Buying a property for the first time?
Here is a list of our frequently asked questions.
Which loan is best for first time buyers?
There are lots of different mortgage loans available in today’s mortgage market and many mortgage lenders will offer special loans to attract first time buyers. The truth is everyone’s needs are different and there is no one mortgage loan that is best. Mortgage loans change everyday and what is best for one first time buyer isn’t necessarily best for another. The best thing to do is get some mortgage advice and understand what all the options are.
How much do you need for a first time buyer home?
The simple answer to this is, at least 5% of the property purchase price and enough to cover solicitors fees, lenders fees and stamp duty land tax. Stamp duty isn’t always charged, and it depends on the purchase price of the property. The bigger the deposit amount that you have usually means the better the interest rate you will be offered.
How to save a deposit to buy your first home?
Firstly, it’s going to be tough…. but it will be worth it.
Nothing is impossible unless you think it is.
There are so many things to spend your money on and big brands all want you to spend your hard-earned cash with them, whether it be a new gadget, night out or designer handbag.
Here are our 6 key steps to saving.
- The first step is to print out your last 3 months bank statements and make a list of all you regular outgoings.
- Next let’s put your outgoings into one of two categories: Essential = This is stuff that you can’t live without. E.g. Rent, train fare, food. Optional = This is the stuff you could live without. E.g. Nights out, holiday, new phone, takeout food
- Set a saving monthly target, this should be the difference between your income and essential outgoings. Ideally this should be at least the cost of your new monthly mortgage and standard household bills.
- Let everyone know, your friends and family will understand and support your plans.
- Ask for help!, this is a great way to boost your deposit. You never know your family may have been thinking about helping you anyway.
- Don’t give up.
Can you be a first time buyer again?
Who or what is a first time buyer isn’t as straight forward as you would think. It really depends who you are asking. For anything relating to tax or stamp duty then you can not have ever owned a home ever to be a first time buyer. For many lenders if you haven’t owned a home for the last 12 month’s they may class you as a first time buyer again and offer you first time buyer mortgage incentives if they are available.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
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How much do you need to earn to get a mortgage?
There is no minimum amount that you need to earn to get a mortgage. Different lenders look at your salary in different ways. The main thing lenders need to do is demonstrate that the loan they have offered to you is affordable.
When is the best time to buy?
There is no right or wrong time to buy your first home. Generally, if house prices are increasing, then the longer to wait the more expensive the property will become. If you are looking to buy in a falling housing market, then the longer you wait the cheaper the property will become. Traditionally the busiest time of year is spring. If you buy during this time you may find you are competing with lots of other buyers.
How do I find a property?
Finding a property is easier than ever. With many estate agents listing properties on their website or using property portals to advertise their homes. Property portals such as rightmove.co.uk are a great way to find a home, check room details, floor plans and how much the current owner paid for it originally.
Other portals you should consider are:
Estate agents generally don’t advertise on all the portals, so you will need to check all the main ones to ensure you are seeing everything that is available. The best way to do this is register for email updates with each portal. Then just check your inbox each day for the latest properties across all the portals.
How much can I borrow on a first time buyer mortgage?
Mortgage lenders calculate how much they will lend you either as a multiple of your salary or a more complex calculation.
The simple form is your annual salary x 5. So, if you earn £30,000 per year x 5 the lender would offer you £150,000.
Other things lenders consider when calculating the maximum loan are:
- Time in current job.
- The way you are paid.
- Commission, bonuses and overtime.
- Any debts.
The amount you can borrow can vary drastically from lender to lender, so don’t get disheartened, get mortgage advice from someone that deals with more than 1 lender and get a bigger picture of what is available to you.
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How much deposit do I need for a mortgage first time buyer?
Generally, the bigger your deposit the better the interest rate will be on your mortgage. The minimum deposit is currently 5% of the purchase price.
Example 1:
Purchase price: £300,000 x 5% = £15,000
Most lenders will offer their lowest interest rates with a 40% deposit.
Example 2:
Purchase price: £300,000 x 40% = £120,000
House or Flat for first time buyers?
Generally, this comes down to how much you can afford and what you want from a property. Most houses are freehold and flats and apartments are leasehold. Buying a freehold house in simple terms means you own the whole house inside and out and the land it sits on. With a leasehold property, you own the inside of the property on a lease for a set number of years and the outside of the property and the land it sits on is owned by the freeholder. The freeholder will charge the leaseholder specific fees for rent and upkeep and insurance of the property.
Buying a leasehold property isn’t as straight forward as buying a freehold property. Typically most houses are freehold and most flats or apartments are leasehold.
When considering a leasehold property, you should ask for the length of the lease, who the freeholders is and a list of all the fees and charges.
Mortgage lenders will take the length of the lease and monthly fees into account when you apply for a mortgage. If the lease is less than 70 years, the lender may not lend on the property or suggest a lower purchase price. This is because there is a cost to extend the lease which could be anywhere from £5,000 to £25,000. Fees and charges relating to the lease may also be deducted from the maximum loan you can obtain.
If the lease on the property you are interested in is less than 90 years I would consider making a lower offer on the basis of your future potential costs.
Which mortgage rate is best for first time buyers?
There are lots of different mortgage rates available in today’s mortgage market and many mortgage lenders will offer special rates to attract first time buyers. The truth is everyone’s needs are different and there is no one mortgage rate that is best. Mortgage rates change everyday and what is best for one first time buyer isn’t necessarily best for another. The best thing to do is get some proper mortgage advice and understand what all the options are.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
How do I choose a solicitor?
Choosing a solicitor is important and can affect how smoothly everything goes. Ask for recommendations from friends and family, speak to the estate agent and then check online for reviews. The next thing to do is call them and ask for a quote, see if you get on and asked yourself can I work with this person for the next 3-6 months? There are lots of low cost options available online, but ask yourself is the cost only important factor?
Which survey is right for first time buyers?
Many lenders with offer a free valuation of the property that you are buying and you may be tempted to take this.
This first thing to understand is this isn’t really a survey. It’s the lenders valuation report and it is to assess the suitability of the property for a mortgage. You may or may not receive a copy. There could be things that don’t affect the lenders decision to lend on the property but could end up costing you thousands to rectify months after to move in. Because the report wasn’t instructed by you there would be no come back on the lender or surveyor.
Most lenders will offer you the option of a home buyers report. This will cost you a few hundred pounds extra. You instruct the surveyor directly and will receive a very detailed report on the condition of the property and a recourse of you find anything down the line that was missed.
If you surveyor raises issues that you were not aware if you may be able to renegotiate the purchase price.
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What if the property is down valued?
If the property you are buying is down valued it doesn’t mean that you can’t buy it, but you may need to renegotiate the price. The first thing to do is, speak to the mortgage lender and see if you can appeal the down valuation decision. Usually the mortgage lender will want you to provide 3 other properties that have exchanged or completed in the last 3 months. The best way to get this information is to speak to local estate agents and find out the address and sale prices. If you are unable to find any other properties to support an appeal or the lender won’t change their mind then you will need to speak to the owner to re-negotiate the price. If the owner of the property won’t reduce the price, then you may not be able to buy the property or you may have to put the extra money in as a larger deposit to cover the shortfall.
What documents do first time buyers need for a mortgage?
Generally, most lenders will need the following documents, but is does differ depending on your circumstances.
- Proof of who you are, so a passport or driving licence.
- Address history, so the lender can see how you have managed any other loan agreements that you have.
- Proof of income, to assess if the loan is going to be affordable.
- Bank statements, to check how you manage your finances and double check some of the other information you have given.
- Proof of deposit, to check where this money has come from and the history of the build-up.
When arranging a mortgage, we may need all of these documents or just 1 or 2, feel free to speak to us about what we will need for your specific circumstances.