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First Time Buyer FAQs
How much deposit do I need for a mortgage?
At the very minimum you need a deposit equal to 5% of the purchase price of your new home.
Generally speaking, the smaller deposit you put in, the higher the interest rate will be on your mortgage, this is because it's riskier for banks to lend money when the mortgage makes up a substantial amount of the property value.
An exception to this lies within the Help to Buy Equity Loan Scheme; in this scenario, you can have a 5% deposit but take out a 75% mortgage deal, that's because the government will provide you with a 20% equity loan, taking your 5% deposit up to 25%, this does come with it's terms and conditions of course and there are a number of things to consider when looking at Help to Buy.
How much can I borrow on a mortgage?
The amount you can borrow on a mortgage is calculated slightly differently by each lender. Generally, the mortgage provider will look at your income and expenditure in order to come up with a maximum amount they are willing to offer you.
Typically, this amount is somewhere between 4 and 5 times the annual income for all applicants but also takes in to account monthly credit commitments and regualr outgoings.
We've built a calculator to give you an idea of how much you might be offered by a lender, just click here
Do I need a mortgage adviser?
Mortgages can be complicated and stressful things to arrange when you're going it alone, and even if you manage to find one for yourself, chances are it won't be the best deal for you.
Not only will a quality mortgage adviser be able to find you the very best deal available on the market, but they'll provide you with an unrivalled level of support and guidance throughout your homebuying journey.
Not only that but there can also be a number of different cogs involved in buying a property, from lenders to solicitors and valuation providers, all requiring different paperwork and information from you.
A mortgage adviser will manage your entire case for you, ensuring an efficient process through to completion.
What documents do I need for a mortgage?
When applying for a mortgage, your chosen mortgage lender will ask to see a number of documents from yourself in order to evidence the information you have provided them with and also to pass their fraud and money laundering checks.
The documents you are asked for by the lender will vary depending on your employment type, what type of mortgage product you are applying for, and the bank's specific criteria.
For a full breakdown of the documents you'll need, see our Knowledge Base answer here.
Can you get a mortgage with bad credit?
This is a tricky question to answer, it really depends on the extent of the bad credit, when it took place and whether it's clear now or not.
That being said, there are a huge range of lenders in the mortgage market and each of them view credit scores in different ways, so even with some bad credit issues, it's still possible to get a mortgage.
We've even got relationships with banks that design mortgages specifically for people with a poor credit history.
We cover this topic in more depth here.
Mortgages for First Time Buyers
Introduction to mortgages
A mortgage is likely the biggest financial commitment you're ever going to make, so naturally, there are a lot of things to think about and consider before diving in.
The mortgage market can be a busy and complex place, particularly for first time buyers, with such a diverse range of mortgages available and a massive amount of information out there, it can be hard to know what the right decision for you is.
That's where an independent mortgage adviser like us comes in, we're on hand to talk you through your potential options, explaining the pros and cons of each, and make a recommendation as to which path might be best for you.
On top of that, you can be sure you're getting the very best deal on the market because we're not tied to any particular lender, our software allows us to search hundreds of mortgage products at a time to find the cheapest one for you.
Getting a mortgage
There are a number of different factors that influence what your mortgage might look like. Firstly, you have your deposit, this needs to be a minimum of 5% of the purchase price of your first home and can come from either your personal savings or as a gift from a close family member. It's important to note that you cannot take out a loan to act as your deposit.
Next, the big question, how much can you actually borrow on a mortgage? Well, that's calculated based on your gross annual income. As a general rule, lenders will offer between 4 and 5 times the gross annual income of all applicants, so if you earn £20,000 a year, you could borrow between £80,000 and £100,000.
This obviously isn't an exact science, but it's a pretty good guide, just bear in mind that your affordability will also be affected by credit commitments and outgoings.
When it comes to getting the best deal as a first time buyer, going to a mortgage adviser is essential, it's our job to make sure you understand the types of mortgages available to you and also to get you the very best deal on the market.
Best mortgages for first-time buyers
Mortgages come in a number of different shapes and sizes, the main types of mortgages you'll be considering as a first time buyer are as follows:
Fixed rate refers to the interest rate of your mortgage loan, as the name suggests, it involves a guaranteed rate of interest for a set period of time, commonly 2, 3, 5 and even 10 years.
This can be a good option if you're looking for stability as it will guarantee your monthly payments for the course of the rate's term, then when the term is over you can just remortgage on to another fixed rate.
Typically, some of the lowest rates on the market can be found in the 2 year fixed range, making them the most popular among first time buyers.
A tracker rate is a form of variable rate, meaning the interest rate on your loan is dynamic and could change at any time, this type of rate gets its name because it tracks the level of another rate, commonly the Bank of England base rate.
To use an example of this type of scheme, you could get a tracker rate mortgage at 2% above base rate, meaning if the Bank of England base rate was 0.5%, you would have a rate of 2.5% on your mortgage, the Bank of England could then decide to increase their base rate and your rate would increase by the same amount.
Depending on market conditions this can provide you with a low interest rate, but it's always liable to change and won't offer you guaranteed monthly payments.
A discounted rate is another type of variable rate, it's usually set for a period of 2, 3 and 5 years at a time and tracks the movement of the lenders Standard Variable Rate.
An example of this type of scheme could be 2% less than SVR, so you will receive an interest rate that is exactly 2% less than the bank's standard variable rate for the term of your scheme.
Remember that the bank can change their SVR at any time and your interest rate will change in line with this.
A capped rate scheme is another type of variable rate, but one with a ceiling. It's liable to change similarly to the other schemes previously discussed, but you'll get the guarantee that your interest rate will never exceed a set threshold, so it offers a little more stability than other variable rates.
These rates aren't very common at the moment due to the historically low interest rates available on the market.
The best type of mortgage for you will depend on what your current and future circumstances are, your mortgage adviser will talk you through the pros and cons of each and make a recommendation for you.
First Time Buyer Schemes
There are a number of different schemes currently in place to assist first time buyers in their goal of getting on to the property ladder.
These range from savings boost schemes like the Help to Buy ISA and the Lifetime ISA, to schemes that actually help you out when you're purchasing the property like the Help to Buy Equity Loan Scheme.
To find out exactly what schemes you might be eligible for, the government has a very useful website called https://www.ownyourhome.gov.uk/schemes-all/ that can help you out.