If you're a first-time buyer who is currently finding the mortgage market somewhat challenging to navigate, then you are certainly not alone. With numerous first time buyer mortgages to choose from, selecting the most suitable deal is not always simple.
This is where we come in. The Mortgage Hut can provide you with all the help, advice and support you need to make your first step on to the property ladder as smooth as possible and successfully secure your ideal first home.
Mortgages come in many forms so let’s start by running through some of the most popular options that you might have seen and want to consider.
Mortgages for First Time Buyers
Find out the options and schemes available to you as a first time buyer.
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First Time Buyer Mortgages
Types of Mortgage Available
Fixed Mortgages
With this type of mortgage, you will pay a set rate of interest for a predetermined period of time. As your monthly repayments will stay the same, managing your budget should be a fairly straightforward process, provided that you can comfortably afford the agreed monthly repayments. If you’re not sure how much you could borrow and would like to get an idea as to what your monthly mortgage repayments might look like, entering a few details into our mortgage calculator will give you an indication of the size of mortgage you could realistically afford.
Tracker Mortgages
Tracker mortgages are typically aligned with the Bank of England Base rate for a set period of time, often between two and five years. It also possible to secure a Lifetime tracker mortgage, but these can come with higher interest rates than those with shorter terms. If the Bank of England base rate were to increase, the interest rate on your mortgage would also increase and your monthly payments would rise. Conversely, if the base rate were to decrease, you would see the benefit as your monthly repayments would be reduced.
Discount Mortgages
How to Improve Your Odds
If you want to obtain the best possible deal, you need to ensure that lenders view you as an attractive borrower by meeting the set of criteria they use to determine whether or not to lend. Checking your credit score and ensuring that any errors on your report are fixed as soon as possible is essential. You should also ensure that you are not financially linked to any ex-partners or old flatmates with poor credit scores.
There are also a number of other things you can personally do to enhance your attractiveness, including:
- Registering to vote
- Managing your available credit carefully
- Closing any inactive accounts
- Paying your bills on time and staying out of your overdraft
- Avoiding applying for credit shortly before submitting your mortgage application
There are also a number of other things you can personally do to enhance your attractiveness, including:
- Registering to vote
- Managing your available credit carefully
- Closing any inactive accounts
- Paying your bills on time and staying out of your overdraft
- Avoiding applying for credit shortly before submitting your mortgage application
New Build Incentives
As there is a significant amount of competition between new build developers, some might offer certain incentives that will sweeten the deal that you could secure. Mortgage lenders might take these deals into account when considering your application, which may then be reflected in the offer they give to you.
Most lenders are fine with incentives that add up to approximately 5% of the total value of the property. Higher incentives, however, could be factored into their calculations, which could push up the purchase value of your property and result in a higher LTV.
Most lenders are fine with incentives that add up to approximately 5% of the total value of the property. Higher incentives, however, could be factored into their calculations, which could push up the purchase value of your property and result in a higher LTV.
New Build Mortgages
New build properties can be appealing to first time buyers because they often appear to provide more structural security than older properties; they have fewer pre-existing issues that will need fixing; and they are generally much more energy efficient.
When to apply
As mortgage offers are generally only valid for six months, you need to ensure that your offer won’t expire before your home is ready. If your property is not complete by the time your offer is due to expire, your lender could provide an extension but you might ultimately be forced to resubmit your application.New Build Lending Criteria
Lenders are typically much stricter on the LTV percentages they will offer for newly built properties, primarily because they want to protect themselves from any early property devaluations that might occur over the first few years. As such, many lenders will only offer a maximum of an 85% LTV for a house and 70% for a flat. This could be an issue for first time buyers who do not have access to a significant sum of money for a deposit.
The Help to Buy Scheme
Help to Buy - Equity Loan
The idea of Help to Buy is it's a scheme which is designed to help hard working people get a foot on the property ladder, by lending the borrower up to 20% (40% for London) of the cost of a newly built property, the borrower then put 5% of their own deposit in and borrows the further 75% (55% for London) in the form of a mortgage.
Help to Buy has been an extremely successful scheme, since the launch it's helped the purchase of 169,102 properties (to 31st March 2018) in England, 81% of these buyers were first time buyers.
Click below to read more about Help to Buy
Help to Buy has been an extremely successful scheme, since the launch it's helped the purchase of 169,102 properties (to 31st March 2018) in England, 81% of these buyers were first time buyers.
Click below to read more about Help to Buy
Shared Ownership Mortgages
If the Help to Buy Equity Loan scheme isn’t quite right for you but you can’t comfortably afford the repayments on a mortgage for 100% of a property, the Help to Buy Shared Ownership scheme provides the opportunity to purchase a share of a property and pay rent on the remaining share.
You can choose to purchase between 20% and 75% of the total value of the property initially and if your circumstances change in the future, you will also have the option to purchase larger shares in your property when you can afford to.
The cost of additional shares will be determined by the value of your property at the time, which will be determined by the housing association. If the value of your home has increased you will pay more but if it has decreased, the cost of additional shares will fall.
You can choose to purchase between 20% and 75% of the total value of the property initially and if your circumstances change in the future, you will also have the option to purchase larger shares in your property when you can afford to.
The cost of additional shares will be determined by the value of your property at the time, which will be determined by the housing association. If the value of your home has increased you will pay more but if it has decreased, the cost of additional shares will fall.
