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First Time Buyer - What you need to know

Buying your first home can be a complex process and one with many factors to consider. So, we’ve collated a handy guide for first time buyers which covers the basics of helping you secure your new dream home. 

How much will I be able to borrow?

As a first time buyer, you’ve most likely been saving for a deposit for a few years to get onto the property ladder. If this is you, the next call of action will be to find out how much you are entitled to borrow. 

The amount you will be able to borrow will be dependent on the size of the deposit you are willing to offer, as well as the overall loan to value or LTV. This is simply the mortgage amount you can borrow from a lender compared to the overall cost of a property. 

For example, if you are buying a property worth £200,000 and the lender is willing to lend you 90% of the property’s value, you will receive a mortgage of £180,000 and need a deposit of £20,000. The average loan to value for first-time buyers is 82%, whereas it is 74% for home movers. 

Generally speaking, first-time buyers are expected to put down at least a 10% deposit, however if possible, the more the better. This is because a larger deposit will offer the benefit of both borrowing less money for your mortgage and having access to a greater number of lenders at a more desirable rate. 

Applying for a Mortgage

A mortgage comparison tool will allow you to work out the best mortgage deals for first-time buyers, and which ones you may be entitled to based on your loan-to-value. 

During the application process for a mortgage, a lender will check your annual salary, additional income, as well as your financial outgoings. For example, your credit card and loan debts, childcare, travel, household bills, and general living costs. To determine if you are a reliable borrower, a lender is also required to access your credit history.

Before you begin to view properties, it’s best to have a mortgage agreement, or an “agreement in principle” from a lender to demonstrate your eagerness to buy to estate agents. While this is not a guaranteed offer, you’ll be able to have a clearer idea of the type or property that you can afford.

What help is available for first-time buyers?

The UK has several schemes to help first-time buyers secure a mortgage. These include: 

  • Help to buy: Equity Loan: Interest free government loan of up to 20% of the cost of a newly built home.
  • Lifetime ISA: For those aged between 18 and 40, the government can offer a 25% boost to your savings until you are 50. 
  • Right to buy: This allows tenants who rent from a local housing association or council the chance to purchase the property they live in. 
  • Starter home scheme: If you are under 40 and a first time buyer, you could be entitled to a new home priced 20% less than its market value 
  • Shared ownership: Co-ownership of a property with a landlord, generally a housing association or council.  

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