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What Are the Best Mortgage Rates for First-Time Buyers?

Best mortgage rates for first-time buyers very much depend on the type of mortgage you need, your circumstances, and your deposit.

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Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

Almas Uddin2023-05-09
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What Are the Best Mortgage Rates for First-Time Buyers?

The best mortgage rates for first-time buyers very much depend on the type of mortgage you need, your circumstances, and your deposit. For example, a first-time buyer with a large 35% deposit, clean credit and high income may be offered a fixed-rate mortgage with an interest rate of around 4%.

However, if you have a minimum 5% deposit, are self-employed, and have some adverse credit issues on your file, the best mortgage first-time buyer rate you can viably expect may be higher.

This variance is why it is important for any first-time buyer to work with an independent broker rather than relying on price comparison sites or a bank to indicate the best mortgage first-time buyer products they qualify for – from a very limited list.

Basic Qualification Rules for First-Time Buyer Mortgages

The starting point is to verify that you are considered a first-time buyer for mortgage purposes. Although there is no reason you can't achieve the best mortgage first-time buyer rates, if you are not a true first-time buyer, you may not be able to use any of the government support schemes.

Buyers who have owned a residence, including a buy-to-let, inherited property or overseas home, are not treated as a first-time buyer, and neither will a partner be if the mortgage application is joint.

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Preparing to Purchase First-Time Buyer Houses

Once you have confirmed that you are an authentic first-time buyer, you should download your credit report from all of the big three UK credit bureaus – this allows you to check whether there are errors or defaults, for example, on your report which will impact your ability to secure the best mortgage first-time buyer rates.

It can be very useful to assess your credit score before you apply since errors can be removed, or you might decide to wait for older credit issues to be removed from your file, which takes six years, to improve your prospects as a first-time buyer.

Every first-time buyer will need a deposit unless they are applying for a guarantor mortgage or similar. The higher your deposit, the more eligible you become for the best mortgages first-time buyers.

Lenders prefer applicants with a deposit of at least 10% and ideally 15% and reserve the very best mortgage rates for first-time buyers they consider a low risk.

Calculating the Deposit Necessary to Get the Best Mortgages First-Time Buyers Rates

Your deposit can make a considerable impact on your eligibility for the best mortgage first-time buyer products because the more the lender is providing against the property value, the greater the risk they will lose out if they were to end up in a repossession scenario.

Deposits are expressed as a percentage of the purchase price or Loan to Value, so a first-time buyer purchasing a home for £250,000 will need a £12,500 deposit as 5% or £25,000 as 10%.

The best mortgages first-time buyers are normally available at a Loan to Value of 80% or less, so a deposit of 20% or more, and a first-time buyer with a larger deposit will have a greater number of lenders and products to choose between.

A first-time buyer can get a mortgage with a deposit of 5%, but it's likely their interest rates, and charges won't be the best mortgage rates for first-time buyers on the market.

Support Schemes to Help a First-Time Buyer

First-time buyer houses may qualify for varied schemes and initiatives intended to either make it easier to buy as a first-time buyer or easier to access the best mortgage first-time buyer rates.

  • First Homes provides a 30% discount on new build properties and is open to first-time buyer applicants with a low income or in other categories such as key workers.
  • The mortgage guarantee scheme allows a first-time buyer to purchase with a deposit of 5%, with a guarantee from the government against the loan.
  • A Lifetime ISA is a savings option where a first-time buyer can deposit up to £4,000 into their savings account and earn £1,000 every year in interest.

The best mortgages first-time buyers products won’t necessarily be available to a first-time buyer using any of these schemes, and lenders will still need to check whether a first-time buyer passes their eligibility check and affordability criteria.

Choosing the Right Type of First-Time Buyer Mortgage

Your access to the best mortgage rates for first-time buyers, and the repayments you make each month, will also depend on the type of first-time buyers houses you wish to buy or the type of mortgage product you apply for.

First-time buyer mortgages can be:

  • Fixed-rate first-time buyer mortgages, which have a fixed interest rate for up to five years. These products often have some of the best mortgage rates for first-time buyers, but at the term end, you may need to remortgage to avoid ending up on the lender's Standard Variable Rate (SVR).
  • Tracker mortgages have a changeable interest rate based on the base rate, so a first-time buyer might find their mortgage payment varies monthly.
  • Discounted first-time buyer mortgages work like tracker mortgages but with a fixed discount underneath the SVR, normally for up to five years.
  • Offset mortgages allow a first-time buyer to use savings, or a family deposit, to reduce the interest charges, which are calculated on the outstanding loan, less the value deposited in an account with the same bank.

We recommend seeking independent advice before choosing the right first-time buyer mortgage since each has pros and cons.

Revolution Finance Brokers works with countless first-time buyer applicants looking for the best mortgage rates for first-time buyers and can advise on the suitable lenders, products and mortgage types to help you move forward with buying first-time buyer houses.

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

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Frequently Asked

Lenders have different eligibility for first-time buyer applicants, so they will assess your income outgoings, debts and deposit before they make an offer – whether or not they can offer the best mortgage first-time buyer rates.

First-time buyer mortgage providers will also need to verify whether your credit history is compatible with their lending policies and will decide on a maximum loan based on the value of the property and your deposit.

Most applicants achieve the best mortgage rates for first-time buyers with a deposit of at least 15%, although an experienced broker can negotiate on your behalf.

Possibly, but a lot depends on how long you have been self-employed and whether you have a high enough average annual income to pass a first-time buyer affordability assessment.

Most lenders will want to see two or three years of tax returns and accounts and will decide how much they can lend against first-time buyer houses based on the average.

The ideal time to apply for a first-time buyer mortgage is when you decide to view first-time buyer houses. You can secure an agreement in principle, which will normally be valid for up to six months and will be in a better position to proceed with proof that you are likely to secure a mortgage quickly.

If you are concerned about your credit rating as a first-time buyer, it's wise to check whether the lender will run a hard credit check. If they turn down your first-time buyer application, a hard check will show on your record – so ascertaining whether you are eligible for the best mortgage first-time buyer products before you apply is advisable.

Stamp duty is an important consideration for every first-time buyer because if you purchase a home worth more than £300,000, you will need to pay a percentage tax on the value above the threshold.

Lenders will need to know the total amount you wish to borrow on your first-time buyer mortgage. If you need to increase the mortgage value to cover stamp duty, you must include this in the initial application.

For example, the best mortgage rates for first-time buyers tend to be for those with a steady income, high deposit and good credit rating. If your deposit falls from 15% to 10% because you need to use some of the borrowings to pay for stamp duty, it might mean you no longer qualify for the best mortgage first-time buyer rates.

Not necessarily, but many local councils and housing authorities have lower-cost new-build housing earmarked for first-time buyer applicants. You can also find opportunities to achieve the best mortgage rates for first-time buyers or the lowest possible purchase prices by looking at schemes such as First Homes.

Lenders won't normally adjust their best mortgages first-time buyers rates specifically because a property is a new build. Still, they may determine that your application is lower risk as a first-time buyer if the property is worth much more than you need to borrow.

The ideal option is to work with Revolution Finance Brokers, who can scour the market and recommend products to each first-time buyer that best aligns with their circumstances, borrowing needs and expectations.

We can also negotiate directly with your lender, ensuring you have the best possible chance of securing the best mortgage rates for first-time buyers and a full understanding of the overall first-time buyer mortgage costs.

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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.

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