Mortgages for first-time buyers
If you’re a first-time buyer, you may have spent the past few years saving for a deposit to help you get on the property ladder.
If so, the next step is to find out how much you can borrow so you’ll have a better idea of the type of property you can afford to buy when you start looking for your first home.
Your deposit is the amount of money you’ve saved up to put towards your first home and it will help determine how much you then need to borrow as a mortgage.
The more money you have saved as a deposit, the less you will need to borrow from the bank. And if you have a bigger deposit, you’ll have access to more competitive mortgage rates.
As well as saving for your initial deposit, you’ll also need funds to put towards fees like property searches, surveys, mortgage arrangement fees, solicitor fees, stamp duty, home insurance, removal costs and so on.
When you apply for a mortgage, the lender will assess your affordability by looking at your annual salary and any other income you receive, as well as all of your outgoings, including credit card and loan debts, household bills, childcare, travel and general living costs.
The lender will also check your credit history to see whether you’re a reliable borrower and will use this and its affordability assessment to decide how much you can borrow.
Mortgage providers will usually have a maximum loan-to-value (LTV) they are prepared to offer you. This is the maximum mortgage loan you can take out as a percentage of the property value.
Before you start viewing properties, it’s a good idea for us to get you a mortgage agreement in principle from a lender. This will give you an idea of how much you can borrow and it will prove to estate agents you are serious about buying.
Some lenders will carry out a hard credit check for this - which then appears on your credit file. Some lenders will run a soft search which won’t affect your credit score.
Your agreement in principle should last between 30 and 90 days. Keep in mind that this is only an estimate and isn’t a guaranteed mortgage offer.
Having an idea of how much you can borrow will help you work out how much you can afford to pay for your new home, and should give you a better idea of your price range when it comes to viewing houses.
The actual mortgage loan you take out will then depend on how much you pay for the property, and whether you want to use any of your savings for making home improvements.
You should always make sure you’d be able to afford the monthly repayments before deciding whether to make an offer.
If your deposit and mortgage amount isn’t enough to get you onto the property ladder, you might be able to buy a home with other people – either a partner, friend or family member. They could help add to your deposit, and with their income plus yours, you might be able to take out a larger mortgage loan and get a property together.
A joint mortgage could mean that you and the other tenants own equal parts of the property (joint tenants), or you might own a share of the home (tenants in common) which might not be the same amount as the others.
How much you’ll pay in monthly mortgage repayments will depend on what type of mortgage you get. The types of mortgages available include: