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

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.

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. 
Fixed Mortgages

Discount Mortgages

This type of mortgage will offer a price reduction over a set period of time on the lender’s Standard Variable Rate (SVR). A discount mortgage is a form of variable-rate mortgage, which means that your monthly payments could vary each month. 

Capped Mortgages

Although capped mortgages are a form of variable rate mortgage, they have an interest limit which means that your interest rate will not rise above an agreed level for a set period of time. In addition to guaranteeing that your monthly payments will not rise above a predetermined amount, capped mortgages also allow you to benefit from lower monthly payments when interest rates fall. 

Offset Mortgages

If you have a mortgage and a savings account with the same lender, your cash savings can be used to reduce (offset) the amount of interest you are charged on your mortgage. Rather than putting your savings into a standard account with another lender, you could put them into an offset account and doing so would mean that you wouldn't pay any interest on the mortgage debt of the equivalent sum you have in your savings account.

It is also important to note here that there are a range of other costs associated with obtaining a mortgage. For example, most lenders will require a basic valuation however you could also choose to upgrade this to a full survey or homebuyer's report. Here at the Mortgage Hut, we are here to help you to understand the options that are available to you and ensure that you secure the mortgage that is most suitable for your needs and circumstances. So, let’s take a few moments to run through some of the most suitable mortgages for first time buyers.

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
How to Improve Your Odds

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.
New Build Incentives

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.

New Build Mortgages

The Help to Buy Scheme

Help to Buy is a term that covers a range of government-backed schemes that have been designed to help first time buyers get a foot on to the property ladder.

Help to Buy - Equity Loan

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

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.
Shared Ownership Mortgages

Find your ideal mortgage at the Mortgage Hut

If you’re looking for your first mortgage, the Mortgage Hut can make your dreams of buying a property a reality. If you need help finding a mortgage provider who can save you time and money, the search ends here. Why not call The Mortgage Hut today on 02380 980304 or request a call back and we’ll use our experience and expertise to get the right mortgage for you.

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