Are you finding it tough to secure a great mortgage deal as a first-time buyer in the UK?
If you’re a first-time buyer getting a mortgage, it’s natural for you to feel daunted, intimidated, or simply confused by the property-purchasing process.
Fortunately, the experienced team of mortgage advisors at UKMC is on hand to clear the confusion and boost your confidence.
To help you learn more about how to get a mortgage in the UK as a first-time buyer, simply carry on reading to discover our complete guide – filled with easy-to-follow steps and handy tips.
Contents:
- Key mortgage terms first-time buyers need to understand
- Which types of mortgages can a first-time buyer access?
- Buying schemes to help first-time buyers get on the property ladder
- How much can you afford to spend as a first-time buyer?
- Understanding deposits and how to make an offer on a property
- Step-by-step process for obtaining a mortgage as a first-time buyer
- How UKMC helps first-time buyers
Key mortgage terms first-time buyers need to understand
When you’re getting a mortgage for the first time, it helps to know the lingo.
While our team tries to be as jargon-free as possible, it’s sometimes hard to avoid in this industry! Among the most common terms you’ll need to know include:
- Mortgage term: The length of time it takes to repay the loan.
- Mortgage interest: An additional fee charged by the lender for loaning you the money to buy your home. It’s calculated as a percentage of the loan and is added to your monthly payments.
- Mortgage broker or advisor: A qualified individual or business who reviews and arranges mortgage deals from lenders, such as banks or building societies, on behalf of buyers.
- Fixed-rate mortgage: A mortgage arrangement where the interest rate is set for a fixed period (often 2 or 5 years).
- Variable-rate mortgage: A mortgage arrangement where the interest rate varies in accordance with England base rate or the lender’s rate.
- LTV (Loan-to-Value): A ratio (usually shown as a percentage) that compares the mortgage amount to the property’s value. A lower LTV often results in better mortgage deals.
- Annual Percentage Rate of Charge (APRC): The overall mortgage cost over a year, including interest and fees, often used to compare mortgage deals.
- Agreement-In-Principle (AIP): An official statement provided by a mortgage lender which outlines how much they’re willing to lend you based on your personal and financial circumstances, prior to making a full application.
- Early Repayment Charge (ERC): An extra charge that’s applied if you pay off your mortgage early (before the end of the term).
Which types of mortgages can a first-time buyer access?
- Fixed-rate mortgage: A mortgage arrangement where the interest rate is set for a fixed period (often 2 or 5 years).
- Variable-rate mortgage: A mortgage arrangement where the interest rate varies in accordance with England base rate or the lender’s rate. Tracker, capped, and collar mortgages are all types of variable-rate mortgages.
- Interest-only mortgage: A mortgage arrangement where only interest is repaid as part of the monthly repayments, not the capital. Instead, the capital is repaid at the end of the mortgage term.
- Guarantor mortgage: A mortgage arrangement with a close friend or family member as a guarantor.
Unsure which type of mortgage arrangement will meet your requirements as a first-time buyer? It’s not always easy!
For example, while first-time buyers technically can get an interest-only mortgage, it’s much harder than an existing homeowner and they’ll typically need either a large deposit or high income.
Buying schemes to help first-time buyers get on the property ladder
Fortunately, there are plenty of buying schemes that can give you a boost into your new home. They include:
Mortgage Guarantee Scheme
The Mortgage Guarantee Scheme increased the availability of 95% loan-to-value (LTV) mortgage deals, meaning first-time buyers can purchase a property with just a 5% deposit instead of a more substantial 10-20% deposit.
First Homes Scheme
The First Homes Scheme helps first-time buyers to purchase their only or main residence home for 30% to 50% less than its market value. It’s applicable for new homes built by developers or homes purchased through an estate agent where another individual purchased the property using the same scheme.
Lifetime ISA
This Lifetime ISA (Individual Savings Account) can either be used to help buy your first home or save for later life. Prospective first-time buyers can contribute up to £4,000 each year into this account, which the government will top us with a 25% bonus to (up to £1,000).
First-time buyers can then use these savings to purchase a property that costs £450,000 or less using a mortgage.
Shared Ownership Scheme
While not exclusive for first-time buyers, the Shared Ownership Scheme is for individuals that can’t afford the entire deposit and mortgage payments to purchase a home to meet their needs.
Instead, they purchase a percentage share of a property (anywhere between 10-75% of the home’s market value) and pay monthly rent to a landlord to cover the remaining sum.
How much can you afford to spend as a first-time buyer?
No two first-time buyers have the same financial situation.
This is because how much you can afford to spend on your first home depends on a wide range of factors, including your:
- Income (salary, bonuses, benefits)
- Employment status
- Deposit
- Debts (loans, credit cards)
- Dependents
- Credit score
- Spending habits
In most cases, lenders will allow you to borrow around 4.5 times your annual income, but this will vary depending on your overall finances and how much of a risk the lender believes you to be.
For a more accurate idea of how much you can borrow or afford as a first-time buyer, why not use our helpful mortgage calculator?
Alternatively, you can always discuss your personal circumstances with one of our experienced mortgage advisors!
Understanding deposits and how to make an offer on a property
One of the most important steps to getting a mortgage as a first-time home buyer will be your deposit – though some lenders are now providing zero-deposit mortgages!
Luckily, we’ve created this clear table answering some of the most common deposit-related questions!
| Deposit FAQs | Answer | Why does this matter for first-time buyers getting a mortgage? |
| What is the minimum deposit amount? | A deposit of at least 5% is usually required in the UK. | This impacts your interest rate, the amount you need to borrow, and the value of property you can afford. |
| How does the deposit affect the LTV? | The higher your deposit, the lower the LTV. | A lower LTV generally means the loan is less risky, giving you access to better interest rates and mortgage deals. |
| Where can first-time buyers get a deposit? | As well as your own savings, first-time buyers can get help with a deposit from an inheritance, Lifetime ISA, or a family member or friend (gifted deposit). | Where you get your deposit from can have an impact on your mortgage options and the overall process. For example, gifted deposits can make you more attractive to lenders by increasing the size of your deposit, but they require a signed Gift Declaration letter. |
| Which government schemes can offer help with a deposit? | Mortgage Guarantee Scheme, First Homes, Lifetime ISA, and Shared Ownership schemes. | Each of these schemes can make purchasing your first home more affordable by either reducing the size of your deposit or increasing your savings. |
| Are there any extra costs alongside the deposit? | Yes, buying your first home typically also includes solicitor fees, survey costs, mortgage arrangement fees, valuation fees, and moving costs. | Ensuring you have a clear idea of the costs involved in getting a mortgage as a first-time buyer can make budgeting easier. |
Once you’ve sorted your deposit, the next step is securing an AIP – as most estate agents will ask for this before they’ll take an offer seriously! With an AIP, you can then make an offer through the estate agent.
This is just how much you’re willing to pay and it’s fully negotiable up until contracts are exchanged. If your offer is accepted, you’ll move on to the full mortgage application and the legal process of buying your very first home!
Step-by-step process for obtaining a mortgage as a first-time buyer
Getting a mortgage as a first-time buyer doesn’t have to be a complicated and confusing process.
Instead, our down-to-earth team aims to make things as simple as possible by explaining the key steps and what you need to do at each stage to make progress.
Sort out your deposit
To ensure you’re not missing out on any vital money-saving schemes, it’s important to explore every deposit support option available to you as a first-time buyer.
This includes the government’s mortgage guarantee scheme which aims to increase the availability of 95 per cent loan-to-value (LTV) mortgage deals, allowing first-time buyers to put down a lower deposit and become homeowners faster.
To learn more about the various schemes available to you as a first-time buyer, as well as the pros and cons of using one of these schemes to acquire your first home, it’s important to consult a professional mortgage advisor.
Use a mortgage calculator
Once you’ve determined the size and source of your deposit, we recommend using a mortgage calculator to find out how much you could potentially borrow from a lender and how much your mortgage is likely to cost each month for your ideal home.
You need to know the market value of your ideal home, your monthly income (or joint income if applying with a partner), the loan or deposit amount, the type of loan you’d like, and your chosen repayment period.
However, it’s important to bear in mind that mortgage calculators (regardless of which one you use) do have their limits and don’t ask for all relevant information.
As a result, they should only be used to provide an estimate of how much you’re able to borrow.
For a more accurate idea of how much a lender is likely to allow you to borrow, you must discuss your requirements and personal circumstances with a mortgage advisor or obtain an official AIP.
Unlike a mortgage calculator, an experienced mortgage advisor or lender will take into account more of your outstanding and ongoing payments, such as credit card and loan balances.
Apply for a mortgage
To apply for a mortgage, you can either contact a lender, like a bank or building society, directly, or reach out to a specialist mortgage advisor to help you find the best deals from a variety of different lenders and liaise with your chosen lender on your behalf.
A good mortgage advisor can suggest the best mortgage deals for first-time buyers thanks to their vast experience in this industry and greater market knowledge of existing schemes and lenders.
As a result, first-time buyers can often save themselves plenty of time, money, and hassle by using a mortgage advisor to help them find the most suitable mortgage for their circumstances.
At UKMC, for example, we search thousands of mortgage deal products to help you secure the best deal for your first home.
All we require is a quick call and some basic information to get the ball rolling, so why not contact our friendly team today to see how we can help?[EW1]
Apply for an Agreement-In-Principle
To determine whether you’d be accepted for a mortgage, it’s important to get an AIP, also sometimes referred to as a Mortgage Promise, Mortgage in Principle (MIP), or Decision in Principle (DIP).
This is an official statement provided by a lender detailing how much they’re willing to lend you based on an extensive range of questions they’ve asked you. At this point, you can start seriously looking at properties as sellers and estate agents will you see you as a more serious buyer.
This stage is often viewed as the first step in obtaining for a mortgage, but first-time buyers can get a better indication of whether they’re likely to qualify for a mortgage by seeking deposit advice and using a mortgage calculator first. For a clearer idea of what you can afford as a first-time buyer, please feel free to contact UKMC to obtain your Agreement-In-Principle.
Find your home and make an offer
Next, you can start the search for your new home online using property websites like Rightmove and Zoopla and local estate agents. Once you’ve found a property that meets your personal preferences (such as size and location), you can arrange a viewing.
If you’re confident that the property is still for you after a viewing, you can make an offer and keep your fingers crossed that the seller accepts!
Conduct property survey and searches
After securing a mortgage deal and having your offer accepted, there are many steps that need to be taken before you can complete. This includes having a property surveyor survey the property and enlisting help from a solicitor to carry out the relevant searches.
At UKMC, we’ll get in touch directly with your chosen solicitor to assist with this part of the process, and our completions team we’ll even be on hand to ensure everything’s moving in the right direction.
Obtain a formal mortgage offer
Once you’ve found your first home and your offer has been accepted, you’ll need to contact your broker again to apply for a formal mortgage offer. This is because an AIP is not a legal document and as a result, you’re not guaranteed to be loaned this amount.
With a formal mortgage offer, you’ll have peace of mind that your chosen lender is happy to loan the amount you require. You can only make a full mortgage application once your offer on a house has been accepted.
Exchange contracts and complete
If you’re satisfied with the results of the survey and conveyancing searches, you can then exchange contracts and complete. Have a question about any stage of the process? Give our friendly team a call today!
How UKMC helps first-time buyers
Concerned about the size of your deposit, or struggling to choose between a fixed or variable mortgage deal?
Here at UKMC, we understand that being a first-time buyer can feel incredibly daunting. Fortunately, we’re experts at getting a mortgage for first-time buyers!
We’re here to help you make sense of the various government schemes designed to help, ever-changing mortgage interest rates, and even the entire home-purchasing process.
Instead of baffling you with mortgage jargon and steering you towards a particular mortgage lender or deal, we adopt an honest and authentic approach by assessing your specific requirements.
We’ll review your options on your behalf, identify the pros and cons of each arrangement, and advise you as to which deal could be best for you.
At every stage of the house-purchasing process, our friendly and knowledgeable team is on hand to help.
Receive professional first-time buyer mortgage support
Based in Warrington, we can provide face-to-face support for customers across Cheshire, but we’ve also helped first-time buyers across the UK to secure the right mortgage deal to suit their specific needs.
If you’d like to learn more about how to get a mortgage as a first-time buyer or the first-time buyer services available at our family-run business, why not arrange an appointment with one of our expert UKMC mortgage advisors today?
To get in touch, you can either call us on 01925 573328, email your enquiry to hello@ukmc.co.uk, or request a call back at a more convenient time using our online contact form.
Disclaimer
UK Mortgage Centre Limited is an Appointed Representative of Refresh Mortgage Network Limited. Refresh Mortgage Network Limited is authorised and regulated by the Financial Conduct Authority. We are entered on the Financial Services Register under firm number 1019794.
As a mortgage is secured against your home, it could be repossessed if you do not keep up the mortgage repayments. The Financial Conduct Authority does not regulate some forms of buy-to-let mortgages.
The Financial Conduct Authority does not regulate will writing and taxation and trust advice.
You may be charged a fee for your advice. A typical fee is £495, which would be payable when you receive your mortgage offer. Your dedicated advisor will discuss this further on your free initial phone call.
Registered company number: 15825320
