How first time buyer mortgages work?
Let’s face it, the road to owning your first home is a bit scary.
That’s one reason why more first time buyers now trust the professional & knowledgeable advisers at Mint FS to cut through the marketing jargon, help work out what they really need, and then comb the market to reveal the very best deals available. Our independent advisers can explain how you could go about getting a first time buyer mortgage that is right for you.
With interest rates still attractively low, Mint FS believe we can quickly seek out deals that are perfect for our customers – even those with more specialist requirements – while making sure they don’t rush into any costly mistakes. We have helpful information on a wide range of topics, such as how to check your credit score If you’d like to discuss the schemes open to first time buyers such as Help To Buy or the Starter Home initiative give us a call and speak to one of our Mortgage Experts.
1: Start by planning for a deposit
Getting a sufficiently large deposit together may be hard work, but being able to put a sizable cash sum down on the property has advantages.
There are more deals at lower interests available when you have a larger deposit. Our impartial advisers can talk you through the size of deposit you’d need, and will tailor their advice to your personal circumstances.
2: Identify the right savings vehicles
There are specific savings products designed to give you a helping hand to build up your mortgage deposit. The best known is the Help to Buy Isa. You can save up £200 month (in addition to a £1,000 lump sum in your first year), and the government will give a 25% bonus when you come to complete your property purchase. You’ll earn decent interest on top of your savings.
The Help to Buy Isa is only open to new savers until 30 November 2019. The alternative is the lifetime Isa, another government-backed savings product. You can save more – £4,000 a year – and you’ll get a 25% bonus on top.
But there are fewer providers, and current interest rates are much lower.
3: Talk to your family
Several mortgage lenders offer products aimed at families, where parents or grandparents want to help their children out with a home purchase.
These include guarantor mortgages, where a family member agrees they will make the repayments if the borrower can’t, and joint mortgages, which are for children and parents buying together. Family offset mortgages aim to use parents’ savings to help reduce children’s mortgage costs.
4: Consider shared ownership
With shared ownership schemes, typically offered by housing associations, you borrow enough to buy a proportion of the property – say 75%. You pay rent on the remaining proportion. All you need is a 5% deposit!
5: Weigh up Help to Buy
The government also offers a scheme to help people struggling to buy a home. The Help to Buy equity loan scheme is available to buyers with a deposit of between 5% and 20% of a property’s value.
The government then offers you an interest-free loan to boost your deposit and secure a more competitive mortgage deal on a new-build property.
6: Consider the additional costs
Remember that you’ll also need cash to meet the additional costs of buying a home. As a first-time buyer, if the home you’re purchasing is worth more than £300,000, you’ll need to pay stamp duty.
Use our stamp duty calculator to work out your potential bill.
You’ll need to factor in mortgage arrangement fees charged by your lender, as well as legal fees to pay your solicitor, plus charges for a survey of the property and Land Registry fees for registering your ownership of it.
And don’t forget you may have to find money to furnish your new home.
7: Check Your Credit Score
Your credit report is essentially your credit history. When you apply for a mortgage the lender will normally check your credit report and use the information, along with their own policies, to assess whether you are likely to repay what you owe on time. The information it contains plays a big part in determining whether or not you can get a mortgage.
The following credit reference agencies can provide you with a copy of your credit report:
Key things to be aware of when checking your report:
- You can request a copy of your credit report from any of the agencies online or by post. Under the Consumer Credit Act, you have a right to obtain your full statutory credit report at a cost of £2 per credit reference agency.
- As well as the £2 statutory report, CallCredit, Equifax and Experian all offer free online credit reports – but only as temporary introductions to their paid-for services. Noddle do not offer free trials, instead their service is free.
- If you sign up for a free trial and don’t cancel before the end of the free period you will start being charged for access.
- Different lenders use different credit reference agencies, so if you spot a mistake on any of your credit files, it’s important to get this rectified across all three (Noddle is covered when you make the correction with CallCredit).
- People you are financially linked to can also impact your credit score, and so if you’re applying for a joint mortgage for example it may well be worth both parties checking their score