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How to Secure Competitive First Time Buyer Mortgage Rates

The comprehensive guide to understanding first-time buyer mortgage rates, and how to ensure you get access to the best possible deals!

How to Secure Competitive First Time Buyer Mortgage Rates

Buying a home for the first time can be confusing, with so many lenders, rates, and terms available to choose between.

Our advice is always to seek independent advice from a whole-of-market broker such as the Revolution team before making any decisions about a long-term financial obligation!

There are thousands of first-time buyer mortgages and incentives, which need careful comparison to ensure you're paying the most competitive first-time buyer mortgage rates you qualify for.

Many high street banks will offer first-time buyer mortgages, often supported by a government initiative such as Help to Buy or the mortgage guarantee scheme.

However, lenders have vastly different criteria, and it's common to find that rates from mainstream lenders are substantially more expensive than those an experienced broker can negotiate on your behalf.

If you'd like more information about the rates available for cheap first-time buyer mortgages or to discuss which lenders are suitable for you, please give us a ring on 0330 304 3040, or email the Revolution Brokers team at [email protected].

How Does a Mortgage Work for First-Time Buyers?

The first step to securing a first-time buyer mortgage is to work out how much you can borrow and how much you'll need if you have a rough idea of the property you'd like to buy (or already have a dream home in your sights!).

Mortgage calculators are helpful but only ever indicative, so it remains crucial to seek advice before submitting an application that could be rejected.

Affordability assessments look at things like:

  • Your annual income
  • Any other earnings
  • Your credit history
  • Existing debts
  • Dependents and financial obligations

Therefore, you'll need to know what you earn per year (or an average income if you're self-employed) before you can start comparing mortgage rates and arrangement fees.

About Your Mortgage
Single or joint mortgage?
What’s your yearly income?

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Based On Your Yearly Income, You May Be Able To Borrow

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Most lenders will let you borrow 4.5 times your annual salary so, as long as you have a standard 10% deposit, you should be able to borrow this much.

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Depending on your personal circumstances, some lenders may let you borrow 5 times your salary.

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Lenders usually cap the amount they lend at 5.5 times your salary, so it’s unlikely you’ll be able to borrow more than this.

What Are the Options for Choosing a First-Time Buyer Mortgage Scheme?

As with the vast number of first-time buyers, you also have multiple options for requesting financial support with a first-time buyer mortgage.

Most of these schemes are designed to top-up the deposit you have available.

The higher your deposit, the lower the Loan to Value (LTV) for which you're asking a lender. That lowers their risk and means they'll usually be able to offer much lower interest rates than you'd have paid without it.

A lot depends on the deposit you have saved and the percentage of the property you'd like to buy.

For example, a 15% deposit is a comfortable level, and if you have more, you'll be in an excellent position to negotiate some attractive rates.

However, most first-time buyers have closer to 10% or even 5%. With a lower deposit, you will find that interest rates start to creep up.

Some of the mortgage schemes available include:

  • Mortgage guarantee scheme - the lender receives a government guarantee for up to 80% of the property purchase price. If you didn't keep up with repayments and the lender was in a repossession scenario, they would receive support if they made a loss.
  • Help to Buy equity loans - you can borrow up to 20% of the property value as an equity loan, provided you have a 5% minimum deposit. That loan goes towards your deposit and is interest-free for five years. However, after five years, you'll either need to refinance the debt or start paying interest on the equity loan.
  • Lifetime ISAs - this type of savings account is a great way to save more towards your deposit. You contribute up to £4,000 as a maximum each year. The government will top up your savings by 25% so that you can earn up to £1,000 every year. If you're saving for a larger deposit, this option is appealing.

There are several other schemes, such as Shared Ownership, so if you'd like to explore the options, please get in touch with the Revolution Brokers team to discuss!

How Can I Find the Cheapest First-Time Buyer Mortgage Rate?

The best way to find the cheapest rates is to work with an independent broker.

Our teams have years of experience finding outstanding mortgages for our clients and leveraging our knowledge to identify lenders most suited to accept your application.

Many first-time buyers haven't taken out any mortgage before, so they won't be familiar with different mortgage products.

For example, most first-time buyers will take out a repayment mortgage, which pays back interest and a proportion of the capital borrowing every month. Over time, this chips away at the total.

Within that category, you can find many fixed-rate deals, ranging from two to five years in most cases. There are also tracker mortgages, Standard Variable Rates, and capped tracker mortgages, so it's not always obvious which deal is the best value.

As a whole-of-market broker, Revolution Brokers scours the UK lending market to determine which deals are the cheapest and provide like-for-like comparisons.

Many products that incentivise new borrowers with low-interest rates carry high arrangement fees, for example, so you must have an expert on your side to avoid falling into the trap of thinking a mortgage is a good deal when it's quite the opposite.

Can First-Time Buyers Get a 95 Mortgage?

A 95 mortgage means you have a 5% deposit available - i.e. you're borrowing 95% of the value of your property.

Yes, they exist, but a 95% LTV is very high, and unless you have a guarantor or other security, it's unlikely you'll get the most competitive rates.

However, you could look at the Help to Buy or a mortgage guarantee option to mitigate the lender's risk and drive down the interest rates quoted.

The primary issue for lenders is that for first-time buyers, they can't see any track record of on-time mortgage repayments in your credit file.

Therefore, lenders tend to be a little cautious and won't usually offer the highest multiples of your annual salary to arrive at a maximum mortgage value.

What is a First-Time Buyer Joint Mortgage?

Joint mortgages mean that two people buy a property together - and you can do this with any other person, whether that's a friend, partner, family member or spouse.

In fact, joint mortgages can often have up to four individuals on the title deeds!

For this type of mortgage, the assessment works pretty much identically as that for an individual buyer, although:

  • The lender will assess your average annual earnings together to arrive at a maximum lending figure.
  • Both applicants will be credit checked, so if one of you has a bad credit history, this can impact the overall application.
  • You will both need to co-sign all documentation.

How Does a Mortgage Work for First-Time Buyers with Bad Credit?

Bad credit makes a mortgage a little trickier to find; there's no doubt about it!

However, don't lose faith if one lender has turned you down.

Most high street banks have reasonably strict policies when it comes to bad credit. They're also sometimes cautious about first-time buyer mortgages, so adding those elements means you're less likely to secure a mortgage product.

There are thousands of niche lenders, including bad credit specialists, so it's nearly always a case of finding out why your bank turned you down and identifying a lender with more flexible eligibility criteria that will be better suited.

Remember, every lender has a different set of policies to follow. Just because one mortgage provider turns you down doesn't mean another won't be happy to accept your application!

They will look at:

  • What sort of bad credit issues you have experienced.
  • How long ago they occurred.
  • Whether you've kept your finances in good order since then.
  • If you have now repaid all the outstanding debt.

It's crucial to consult an experienced broker since lender rules vary considerably in this area.

For example, one bank might have a generic credit score and refuse any applicant who doesn't meet that requirement, regardless of the reason.

Others refuse lending to people with a CCJ on their credit file in the last three years.

Specialist lenders often take a more case-by-case view to new applications, so they’re more likely to be comfortable lending to a bad credit first-time buyer, provided you're now in a position to afford the debt.

How Do Lenders Calculate Affordability on a First-Time Buyer Joint Mortgage?

Affordability means that the lender needs to know you can afford to keep up with the repayments.

They'll look at your income, outgoings, other debts, and the property's value to calculate if they think the borrowing level is manageable with your income.

Are First-Time Buyer Mortgage Schemes Open to All Applicants?

Yes, in most cases, any first-time buyer can apply for Help to Buy or a mortgage guarantee scheme to help them get onto the property ladder.

You will usually need to apply to the scheme first and then approach a participating bank that can utilise the support to offer a competitive deal.

Alternatively, give us a call, and we'll streamline the process to get your application approved faster.

Professional Support Understanding How Does a Mortgage Work for First-Time Buyers

Revolution Brokers works with thousands of first-time buyers who have been turned down by their bank or found that the mortgage rates offered are not affordable.

Contact our friendly team via email at [email protected] or call us on 0330 304 3040 to discuss the options.

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