FIRST TIME BUYER

Where to start?

Buying your first home should be fun not frightening. It’s easy to see why some people can feel overwhelmed though.

There are a lot of different terms thrown at you from the second you start looking at mortgages – repayment mortgage, fixed rate, standard variable rate, etc. - not to mention the fact that you might not know much about the property buying process in general.

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First time buyer support

We know buying a house for the first time can be a daunting process which is why we will be here to help you every step of the way!

FIRST TIME BUYER GUIDE

 

 

It should be thrilling to buy your first property, it's a place you'll call home and where you'll start a new life. This guide will tell you what you need to know about buying a property so that you can comfortably embark on your house-hunting journey and reflect on what it really is all about, finding your first home.

 

What is a first-time buyer's definition?

 

You would have never purchased a significant interest in a residential property or an equal interest in land located elsewhere in the world to count as a first-time buyer.  It doesn't matter whether you bought the property alone or with others, you both need to follow the first-time buyer requirement if you bought the property with other individuals.

If you're a first-time customer, why does it matter?

Since first-time consumers are currently collecting and qualifying for such programs of coveted Stamp Duty relief. These advantages will make a real difference to the expenses you face when purchasing a house, but not everyone counts as a first-time buyer.

 

Taking out a mortgage

 

To purchase a house, you may need to borrow money from a lender. Eventually, with interest, you pay back the loan in full.

 

When you take out a mortgage, you have to set down a deposit. The deposit is a percentage of the value of the property you choose to purchase. The mortgage number makes up the remainder. This is known as the loan-to-value or LTV.

A mortgage is a type of secured loan, meaning that it is secured against the property you purchase. The interest of the lender in the estate is registered in the Land Register with the title deeds. This offers them the right, if you do not maintain the payments, to repossess the land. Depending on the selling price at the time of repossession, you may forfeit your deposit, too.

 

Paying your mortgage each month is not even that different from paying rent, except you give it to a mortgage lender instead of giving your money to a landlord. This could be either a repayment or interest-only mortgage.

 

Repayment Mortgage

 

A repayment mortgage is the most common type of mortgage, where you pay back a bit of your mortgage loan with some interest per month. A "capital payment" is the part that goes into paying off the unpaid mortgage debt. Throughout the length of the mortgage, which is usually 25-30 years but can be almost any term you choose if you fulfil the repayments, then you can pay back the entire amount of money you lent and all the interest paid over the mortgage term. You can own 100 percent of the interest of your home just when you make your last payment, that's when the lender no longer has any rights because you paid what you owe and now it's all yours.

 

Interest-Only Mortgage

 

There's another form of mortgage called an interest only mortgage. Like a repayment mortgage, it can be over different terms however the LTV is usually lower.  This is one of the reasons why interest-only mortgages are less common to first-time buyers, who typically need a higher LTV, but if you think they suit you better, they're still an option.

You only make payments on the interest being paid, as the word 'interest-only' implies. No contributions go towards reducing the balance on the mortgage. Until the completion of your mortgage contract, the real loan debt, which you used to finance your house, stays the same. That's why in one go, you have to pay it all back. This is another reason that first-time borrowers are less common for interest-only mortgages: at the end of the term, you must have the means to repay your debt and be able to show proof that your plans will be enough at the time to clear the remaining balance.

 

Interest Rates

 

Interest rates are how banks and building societies make money. Since it is the service they supply you with, they bill you for borrowing money. When adding your interest rate, represented as a percentage, to the outstanding debt balance, the amount you pay in interest is determined. Per month, you pay your interest, usually alongside your capital charge. There are distinct types of interest rates for mortgages: fixed, index, variable which can be discussed with the advisor.

 

For first-time purchasers, a fixed rate repayment mortgage is also a common option. For this form of mortgage, there are two elements which compose the overall monthly charge, interest and capital. At the beginning, when the balance is at its peak, the actual mortgage payment is mainly interest, and the interest is carried out on the overall amount of accrued debt.

Your net monthly contribution still contains a capital payment on the mortgage balance, so the mortgage balance or overall debt declines per month.

 

Your Mortgage Term

 

The time for which you pay your mortgage is your mortgage term. It’s usually 25 - 30 years but differ on a case-by-case basis. The period of time you settle to will effect your monthly repayment as well as the overall sum you pay in interest, so before making any definitive commitments, it's crucial to decide on your monthly budget. Based on the repayments you can handle, it'll give you a clearer picture of the word you're realistically looking at. The shorter the term, the lower the total interest payment but the higher the monthly payments.

 

First Time Buyer Deposits

 

When you intend to take out a mortgage, you have to save up for a deposit. Usually, first-time buyer deposits are 5 percent - 15 percent of the property's gross market value, but they can be higher.

 

The amount you can deposit helps decide how much of a mortgage you're going to need. The higher your deposit, the less you'll have to borrow from the lender and the less interest you'll have to pay. In addition, bigger deposits allow you access to more favourable mortgage rates and they contribute to a lower LTV, allowing the lender more protection so that they can start charging a lower interest rate.

Stamp Duties

 

Stamp Duty is the tax that is levied on sales of property. As a first-time customer, you usually pay less than anyone else for Stamp Duty. Ultimately, the price you'll spend depends on the valuation of the land you are buying.

 

Other Considerations

 

Appraisal/Survey

Before they lend you money, your mortgage lender may need to check the valuation of your house. The lender can schedule a valuation for loan purposes while the mortgage application is being processed. Depending on the type of mortgage product that you choose, certain lenders do not charge you for this.

 

Homebuyer report

A valuation is part of a homebuyer report, but the distinction between a homebuyer report and a valuation for mortgage purposes is that the surveyor also prepares a property status report for you. This article describes any analysis that could be expected in the near term as well as immediately.

 

Structural survey

A complete structural survey is much more detailed and really required just if you intend to do substantial work on the house, it was constructed before the 1900s, it is of uncommon design, or if you believe there might be issues with the real foundation, e.g. if it has been underpinned in the past because of subsidence.

 

Legal/Conveyances

It's unsurprising that the purchasing of a house requires a lot of regulations and regulatory criteria. To lead you around the minefield of deals and ticks in boxes, you'll need a decent conveyancer or solicitor. Through liaising with the seller's solicitor, the conveyor or solicitor will also represent you, so that they will guarantee that it is done on time and that the purchase runs smoothly. Conveyancing fees can vary quite a bit, so if you want to hold the cost down, it's worth asking for multiple quotations. We can provide you with recommendations as well.

 

Using a Mortgage Broker

It is a great idea to speak to a mortgage broker before you start the process. This way we can support you through the whole process and make the entire journey stress free. At The Mortgage portal we not only lead you through the application process, fill out the paperwork and locate the right deals for your requirements and conditions but we will guide you through all the detail.

or alternatively, call us now on 01803 303909 to speak to an advisor.

 

Your property may be repossessed if you do not keep up repayments on your mortgage.

Some buy to let mortgages are not regulated by the Financial Conduct Authority.