First Time Buyer Mortgages

Many Mortgage Lenders have different methods of assessing how much you will be able to borrow to buy your first home. Generally speaking, your employment status, your credit history, your ability to afford and repay a mortgage and the type of property you wish to purchase will all be taken into account.

Lenders will need evidence of income such as payslips, bank statements or tax returns. Lenders may also take into account income from pensions or investments, overtime, in addition to your basic salary and any child maintenance or financial support from ex-partners.

In order for the lender to assess your affordability, you will need to be prepared to provide details of your outgoings such as loan or credit agreements, credit cards, maintenance payments, bills such as council tax and utilities and other monthly outgoings.

When applying for a mortgage the lender will look at your financial circumstances as whole and assess whether they think you will be able to pay the mortgage each month. They will also consider your ability to pay if you were to become ill, lose your job or have a life change which could affect your payments such as taking a career break or having a baby.

Finding a good deal can be difficult when trying to purchase your first home for many reasons:

• It is possible that you might have a relatively low deposit available, and therefore you might need a high Loan-to-Value ratio (LTV). Unfortunately, higher LTV mortgages typically have higher than average fees and interest rates.

• Young first time buyers may have low incomes, due to being in the early stages of their career. This will limit the amount that a mortgage lender will let them borrow because of affordability risks.

• Single first time buyers may struggle to borrow enough to purchase a property based on just one income.

• First time buyers struggling to save a deposit for a home are unlikely to have a large amount of savings and may find it hard to budget for the additional costs of buying a home such as mortgage arrangement fees, valuation, homebuyers report or full survey, stamp duty and legal fees - it all adds up.

For first time buyers there are a number of options:

Help to Buy

The Help to Buy Equity Loan is a government scheme that could help you purchase a new build home costing under £600,000 with just a 5% deposit by borrowing up to 20% (40% in London) of the property’s value as a loan which is interest free for the first 5 years.

Right to Buy

If you currently rent your home from the council, it may be possible to purchase your home at a discounted rate through the Right to Buy scheme. The size of the discount will depend on various factors including the area you live in, the type of property and how long you have been a tenant for.

Shared Ownership

Shared ownership schemes enable you to buy a share in a property and then pay rent to a landlord (normally the council or a housing association) on the remaining part. You can initially purchase between 25% and 75% of your home and then have the option to buy more shares up to 100% in the future.

Guarantor Mortgage

With a guarantor mortgage, a parent, guardian or close relative is legally responsible for your mortgage payments if you are unable to make them. This type of mortgage will only be offered by certain lenders and the guarantor must be able to prove they can meet the payments if needed.

Joint Mortgage with Friends