therefore, aim to save as large a deposit as possible because you will have access to a wider range of mortgage products and be able to benefit from more competitive rates.

Fixing your mortgage rate

There are thousands of different mortgage deals but they broadly fall into two categories - variable rate and fixed rate.

Many first-time buyers favour fixed-rate mortgages because they allow them to budget with certainty. With a fixed rate, you know exactly how much you will have to pay out each month, so you don't need to worry about fluctuations in interest rates.

You can usually fix your mortgage for two, three or five years. But some lenders offer long-term fixes of ten years or more.

It's important to think about how long you want to lock yourself into a mortgage for. Most will charge you a penalty - known as an early repayment charge (ERC) - if you need to get out of the deal before the end of the fixed term. Therefore, most first time buyers tend not to go for long term fixed rate deals because a lot can change in 10 years.

The interest rates on fixed rates tend to be slightly higher than those on the best variable rate deals, but that is because you are paying for the security and peace of mind. Remember, variable rates can change so if the Bank of England puts interest rates up, variable rates will rise while a fixed rate will remain the same.

Our easy-to-use base rate calculator will help you work out how your mortgage repayments will be affected by interest rate fluctuations. 

Variable mortgages

There are two types of variable rate mortgage.

Trackers are directly linked to the Bank of England base rate and move in line with changes to that. So if the Bank of England puts the base rate up by 0.25%, your mortgage rate will rise by the same amount.

The other type is a discount. Discount mortgages are linked to the lender's standard variable rate (SVR), not the Bank of England Base rate. SVRs are set by each lender and therefore they can change even if there's been no change in the Bank of England rate. There's a bit more risk attached to a discount so trackers tend to be more popular with those opting for a variable mortgage.

Some lenders play around with different types of mortgage. They might combine a fix and a tracker, or offer some sort of guarantee that a variable loan will not rise above a certain rate. Always make sure you understand how your mortgage works so that you do not pay a premium for a product that you don't need.

Fees for first-time buyer mortgages

Don't forget to factor fees into your cost calculations. Most lenders charge an arrangement fee for your mortgage, which could be £1,000 or more. Some also levy a non-refundable booking fee of several hundred pounds.

Also, don't forget the other fees and costs associated with buying a home - you'll have to pay for a survey and for the conveyancing. Then of course, there's the cost of furnishing your first home. It can all mount up pretty quickly.

Choosing the right mortgage

MoneySupermarket makes it easy for first-time buyers to choose the right mortgage. Whether you have a big deposit or small, want a fixed or a variable rate deal, we compare first-time buyer mortgages from a wide range of lenders so it's one less thing for you to worry about. What's more, our comparison service is free, independent and online.


The figures and information provided by this tool are for illustration purposes only

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