Read through our Guide to Mortgages for First-Time Buyers to learn more about mortgages. A first-time buyer is somebody who has never bought or owned a property in the UK or abroad before. The information in this guide may still be relevant if you have previously purchased a home.
CAN YOU AFFORD A MORTGAGE?
Is joining the housing ladder the right step for you? Can you afford to pay a mortgage? There are a few questions you should ask yourself when you feel like you are ready to purchase your first home.
To better understand your affordability, it may be a good idea to start budgeting. By budgeting, you will have oversight on your incomings, outgoings and expenditure. By sticking to a budget you may be able to save more money, reduce unnecessary spending or allocate more money towards your home fund.
When applying for a mortgage, lenders will look at your credit score and credit history. Lenders want to know you are a reliable borrower and will repay any credit agreements on time. Signing up for a credit score reporting platform will let you know what your credit score is and report on your performance. A credit reporting platform will give you recommendations on how you can improve your credit score.
SAVING FOR A DEPOSIT
Before viewing any properties, you will need to save up some money for your deposit. Deposits are generally 5% or more of the total property value. Saving more than 5% will give you access to a wider range of mortgages available on the market.
Saving for a deposit can sometimes be the longest part of the journey to homeownership. Finding a saving strategy that works for you will be an important part of saving for your deposit. There are other ways to raise the funds to pay your deposit. Some first-time buyers are fortunate to receive a gifted deposit from family or friends. Money that has been inherited can also be used as a deposit.
HOMEOWNERSHIP SCHEMES FOR FIRST-TIME BUYERS
Several schemes on the market are available to first-time buyers.
There is a new scheme recently introduced called First Homes. The scheme allows eligible first-time buyers to purchase a home at 30% to 50% less than its market value.
One of the most common schemes available to first-time buyers is Shared Ownership. The Shared Ownership scheme allows you to purchase a share of a property with a mortgage and pay rent on the remaining share. Depending on your financial circumstances and goals, you can 'staircase' your Shared Ownership property and purchase more shares. You can eventually staircase to 100% to own your property outright. To browse properties that are available to buy through the Shared Ownership scheme, visit the Share to Buy website.
Prospective homeowners can also take advantage of a Lifetime ISA. The savings account allows you to save up to £4000 a year between the ages of 18-50. The government will add a 25% bonus to your savings, up to a maximum of £1,000 a year. The money saved in a LISA can be used towards a deposit for a home or as savings for later life.
Each of the schemes mentioned above will have its criteria. Buyers must meet the set criteria to take advantage of a home-buying scheme.
CHOOSING THE RIGHT MORTGAGE FOR YOU
There are different mortgage types and interest options you can choose from when arranging your mortgage. Our Mortgages Explained guide explains the different types of mortgages and different repayment methods you can choose.
When considering the different mortgage deals available, we’ll discuss the following with you:
OTHER ASSOCIATED COSTS
Apart from your monthly mortgage payments, there are other costs when buying a home. These include:
MORTGAGE ADVICE FOR FIRST-TIME BUYERS
We have more mortgage guides available that can help you navigate the mortgage market. Click the relevant guide below to learn more about mortgages.