Mortgages for First-Time Buyers are no different to any other type of mortgages for house purchase, although a more detailed debate regarding systematic budgets and affordability is usually suitable to ensure that applicants are fully alert of all the ongoing costs related with home possession. Regular costs for household utilities, Council Tax, telephones and insurances need to be included in the monthly budget, together with general living costs such as food, housekeeping and essential travel. As there will always tend to be some ongoing additional things that will need paying for, an allowance for any unexpected costs should ideally be made.
By going through all of your income and known regular commitments, our Advisers will then be able to work with you to estimate what is needed for some of the household related costs in order to establish a realistic budget for your mortgage. Applicants who have previously been renting will have some experience of regular household commitments which will form a basis for the budget discussions.
Generally speaking, a deposit of at least 5% of the purchase price will be required, although there may be some exceptions to this in the event that you are buying a property under the market value, possibly with a gifted equity deposit from the vendor who would usually be a family member. A larger deposit will influence the rates of interest and mortgage deals that will be available. Deposit can come from a variety of sources. Most commonly this will be from personal savings and investments, although in recent years there has been a growing number of borrowers receiving financial help from family by way of gifted deposits. This is normally acceptable to a lender, provided that the funds are not repayable and the donor of the gift will not have any financial interest in the property or be living in the property. Regardless of the amount of deposit you have, the amount of borrowing must still fit within the lender affordability calculations.
It is important that an affordable monthly budget is established at the early stage of a discussion to ensure that your expectations can be met. Traditionally a lender used to calculate lending based on a multiple of income. This is no longer the case as individual circumstances are very different when it comes to how people spend their disposable income. A lender will have a specific affordability calculator into which all income and known commitments are entered. Any future unknown costs may be estimated or the lender may assume a figure based on information from the Office of National Statistics. Income used in the calculation can be from employment or self-employment. Some types of benefits may also be acceptable and these can be clarified by our experts. A detailed analysis of all your income and expenditure by one of our specialists will provide an accurate indication of a maximum mortgage that may be available.
However, in some circumstances it may be that this is actually greater than you are comfortable with, once you have established your monthly budget for mortgage and related costs. The amount of deposit may also influence the amount available to borrow, with some lenders applying a “cap” on higher loan to value cases which may be 4 or 4.5 x the income, regardless of the affordability calculation.
Mortgage costs for First-Time Buyers are as follows.
• In the first instance you will need a deposit to put down. This usually starts at 5% of the value of the property you are looking to purchase.
• Stamp Duty will be payable if you purchase a property for over £300,000.
• You will also need to pay for a Solicitor or Conveyancer who will take care of all the legal paperwork when purchasing a property.
• Your Solicitor will also collect payments for The Land Registry (For when your property is registered in your name), HMRC (to pay the Stamp Duty), Local Authority and various other third parties (while they carry out the due diligence on the property you are looking to purchase).
• You may also be required to pay for a Survey/ Mortgage Valuation fee.
• And lastly you may also be required to pay for a Mortgage Advisers fee, and depending on your mortgage product any product related fees to the lender.