Your first-time buyer Q&A

Your first-time buyer Q&A

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Buying a home for the first time? It can be tricky knowing where to begin. There’s plenty you need to know about getting on that first rung of the property ladder…

Ready to learn more about first time buyer mortgages?

How do I apply for a mortgage?

You’ll need to have:

  • Proof of your address, such as a utility bill or bank statement
  • Proof of ID, such as a passport or driving licence
  • Proof of income, which is normally your last three pay checks.

Most lenders will also require you to be at least 18 years old, but according to MoneySuperMarket data the average first-time buyer is 31.

When it comes to making your application, you can normally do this through the phone, online, by post, or in person by visiting your local branch.

However, before you apply you should contact all three credit reference agencies and get copies of your credit reports. This can help you judge whether you’re in a good place to apply, or if you need to do any work on your credit history to give yourself a better chance of getting a good deal.

The average age of first-time buyers is 31

Data collected by MoneySuperMarket from January 2016 to July 2018

How much deposit do I need for my first mortgage?

The minimum deposit lenders will generally accept is 5% of the property value. These are known as 95% mortgages, and if you want to go for one of these your options may be limited.

This is because most lenders ask for at least 10% of the property value as a deposit. For example the average deposit for first-time buyers is £43,433, which would be enough to get you a house worth over £430,000 if you took out a 10% deposit.

However, the average purchase value for first-time buyers is £217,200 – making £43,433 a 20% deposit. The more you’re able to save up, the more – and better – mortgage deals you’ll have to choose from, with lower rates available for larger deposits.

The average deposit for first-time buyers was £43,433

Data collected by MoneySuperMarket from January 2016 to July 2018, accurate as of July 2018

How much can I borrow?

The average loan amount for first-time buyers on MoneySuperMarket is £173,767. The amount you’ll be able to borrow will depend on your current debts, outgoings, and incomings. Lenders look at your salary in the following way:

  • For single applicants, they’ll usually lend you four times your annual salary
  • For joint applicants it’s generally three times the joint salary or four times the first salary plus the second salary.

However the Financial Conduct Authority’s Mortgage Market Review means lenders also factor in your personal expenses, such as bills, debts, and childcare.

This means they’ll have a more accurate picture of you can afford, but also the more of these outgoings you have, the less you’ll be able to borrow. Lenders need to know you can afford to repay the loan.

It will also depend on the deposit you put down – a higher deposit generally means you’ll be able to borrow more. However different lenders have different rules and requirements, which is why it’s best to shop around and see what all your options are.

Average loan value for first-time buyers is £173,767

Data collected by MoneySuperMarket from January 2016 to July 2018, accurate as of July 2018

How long can I borrow for?

Mortgages come in different terms, ranging from five years to over 40. It’s common to see mortgages that last for 25 years. In fact the most popular mortgage term for first-time buyers is between 21 and 30 years, according to MoneySuperMarket data.

However a longer mortgage may allow you more flexibility. Long term mortgages generally mean you’ll pay less each month, and if your deal allows overpayments it could work to your advantage.

You’ll be able to overpay when you can afford to, cutting down the mortgage term as you do, and if things get tight you can go back to your lower payments. However these mortgages may also come with higher fees and less favourable interest rates, so it’s always worth comparing your options.

The most popular mortgage term for first-time buyers is between 21-30 years.

Data collected by MoneySuperMarket from January 2016 to July 2018, accurate as of July 2018

How much will my first mortgage cost?

The cost of your mortgage depends on how much you borrow, the interest rate you borrow at, and how long you’re borrowing for. You can work out how much your mortgage will cost with our mortgage calculator.

How much stamp duty will I pay for my first mortgage?

After the 2018 Budget, you won’t pay stamp duty on the first £300,000 on properties that cost up to £500,000. However for homes costing over £500,000 then you’ll pay:

  • For the first £125,000 the rate is 0%
  • From £125,001 to £250,000 the rate is 2%
  • From £250,001 to £925,000 the rate is 5%
  • From £925,001 to £1,500,000 the rate is 10%
  • From £1,500,001 and upwards the rate is 12%

Are there any other costs included in my mortgage?

You should also factor in any potential fees and charges included in the mortgage deal, as these can often be quite high. They won’t be the same for everyone, but they can include:

  • Arrangement fees
  • Booking fees
  • Valuation fees
  • Survey fees
  • Legal fees

Read more with our guide to the cost of buying your own home.

What will lenders want to know about me?

In order to decide whether you qualify for a mortgage deal, lenders will generally want to know about your incomings and outgoings. This helps them see whether you’d be able to afford to take out a loan.

Like with any kind of loan, they’ll also look at your credit report. This can sometimes be an issue for first time buyers who haven’t had enough time to build a decent borrowing history.

However there are things you can do to strengthen your credit report, such as taking out a credit card and using it responsibly – learn more with our guide to improving your credit score.

What types of mortgages are there?

There different mortgage types, designed for people in different situations. One of the main distinctions is on how you pay your mortgage:

  • Repayment: Repayment mortgages mean each monthly payment chips away at the total loan amount, including the original sum plus interest.
  • Interest only: Interest-only mortgages are when you only pay off the interest added to the loan, then make a balloon payment at the end to pay off the original sum.

You can also choose between different interest types:

  • Fixed rate: Fixed rate mortgages mean the interest rate you pay at stays the same for a certain period of time.
  • Variable rate: Variable rate mortgages have an interest rate that can change when the lender decides to change it. This means it can go up or down, depending on a number of factors including the lender and the economic conditions.
  • Tracker: Tracker mortgage interest rates can also change, but they’re normally attached to another interest rate – usually, but not always, the Bank of England base rate.

For more information on mortgage variations, read our guide to different types of mortgage.

Can I get a mortgage with someone else?

Most lenders also offer joint mortgages, which can come in two different forms:

  • Joint tenancy: Joint tenancy mortgages are when two or more people have equal rights to the property being bought. If one tenant were to pass away, their share would go to the other tenant(s).
  • Tenants in common: Tenants in common mortgages are when two or more people take out a mortgage but the split isn’t legally required to be equal on all sides. In this case, tenants can leave their part of the property to someone else in their Will.

For both types of joint mortgage, if one tenant wanted to sell the house then all tenants would have to agree.

Can I get help buying my first home?

The government backs a Help-to-Buy scheme that offers assistance for people looking to get on the property ladder. A number of UK banks participate in the scheme, but you’ll need to find a Help-to-Buy agent in your chosen location to get things started.

You can also apply for a Help-to-Buy ISA, which can be useful in helping you save up a deposit for your mortgage.

What is a mortgage broker?

Mortgage brokers are people who have access to an array of mortgage deals – some of which aren’t available to the general public. They can look for and organise mortgages on your behalf, and while they usually charge a fee it can sometimes be worth it due to the savings you could make.

If you want to use a mortgage broker, you should always make sure they or their organisation should be authorised by the Financial Conduct Authority. Learn more with our page on mortgage brokers.

What is a mortgage guarantor?

A mortgage guarantor is someone who legally agrees to cover your mortgage payments if you can’t make yours. They can be useful for people who want to help their family members, such as children or grandchildren, get on the property ladder.

Lenders may ask you to provide a guarantor if you don’t have enough of a deposit, or if you have a poor/thin credit file – read more in our guarantor mortgage guide.

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