First Time Buyer Mortgages
Buying your first property is a big life event, so it can be as daunting as it is exciting. At Taylor-Brown Financial, we enjoy nothing more than demystifying the property buying process and helping first time buyers get their foot on the property ladder.
As in all areas of finance, there is a lot of jargon when it comes to mortgages. Getting your head around it for the first time can be confusing and frustrating.
There are around 100 mortgage lenders in the UK who offer a wide range of mortgage deals in the market. Understanding which mortgage products you are eligible for isn’t always straightforward.
This is one of the reasons why it is important to seek advice from a trusted mortgage broker, to ensure you get the right mortgage deal for your circumstances.
Here at Taylor-Brown Financial, we help many first time buyers navigate the home-buying process from start to finish. As a mortgage broker, we represent the market and have access to a wide range of mortgage products to help you. We aim to provide financial advice to make that first step to homeownership as stress-free as possible, we welcome consultancy discussions and provide you with honest and realistic advice about the best possible next steps to take in the process of buying. We can also assist you with areas such as income protection, whether you are employed or self-employed. Our advice extends to include buildings and contents Insurance acting as a broker to find you a reputable and competitive policy most suited to your needs.
We can help every step of the way, including solicitor and surveyor recommendations. To arrange a meeting, either face-to-face, by phone or via Zoom, please get in touch.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Agreement in Principle (AIP)
Securing an Agreement in Principle (AIP) with a suitable mortgage lender in the early stages of your property search can often put you in a better position when making an offer on a property, especially if demand is high. This provides reassurance to the estate agent and vendor by showing your borrowing capacity and creditworthiness.
The AIP is not a guarantee of your ability to secure the mortgage but provides evidence that you have taken all appropriate actions to support your offer. Once you have confirmation that your offer is accepted, we will then proceed to a full application for your mortgage.
As your appointed mortgage broker, we will ensure you are ‘mortgage ready’ by assessing your documents in a similar way we would expect a lender to do, therefore increasing the likelihood of your mortgage application being accepted, as we take the time to fully understand both your personal and financial circumstances prior to recommending the right mortgage for you.
Types of first-time buyer mortgages
When you are embarking on finding a first-time buyer mortgage, you may not be aware of the different types of mortgage products available to you, which could mean you miss out on the most suitable deals. Part of our process is to assess your personal circumstances and present the mortgage options that are right for you.
Here are some typical examples of first-time buyer mortgages:
Mortgage Guarantee Scheme
The government-backed Mortgage Guarantee Scheme was reintroduced to the mortgage market in early 2021, allowing eligible first-time buyers to purchase a property with just a 5% deposit. The availability of 95% mortgage rates has increased accordingly, giving many more first time buyers the opportunity to get onto the housing ladder.
Shared Ownership
Shared Ownership is a very popular scheme with first time buyers and offers the opportunity to buy a percentage of a property, rather than borrowing against the full market value.
The remaining share of the property will typically be owned by a housing association, which will charge a reduced monthly rent for its share. This is in addition to the repayments on your mortgage, so it is important to seek expert mortgage advice to fully understand your options, including how much of a share you can afford to buy from the outset.
There are two main advantages of this scheme for first time buyers. Firstly, the level of deposit required is based on the share you are agreeing to buy.
For example, if the property has a market value of £250,000 and you are agreeing to buy a 50% share, you could potentially put down just 5% of £125,000 (£6,250), rather than 5% of £250,000 (£12,500), subject to borrowing capacity.
Secondly, as you are purchasing a share of the property, the amount of mortgage borrowing required is also significantly less. This makes it much more affordable for first time buyers, particularly individuals buying alone.
It is worth noting that there are factors that may prevent you from being eligible for buying a shared-ownership property. Before your offer is likely to be accepted, you will need to be suitably qualified by the housing association, who have their own criteria for buyers who they accept, which can vary from one housing association to another. For example, they would usually state that you cannot already own another property, or if you household income is considered too high.
In addition, though it could be more affordable to staircase your property ownership throughout your tenure, it is important to understand this could be more expensive, both in terms of the monthly repayments on your mortgage, but also when it comes to the potential fees involved for staircasing too e.g. valuation fees for a RIC’s surveyor, stamp duty, mortgage fees etc.
Guarantor Mortgages
A guarantor mortgage usually involves a family member, typically a parent, who is prepared to join you on your first-time buyer mortgage to boost your borrowing potential and therefore increase your budget.
It is important to note that the guarantor is providing the lender with a guarantee that they will subsidise the mortgage payments throughout the mortgage term. They will often require the guarantor to provide their own property as security against the mortgage. So it is important that your guarantor also seeks mortgage advice.
Joint Borrower, Sole Proprietor
Another popular option to consider is a joint borrower, sole proprietor mortgage. This type of mortgage is joint with a family member, typically a parent(s), but the property is solely owned by you, so only your name will appear on the title deeds.
Similar to a guarantor mortgage, this allows your family member’s income to be considered for affordability, which will likely increase your mortgage borrowing capabilities and in turn increase your budget for the property you can consider purchasing.
The responsibility of paying the mortgage is shared, although the amount your family member is committed to paying can reduce throughout the term of the mortgage.
Get in touch with Taylor-Brown Financial to start the home-buying process
We specialise in helping first time buyers get their foot on the property ladder, especially in the Cambridge and Newmarket areas. We are here to guide you through the entire process, providing advice and friendly, down-to-earth service.
We take great care to understand each client’s circumstances so that we can recommend the most suitable mortgage products with the most suitable rates. We aim take all the hassle out of applying for a mortgage and can even put you in touch with a solicitor and surveyor.
To find out how we can help you, please get in touch.
Please note: We do not provide legal advice. These services are offered by referral to a third party only.
Is it harder to get a mortgage as a first-time buyer?
There are many conflicting articles which suggest this is the case, but in our experience, a first time buyer’s mortgage application is underwritten in much the same way as any other mortgage.
There are factors that increase the likelihood of a successful mortgage application. For example, the bigger the deposit a first time buyer can afford, the less stringent lenders will be. Also, if you have a good credit score and a proven track record of paying your credit agreements over several years, lenders will be more reassured.
How much can I borrow with a first-time buyer mortgage?
How much you can borrow varies significantly from lender to lender and is reliant on several variables, including the nature of your income, your level of indebtedness, and the size of your deposit.
The income you receive from your employment can often be interpreted differently from lender to lender, so understanding the nature of your income can make a big difference in your borrowing potential across the market.
This is true for the size of your anticipated deposit too – often the amount you can borrow will vary significantly by how much deposit you are able to put down, whether this is from your personal savings or a gift from a family member or friend (or a combination of the two).
Can I still use my Help to Buy ISA?
If you opened a Help to Buy ISA before the deadline in November 2019, as a first time buyer you can still use these funds towards your deposit. However, be aware that you can keep saving until November 2030, but need to claim these funds before 01/12/2030. There are terms and conditions which we will be happy to discuss further with you.
Please note: This information is subject to change.
What is stamp duty?
Stamp duty is a tax paid by homebuyers which is levied on a property purchase. Currently, first time buyers in England are not required to pay stamp duty on a property purchase under £425,000 (correct as of November 2022).
What is a mortgage?
A mortgage is a loan secured against a property. If the borrower is unable to keep up the repayments on the debt secured against the property, the mortgage lender can take repossession. This is why it is imperative that you receive sound mortgage advice and ensure you can meet the repayments on your mortgage.
What is a mortgage interest rate?
An interest rate for a mortgage is the amount a lender charges a borrower as a proportion of the sum lent. Interest rates vary based on your individual circumstances.
Are mortgage brokers tied to particular mortgage lenders?
Mortgage brokers, such as Taylor-Brown Financial, are not tied to any particular mortgage lenders. That means we can offer advice on which mortgage best suits your needs as a first time buyer. Our only motivation is to find you the most suitable mortgage deal and strike up a long-term working relationship to see you through your home-buying journey.
Are mortgage brokers and mortgage advisers the same thing?
The two can mean the same thing. But generally, a mortgage broker is impartial while the term ‘mortgage adviser’ refers to someone who represents a particular mortgage lender, such as a bank or building society. A mortgage adviser for a bank or building society is typically tied to that one provider, and therefore only offers products from that one financial institution. Whereas a mortgage adviser like us here at Taylor-Brown Financial has access to dozens of lenders, allowing us to compare products which is more representative of the market, before recommending the most suitable deal for your circumstances.
Are mortgage brokers regulated?
Yes, all mortgage brokers are regulated by the Financial Conduct Authority, assuring borrowers with a guarantee of fair service.
