What is a First Time Buyer Mortgage
First Time Buyers are classed by most mortgage lenders as people who have either
1. Never owned a property ever or
2. People who have owned a property in the past but not owned one for 6 months or more.
Different lenders have different ideas and rules regarding this. Being a First Time Buyer is not generally a problem.
Mortgages may seem to be a daunting process but honestly, it does not have to be. Buying your first home is one of the most exciting things ever so if you find a good broker to do it for you at a reasonable price then please use one. The reason you should use one is quite apparent. After all; if your car breaks down and you knew nothing about cars for, you would not try to fix it yourself, you would take it to a mechanic. It’s the same with mortgages. Mortgage brokers can save you time, effort and money so why not use one? The initial consultation is free of charge.
First Time Buyer Q&As
1. How much deposit you need. You generally need at least 10% deposit, but in most cases, you need 15%
2. What type of bad credit you have, for example, do you have defaults, CCJs, Bankruptcy, IVA or a Debt Management Plan?
3. When were the bad debts registered and how much were they?
These mortgages are available to First time buyers buying their first home but in short you need a larger deposit and you will pay a higher interest rate than normal.
The amount of interest and the deposit you need depends on how recent and the level of bad credit you have.
Some mortgage lenders class first time buyers as people who have never ever owned property before in their life and other mortgage lenders consider first time buyers to be people who has not owned a property for more than 12 months or 2 years.
Different lenders have different criteria but being a First-time buyer. Speak to you adviser if you have any questions regarding this.
If you have less than a 20% deposit, then you are generally restricted to around 4.5 times your salary although this does vary from lender to lender.
1. Equity Loan – this is for new build properties only. The Help to Buy people give you 20% of the property value as a loan, you put in 5% deposit and the rest is made by the way of a mortgage. I think this is a great concept and it used to be called “Shared Equity” but has been jazzed up by the government and called “Equity Loan”
2. Mortgage Guarantee – This is for any property you wish to purchase on the open market i.e. new and second-hand homes. These homes must be approved by the Help to Buy people. You put in 5% of the property value and the government “guarantee” 20% of the property value. This guarantees the lender will get their money back if 1. the property decreases in value and 2. you stop making your mortgage payments and the mortgage lender repossesses your home. If the property value is less than the mortgage owed on the property, the “guarantee” ensures the lender gets all the money back therefore minimising the risk of them being out of pocket. It’s a guarantee for the lender that’s all. We recommend you get independent legal advice regarding this as there could be further financial implications and liabilities on your behalf if things should go wrong.
The maximum property value you could buy through this Help to Buy is £600,000 and you must also NOT own any other properties
The thing to remember is the bigger the deposit the better the rate.