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Help for first-time buyers

Thinking about buying your first home? There’s a lot to take in, but we’ve got you covered; from budgeting to finding a suitable first-time buyer mortgage.

1. Budget for all costs

Buying a home can be more expensive than you initially think. Aside from the obvious - your deposit and monthly mortgage repayments - there are many other costs involved when buying a home:

  • Home survey costs
  • Solicitor or conveyancer fee
  • Removal costs
  • Buildings & contents insurance
  • Immediate repairs (if applicable)
  • Furnishing and decorating
  • Mortgage arrangement and valuation fees
  • Stamp Duty (Land & Buildings Transaction Tax in Scotland, or Land Transaction Tax in Wales)

Note: Currently, first-time-buyers will pay no Stamp Duty on the first £300,000 for properties worth up to £500,000 (more info here).

Understanding how much you might need to outlay before beginning the mortgage application process will help you budget accordingly.

Make sure you also understand the extra costs involved in owning a home once you’ve exchanged contracts and moved in. For example, if you buy a leasehold property you might have to pay a yearly ground rent and service charge to the freeholder. Likewise, if you live in a serviced apartment, you may have a regular service charge to pay.

2. Budget for your monthly repayments

As a first-time buyer, it’s a good idea to put together a budget before you start searching for a property. A mortgage calculator will help you to work out how much you could afford to borrow.

When you apply for a mortgage, the lender will want to ‘stress test’ your application to make sure you can keep up with monthly repayments both in the short and long-term. For instance, if you plan to start a family and your job circumstances change, they’ll want to know that you’ll still be able to keep up with the payments.

You’ll have to evidence your income and expenditure as part of the mortgage application process in the form of bank statements, payslips, and other documentation. Think carefully about which type of mortgage would suit your needs most. A fixed-rate where you know exactly how much you’ll be paying each month for a set period, or a tracker/variable rate that will rise and fall in line with The Bank of England’s bank rate?

Find out more about the different types of mortgages available.

3. Consider home-buyer schemes

A number of government schemes have been designed to help first-time buyers onto the property ladder. These include Help to Buy, Right to Buy and Shared Ownership.

Help To Buy

Help To Buy is a government scheme designed for first-time buyers who need a little help with their deposit. The government lends the buyer money in the form of an equity loan towards a newly built property.

  • You need to have at least 5% of the sale price for your deposit.
  • The government lends you up to 20% of the sale price.
  • You borrow the remaining amount (up to 75%) from a mortgage lender and repay it on a monthly basis.

Right To Buy

Right To Buy gives tenants in England, Wales, and Northern Ireland who rent their home from a public sector body the opportunity to buy their home at a discounted rate.

  • Usually, tenants must have rented from the public sector for three years before becoming eligible.
  • The three years can be non-consecutive, so if you’ve had periods of renting from a private landlord in-between, you could still qualify.
  • Public sector properties include council and housing association homes.

Shared Ownership

Shared Ownership allows you to buy a portion of a home from the landlord who is usually a council or housing association. You’ll pay reduced rent on the remaining share.

  • Your mortgage can be between a quarter to three-quarters of the property’s full value.
  • You can buy a larger share or the entire property later down the line if you want to.
  • The scheme is designed for buyers whose combined household income is less than £80,000 (£90,000 in London).

Starter Home Scheme

This is a new government initiative that aims to provide up to 20,000 new homes to first-time buyers by 2020. These properties will be sold at a 20% market discount price compared to others in the area.

4. Find a mortgage

Unless you have a comprehensive understanding of the property market, finding a mortgage deal that’s most suited to your needs can be very difficult.

Using a mortgage broker is a good idea for first-time buyers because they consider a wide range of deals and offer impartial advice on options that match your needs and requirements. They’ll then help you navigate the process of finding and applying for a mortgage.

Unlike many conventional mortgage brokers, online mortgage brokers like Trussle don’t charge a fee and the process is often quicker and more streamlined. Find out more about how Trussle can help first-time buyers securing a great-value mortgage online.

A good mortgage broker will:

  • help you to work out how much you can borrow.
  • suggest the most suitable options for your needs.
  • search the market on your behalf for the most suitable deals.
  • guide you through the application process.
  • continue to monitor your mortgage and alert you when it’s time to switch later on.

When looking for a mortgage, you’ll probably come across the term LTV (loan-to-value). Don’t be put off by the jargon; this just means the amount you’re borrowing compared to the property’s overall cost. So, if you want to buy a home for £300,000 and you have a £30,000 deposit, your Loan (£270,000) To Value (£300,000) is 90%.

First-time buyer mortgages share the same features as a standard mortgage, meaning you’ll have an LTV, mortgage term, and a monthly repayment plan.

5. Consider a guarantor

Guarantor mortgages can help you onto the property ladder if you can’t afford a deposit or your financial circumstances don’t match the mortgage lender’s requirements.

A guarantor is someone who assumes liability for credit on behalf of another individual. So in the context of a mortgage, a guarantor will agree to be liable for some or all of your repayments in the event that you can’t afford to pay them. They won’t own a share of the property and won’t be named on the deeds.

A family member or even a friend can act as a guarantor, but they must meet certain criteria to be considered, and this criteria varies according to the lender. For instance, they have to own their own property, have a high enough income to cover repayments, and have a strong credit history. A guarantor mortgage can be a helpful thing but it’s a long-term commitment for both sides.

6. Mortgage criteria for first-time buyers

Eligibility for government schemes is dependent on a number of factors. Likewise, the mortgage criteria for first-time buyers varies from lender to lender, but as long as you can evidence your income and expenses and can afford the repayments and deposit, you should be able to apply for a mortgage.

The basics:

  • You must purchase a property in the UK.
  • You must be a UK resident or have full rights to reside in the UK.
  • You must be at least 18 years old.
  • You must be able to afford the required deposit and monthly repayments.