First time buyer mortgages

Your deposit is the amount you contribute, in cash, towards the purchase of your home. Usually, the minimum is 5%. However, the bigger your deposit is, the lower your monthly mortgage repayments and interest rate will be.

There are 100% mortgages available, but they are relatively rare, tend to have high-interest rates attached and may not be right for your own financial situation.

When saving for a deposit, it is important to explore all available options. There are two main government schemes in place to help first-time buyers save enough money for a deposit. Both offer a 25% government bonus, but they work differently:

Help to Buy ISA

You can no longer open a Help to Buy ISA however if you already have a Help to Buy ISA you can continue to pay in up to £200 each month. The government will top up your savings by 25% (up to £3,000) when you buy your first home. If you are buying with someone who also has a Help to Buy ISA, both of you will get the 25% bonus.

You can pay into the Help to Buy ISA until November 2029. You can claim the 25% bonus until November 2030.

Lifetime ISA

Lifetime ISAs are available to UK first-time buyers over 18 and under 40 years of age. Monthly deposits are not limited, but an annual limit of £4,000 applies. With a Lifetime ISA, a 25% bonus is automatically added each month to deposits made into the account until you reach the age of 40.

Withdrawing money saved in a Lifetime ISA for any reason other than buying a house or retirement will incur a 25% early access penalty and 5% interest.

Both types of ISA are individually held, so if you are looking to buy a home with your partner, you can each open an account, to effectively double your bonus.

Saving your deposit is, without doubt, rewarding, but it can seem as though it’s taking a lifetime, during which house prices are rising and your friends are jumping on the housing ladder.

That’s probably why more and more first-time buyers are making a withdrawal from the ‘bank of mum and dad’ (or grandma and grandad). In 2016, parents and families contributed to deposits on almost 300,000 homes (source: Legal & General).

Before looking at properties, you need to know your budget. A lender will be able to tell you how much you are eligible to borrow based on several factors, including;

• Your income
• Your credit history
• Your existing loan commitments
• Your monthly outgoings
• Your available deposit

Lenders will have their own criteria which may vary from this.

When you are working out how much you will need to buy a house, it is important to keep in mind that costs don’t stop at the deposit and mortgage repayments.

You are also likely to need to pay:

Arrangement fee

This can be up to £1,000. It is possible to add it onto your mortgage, but that will mean that you incur higher monthly repayments. A mortgage broker can help you understand whether to go for a lower rate and upfront arrangement fee or a higher rate which spreads the fee over the term of the mortgage.

Valuation fee

Your mortgage lender will carry out a valuation of the property to ensure that it is worth the amount you are borrowing from them and that it is in a good enough state of repair. Some lenders offer a basic valuation for free, but those who don’t usually charge £200 – £400 for this.

Survey fee

Depending on the age and state of repair of the property you may decide to hire an independent company to check the property for issues which could be costly to repair in the future. Whilst surveys can cost more than £1,000, it is worth knowing the condition of the property before making a commitment.

Legal advice (solicitor or conveyance)

You will need the services of a solicitor or conveyancer to
handle the legal side of buying your property. This can
cost upwards of £500.

Stamp Duty

For first-time buyers, no Stamp Duty is payable on properties costing up to £425,000. To help purchases in property hotspots such as London, there is no Stamp Duty on the first £425,000 and the 5% on any proportion between £425k and a maximum of £625k.

Land Registry fee

When you buy property, is it necessary to inform the local authorities that the land has changed ownership. The charges for this range from £30 to £910 depending on the property value and the application method used.

Our expert advisers are well versed in the Help to Buy process and the mortgage options, from helping you to apply for funding to the specialist criteria required by mortgage lenders, we can help make your dream a reality.

If you’re looking to purchase a property using the Help to Buy scheme in Southampton, Andover, Winchester or the surrounding Hampshire and West Sussex areas, get in touch today to speak to a qualified independent mortgage adviser

Help to Buy is a government scheme designed to help first time buyers get a first mortgage to get a foot on the property ladder (buying first house).

As part of the scheme, the government loans you 20% of the cost of a new build home, leaving you to find only a 5% deposit and 75% mortgage. The 20% government loan won’t accrue any interest for the first 5 years either, giving you time to settle in comfortably before the higher payments kick in.

You apply for a help to buy loan, alongside your mortgage application once you’ve found a property.

It’s worth being aware of a few key facts:

• The scheme applies to newly built homes up to a value of £600,000 in England
• It does not apply to second homes or buy to let properties
• You can only take out a repayment mortgage alongside the scheme, you can’t apply for an interest only mortgage

Look out for the help to buy symbol (above right) on new build developments, and if in doubt ask. Although most major developers are part of the scheme, not all are taking part.

A common misconception, the scheme is not exclusively for first time buyers, and can be used by home movers as long as this will be their only property, and they meet the criteria above.

Mortgage lenders assess affordability differently for the Help to Buy Scheme so it’s important you speak to a mortgage adviser first to understand how much you will be able to borrow.