Mortgages for First Time Buyers
First Time Buyer Mortgages
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.
Types of Mortgage Available
Tracker MortgagesTracker 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.
How to Improve Your Odds
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
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
When to applyAs 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 CriteriaLenders 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
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
The Help to Buy ISA
If you are saving to purchase your first home and put your money into a Help to Buy ISA, the Government will enhance your savings by 25%. When you open your account, you can put in an initial deposit of up to £1,200 and for every £200 payment you make each month, you will receive a £50 government bonus. The government bonus is capped at a maximum of £3,000 and you will need to have saved £1,600 before you can claim the minimum bonus of £400. When you are ready to purchase your first home, your conveyancer or solicitor will apply for your bonus.
Crucially, Help to Buy ISA accounts are available for every first time buyer, and not just for each household. This means that if you are planning to purchase a property with a partner, you could receive up to £6,000 towards the cost of your first home. If this scheme doesn’t sound quite right for you and your circumstances however, there are other options that might better suit your needs.
Shared Ownership Mortgages
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.
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