First Time Buyer Mortgage Advice
(Last Updated: 02/09/2024)
06/06/2022
4
9 min read
First time buyer mortgage advice is essential if you're looking to get the best possible mortgage for your first home purchase.
There are a bewildering number of mortgages on the market and the best mortgage advisors for first time buyers can ensure that you find the best suited home loan for your needs and have the greatest chance of success in your application.
What mortgage is best for first-time buyer?
There are a wide array of mortgages to support getting your foot on the housing ladder including some which bridge the gap between your deposit, the mortgage you can afford and the actual price of the property.
Below are 6 options. The first two require no financial help from friends or family members, whereas the rest do.
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Help to Buy is a Government scheme targeted at helping first time buyers and existing home owners buy a property by offering a loan to reduce the amount of deposit and mortgage you need. The scheme has successfully helped 214,064 first time buyers so far.
The scheme is closed to new applicants as of the 31st of October 2022.
To be eligible, you must legally complete your purchase by 6pm on the 31st of March 2023.
The property must be new build, cost no more than £600,000 and you need to pass the eligibility criteria. The Government loan (also known as an equity loan) is interest free for the first 5 years and can be up to 20% or 40% (if in London) of the total price of the property. With a minimum of a 5% deposit required, here is an example of how Help to Buy works:
- Outside of London: £258,000 property outside of London. Help to Buy Loan of 20% is £51,600, your mortgage is 75% at £193,500 and your deposit is the balancing 5% at £12,900.
- London: £400,000 property in London. Help to Buy Loan of 40% is £160,000, your mortgage is 55% at £200,000 and your deposit is the balancing 5% at £20,000.
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In these schemes you can buy a share in a new build house using a mortgage. The other share is owned by the housing association. As you are only buying a share in the house, your 10% deposit and the amount you'd have to borrow would be half what it would be if you were buying the whole property.
For example, to buy 50% of a house worth £500,000, you would need a deposit of £25,000 and borrowing capacity of £225,000. However, your borrowing capacity will be slightly lower than usual, as you will be paying rent to the housing association on the other share.
You can purchase further shares of the house up to 3 times. This process is called staircasing. You may be able to do this with savings, by re-mortgaging, or a combination of the two.
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If you are lucky enough to have parents or grandparents with funds to spare, they can gift you the amount of the deposit.
Is your first time buyer mortgage deposit a gift or a loan?
If the gift is deemed to be a loan (you are expected to pay back the gift one day) then your mortgage will be affected. Your parents could loan you the deposit - but this would reduce the amount your mortgage lender would be willing to lend you.
If you are buying with someone else, SAM recommends that you look into getting a Deed of Trust, which can stipulate that the gift-giver receives the gift back if you decide to part ways and sell the property. Otherwise, you may find that your co-owner gets a share of your gift when the proceeds are split up.
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If you have your deposit, but cannot borrow enough money to buy the house you want, a joint applicant can share some of the mortgage liability. This means that they are liable for the mortgage (if you don't pay it, they would have to) but they are not an owner of the property
You get to be a home-owner and the joint applicant's other property(ies) will not affect your first time buyer stamp duty liability.
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A 'guarantor' provides a legal guarantee that they will repay the amount borrowed if you do not keep up with your repayments.
(The property would be repossessed and sold first - the guarantor usually would only have to pay if the mortgage is worth more than the resale value, the guarantor should always check this with their solicitor).
This type of mortgage can help if:
- you have a low income
- you have a bad credit score
- you don't have enough credit history (i.e. you've never had a credit card)
- you have a small deposit (or even no deposit!)
The guarantor needs to have a close long term relationship with you or be a close family member, live in the UK and must receive their income in GBP into a UK bank account.
They will need to have a good credit rating and the lender will either hold some of the guarantor's savings or place a legal charge over their property as security for your loan.
Because of this risk to the guarantor, they must receive independent legal advice from a solicitor.
It is best to apply for a guarantor mortgage through an independent mortgage broker, as they are not suitable for everyone and applying for the wrong types of mortgage product may damage your credit rating.
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- 6
Family Springboard Mortgage
This is a type of guarantor mortgage, also known as 'family boost', 'family deposit mortgage' or just 'family mortgage'. You can buy with as little as 0-5% deposit, borrowing the rest with a family springboard mortgage. The 'helper' opens an account with the lender, and places 10%-20% of the property's value into this account.
The helper's money will be held for a number of years (usually 5) and then it is returned to the helper with interest, as long as you have made all of your mortgage payments on time.
This can be a great solution as the helper does not have to gift you the deposit. They get it back after 5 years and they gain interest on the money, without you having to pay them interest on it as if it were a loan. If it were a loan directly to you, your lender would likely reduce the amount they'd be willing to lend you.
The helper will not be an owner of the property and their money will be at risk if you do not meet the conditions of your mortgage. They will be required to receive independent legal advice to make sure they fully understand the risks.
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Why do you need first time buyer mortgage advice?
When you're looking to get your foot on the first rung of the property ladder, you'll be seeking any number of home buying tips for first time buyers. And most often you'll be buying using a mortgage, so you'll want first time mortgage tips from the best sources.
Professional first time buyer mortgage advice can guide you towards the best products, whether you're looking for a gifted deposit mortgage or looking to buy through a scheme. Because our mortgage advisors are all independent, that means they can find mortgages from the whole of the market too and aren't tied to any particular lender or lenders.
Your initial telephone consultation is completely free with no obligation and an opportunity to pick up excellent first time mortgage tips in general.
Get First Time Buyer Mortgage Advice from Independent Mortgage Brokers
Our first time buyer mortgage advisors can help you get the right mortgage for your first home purchase and are fully experienced in the Help to Buy and shared ownership schemes. The initial call is free. We're rated Excellent on Trustpilot. Book your free telephone consultation today.
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Written by:
Andrew Boast
Andrew started his career in 2000 working within conveyancing solicitor firms and grew hands-on knowledge of a wide variety of conveyancing challenges and solutions. After helping in excess of 50,000 clients in his career, he uses all this experience within his article writing for SAM, mainstream media and his self published book How to Buy a House Without Killing Anyone.
Reviewed by:
Caragh Bailey
Caragh is an excellent writer and copy editor of books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey, property law and mortgage-related articles.
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