First Time Buyer Mortgage Guide

As a first time buyer it can be difficult getting a deposit together and getting the right mortgage for your needs. Learn more about mortgages made for first time buyers.

First Time Buyer Mortgage Guide

So it's your first time buying?

If you haven't read our guide to mortgages - have a quick catch up.

Less than a decade ago, when property prices were still climbing on a monthly basis, Lenders were happy to provide you with a mortgage of 100% or more of the value of the home you wished to purchase.

We all know what happened next (the credit crunch, repossessions, tightening of lending rules ... ) and now things are quite different.

Deposit for your home

It is now fairly normal for a minimum 10% deposit even in the tailored for first time buyers mortgage deals. However, if you want to get the lowest interest rate possible, and the lowest amount to pay in fees - you need to save for the largest deposit possible.

What is a good deposit amount?

Anything above 20-25% deposit (75-80% Loan to Value) is the starting amount to increase the amount of mortgage choices available to you. If you want the lowest to pay in fees and the best rate, you need to put up 40% of the value of the home you are looking to buy.

Use our House Deposit Calculator to get an idea of how much you need to save per month or how long you need to save for to get your deposit together. Just enter an interest rate and the amount of money you need to save - then either enter how much you can afford to put into the saving account per month or how long you want to wait before you apply for your mortgage.

Help getting a deposit?

The bank of mum and dad, if possible, can help in getting a short cut to saving your deposit.

There are mortgage deals for first time buyers that can also use your parents in other ways:

  • Parental Guarantee - Your parents guarantee an amount of the mortgage above the amount you yourself can borrow - the bank will then lend you more than they normally would based on your circumstances but in the event you have trouble making repayments, they will take up your parents guarantee and they make the additional payment.
  • Parents Savings - Your parents use their savings to offset the amount of interest charged to you on your mortgage. Try our offset mortgage calculator and enter the amount of savings to see the difference it can make.

How's your credit?

A good deposit amount must be coupled with a good credit score in order to get the best mortgage deal.

As with all types of credit, credit scoring is used to determine whether you are eligible for the product a financial institution is offering. Mortgages are no different.

Credit scoring takes into account many different factors, and it is hard to create a single checklist as each lender is different in the criteria they use.

A poor credit score will make it almost impossible to get a mortgage and, if you can get one, it will cost more than a mortgage for an applicant with good credit score.

Some factors that can lead to a bad credit score include:

  • Making lots of applications for credit within short periods of time of each other.
  • Joint applications - not always a bad thing, except where one half of the relationship drags down the other by being bad with money.
  • Missing payments will adversely affect your credit score.

You can help your credit score by following some of the following recommendations:

  • Firstly, get a copy of your credit file and look through it for mistakes and to get an idea of where you stand. Have any errors amended.
  • Make sure all addresses for your accounts (credit/bank/store cards etc) are correct - you don't want any errors flagging up on your application.
  • If you are not on the electoral roll, please register.
  • If you are linked to someone else on your credit file, a joint account or additional card with bad history - have yourself removed (delinked) from any linked record if possible.
  • If you have many credit cards that are available limits but have not been used nor are needed, cancel them. Too much available credit can be detrimental.
  • You can gradually increase your credit score, even if you currently have past arrears as the cause for your bad credit score. Apply for specific 'creditbuilder' credit cards which have low credit limits and unfortunately, rather high interest rates. If you spend conservatively on them each month, and importantly repay the full balance on each statement (avoiding interest) - you will gradually improve your credit score. Search for credit card deals for bad credit using our deal finder.

A mortgage broker can increase your chances and save you time as they have a more intricate knowledge of which mortgage is more/less stringent as well as have links with underwriters at the lenders to whom they can make a case for you. You can get mortgage advice from an FCA regulated broker right now - just click here and fill in a few details to get a free call back.

Homebuyer or Homestart Mortgages

You can get a mortgage specifically designed to ease the burden on your for the first few years of your mortgage by starting off as interest only then switching payment type to repayment.

By doing so, you can either put the amount saved toward a fund to put forward a larger deposit at the end of the first few years.

Buying with Friends

A joint mortgage can be padded out to up to 4 people allowing the possibility of getting a mortgage with your friends.

The increased income, coupled with extra deposit contribution would allow the banks to incease the amount you can borrow and open up lower interest rates too.

Downsides center around the relationship you have with your fellow borrowers when life plays out in manners other than expected. There may be unemployment, relocation or more to deal with. To prevent any wiggle room, you are best advised to create some kind of contract between each other to lock down the steps to take in these scenarios.

Shared Ownership

Under a Shared Ownership scheme you are part buying and part renting from your local housing association.

Typically, 75% of the property is to be purchased and 25% is rented. The ratio of the purchase/rent can be changed in the future.

The advantages of schemes such as this are the lower mortgage amount required to get on the housing ladder (even in part) and the option to buy out the rented portion as the years go by and your salary increases.

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£75,000 repayment mortgage on a property valued at £100,000 (min 75% LTV). Mortgage Term 25 Years. Costs compared over 3 years.

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£5,000 loan. Loan Term 3 years. Compared Over The Term of the Loan.

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£250 purchase balance and £500 balance transfer. Repaid over 2 years at the higher of 3% minimum payment/£5. Comparing the total cost of credit.

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£1,000 saved over 3 years. Does not take into charges. For non-ISA accounts, 20% tax at source is assumed. You can get a full breakdown when you compare.

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£1,000 invested over 3 years. Does not take into account taxation or charges, you can get a full breakdown when you compare.

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£150 invested every month for 3 years. Does not take into account taxation, inflation or charges, you can get a full breakdown click get more info.

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Mortgage Assumptions

  • Fees

    All fees charged will be paid upfront rather than added to the cost of the mortgage.

  • Costs

    Total costs consist of the full monthly payment amount over the comparison period, plus the upfront fees.

  • Offer Period

    When a initial interest rate offer ends, the monthly payment will be recalculated at the standard rate based upon the remaining balance at the time.

  • Tracker and Discount Rates

    With tracker and discount mortgages, please note that the costs will assume the base rate or lenders variable rate stay the same as now for the duration of the comparison.

Loan Assumptions

  • Fees

    No fees have been taken into account.

  • Costs

    Total costs consist of the total INTEREST charged over the term of the loan.

Credit Card Assumptions

  • Fees

    Balance Transfer fees will be added to the balance transfer balance on the card.

  • Minimum Payments

    Payments will be assumed to be made at either 3% of the total outstanding balance or £5, whichever is the higher.

  • Payment Priority

    Balances will be paid off in the following order: 1. Purchases, 2. Balance Transfers.

  • Rate Offers

    When the offer period on a promotional/initial rate expires, interest will be charged at the normal rate.

  • Total Costs

    These take into account the amount of INTEREST charged during the comparison period.

Savings Assumptions

  • Charges

    No charges are taken into consideration when calculating costs.

  • Taxes

    For ISA's, no tax will be deducted from earned interest. For other account types, 20% tax will be deducted at the point the interest in paid.

  • Bonus Rates

    When bonus rates expire, the interest rate will revert to the normal rate advertised. In the case of fixed rate bonds, once the bond period ends, no interest will be paid.

  • Interest Period

    Monthly interest in calculated and paid monthly. Annual interest will be calculated monthly, but paid on the anniversary of the starting date. Interest will be paid pro-rata if the comparison period ends before an anniversary.

  • Total Costs

    These take into account the total value accrued in your savings at the end of savings term. It does not take into account inflation.

Investments Assumptions

The Investments category displays Stocks and Share ISA deals only.

  • Charges

    No initial, annual or per deposit charges are taken into consideration when calculating costs.

  • Taxes

    For ISA's, no tax will be deducted from the annualised growth.

  • Rates

    Using past performance figures, we have created a compounded annual growth rate to provide a annual percentage figure to calculate growth against. This is from past performance and is NOT an indication of the future performance of the fund.

  • Interest Period

    Annual growth will be calculated monthly, but added on the anniversary of the starting date. Growth will be added pro-rata if the comparison period ends before an anniversary.

  • Total Fund Value

    This takes into account the total value of your fund at the end of invested period. It does not take into account inflation.

Pensions Assumptions

The Pensions Category displays a small selection of pensions only.

  • Charges

    No initial, annual or per deposit charges are taken into consideration when calculating costs.

  • Taxes

    No tax will be deducted from the annualised growth.

  • Rates

    Using past performance figures, we have created a compounded annual growth rate to provide a annual percentage figure to calculate growth against. This is from past performance and is NOT an indication of the future performance of the Pension.

  • Interest Period

    Annual growth will be calculated monthly, but added on the anniversary of the starting date. Growth will be added pro-rata if the comparison period ends before an anniversary.

  • Pension Value

    This takes into account the total value of your pension at the end of invested period. It does not take into account inflation.

  • Fixed Rates

    The interest rate charged is fixed for a number of years or until a certain date by the lender.

  • Base Rate Tracker

    The interest rate is set and then tracks the rises and falls of the Bank of England's base interest rate which is decided monthly.

  • Discount

    The interest rate is the lenders standard variable rate, which they decide. The discount period gives you a certain amount off that rate. The rate can be changed at anytime by the lender.

  • Variable

    The interest rate is the lenders standard variable rate, which they decide and can change anytime.

Click the arrows to arrange the product details by the name of the lender, or if you have selected all rates, the type of rate selected.

Click the arrows to arrange the products by the maximum LTV (Loan to Value) allowed by the lenders.

Click the arrows to arrange the products by the initial monthly payment you will be charged for mortgage amount you entered.

Click the arrows to arrange the products by the calculated APR (Annual Percentage Rate). This rate takes into account fees and charges as well as interest.

Click the arrows to arrange the products by the calculated total cost of the mortgage (Amount Paid) over the period selected.

What is the value of the property for which a mortgage is required?

How much do you need to borrow?

  • Capital + Interest

    Payments made to the lender will repay the amount borrowed as well as cover interest.

  • Interest Only

    Payments made to the lender will only cover interest. You will need to put money aside elsewhere in order to be able to repay the actual amount borrowed.

What is the minimum period for which you want the interest rate offer?

For example, for a minimum 3 year interest rate offer, select 3 years.

Tick to remove mortgages that have Early Repayment Charges.

Early Repayment Charges are applied by the lender if you repay the mortgage, or remortgage to a different lender within a certain period of time or date set by the lender. Typically a percentage of the outstanding balance at the point of repayment.

Tick to remove mortgages that have any fees.

Lenders may apply fees such as arrangement, booking or valuation fees when you take out the mortgage.

Tick to only show Buy To Let mortgages. If you are purchasing/remortgaging a property which is to be rented to tenants, this is the type of mortgage you will need.

Tick to only show Offset mortgages. Offset mortgages allow you to use you savings or regular income to reduce the amount of interest you are charged on your mortgage.

How many years do you wish to spread your mortgage over?

  • Good Credit

    If you have zero missed payments in the last 2 years, no CCJ's or defaults these deals may be available to you.

  • Fair Credit

    If you have missed a few payments as recently as the last 6 months, these deals may be available to you.

  • Bad Credit

    If you have missed payments in the past, had CCJ's or defaults, lenders in this category may have deals for you.

Click the arrows to arrange the product details by the name of the lender.

Click the arrows to arrange the product details by the headline rate (APR) of the loan.

Click the arrows to arrange the product details by the total cost of the loan (Interest Charged) over the time period selected.

Over how many years do you wish to spread this loan?

Tick to show only loans that include some form of payment break

Tick to show only loans that are available to homeowners.

Tick to show only loans that are available only to existing customers of the lender.

  • Good Credit

    If you have zero missed payments in the last 2 years, no CCJ's or defaults these deals may be available to you.

  • Fair Credit

    If you have missed a few payments as recently as the last 6 months, these deals may be available to you.

  • Bad Credit

    If you have missed payments in the past, had CCJ's or defaults, lenders in this category may have deals for you.

Click the arrows to arrange the product details by the name of the lender.

Click the arrows to arrange the product details by the purchase rate (APR) of the credit card.

Click the arrows to arrange the product details by the balance transfer rate (APR) of the credit card.

Click the arrows to arrange the product details by the headline rate (APR) of the credit card.

Click the arrows to arrange the product details by the total cost (Interest Charged) of repaying your chosen balance over 24 months.

Show only credit cards that allow balance transfers.

Show only credit cards that provide some form of cashback.

Show only credit cards that have a reward scheme.

  • Easy Access

    Regular savings accounts which may have short or notice period if you need to withdraw funds.

  • Cash ISA

    Tax Free savings, allowing you to deposit up to a maximum of your annual cash ISA allowance every year.

  • Fixed Rate Bonds

    Bonds where you deposit an amount of money away for a certain period in return for a fixed level of interest.

Click the arrows to arrange the product details by the savings institution.

Click the arrows to arrange the product details by the notice period to withdraw funds. For Bonds, this period will be the length of the bond.

Click the arrows to arrange the product details by the rate (AER).

Click the arrows to arrange the product details by the total amount saved depending upon the amount you wish to save and the period over which you are saving it.

How much money do you have to deposit?

Show only cash ISA's where you can transfer funds from an existing ISA.

Show only savings where you are permitted to make withdrawals.

  • Ethical

    Stocks and Share ISA's where your money will only be invested into growth funds purchasing stock in companies that are socially, ethically and environmentally responsible.

  • Income

    Stock and Share ISA's where your money will be invested into high dividend payout companies, in order to generate a tax free income from your savings.

  • Pick Your Own Fund

    Stock and Share ISA's where your money can be used to purchase units from funds you pick from.

Click the arrows to arrange the product details by the institution name.

Click the arrows to arrange the product details by the risk level.

Click the arrows to arrange the product details by the past performance level. Remember that past performance is not an indicator of future performance.

Click the arrows to arrange the product details by the fund value after the chosen period. If it is an income ISA, this will show the growth of the initial fund.

Click the arrows to arrange the product details by the name of the pension provider.

Click the arrows to arrange the product details by the past compounded annual growth rate of the pension plan. Remember that past performance is not an indicator of future performance.

Click the arrows to arrange the product details by the pension value based upon the amount you are investing and period invested (figures are created using the past compounded annual growth rate).

How much will you be investing monthly into the pension, gross?

Enter the minimum past annual growth percentage for funds you wish to see.

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We have provided guides, tools, a selection of deals (lowest rate and/or fees) but expect you to seek full professional advice with a whole of market adviser before making any decision.

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