First Time Buyer Mortgages
Mortgage Advice for Contractors and Self Employed
Mortgages for First Time Buyers
Increasing property prices and cautious mortgage lenders, make getting on the property ladder a daunting task to potential first time buyers in today?s market. However, the current low interest rates and a range of options and deals for first time buyers, could enable many to make that first step on the ladder with as little as a 5% deposit.
Mortgage Application Process for First Time Buyers
Mortgage Lenders have various, complex ways of assessing how much you will be able to borrow to buy your first home but your employment status, credit history, affordability and type of property you wish to purchase will all be taken into account.
Lenders will require evidence of income such as payslips, bank statements or tax returns and accounts if you are self-employed. They may also take into account income from pensions or investments, overtime, commission or freelance work in addition to your basic salary and any child maintenance or financial support from ex-partners.
In order for the lender to assess your affordability, you will need to be prepared to provide details of your outgoings such as loan or credit agreements, credit cards, maintenance payments, bills such as council tax and utilities and other monthly outgoings.
When applying for a mortgage the lender will look at your financial circumstances as whole and assess whether they think you will be able to pay the mortgage each month. They will also consider your ability to pay if you were to become ill, lose your job or have a life change which could affect your payments such as taking a career break or having a baby.
Challenges Facing First Time Buyers
Finding a good deal can be difficult when trying to purchase your first home for several reasons:
It is likely that you will have a low deposit, possibly as little as 5 or 10% of the property?s value and therefore a high Loan-to-Value ratio (LTV). Unfortunately, higher LTV mortgages typically have higher than average fees and interest rates.
Young first time buyers may have a relatively low income, due to being in the early stages of their career. This will limit the amount that a mortgage lender will let them borrow.
Single first time buyers may struggle to borrow enough to purchase a property based on just one income.
- First time buyers struggling to save a deposit for a home are unlikely to have a large amount of saving and may find it hard to budget for the additional costs of buying a home such as mortgage arrangement fees, valuation, homebuyers report or full survey, stamp duty and legal fees.
Mortgage Options for First Time Buyers
For first time buyers who are struggling to save enough deposit or borrow enough to purchase a suitable property, there are a number of options:
Help to Buy
The Help to Buy Equity Loan is a government scheme that could help you purchase a new build home costing under £600,000 with just a 5% deposit by borrowing up to 20% (40% in London) of the property?s value as a loan which is interest free for the first 5 years.
Right to Buy
If you currently rent your home from the council, it may be possible to purchase your home at a discounted rate through the Right to Buy scheme. The size of the discount will depend on various factors including the area you live in, the type of property and how long you have been a tenant for.
Shared ownership schemes enable you to buy a share in a property and then pay rent to a landlord (normally the council or a housing association) on the remaining part. You can initially purchase between 25% and 75% of your home and then have the option to buy more shares up to 100% in the future.
With a guarantor mortgage, a parent, guardian or close relative is legally responsible for your mortgage payments if you are unable to make them. This type of mortgage will only be offered by certain lenders and the guarantor must be able to prove they can meet the payments if needed.
Joint Mortgage with FriendsIf you are considering purchasing a property jointly with a friend or group of friends you will need a joint mortgage. Buying a property in this way can significantly decrease the financial burden, however it is important you think carefully about who you choose to make such a large commitment with.
Ways a Mortgage Broker can Help First Time Buyers
Provide expert help and support for inexperienced buyers.
Have access to thousands of mortgage deals.
Spend time carefully assessing your situation and working out which mortgage is most suitable for you.
Help you understand any important decisions about your mortgage such as: How long you want the term? Is a fixed or tracker mortgage best for you?
- Knowledge and experience when it comes to lenders who are more sympathetic and generous towards first time buyers