How much can you borrow?
Our mortgage calculator shows you how much you could borrow based on your income
You’ll be classified as a first-time buyer if you - and anyone you are buying with – are purchasing your first residential property. If you’ve owned a house or flat before - in the UK or abroad - you're unlikely to be eligible for many of the schemes designed to help first-time buyers on to the property ladder.
This is true whether you owned an entire property or a share in one. For example, as a joint tenant or under a shared ownership scheme. What’s more, you may not qualify as a first-time buyer if you’ve inherited a home, even if you’ve never lived there and it’s since been sold.
Likewise, if someone else – who already owns their own home (i.e. a parent, guardian) – is purchasing the house for you, you won’t be classified as a first-time buyer. That said, different schemes will vary in their rules and criteria, so read any small print before applying.
You can get hold of your file for free and make sure all your information is correct. Find out more about how you can boost your score so you’re in the best possible financial position and ready to apply for a mortgage.
The greater the cash savings you can put down towards your first home purchase, the less you'll need to borrow through a mortgage. This will also mean you should have a lower loan-to-value ratio and should give you access to better rates.
A mortgage broker will show you how much you can afford to borrow for a first-time buyer mortgage. From this, you can work out what sort of property you can afford in your area – ideally before you start house hunting.
Your level of deposit – expressed as a percentage of your property value – is important. It represents the level of risk to the bank or building society lending you the money. For example, if your first home purchase has a value of £250,000 and you’ve saved £25,000 to pay towards it in cash – that’s a 10% cash deposit.
It means you’ll need to borrow £225,000 in a mortgage from the bank, so the loan to value – or LTV – of the mortgage is 90%.
In contrast, if you’ve saved £50,000 that’s a 20% deposit – so the mortgage (at 80% LTV) you need is less, and this represents less risk to the lender. A bigger deposit will usually also give you access to more competitive mortgage rates. While you can get a mortgage with a 5% deposit, saving up more can be beneficial.
For example, with a 10% or even 15% deposit, you’ll usually have more choice of mortgage deals and at lower rates. This could save you a lot of money over the course of your mortgage.
There are a number of schemes designed to help first-time buyers.
Among the newest is the First Homes Scheme – which offers a 30% discount on the market value of new build homes – but it’s only for eligible first-time buyers, with priority afforded to key workers and army veterans.
In addition, many mortgage lenders will lend to any home buyer who may only have a 5% deposit.
This is under the 95% mortgage scheme ,where the government has agreed to underwrite a part of the loan.
Eligibility criteria are in place, too. For example, it is only available on property purchases worth up to £600,000.
Available to first-time buyers in England, the scheme offers loans of up to 20% – or 40% if you’re in London – of the value of a new-build home costing up to £600,000. The scheme is open to first-time buyers and those looking to move up the ladder.
The loan is interest-free for the first five years, and from year six, you’ll be charged 1.75% interest on the loan amount.
Each year after that, the amount of interest you pay will then rise in line with inflation, plus 2%.
If you’re aged 18–39 and are saving up for a deposit to buy your first home, you can save into a Lifetime ISA where cash is topped up with a 25% bonus by the government.
You can use this money to buy a property costing up to £450,000.
A fixed-rate mortgage will keep your monthly mortgage repayments at a set rate for two, three, or five years – although in some cases, you can fix it for as long as 10 years. Once the deal has ended, it’s usually best to switch mortgages to avoid paying your lender’s standard variable rate (SVR), which is likely to be much higher than your fixed rate deal.
A tracker mortgage tracks the Bank of England base rate, which means that the amount of interest you pay each month could go up or down if the base rate does. If you decide to go for this option, make sure you could afford your repayments if interest rates rise.
A discounted, variable-rate mortgage usually lasts for between two and five years and is fixed at a set percentage below your lender’s SVR. However, your mortgage rate will change if the SVR changes. So it's important to bear that in mind when you're doing your sums.
With an offset mortgage, you can use a linked savings account to offset the amount you owe on your mortgage. So instead of earning interest on your savings, you pay less interest on your mortgage. This is because your savings balance offsets your mortgage debt – and you only pay interest on the debt balance.
Our mortgage calculator shows you how much you could borrow based on your income
Work out the cost of your mortgage and the predicted cost of your monthly repayments
See how much your mortgage payments will be affected by a change in the Bank of England’s base rate
It’s quick and easy to compare first-time buyer mortgage deals using our mortgage comparison tool. Just enter a few details, such as the value of the property you want to buy, the size of your deposit, and the length of time you want the mortgage loan to last, and we’ll show you a list of mortgage rates from different providers that match your needs.
You can filter the results by the type of mortgage you prefer, as well as the monthly repayments you’ll have to make. While you're comparing mortgages, you can get a better, more comprehensive idea of the total cost of your loan, by selecting the option to add fees to the mortgage balance.
Alternatively, you can request to see mortgages that have no product fees – although these will generally have higher interest rates. Remember that the comparison tool doesn’t take into account your financial situation or your credit history, so monthly repayments and rates could change when you apply for a mortgage in principle or when you get a mortgage offer from your prospective lender.
When you apply for a mortgage, the lender will assess your affordability by looking at your annual salary and any other income you receive, as well as your outgoings, including credit card and loan debts, household bills, childcare, and general living costs.
The lender will also check your credit history to see whether you’re a reliable borrower and will then use this and its affordability assessment to decide how much you can borrow.
The size of your cash deposit towards the home purchase will also have an impact. Mortgage providers usually have a maximum loan-to-value (LTV), or percentage of the property value, they’re prepared to offer.
If, for example, you want to buy a £200,000 property on an 85% LTV mortgage, you’ll need a 15% deposit, which comes to £30,000.
Yes, you can. But, of course, you’ll need to prove your income in order to take out a mortgage.
It's likely you’ll have to provide at least two years of tax statements or company accounts that have been undersigned by an accountant. If these documents show consistent or increasing profit, you’ll be one step close to securing your first-time buyer mortgage.
When you’re ready to start viewing properties, it’s a good idea to get a mortgage agreement in principle from one or more lenders.
This will give you a good idea of how much you can borrow. Estate agents may also want to see this to ensure you’re serious about buying.
Before going ahead with an agreement in principle application, check whether the lender will carry out a credit check. This will usually appear on your credit file.
An agreement in principle is generally valid for between 30 and 90 days and is an estimate rather than a guaranteed mortgage offer.
When you buy a property, you might also need to pay various fees and charges upfront.
It's usually a good idea to instruct a conveyancer or solicitor to help with your purchase, and they'll inform you of the charges you need to pay.
In some cases, some of the legal fees are included as part of your mortgage but not always. Extra costs are likely to include:
You may also need to buy essential items, such as appliances and furniture, and cover the cost of a removal service – or at least a rental van.
If you’re struggling to borrow enough to get onto the property ladder, one way to raise a larger deposit and get a bigger mortgage is to buy a home with your partner or with one or more friends or family members.
You can take out a joint mortgage as joint tenants, which means all parties own an equal share of the property, or as tenants in common, with which the split can be calculated based on how much each person puts in.
Either way, it’s a good idea to seek independent legal advice before taking out a joint mortgage to make sure you all agree on what happens to the property should one of you want to sell or leave.
If you’re a first-time buyer earning less than £80,000 a year (or £90,000 in London), you could be eligible for a shared ownership mortgage.
With this type of home loan, you buy a percentage of a property – say 25% and pay rent on the rest.
This can be a good option if you only have a small deposit, as you only have to find say 10% of the value of the share you buy.
You can often increase the share of the property you own when it becomes affordable, while stamp duty can usually be deferred until you own 80%.
A guarantor mortgage is another way to take out a larger mortgage for your first home. With a mortgage of this kind, the guarantor – most likely a parent or close family member – promises to cover the mortgage repayments if you cannot.
Although the guarantor’s name won’t go on the property deeds, it’s still a good idea to seek independent legal advice before asking someone to guarantee your mortgage – just to make sure everyone understands the rules.
Other mortgage types to consider
Other mortgage types you might want to consider if you’re looking to remortgage include:
Capped rate mortgage: a capped rate mortgage is a variable-rate mortgage, but there is a limit to how high the rate can go. This can be useful if you want a variable-rate mortgage, while avoiding unaffordable payments if the rate rises
Discounted mortgage: a discounted mortgage is another type of variable-rate mortgage. This offers a discounted rate on the lender’s standard variable rate for a certain period of time
Offset mortgage: an offset mortgage helps to reduce the overall interest you pay by offsetting your savings against the outstanding balance of your mortgage. But this does mean you won’t be gaining any interest on your savings during the deal
Fixed-rate mortgages have an interest rate that stays the same for a set period. This could be anything from two to ten years. Your repayments are the same every month and you don't need to fear fluctuations in interest rates.
If you choose to leave the deal before the end of the fixed term, most will charge you a penalty. This is known as an early repayment charge (ERC).
Interest rates adjust periodically with a variable-rate mortgage, which means repayments may change throughout the loan term. Usually, the interest rate changes in relation to the Bank of England's base rate. This is very influential on variable interest rates, as is the base rate of each lender.
For standard variable-rate (SVR) mortgages, each lender has an SVR that they can move when they like. In reality, this tends to roughly follow the Bank of England's base rate movements. SVRs can be anything from two to five percentage points above the base rate (or higher) and they can vary massively between lenders.
The other type of variable mortgage is a discount mortgage. Rather than being linked to the Bank of England base rate, discounts are linked to the lender's standard variable rate (SVR). For example, if the SVR is 4.50% with a discount of 1%, the payable mortgage rate is 3.50%. If the SVR rose to 5.50%, the pay rate would rise to 4.50%.
The problem with discounts is that SVR changes are at the lender's discretion. So, your mortgage payments could change even if there has been no alteration in the Bank of England base rate. What's more, even if the SVR changes following a move in the base rate, there is no guarantee that it will increase or decrease by the same amount.
As a result, trackers are usually seen as more transparent than discounted deals and are often seen as being fairer for the borrower.
For example, when the base rate fell from 5.00% to 0.50% between October 2008 and March 2009, Lloyds TSB was the only top-20 lender to reduce its SVR by the full 4.50%. All the others cut their rates by less.
When the Bank of England raised the base rate from 0.25% to 0.5% in November 2017, anyone who wasn’t on a fixed-rate mortgage was at risk of seeing their repayments increase. A number of leading mortgage lenders followed and increased their tracker and/or SVR rates a month later.
Most mortgage deals carry arrangement fees, which can vary from a few hundred pounds up to a couple of thousand.
Also bear in mind that these set up costs can sometimes be made up of two fees. Lenders may charge a non-refundable booking fee, which is effectively a product reservation fee. If your remortgage falls through and you don’t end up taking the mortgage deal, you won’t get this fee back.
The second type of fee is an arrangement fee which you pay on completion of the mortgage, so you won't have to pay it if, for any reason, you don't take the mortgage.
Calculate how early you could pay off your mortgage. But make sure you read our mortgage overpayment guide first, as overpaying isn’t the right move for all homeowners.
Remember to always factor additional fees into the overall cost of any deal. Even if a lender is offering a seemingly unbeatable rate, steep fees could mean that it actually works out to be more cost-effective to opt for a higher rate with much lower fees or no fee at all.
The best remortgage rate for you depends on how much you are looking to borrow. A high fee is often worth paying in order to secure a low interest rate if you are applying for a large mortgage. But those with smaller mortgages could be better off opting for a higher rate and lower fee.
However, while this is the general rule, you need to work out the total cost over the term of the deal. For example, if you are going for a two-year fixed rate, you need to work out the cost of your repayments over the term. You can do this by finding out what the monthly payment will be using our mortgage calculator – and then multiplying by 24. You then need to add on the arrangement fee to find out the total cost.
You will likely find that you have more mortgage deals to choose from if you have a good credit history, so it’s worth making sure that your credit report is as good as it can be before applying for a remortgage. Paying off any outstanding borrowed credit you owe and making sure your current address is on the electoral roll can help to improve your credit score.
The more money you can save as a deposit, the less you’ll need to borrow as a mortgage loan. What’s more, having a bigger deposit can help you get access to more competitive mortgage rates.
Lenders will often have a maximum loan-to-value ratio they’re prepared to offer you. Instead, the rest will need to be made up with either a deposit or an equity loan like the government's Help to Buy equity loan scheme.
Using a mortgage comparison tool can give you a better idea of how much you’d need to pay in monthly costs and interest, the duration of the deal, the maximum LTV, and any product fees you may need to pay for the remortgage deals available based on your borrowing requirements.
It’s important to remember that the mortgage deals you’re offered when you go to make an application may differ because they will then be influenced by your financial situation and credit history.
Get free mortgage advice and see deals from the whole of the market with broker London & Country. Call free from your landline or mobile on 0800 170 1943 any day. Read more about London & Country
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