Home Property First-time buyers: 5 top tips on getting a mortgage

First-time buyers: 5 top tips on getting a mortgage

For a first time buyer, there is a feeling of excitement as well as trepidation.  With the pandemic affecting everything, including mortgages in the UK, it is not as easy now as it was earlier to obtain a mortgage for a new home.  However, it is definitely possible, and there are still many options available. An experienced and professional mortgage broker will provide the expertise required.

The following are a few suggestions to secure first time buyer mortgages UK:

  1. Deposit:  This is one of the significant factors.  Usually, at least 5% to 15%  is covered by the buyer, remaining under a mortgage.  You will need to plan on how to save to build up this deposit amount.
  • Saving:  “Little drops of water make a mighty ocean”.  Small amounts can accumulate. So by reducing daily spending, cutting down on bills, switching to less expensive energy tariffs, cancelling unused subscriptions like TV, magazines, gyms etc. and checking on your Council tax for discounts can add to the savings.  
  • Cashback credit card:  This will enable you to earn a percentage of your spending by way of credit on your bill. Maximum benefit will occur if it is used for all daily expenditures as long as the balance is fully paid every month; if not, the interest charged will outweigh the cashback.  Using a credit card responsibly will improve credit rating, which is essential when applying for a mortgage.
  • Living situation:  Savings could escalate if you moved to cheaper living accommodation or shared accommodation (where expenses like bills etc. could also be shared) thus achieving your deposit goal in a shorter time.
  1. Government schemes:  
  • Lifetime ISA (Individual Savings Account):  This Government scheme is eligible for UK residents who are over 18 and under 40 years of age.  A maximum of GPB 4000 can be deposited each year until the individual is 50 years.  The government will add a 25% bonus to the savings, up to a maximum of GBP 1000 a year.  You can withdraw money from your ISA if you are a first-time buyer, at least 12 months after opening the ISA.  The property should cost less than GBP 450,000 and is bought with a mortgage through a conveyancer or solicitor. 
  • Help to Buy equity scheme:  The Government offers an equity loan to first time buyers for a new-build home to be used as the main residence.  5% deposit will be required.  The maximum purchase price for this plan will depend on the area in the UK.  
  • SDLT holiday:  Availing of the stamp duty land tax holiday can be beneficial if the price of the property is GBP 500,000 or less.
  • “Generation buy”:  This project is yet to come into force, but it will allow first time buyers a mortgage with just 5% deposit.

The best of brokers in the UK will provide guidelines to all the above.

  1. Credit rating:  To be eligible for a mortgage, your credit score is essential.  Everything should be up to date with no outstanding.  Being on the electoral roll at your current address and ensuring that there are no mistakes in your report can help.
  2.   The right time:  
  • Make sure that the required deposit and all paperwork are ready in advance before applying for a mortgage. Proof of ID, address and Bank statements for the last three months are usually the primary documents required. If you are self-employed, audited accounts for the previous two years and a more significant deposit amount may be required. Lenders will want to ensure that you are a “safe bet”.  A rejection can affect your credit rating.
  • Some lenders offer low-deposit mortgages for a limited time –  a portion of the amount available only for one or two days. A professional broker will be able to inform you immediately to enable you to take advantage of the best of such offers.
  1. Family Springboard Mortgage:  The buyer puts down a 5% deposit against a 95% mortgage amount.  Besides, a family member deposits 10% of the purchase price into a savings account with the lender as a security for five years.  Both the first time buyer and the family member earn interest on the deposits, fixed for five years.  Once the five year term is over, and as long as the mortgage payments are up to date, the funds held in account can be released.  

Conclusion:  There are various other fees and expenses to take into consideration as well – transaction, administration and legal.   To help make the right choice and arrange a bespoke mortgage, the advice of a professional mortgage broker is a must.  With the lockdown, the best online mortgage brokers in the UK are still available and can be contacted to ensure that you obtain the right mortgage at the right time!