CALL USWhat makes me a First Time Buyer
From a mortgage lenders perspective; If you currently don’t own a property or on a joint application, both of you don’t currently own a property, you will be known as a First Time Buyer (FTB) with the majority of lenders.
From a stamp duty perspective; If you have never owned a property or on a joint application, both of you have never owned a property you are classed as a FTB. On the 22nd November it was announced that FTB's purchasing a property for £300,000 or less would have no stamp duty to pay. In London a First Time Buyer purchasing for up to £500,000 will not have stamp duty to pay on the first £300,000 saving you up to £5,000.
Are there any special mortgage deals for First Time Buyers?
In practice most of the mortgage rates are the same for FTB’s as someone moving up the property ladder with a new purchase. There are some products designed to be attractive to FTB’s such as products that requires only a 5% deposit for people who don’t have lots of savings, or offer cash back on completion. It is important to weigh up the benefits of these against the overall cost of the mortgage.
How do you get a First Time Buyer mortgage?
The process for applying for your first mortgage is exactly the same as applying for any other mortgage.
The first thing you need to do is to find the most suitable mortgage product for your circumstances. This can be quite tricky if you don’t know where to find a comparison of the 1000’s of mortgage deals available. Even if you have found the cheapest product you might not be eligible. Every lender has their own criteria for assessing applications.
A whole of market mortgage broker can source the entire range of mortgages available in the market. They can also ensure you meet the criteria of a lender by assessing your circumstances first. This can save a lot of wasted time and money.
What are the pitfalls?
- Not finding the cheapest deal and costing yourself money
- Selecting a mortgage that might not be suitable for you in the future e.g. if you move house, need to let the house out or want to release capital
- Not understanding all your options e.g. government schemes such as Help to Buy or Shared Ownership
- Selecting the wrong term which as a result could cost you additional interest in the future
- Not uncovering issues early in the process that might cause you problems with an application
- Not getting access to exclusive deals only available via a mortgage broker
- Paying too much for the advice you receive from a broker
- Having an unrealistic view of what you can afford
- Not considering protection products at the time of taking out a mortgage. You can insure yourself against death, critical illness, sickness, accident and unemployment.
How to avoid the pitfalls
At Bennison Brown we offer a free FTB review service. This gives you the following:
- Direct access to an experienced mortgage adviser
- A review of your circumstances and an assessment of what you can afford
- An illustration to show all the costs and key information about the mortgage we believe is most suitable
- A Decision In Principle from the preferred lender if you require this. This will surface any issues with your credit file and often estate agents will require this
- A discussion on the most suitable term and the pros and cons explained of different products such as the difference between a 2-year and 5-year fixed rate mortgage
- An unlimited time to answer any questions you have
- Advice on how to interact with estate agents to secure your purchase at the best possible price
How much can I borrow?
Every lender has a different criteria but there are the main factors taken into account:
- How much you earn each year
- Your disposable income after essential spending
- How much your mortgage may cost now and in the future
Lenders will calculate what your payments could cost in the future by using stressed interest rate, this will help them see if you can afford the mortgage if interest rates rise in the future. Each lender has a different approach to calculating affordability and the amount you can borrow will vary from lender to lender.
How important is my annual income?
It’s important and you can typically borrow 4.5 times your sole/joint income although there are lenders that will go beyond this amount for certain applications. This is subject to also passing an affordability test. However this will depend on personal circumstances and you will need to meet a lenders affordability test.
Other things to consider
The professional support you need beyond a mortgage broker:
- You will need to appoint a solicitor to deal with the legal purchase and implementing the mortgage
- If you are self employed you may need support from an accountant to verify your income
Bennison Brown can point you in right direction of other professionals we work with that you can trust.
Summary
Buying your first home is a major step and it is vital you are able to consult with professionals you can trust. Trying to do it by yourself could cost you a lot of time and money. Bennison Brown offer a free service to help you avoid pitfalls. We do this as we want to help people and we also want to build trust with you so you consider using us should you go ahead with a full application.
A mortgage broker does not need to be expensive assuming you negotiate a good deal. A broker also gets paid by the lender so there should be no reason not to get advice. At Bennison Brown we charge a maximum of £380 should we get you a suitable mortgage offer. We try to keep this as low as possible whilst maintaining the reputation we’ve developed for offering a 5-star service.
