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Last Updated: 8th August 2023

What is a First Time Buyer Mortgage?

A first-time buyer mortgage is a specialised home loan tailored for individuals venturing into the property market for the very first time. It’s designed to make homeownership more accessible by offering unique benefits and incentives.

Unlike regular mortgages, first time buyer mortgages often come with lower deposit requirements, making it easier to get started on the property ladder. This reduced upfront cost can be a significant advantage for those saving for their first home.

First time buyer mortgages also open the door to various government schemes and support, which can provide additional financial assistance. These schemes aim to ease the financial burden associated with purchasing a property, making the dream of homeownership more achievable.

Benefits of First Time Buyer Mortgages

First time buyer mortgages offer a range of advantages and incentives that make them a smart choice for aspiring homeowners. Understanding these benefits can help you make an informed decision when embarking on your homeownership journey.

Lower Deposit Requirements: One of the most significant benefits of first time buyer mortgages is the potential for lower deposit requirements. Traditional mortgages often demand sizeable upfront deposits, which can be challenging for first time buyers. With a first-time buyer mortgage, lenders may be more flexible, allowing you to get started with a smaller down payment.

Government Schemes and Support: First time buyers often have access to various government-backed schemes and support. These initiatives can provide financial assistance, reduced costs, or shared equity, making it easier for you to step onto the property ladder.

Competitive Interest Rates: Many first time buyer mortgage deals come with competitive interest rates, helping you save money over the life of your loan. Lower interest rates can result in more manageable monthly repayments, allowing you to budget more effectively.

Specialised Mortgage Products: First time buyer mortgages are specifically designed to cater to the needs of new buyers. These specialised products may come with more flexible terms and features tailored to your unique circumstances.

Stamp Duty Exemptions: In some cases, first time buyers may be eligible for stamp duty exemptions or reductions. This can lead to significant savings during the property purchase process.

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Types of First Time Buyer Mortgages

Navigating the world of mortgages as a first time buyer can be overwhelming, but understanding the various types available is essential to making the right choice. Here are three common types of first time buyer mortgages to consider:

Fixed-Rate Mortgages for First-Time Buyers: A fixed-rate mortgage offers stability and peace of mind for first time buyers. With this type of mortgage, the interest rate remains constant throughout an initial period, typically ranging from two to five years. This means your monthly repayments remain predictable, unaffected by fluctuations in the interest rates during the fixed period. It’s an excellent option if you prefer budget certainty and protection against potential interest rate increases.

Tracker Mortgages and Their Benefits: Tracker mortgages are tied to the Bank of England’s base rate, which means the interest rate fluctuates in line with changes in the base rate. For first time buyers, this can be advantageous when the base rate is low, as it can lead to lower mortgage repayments. However, it’s essential to be prepared for potential rate increases, which could impact your monthly payments. Tracker mortgages often come with an initial period where the interest rate is fixed at a margin above the base rate before transitioning to tracking the base rate.

Shared Ownership Schemes for First Time Buyers: Shared ownership schemes enable first time buyers to purchase a percentage of a property (usually between 25% to 75%) and pay rent on the remaining share. This option is particularly helpful for buyers who may not be able to afford a full mortgage on their desired property. Over time, buyers can increase their ownership by buying additional shares, a process known as “staircasing.” Shared ownership can be an excellent way for first time buyers to step onto the property ladder with a more affordable initial investment.

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With a Mortgage Experience adviser on your team, you can sit back, relax, and make yourself a cuppa, safe in the knowledge that we will be doing all the heavy lifting to find you a suitable mortgage with the best rates available. This gives you more time to pack, and well, do the actual physical heavy lifting (should you wish) as you move into and enjoy your new home or the financial benefits of your remortgage.

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Minimum Deposit Needed for First Time Buyers

The minimum deposit required for first-time buyers can vary depending on several factors, including the mortgage lender, the property’s value, and your financial circumstances. Generally, most lenders require a minimum deposit of around 5% to 10% of the property’s purchase price. However, putting down a larger deposit, if possible, can offer several benefits, including potentially access to more favourable mortgage rates and increased chances of mortgage approval.


Understanding Deposit Requirements

As a first-time buyer, saving for a deposit is a crucial step in the journey towards homeownership. The deposit is a lump sum of money you need to put down when purchasing a property, and it plays a significant role in securing a mortgage.

First Time Buyers FAQs

What is the minimum deposit for a first-time buyer?

This may vary depending on your circumstances, however, for many lenders, your deposit should be at least 5% of the property’s value.

Remember, if you can save more and put down a larger deposit, then typically you should be able to get a lower interest rate on your mortgage.

How much can I borrow?

How much you could borrow would depend on your circumstances. For instance, lenders will undertake affordability checks, with your deposit, and credit history factoring into the decision.

What is a joint mortgage?

A joint mortgage is when you take out a mortgage with someone else. This could be a spouse, partner, friend or family member. Both people on the mortgage will be responsible for payments. Joint mortgages are usually for two people, although some lenders will allow more. Bear in mind that the more people who are on the mortgage, the more people become liable for repayments.

What is LTV?

LTV stands for loan-to-value ratio, and it is the amount of money you can borrow on a mortgage versus the overall worth of your property. For example, if the property you want to buy is worth £200k, and the lender will lend you 90% of its value, the mortgage will be £180,000 and your deposit will need to be £20,000. Most lenders will have a maximum LTV that they are willing to offer.

Should I buy a freehold or leasehold property?

If this is your first time buying a house, you’ll probably come across the terms freehold and leasehold quite a lot in your search. 

Freehold means you own both the property and the land it sits on. Most houses you buy are freehold. Leasehold means that you will own the property but not the land it is on, and it remains this way for the length of your lease with the landowner. Most maisonettes and flats will be leasehold, meaning you will have to pay fees, such as service charges and ground rent.

There are pros and cons to each, which you should consider carefully before making a decision. It can be difficult for properties with short leases to sell on, and some lenders won’t consider a mortgage if the lease has less than 70 years left.

What is a guarantor mortgage?

You may have come across the term ‘guarantor’ if you have rented in the past. A guarantor is someone who makes repayments if you can’t; in this case, they will repay your mortgage. A guarantor mortgage can be worthwhile exploring if you have no deposit or a very small one, are struggling to find a lender, or want to buy a more expensive house. Of course, you will need someone who is willing to sign as your guarantor. 

Asking someone to be your guarantor is a big commitment on their part, as they will be liable for your monthly mortgage payments if you can’t pay them. If they are then unable to pay, your home may be repossessed. Before committing to a guarantor mortgage, you and your potential guarantor should both seek legal advice.

What is shared ownership?

If buying a home is out of your range at the moment, then a shared ownership scheme may make the prospect more affordable. Shared ownership involves buying a share of a house, then paying rent on the remaining share. If you are able to in the future, you can buy the remaining share.

Shared ownership should be considered carefully before committing. Splitting the ownership of a home may limit who you are able to sell to in the future, and any improvements will need to be approved in advance.

As with any financial commitments, always seek legal advice before becoming tied into a mortgage.

What costs do I need to consider?

Although it will make up the bulk of your payment, your deposit isn’t the only expense you have to consider when buying a home, for the first time or otherwise.

Valuation fee – A valuation is carried out by the lender to determine if your house is worth the amount they are willing to lend you. The fee for a valuation varies between providers.

Survey fee – A survey is different from a valuation because it looks at the structure of the property along with any potential issues. This could include structural or building problems, or restrictions on planning permission. The cost of a survey can vary depending on the level of detail you require.

Arrangement fee – This is the fee you pay to take out a mortgage, and the price will vary among providers. Most will let you add the arrangement fee onto the mortgage itself which, although it sounds better than an upfront payment, means more interest in the long run.

Legal fees – This is the cost for solicitors to handle all the conveyancing involved with your purchase, and can range from £500 to upwards of £1,500.

Broker fees – This is a fee payable if you use a broker to secure your mortgage. Many brokers will earn their fee through a commission with the mortgage provider. Using a specialist mortgage broker can help you get access to more lenders and more favourable rates.

Stamp duty – This is a tax that is payable on any property purchase over £125,000 – or £300,000 if you’re a first time buyer. The rate increases as the value of your property goes up.

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*Note: Do not enter any symbols, commas or letters. Enter simple numbers only. These figures are only illustrative. All mortgages are subject to the applicant(s) meeting the eligibility of the specific lender. An assessment of your needs will be confirmed before a recommendation can be made.

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