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The Independent Guide to Finding the Best First-Time Buyer Mortgage

The Independent Guide to Finding the Best First-Time Buyer Mortgage
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Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

Almas Uddin02 Dec 2023

The Independent Guide to Finding the Best First-Time Buyer Mortgage

Buying a property as a first time buyer opens up several opportunities, with a range of support schemes, Stamp Duty exemptions and different mortgage products designed to make it easier to get onto the property ladder.

However, what's not always so easy is working out which lender to apply to - and getting approval for a reasonable interest rate.

This guide from Revolution Finance Brokers runs through all the essential information you should have before applying as a first-time buyer from the independent, whole-of-market experts.

How Much Could I Borrow Through a First Time Buyer Mortgage?

Lending rules are pretty strict, and although banks used to offer about five times your annual income, they need to comply with regulations and ensure you can afford the mortgage they agree to.

There isn't a simple calculation because the multiple of your salary will also depend on lender rules around:

  • Your yearly earnings and type of employment.
  • How much you have to put down as a deposit.
  • Regular outgoings and pre-existing debt.
  • Your credit history.

Even at the agreement in principle stage, a lender is likely to need to know your income and apply a stress test - a theoretical interest rate to make sure you'll still be able to manage your repayments if interest rates rise.

The best way to check what you can afford is to give us a call or use the Revolution contact form, and we'll run through your requested mortgage value to advise what's possible.

What is a Fixed-Rate First Time Buyer Mortgage?

Most first-time buyers go for a fixed-rate mortgage, where your interest is locked in over a set period - usually between two and five years.

From a budgeting point of view, that's great because you know your interest won't change, and your monthly Direct Debit will be the same value until the end of the fixed period.

The downside is that you could end up paying more than on a variable mortgage and probably won't be able to exit the agreement until your fixed period is up.

First Time Buyer Mortgage Advice for Variable Rate Mortgages

Variable mortgages come with an equal set of pros and cons.

The interest rate will change along with the base rate, although the monthly costs tend to be slightly cheaper than most fixed-rate mortgages.

Your pitfall here is that with rising base rates, there is the potential for your mortgage costs to increase above what you've budgeted for.

Do I Need a Mortgage Broker First Time Buyer Specialist?

We strongly advise you to consult an independent broker before you apply - even if you're confident that you'll meet all of the eligibility and affordability criteria!

That's because a negotiation by a broker on your behalf could shave thousands off your overall mortgage costs and open up access to specialist lenders who don't offer products directly to the general public.

How to Compare First Time Buyer Mortgages?

Mortgage comparisons can be tricky because sometimes the costs are less transparent, and it's not clear which option works out as the most cost-effective.

You'll also need to budget for additional charges - some of which your lender might include in a first-time buyer offer. Be warned; freebies usually mean you’re paying more somewhere else!

Extra costs to be mindful of include:

  • Conveyancing and legal fees
  • Surveys and searches against the property
  • Stamp Duty (the first-time buyer exemption notwithstanding)
  • Buildings insurance
  • Mortgage arrangement charges

How to Get a Mortgage UK First Time Buyer Appropriate?

The best way to get a mortgage as a first-time buyer is to come to your application equipped with all the information and supporting documentation you need.

Lenders routinely reject applicants because they've missed a few fields on the application or haven't proven a figure, so you can do several things to move things along:

  • Download your credit file from all three big agencies, and ensure you've corrected any errors or closed any unused accounts.
  • Save as much as you can for your cash deposit - the larger the down payment, the lower the risk, and the better your rate.

The optimal action is to speak with a mortgage broker who'll give you a clear, independent assessment of your circumstances and stop you from applying for a mortgage that doesn't represent a great deal.

Do I Need to Be in Employment to Apply for Mortgage Deals for First Time Buyers?

Normally, lenders will prefer first-time buyer applicants with permanent, contracted employment - that means they are assured that your income is stable and unlikely to change suddenly.

There are self-employed mortgages and first-time buyer products for directors, but anything outside of the norm will certainly need support from a broker since this falls outside the scope of what most banks will offer.

Which Schemes Might a First Time Buyer Mortgage Advisor Recommend?

The First Homes Scheme is one of the multiple initiatives that might be worth exploring.

It works based on selling new build development properties to eligible first-time buyers at a discount of 30% on the usual market value.

Mortgage Guarantees to Support 90 Mortgages for First Time Buyers

Another popular option is the mortgage guarantee scheme. You can apply provided you have a minimum 5% deposit (and qualify with a 10% down payment!) and request a government guarantee to support your application.

Lenders are more likely to approve your application since the guarantee mitigates their risk - but you must buy a property worth under £600,000 to be eligible.

How Do I Check if I Am Eligible for Mortgage Deals for First Time Buyers?

Although first-time buyer seems an obvious status, it isn't always that clear cut!

You'll usually be eligible if you and anybody else on the application are buying a first residential home.

If you've ever owned a home in the UK or elsewhere, you probably won't qualify for first-time buyer deals or support schemes.

Unfortunately, joint tenancies under shared ownership don't qualify, as although you may not have owned a home outright, you have held a share in a property.

What Are the Best Mortgages for First Time Buyers?

The best mortgage for you will depend on your finances and circumstances, but the general categories to choose between include:
  • Fixed-rate mortgages: with static monthly repayments for an initial term.
  • Tracker mortgages: interest rates vary along with the Bank of England base rate.
  • Discount mortgage: similar to tracker mortgages, but with the rate set at a percentage underneath the lender's Standard Variable Rate.
  • Offset mortgages: use your savings to offset your mortgage balance and reduce the interest payable

What Deposit Will I Need for a First Time Buyer Mortgage UK?

The bigger your deposit, the better! You'll get a more favourable interest rate the higher the down payment.

However, you can usually get a first-time buyer mortgage with a minimum down payment of 5%, which means you're borrowing 95% from the lender or looking for a 95% LTV mortgage.

For example, if you want to buy a home worth £150,000 and have a 5% deposit of £7,500, you need to apply for £142,500 to settle the balance.

Does a Higher Deposit Mean Access to the Best Mortgage Deals for First Time Buyers?

Essentially, yes. That said, you could think about a Help to Buy equity loan to bump up a 5% deposit to 25% - although you'll need to refinance the loan in five years when the interest-free period ends.

First Time Buyer Mortgage Calculator - How Much Can I Afford to Borrow?

If you're unsure how much you can afford on a first-time buyer mortgage, you'll need to think about your deposit, the maximum a bank or building society will lend, and what else you need to cover within your budget.

Give us a call if you're unsure, and we'll help you establish affordability to start house hunting with confidence.

How to Calculate Affordability on the Cheapest First Time Buyer Mortgage

Affordability metrics are down to the lender.

Most conventional mortgages are available on four or 4.5 times your yearly income (for all applicants if it's a joint mortgage application).

Note that some lenders will offer more, even five or six times your salary, although it's pretty unlikely you'll get this generous mortgage cap as a first-time buyer.

Is There a Mortgage for Bad Credit First Time Buyer Applicants?

Every mortgage lender will need to assess the application and look at income, debts, outgoings, credit records and liabilities - this is a mandatory process and applies even to bad credit lenders.

Most banks won't lend to first-time buyers with adverse credit, but several respected specialist lenders have a more flexible approach to bad credit applicants.

You'll normally pay a higher interest rate if you have any adverse credit issues, but there's normally a suitable solution if they aren't severe (such as bankruptcy).

Remember that credit reports disappear from your record after six years, so it could be worth waiting a few months if you're close to that point!

You can also refinance your mortgage when the six years roll around and will almost always get a better interest rate without old bad credit reports on your file.

Choosing the Right Time to Apply for 95 Mortgages for First Time Buyers

We often speak to first-time buyers putting off their mortgage application - but the best choice is to go ahead and start assessing your options!

That's because:

  • House prices are rarely static, and they're only moving one way - up!
  • A property isn't likely to be worth any less in a year or two than it is now.
  • Even the hardest savers may find that inflation and property values increase faster than they can add savings to their budget.

It's wise to get an agreement in principle in place from one or more lenders before you start viewing properties.

That means you won't look at a home you can't afford to buy and won't have the disappointment of being turned down if you don't request an agreement in principle before you start your property search.

Which Are the Best Mortgage Providers for First Time Buyers?

There isn't one lender we'd recommend because all have pros and cons and policies that determine the type of applicant they're most likely to accept.

However, we would point out that mainstream banks are one of the multiple options and sometimes don't have the most favourable deals for first-time buyers.

Are Banks the Best Mortgage Lenders for First Time Buyers?

Your regular bank can be a good bet - they'll likely know a bit about you to streamline the application process and may offer better deals to existing customers than they publish as general rates.

We'd suggest looking at niche lenders, too, because there's a chance you'll find a much better interest rate that could save you a huge amount of money.

How Long is a First Time Home Buyer Mortgage Offer Valid?

Most agreements in principle are valid for 30 days and up to three months.

It's great to have an agreement so you have a reasonable amount of confidence that your application will be approved - but this is a tentative agreement, not a guarantee your full application will pass eligibility inspections!

Are There 5 Deposit Mortgages for First Time Buyers?

If you have a 5% deposit, you will have limited options, but products are available to first-time buyers with a minimum deposit.

In most cases, it's important to use the mortgage guarantee scheme or Help to Buy since the rates on a 95% LTV mortgage won't be as good as if you can access a support initiative to reinforce your application.

Is There a First Time Buyer Mortgage No Deposit?

Mortgages at 100% LTV exist - but they're extremely rare.

The only situation where a lender would consider lending 100% of the value of a property with no deposit is if you can offer another form of security worth more than the property value you're buying.

Is Help to Buy Useful for a First Time Buyer Mortgage Deposit?

Help to Buy is a government scheme designed to help first-time buyers with a deposit - the minimum is 5%.

You borrow up to 20% of the property value in the form of an equity loan and then have a 25% deposit to offer a lender, which means your costs go down and your eligibility goes up!

The loan is repayable and starts to attract interest after five years, but it can be a valuable way to boost your down payment.

Is Shared Ownership the Best Mortgages for First Time Buyers?

Shared Ownership is another opportunity and allows you to purchase a proportion of your property, in chunks from 25% to 75%.

Applicants have to pay a nominal rent for the balance owned by the local housing association but need a much smaller mortgage and can gradually increase their ownership.

How Does a Lifetime ISA Help Reduce First Time Buyer Mortgage Rates?

Lifetime ISAs are savings products available to people from 18 to 40 and are a further government incentive to maximise your savings towards a deposit.

You can contribute up to £4,000 a year and get a 25% top-up - a £1,000 boost every 12 months.

If you're saving for a deposit, you'll get to your target faster and won't need to pay anything back.

How Can I Get the Best Mortgage Rates for First Time Buyers?

Our suggestion is to consult a seasoned broker who will support you throughout the process - from choosing lenders, compiling an application, negotiating terms and getting your deal across the line.

Everyone's circumstances and finances are different, so it's important to ensure you select a lender with appropriate eligibility criteria to avoid frustration, rejection, or paying over the odds for your first property purchase.

Expert Tips on How to Get a Mortgage First Time Buyer

Please contact mortgage brokers on 0330 304 3040, via our contact form, or email us at [email protected].

We have years of expertise in putting together mortgage applications and helping first-time buyers find the perfect mortgage product and settle in once they've picked up their keys as a homeowner.

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FCA disclaimer

The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature.

We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.