What First-Time Buyer Mortgage Support Schemes Can I Use?
There are varied initiatives and programmes designed to help you secure a first-time buyer mortgage, although the schemes you qualify for may depend on your circumstances.
First-Time Buyers ISA
The Lifetime ISA, or first-time buyers ISA, is open to anybody saving towards retirement or a first-time buyer mortgage. However, you must be between 18 and 39 to open an account. You can use the first-time buyers ISA to boost your deposit to purchase a property up to £450,000.
This first-time buyer mortgage support scheme allows holders to deposit up to £4,000 annually, with a 25% government contribution, effectively increasing your first-time buyer mortgage deposit value by £1,000 for every £4,000 saved.
The First-Time Buyer Mortgages Government Scheme
Another option is to use the first-time buyer mortgage guarantee, where lenders can accept applicants with a minimal 5% deposit, with reduced risk. The government guarantees up to 80% of the total property purchase cost and 95% of any potential losses.
This first-time buyer mortgage initiative makes it easier to qualify for competitive rates on a first-time buyer mortgage, even where you cannot save a more substantial deposit.
Understanding Loan to Values on First-Time Buyer Mortgage Assessments
Lenders offering mortgages for first-time buyers will need to calculate the Loan to Value, or LTV, you are applying for. The LTV is the ratio that shows what you’d like to borrow on a first-time buyer mortgage as a proportion of the property value.
For example, if you want a first-time buyer mortgage to buy a home valued at £200,000 and have a £20,000 deposit, you are applying to borrow £180,000, or 90% LTV.
Knowing the LTV is important because you will be able to apply for more mortgages for first-time buyers and secure more favourable interest rates if you are applying for a lower LTV ratio.
Some lenders have a maximum LTV of 90% or 95%, but if you are using a product that is part of the first-time buyer mortgages government scheme, you can still usually proceed with a 5% deposit.
Calculating Additional Costs Involved in a First-Time Buyer Mortgage
Stamp duty is one of the highest additional costs to budget for when applying for a first-time buyer mortgage. First-time buyer relief means that if you purchase a property up to the value of £300,000, you won't need to pay any stamp duty.
However, more valuable properties will still be subject to the tax for any value over and above the threshold that qualifies for first-time buyer relief.
Other costs to account for when assessing whether your first-time buyer mortgage is affordable include valuations and surveys, legal fees, mortgage arrangement charges, moving-in costs and taking out building insurance.
How to Find the Best Mortgage Deals for First-Time Buyers
The ideal way to select a first-time buyer mortgage is to work with an independent broker who can recommend the mortgages for first-time buyers that you are most likely to be approved for and that have the most competitive fees and interest rates.
It is rare that an applicant will find the best mortgage deals for first-time buyers through a bank or money comparison site since these exclude the large proportion of specialist or broker-only lenders who often have some of the most attractive deals on the market.
We suggest any first-time buyer mortgage applicant with a low deposit, in self-employment or with any other non-standard circumstances contact the Revolution Finance Brokers team before selecting the right mortgages for first-time buyers.
Different Types of First-Time Buyer Mortgage Products
Mortgages for first-time buyers are highly varied, and understanding which first-time buyer mortgage product to apply for can make a big difference to your affordability.
Most people know that interest rates are a major aspect of selecting a first-time buyer mortgage, and a fixed-rate deal is the most common option. That means you pay a static interest rate and the same monthly repayment for up to the first five years of your first-time buyer mortgage term.
Repayment terms are the norm in mortgages for first-time buyers since interest-only mortgages tend to be designed for buy-to-let investors and may not be available.
It is also important to decide whether you want to buy a leasehold apartment, a property with a freehold share included in the price, or an entirely freehold home before you apply for a first-time buyer mortgage.
Applying for Mortgages for First-Time Buyers
Lenders assess first-time buyer mortgage applicants on multiple criteria, assessing your annual income, credit scoring, LTV, employment type and other factors. Our advice is always to consult a whole-of-market broker who can highlight the best mortgage deals for first-time buyers that are compatible with your application.
Please get in touch at your convenience for more guidance on mortgages for first-time buyers and how to ensure your first-time buyer mortgage is sustainable and affordable.
