Quick Mortgage Advice for First Time Buyers

It’s daunting buying your first home and it can be a very stressful period for a whole variety of reasons. One area that may well give you sleepless nights until it’s settled is getting that all-important mortgage.

Here, we take a quick look at some mortgage basics that all first-time buyers need to know.

How Much Deposit Do You Need?

The first big hurdle is saving up enough money to afford the initial deposit. You generally need to find between 5 and 20% of the value of the home and the more you can save the more mortgage products will be open to you.

The Government’s Help to Buy Scheme is designed to enable you to get a property with just a 5% deposit by providing a low-cost loan to cover the rest of the deposit. You can find out more here.

You may also want to take advantage of a Help to Buy ISA where the government match what you save (up to a limited amount) which could massively help your savings total! Better get in there quick though as the deadline for opening a new ISA is November 2019 so go and make an appointment at the bank asap!

What Can You Afford?

It’s really important as a first-time buyer that you put together a budget of what you can afford.

Not only will there be the mortgage to pay every month, but there are also going to be other outgoings including solicitor fees, survey costs, insurance and your general living expenses.

  • As a first-time buyer, you will not have to pay stamp duty on the first £300,000 value of your property.
  • Lenders will generally carry out a stress test on your finances to make sure you can afford repayments so it’s important to be honest with them.
  • You’ll need evidence such as payslips and bills to back up your claims of being able to afford any mortgage.

If you are having trouble finding a mortgage because you are first time buyer, you can opt for a guarantor mortgage where a parent or guardian underwrites the arrangement if you get into trouble.

What Type of Mortgage?

For first-time buyers, the range of different mortgages on the market can be really confusing.

The two main types are fixed-rate and variable rate. In the former, the rate is fixed for a certain period of time such as two or five years. This means that you can be sure of your monthly outgoings. With a variable rate mortgage, the interest rate can change at any time.

There are variations including discount mortgages, tracker mortgages, capped rate and offset mortgages. That’s why it can be important to get input from a mortgage broker in the first instance to ensure you choose the right product.

You can find out about different mortgages here.

What Are Mortgage Fees and Costs?

There can be extra fees and costs associated with getting a mortgage. You might, for example, have to pay broker or advisor fees. The most important include:

  • Arrangement Fee: This is the cost of the product itself over and above the repayment of the loan and can be anything from nil to £2,000.
  • Booking Fee: This may be charged for applying for a mortgage and is often non-refundable if the deal falls through for any reason. The average fee is around £99 to £250.
  • Valuation Fee: Before the mortgage company decides to offer a loan, they will need to value your property themselves. This can cost between £150 and £1,500.
  • Mortgage Broker Fee: If you are using a broker, they may charge a set fee or take a commission. On average this is about £500.

It’s important to do all your research and take your time when arranging a mortgage. While it can be challenging and often difficult to understand, the good news is that you can shop around to get a good deal that suits you. While nothing is ever guaranteed, there are more lenders out there at the moment than ever before.

Need advice on buying your first home or looking for a property to buy? Try our online Property Search or get in touch with the Graham & Co team to discuss your requirements. You can also sign up to property alerts where we will send new properties straight to your inbox.