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Mortgages – A First Time Buyers Guide
The Help to Buy scheme has experienced a huge success over the last few years. With more than one million first time buyers now recorded to have used Help to Buy*, either through the 5% deposit scheme or by obtaining a Help to Buy ISA, this has given new buyers a great way to get their foot onto the property ladder.
For anyone looking to take out a mortgage for your first home, here are some key points to consider and what to expect throughout the buying process:
This will be your first step to getting a mortgage and is possibly where Help to Buy may be of assistance. If you’re in the process of looking at mortgages, you may have already saved up a substantial deposit – usually in the region of 5-10% to begin with however, the deposit figure you need will vary depending on the cost of the house you want to purchase.
LTV, or loan to value, is a term commonly used to determine the ratio of finance in comparison to how much your property is worth. For example, if you were buying a house worth £100,000 and had a 10% deposit, you would be borrowing £90,000 from the lender – this is a 90% loan to value. Typically, an average first time buyer would need to save up around 10% of the property purchase price, or 5% if you’re using Help to Buy. Remember that a smaller deposit could result in larger mortgage payments so it’s wise to check this early on and make a note of how much you will be paying each month.
Mortgage payments aside, there will be a number of other costs you’ll need to work into your overall budget. If you’re already renting, you will likely be paying monthly bills so this might not be too much of a factor but there will be cases where large payments need to be made such as:
- Survey costs
- Solicitor’s fees
- Buildings and contents insurance
- Possible furnishing/decorating costs
- Valuation fees
- Stamp duty (if applicable)
Whilst the above list consists of mainly one-time purchasing costs, a good mortgage advisor will be able to look at your income and expenditure and give you an idea of your affordability for ongoing costs such as mortgage payments, utility bills and the like. Remember, you could lose your home if you don’t keep up repayments on your mortgage so it’s vital to understand where your affordability lies.
See our guide on tips to secure a mortgage here.
It will be an advantage to understand the application process of a mortgage beforehand. Having all your documents ready and up to date ahead of time will hopefully result in a quicker purchase process. These include:
- Wage slips or other proof of regular income – usually at least 3 months’ worth.
- Outgoings from bank statements or tax returns, again around 3 months’ worth and as recent as possible
- Records of any debts and credit card statements
- Proof of address
- Formal identification (i.e. passport)
- Any other important, regular payments such as pension, childcare costs etc.
Each and every mortgage application process will be different, even for first time buyers. It is difficult to create one clear cut guide to fit everyone so if you’re looking for further advice and would like to know more about securing a mortgage for your personal situation, then speaking to a mortgage adviser could be the right step for you. Not only can a broker find you the best deal to suit your needs, they can also guide you through the process and provide a main point of contact throughout. This is particularly important with your first property purchase as you may not be familiar with the process and your mortgage broker can guide you along every step of the way.
There are many factors to consider when it comes to buying your first property. See our first time buyer’s page for more information here, including a helpful mortgage calculator to give you an idea of how much you can borrow. Alternatively, you can call our team on 0800 2012 100.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
Source: https://www.gov.uk/government/news/help-to-buy-used-by-over-a-million – On clicking this link you will leave the regulated site of Expedite Financial Services Ltd. Neither Expedite Financial Services Ltd, nor Sesame Ltd, is responsible for the accuracy of the information contained within the linked site.
For mortgages, we can be paid by commission from the lender and a client fee of £395 paid on completion of the mortgage.