As a first-time buyer, finding the right mortgage can be very stressful and a confusing process, and our team are here to help. We will explain and guide you through the buying and mortgage process.

We will work on your behalf to find you a suitable mortgage product to suit your circumstances and have access to exclusive products which are not available directly from high street lenders.

Mortgage help for first-time buyers

There are a few things to understand before we get started.

How mortgages work

  • A mortgage is a loan you take out with a lender for a number of years
  • The length of time over which you have a mortgage is called your “mortgage term”
  • Mortgage terms can be anywhere between 5 and 40 years
  • A mortgage is a type of secured loan, which means it’s secured against a property – usually the property you want to buy with the mortgage
  • Using a property as security for a loan means that the lender can repossess it if you don’t keep up the mortgage payments
  • To take out mortgage, you must put down a mortgage deposit of at least 5% of the purchase price – the mortgage itself makes up the rest

Mortgage interest rates

  • When you take out a mortgage, you’re given an introductory interest rate for the first few years – typically between 2 – 5 years
  • A popular kind of interest rate for first-time buyer mortgages is a fixed rate, which is where interest is charged at a set rate for a certain period.  Fixed rates are particularly good for those who like to budget
  • After the introductory period ends, you’re transferred onto your lender’s SVR (standard variable rate), which is the interest rate they set themselves. The lender’s SVR is normally higher than the introductory rate; so you would often remortgage onto a new product with your existing lender or a new lender when your introductory deal ends

Paying your mortgage

  • You’ll pay back your mortgage with interest
  • There are 2 main types of mortgage which determine how you pay the lender – repayment and interest-only:
    • With a repayment mortgage, you pay back a bit of the outstanding mortgage balance – i.e. the amount you borrowed –  each month alongside interest payments
    • With an interest-only mortgage, you only make interest payments each month and repay the full mortgage at the end of the mortgage term
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Keep reading to find information on the home buying process and for answers to some of your main FAQ’s.

Or, see our First-time Buyer’s Guide if you need a little more help understanding mortgages and how they work for first-time buyers.

You can also learn about the different types of mortgages and interest rates in our guide.

First-time Buyer: Frequently Asked Questions

How much deposit do first-time buyers need?

Generally speaking, a deposit of at least 5% of the purchase price will be required, although there may be some exceptions to this. A larger deposit will influence the rates of interest and mortgage deals that will be available to you.

Mortgage deposit can come from a variety of sources; most commonly this will be from personal savings and investments. Although it is common for borrowers to receive financial help such as gifted deposits from family. This is normally acceptable to a lender, provided that the funds are not repayable and the donor of the gift will not have any financial interest in the property or be living in the property. Regardless of the amount of deposit you have, the amount of borrowing must still fit within the lenders affordability calculations.

How much can first-time buyers borrow?

It is important that an affordable monthly budget is established at the early stage of a discussion to ensure that your expectations can be met. Each lender will have a specific affordability calculator into which all income and known commitments are entered. Any future unknown costs may be estimated or the lender may assume a figure based on information from the Office of National Statistics. Income used in the calculation can be from employment or self-employment.

Some types of benefits may also be acceptable and these can be clarified by our experts. A detailed analysis of all your income and expenditure by one of our expert advisors will provide an accurate indication of a maximum mortgage that may be available.

The amount of deposit may also influence the amount available to borrow, with some lenders applying a “cap” on higher loan to value cases which may be 4 or 4.5 x the income, regardless of the affordability calculation.

Mortgage rates for first-time buyers

First-time buyers can usually access mortgage rates that are available to all applicants. On top of this lenders sometimes have exclusive rates that are reserved for first-time buyers; they may also include extra benefits added to them. The benefits can range from free mortgage valuation/ surveys, cash back and in some instances help towards fees.

Speak to one of our experienced advisers at The Residential Mortgage Hub to see what rates may be available to you.

I'm a first-time buyer with poor credit, can I get a mortgage?

Being a first-time buyer with poor credit does not instantly disqualify you from obtaining a mortgage. Whether you’re a first-time buyer with poor credit or already a home owner, the criteria for whether or not you qualify for a mortgage when you have poor credit is usually similar.

The assessment process is complex and it will help if your case is presented to a lender in a favourable way. That is why it can be important to speak to an experienced Mortgage Adviser who can help you with the purchase of your first home.

Lenders will assess your eligibility based on the ‘hard data’ that is showing on your credit file. Things they will look at to assess an application can range from the number of Late Payments, Defaults or County Court Judgements (CCJ’s) that show on your credit file, as well as how recent or historical this data is. The data is not limited to this as credit files can hold a lot more detailed information.

Other things that they will take into account when assessing your eligibility will be your general financial conduct. This is usually assessed by looking carefully at your personal and/ or business bank statements.

Mortgage advice for first-time buyers

Buying your first home is a time of excitement but it can be a period of anxiety and a step into the unknown.

Don’t forget free and helpful advice can be found from a variety of sources including:

Family and friends – A good source of honest and hands on experience of home ownership. It does however depend on their knowledge of the current mortgage industry to the accuracy of the information being provided.

Internet – A huge amount of information at your fingertips 24 hours, 7 days a week. However, with such a large amount of information it can be difficult to know where to begin and to determine what is relevant to you and your individual requirements.

Lenders / Banks – Fully qualified advice tailored to your individual needs. However, this can be a restricted viewpoint of the market as they are only able to advise on what they can offer or do for you.

Mortgage Advisers – Fully qualified advice again tailored to your individual needs. However, do check on their access to the market. A broker with access to a wider range of lenders will be able to offer more options than a broker who is tied to a particular bank. There may also be a fee payable.

 

First-time buyer mortgage advice

At The Residential Mortgage Hub, we have access to over 11,000+ mortgage products from over 90 lenders. Our Mortgage Advisers will always endeavour to find the most suitable mortgage for you based on your specific circumstance. Call us to see how we can help.

Can a mortgage broker get exclusive rates for first-time buyers?

In addition to having access to many mainstream, high street and specialised lenders, deals and rates; it is highly likely that some exclusive rates and terms may be available through a mortgage broker.

Important information

Your home may be repossessed if you do not keep up repayments on your mortgage.

There may be a fee for mortgage advice. The actual amount will depend upon your circumstances.

The fee is up to 1% but a typical fee is £598.