First-Time Buyer Guide

Buying your first home should be fun, not frightening. Our first-time buyer guide is packed full of informative and helpful advice for people who are looking to buy their first home.

Buying your first home is one of the most exciting and biggest things you’ll ever do. To make the process as smooth as possible, here at ChoiceMortgages UK Ltd we guarantee to help find the perfect mortgage for you.

With over 30 years’ experience, we can help and assist you in taking that step onto the property ladder. To get you started, we have put together a guide which will help answer questions you may have. It also explains and provides definitions of new words, as well as giving a break-down of the application process which is involved.

What is a mortgage?

You always hear people speak about mortgages and how they can’t wait to get one, but what is a mortgage? The Oxford Dictionary determines that a mortgage is:

“A Legal agreement by which a bank, building society etc. lends money at interest in exchange for taking title of the debtor’s property, with the condition that the conveyance of title becomes void upon the payment of the debt.”

Having a true understanding of the commitment you’re about to take is crucial. Here at ChoiceMortgages UK Ltd we are on hand to ensure you are happy to commit to the legal agreement you undertake, by taking you through every part of the process step-by-step.

Is the property within my budget?

It is easy to get carried away when looking at properties for the first time, especially if you have your heart set on a dream home or location. Staying realistic and honest to yourself about what is affordable, in line with your salary, is important when buying your first home.

It is also important to consider all potential financial situations when deciding how much you are able to spend on your monthly mortgage. This could include change of job, saving for another large life event (marriage or a family) or what would happen if you were unable to work due to an accident or sickness.

Other monthly costs will begin to arise once you have purchased your first home, such as general household bills, council tax and property insurance.

Online mortgage affordability calculators are available to help you work out how much you might be able to borrow. They are not a guarantee, however it will help to plan and work out costs.

Finding the right mortgage

As well as choosing the right area and property for your first home, it is also important to make the right choice when selecting your mortgage deal. There are many different lenders in the mortgage market, which can make the process overwhelming.

The two main types of mortgages are ‘fixed rate’ and ‘variable rate’. However, many other different types of mortgages are available. If you are struggling to select the right one for you, you can speak to our experts who are always on hand to assist.

Fixed rate: A fixed-term mortgage is an agreed rate over a set period, usually two to five years – but sometimes going up to ten or fifteen. Fixed-term mortgages are beneficial because during the term the price will remain the same, allowing you to budget around this. Things to keep in mind with a fixed-term is that even if interest rates drop drastically, your price will remain at a potentially higher rate. If you wish to exit the agreement early, you’re likely to incur a large penalty fee. However, a fixed rate does protect you against future rate rises.

Variable rate: As the name suggests, the mortgage rate can move up or down throughout the duration of your agreement. The price is usually reflected as a result of the UK economy. In times of growth and inflation, you could potentially see an increase in interest rates and vice versa for a decrease.

Variable rate mortgages separate into a further three categories – tracker, standard and discounts.

Tracker: Tracker mortgages track external interest rates, usually the base rate which is set by the Bank of England. It is important to take into consideration the affordability of your repayments if the external rate were to increase.

Standard: Known as an SVR, this type of variable mortgage is set by the lender and commonly what you are moved onto once your existing mortgage product expires.

Discount: A discounted variable mortgage is fixed at a set percentage, usually below the lender’s SVR. As with all variable rates, the amount you repay each month could change.

How much do I need to save before buying a house?

According to the Money & Pensions Service, the average first-time buyer puts down a 20% deposit on their first home. Therefore, depending on the area you’re based in and the property cost, you could be looking at, as a minimum, £20,000 or more.

Saying that, is it not a requirement that you have to put down a 20% deposit the first time. Some lenders will accept a minimum 5% deposit, and you could consider other options such as a Help to Buy Equity Loan, shared equity or shared ownership. Each situation is different, therefore take the time to go through the different options available and ensure you are happy with the choice you undertake. Gifting of deposits is also an option. This is where family members can help with deposits in cash gifts or a formal arrangement with the mortgage lender, by acting as a guarantor or providing part of the deposit themselves.

Aside from the deposit towards the mortgage, it is important to take into consideration not only your monthly mortgage payment – but also other costs you may incur; mortgage adviser fees, Stamp Duty tax, solicitor fees as well as survey costs and initial furnishing and decorating costs.

The application process

In between saving for your deposit and getting your keys, you need to apply for a mortgage on your property. The application process can be daunting, however at ChoiceMortgages UK Ltd we understand communication is key and promise to provide a dedicated personal service throughout the entire process.