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What Is a First-Time Buyer Mortgage UK?

First-time buyer mortgage UK is a product created to help first-time buyers. The terms might include a lower-than-usual deposit requirement, such as a 5% mortgage, or might offer incentives, such as cashback, to attract first-time buyers.

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

Almas Uddin2024-06-14
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What Is a First-Time Buyer Mortgage UK?

We often speak with clients looking for mortgages for first-time buyer applicants who are unsure which products to choose, which are designed for them, and which are eligible for a first-time buyer scheme.

In short, a first-time buyer mortgage UK is a product created to help first-time buyers. The terms might include a lower-than-usual deposit requirement, such as a 5% mortgage, or might offer incentives, such as cashback, to attract first-time buyers.

However, a common misconception is that a first-time buyer mortgage is easier to qualify for. Regardless of whether you’re applying for a mortgage for first-time buyers that has been specifically designed for that demographic, the lender’s other policies around affordability and credit scoring still apply.

How to Apply for a First-Time Buyers Mortgage

The application process for a first-time buyer mortgage is like any other. However, you will need a deposit since, unlike a mortgage applicant with an existing home, you won’t have any equity to offer as security.

Lenders will assess applicants against several criteria, but you can improve your chances of approval for a first-time buyers mortgage by:

  • Offering a deposit of at least the minimum, which could be achieved through savings, gifts from family members, or boosting your savings through a first-time buyer scheme such as a Lifetime ISA.
  • Applying for a guarantor mortgage if you haven’t got a sufficient deposit to qualify for the first-time buyer mortgage you would like.
  • Evidencing a clean credit score or improving your credit rating by registering to vote and closing unused accounts before you apply for mortgages for first-time buyer applicants.
  • Providing full details of your employment, income, debt and outgoings to assist with an affordability assessment.

One of the most common reasons people are turned down for a first-time buyers mortgage is that they make a mistake on the paperwork, miss out a field, or fail to provide supporting documents. An experienced broker ensures your first-time buyer mortgage application is complete and correct before submitting it to avoid this stumbling block.

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Based on your yearly income,
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Most lenders will let you borrow 4.5 times your annual salary so, as long as you have a standard 10% deposit, you should be able to borrow this much.

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Depending on your personal circumstances, some lenders may let you borrow 5 times your salary.

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Lenders usually cap the amount they lend at 5.5 times your salary, so it’s unlikely you’ll be able to borrow more than this.

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Eligibility Criteria for a First-Time Buyer Mortgage UK

Every lender has varying lending policies and rules, so it's vital you check these before you apply. Otherwise, you are very likely to have your first-time buyer application refused.

Policies could relate, for example, to your age, your employment type, the location of the property, the type of home you wish to buy, and other factors such as your credit rating or deposit source.

Brokers work to assess your circumstances and match your borrowing requirements with a suitable lender, thereby reducing any likelihood of being rejected for a first-time buyers mortgage.

Deposit Requirements on a Mortgage for First-Time Buyers

The deposit you pay is calculated as a percentage of the property price. For example, if you're buying a home for £250,000, a 5% deposit would be £12,500, and a 10% deposit would be £25,000.

As a rough indication, lenders with products enrolled in the mortgage guarantee first-time buyer scheme require a minimum deposit of 5%, and there are sometimes products outside of the scheme with a similar down payment requirement.

Other lenders will need any applicant for a first-time buyers mortgage to put down at least 10%, and potentially more if you’re looking to purchase a buy-to-let.

Being able to secure mortgages for first-time buyers with low deposits can be useful in that it is easier to purchase a property without having to save a larger value. However, the downside is that a first-time buyer mortgage based on a higher Loan to Value will also be more expensive in interest charges.

Loan to Value is the amount you'd like to borrow through a first-time buyer mortgage against the property value. If you are buying the same £250,000 property and have a 10% deposit, your Loan to Value is 90% since you're applying to borrow £225,000 towards the cost and covering the other £12,500 through your down payment.

The ideal situation is to have a 15% deposit before you apply for mortgages for first-time buyer applicants, although that may not always be possible.

Calculating Monthly Repayments on a First-Time Buyers Mortgage

We often work with clients who are concerned about what their first-time buyers mortgage will cost in monthly repayments, and it is important to budget and be confident you can afford the costs.

Lenders add interest to your first-time buyer mortgage repayments, either based on a fixed-term interest rate or with a changeable interest charge for tracker or variable mortgages, which adjust according to the Bank of England base rates.

Higher-value mortgages for first-time buyers will inevitably cost more to repay, and the higher your deposit, the lower your repayments since the total debt value will be smaller.

Another influential factor is the term. Most first-time buyers mortgage products run for a standard 20 or 25 years. Still, if you have a longer contract that runs for, say, 30 years, your monthly repayments will reduce accordingly since you're spreading the repayment over a longer period.

It is worth reiterating that a longer term means your first-time buyer mortgage UK will probably cost more overall, even if the monthly payments are lower.

Using a First-Time Buyer Scheme to Help With a First-Time Buyer Mortgage UK

There are several ways to improve your chances of approval, reduce your first-time buyer mortgage deposit requirement, or make it easier to apply – and the right scheme may depend on your circumstances, the value and location of the home, and your financial position.

The Help to Buy ISA is not now available, nor is the Help to Buy equity loan scheme, but you can still open a Lifetime ISA if you are below 39 and use the account to increase the deposit you have to put down in a mortgage for first-time buyers.

This ISA pays £1,000 on top of every £4,000 you save a year, so you can effectively increase your deposit by 25% every 12 months, which should help you save a deposit faster and increase the number of mortgages for first-time buyer applicants you are eligible for.

Other schemes you might wish to consider to help with your first-time buyers mortgage include:

  • Right to Buy or Right to Acquire, providing discounted property prices for people who have lived long-term in council or housing association homes to buy the residence with a first-time buyer mortgage.
  • Shared Ownership, where you can take out a first-time buyer mortgage for a proportion of the property and pay a rental premium on the balance owned by the housing association. Over time, you can buy additional ratios and build up to full ownership.
  • First Homes is designed for low-income buyers and provides considerable discounts on the value needed through a first-time buyer mortgage to purchase a home.

The mortgage guarantee first-time buyer scheme we mentioned earlier may also be useful. The government guarantees the loan, making it easier for a lender to approve mortgages for first-time buyer applicants with a small 5% minimum deposit.

If you would like further advice about applying for a first-time buyer mortgage UK or working out which help schemes are best suited to your circumstances, please get in touch with mortgage brokers at any time.

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

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Frequently Asked
Questions

On your application, you'll be asked to verify what you earn, your regular outgoings, any other debts you may have, and your savings – as well as the deposit you expect to put down on your first-time buyer mortgage.

Lenders use that information to calculate whether they feel you can afford a first-time buyer mortgage. They will ask for evidence such as payslips, proof of ID and bank statements to back up the information provided.

Possibly – although a first-time buyer scheme will be aimed at people purchasing a primary residential home, it may be viable to apply for a first-time buyers mortgage to invest in a rental property. However, as a first-time buyer, you will need a larger deposit and often a guarantor to offset the lender's perceived risk.

It is also worth considering that you may find it harder to take out a first-time buyers mortgage to purchase a home to live in if you already have a buy-to-let mortgage since this will increase your debt-to-income ratio.

Another option could be to take out a first-time buyers mortgage, live in a home for at least a year, and then seek an agreement to let from the lender, seeking their approval to lease the house without changing mortgage products.

Lenders are not obliged to accept and may charge a higher interest rate if they do.

There isn’t necessarily a good or bad time, although interest rates do fluctuate, as does the housing market and property availability. Buying a home is a large commitment, so you will normally need to wait until you are in long-term employment or have two to three years of self-employment income records to be eligible for a first-time buyer mortgage UK.

You can also improve your chances of approval for a first-time buyer mortgage by paying down debts, improving your credit score, and avoiding taking on short-term debt in the run-up to submitting your application.

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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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