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First Time Buyer Mortgage Guide: The Easy Step-by-Step Guide

For most people, buying a property will be the biggest purchase they ever make – and the most important. This can be daunting, especially if you are a first-time property buyer unfamiliar with the process.

Our first-time buyer mortgage guide is here to equip young professionals and families hoping to buy their first home in the near future. Use the information below to guide you through the process, and feel free to speak with Moneysprite mortgage advisers for professional support.

How much money do you need to buy a house?

When applying for a mortgage, the lender will assess an array of factors that feed into their decision, such as household income, existing debt and your credit score. One of the most important factors is how much money the buyer can put down as a deposit for the property.

Lenders use a loan to value ratio (LTV) to avoid overborrowing, with most lenders offering to borrow up to 80% of the home’s value. This means the first-time buyer will need to put a down payment of at least 20%. However, a new government help-to-buy scheme has been launched to enable first-time buyers to purchase their first residential home with a minimum 5% deposit.

100% mortgages do not require any deposit at all, but these come with significant risks. They usually require a guarantor to secure their life savings or own home against the mortgage, and you’re exposed to the potential of negative equity (if your home loses value and becomes less valuable than the mortgage).

How much stamp duty does a first-time buyer pay?

Stamp Duty is a type of land tax that is paid to the government when you buy property in England or Northern Ireland. Since July 2021, Stamp Duty relief has been implemented for first-time buyers, and they will not pay any Stamp Duty on the first £300,000 of their property purchase. This means lots of buyers will not pay any Stamp Duty on their first home purchase.

For properties worth up to £500,000, the first-time buyer will pay 5% of the value above £300,000. For example, if they bought a property worth £400,000, they would pay 5% Stamp Duty on £100,000 only (£400,000 value minus the £300,000 Stamp Duty relief), which equates to £5,000.

If the first-time buyer is purchasing a property worth more than £500,000, they will receive none of the first-time buyer Stamp Duty relief and will be subject to normal Stamp Duty rates.

Property purchases are also subject to land tax in Wales and Scotland, but the tax goes by a different name with different rules.

First-time buyer guide

A mortgage in principle is a non-legally binding agreement with a mortgage lender to the amount of money they will let you borrow within a mortgage. The loan amount is based on personal circumstances and can be quite accurate but may not be 100% reliable. You use a mortgage in principle to know what properties you will and will not be able to afford.

The fun part! Search the market for your first home with the mortgage in principle in mind. This involves booking viewings and attending open home viewings.

Once you’ve found the property you want to buy, it’s time to make an offer. You may have to do some negotiating, but hopefully you’ll get it at a price within the mortgage in principle amount.

Make a formal mortgage application based on the property you want to buy and the amount you need to borrow. The mortgage terms you are offered should be highly identical to the mortgage in principle, providing a long time has not passed since the mortgage in principle was agreed.

A property chain is when the completion of the sale is held up because the sellers need more time to find their next property. Even if the sellers of the property you’re buying from have already found their next home, the people they are buying from may not be ready to move. Delays can occur anywhere along the chain and can delay a property purchase.

Sometimes getting caught in a slow buyer chain is unavoidable, but there is one thing you can do to mitigate the chances of this happening. You may want to look for “chain free” properties only, meaning the sellers are not part of a chain at all. This can be the case because the sellers are selling an investment property or an inherited family home rather than moving themselves.

First-time buyers are appealing to sellers because they come to the market without being part of a chain.

Conveyancing is the legal administration to transfer property ownership and is done by a solicitor called a conveyancer. They will conduct extensive searches to ensure you are buying a property without external debts and unknown owners. They’ll also work with the seller’s legal team and your mortgage provider. Their work is essential in avoiding costly mistakes.

A property survey is used to identify any issues with the property’s condition, including its structure. A survey could unearth some issues with the property that you were not able to see with an untrained eye. If these issues are significant, you may want to renegotiate your offer. Not completing the right type of survey can result in costly building work.

Organise building insurance in preparation for the completion date. It’s essential that this is in place by this date to protect your investment.

Both legal teams will exchange the contracts and analyse them to ensure everything is in order or needs changing. At this stage, the completion date will also be agreed upon, which is when you become the legal owner of the property.

Congratulations! You’re now a homeowner. On this date, the seller must have vacated the property and handed over all keys to the buyer.

Moneysprite has helped individuals, families, the self-employed and scores of other first-time buyers get onto the property ladder. Speak with our mortgage advisers to make a daunting process seamless!

If you need help with your mortgage, call us today: 0345 450 4660

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