first-time-buyers-guide

First Time Buyer’s Guide

Buying your first home is a really exciting milestone in your life, but it can seem a bit daunting.

In this guide, we’ll walk you through the steps you need to take to buy your first home. By the end of this guide, you will be confident that you know what to do at each stage of the process.


Find a mortgage broker

A mortgage broker will help you to decide what kind of mortgage will suit you. They will also let you know how much you could potentially borrow depending on your individual financial circumstances.

You can arrange an appointment or call with a mortgage broker. Alternatively, you may prefer to go online and find a company that can arrange your mortgage end-to-end digitally. This will make the process faster and involve less paperwork. 

Make sure you are comfortable with the mortgage broker you choose. You should ensure that they will guide you through the whole process and follow up with the solicitors on your behalf to keep the case on track. You should also check that they are available out of hours in case you need to contact them in the evenings or at weekends.

 

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Choose your mortgage

Choosing the right mortgage is an important decision. If your application is rejected, it can have a negative impact on your credit score. Your mortgage broker will guide you to the right mortgage for your circumstances. They will ensure that you meet the lender’s criteria before you apply so that your mortgage application won’t be rejected. 

In addition, brokers can help you calculate the overall cost of your mortgage to ensure you get the most appropriate deal. Sometimes products with low-interest fees have other costs such as survey fees, booking fees and product fees that actually make the mortgage more expensive. Your mortgage broker will calculate the total costs to ensure you get the most suitable deal

Secure a Decision in Principle

Once you have found the right deal, your mortgage broker will secure a Decision in Principle (DIP). This is an agreement with your chosen lender that they will grant you a mortgage on condition that the information you have given them is correct.

A Decision in Principle puts you in a great position to make an offer once you have found your dream home.

Find a property

Now that you know how much you can afford to borrow, you can start looking for your perfect home. You should register with several local estate agents and they will send you listings as they come onto the market. Take your time when viewing each property – it’s a big decision after all. You might like to take photographs or make notes on each property you view.

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Put in an offer

Once you have found your dream home, you can put in an offer. Make sure you are clear about what is included in the sale. You should check items such as light fittings, white goods, curtain rails and garden items. 

Once your offer has been accepted, you can proceed with your mortgage application. The sale can then proceed subject to an independent valuation, surveys and searches.

Complete your mortgage application

You are now ready to complete your mortgage application. This is when you will need to verify details such as your income and your identity.

You can complete your mortgage online if you choose. Open Banking and Online Identification make it easy to complete the whole process digitally. Alternatively, you can speak to your mortgage broker who can guide you through the process.

Your lender will also organize a mortgage valuation at this stage to establish the value of the property and ensure it is one they can lend against.

Choose a conveyancer or solicitor

For straightforward property purchases, you can use a conveyancer. However, if the situation is complicated in any way, then it may be best to choose a solicitor.

Don’t necessarily go with the conveyancer your estate agents recommend. Ask around for recommendations and compare a few quotes before you decide. Don’t automatically go for the cheapest, though; you should check that the firm you choose has a good reputation and plenty of satisfied customers.

Your conveyancer will now draw up contracts for the purchase. They will also do a number of checks and searches to make sure there is nothing about the purchase that is a matter of concern.

Instruct a survey

You may want to have your own homebuyers report or survey done at this stage. This is especially advisable if the property is very old or unusual or if you have any concerns about the condition of the property.

Exchange contracts

Once all the paperwork is done, your solicitor or conveyancer will exchange contracts with the seller’s solicitor or conveyancer. This means you have legally agreed to purchase the property on a specified date. You will now pay your deposit.

Completion

On the date specified, money is transferred to the seller’s solicitor and the keys of the property are released to you.

Further information

To ensure you fully understand the mortgage process here is some additional information about mortgages, insurance and buying a property.

What is a first time buyer?

There are quite a few regulations covering who qualifies as a first time buyer; however, in general, a first time buyer is someone who has never acquired a major interest in any property or land or inherited property or been given property as a gift.

To receive the benefits of being a first time buyer, all applicants must be eligible.

First time buyers currently receive a stamp duty exemption and may be eligible for certain government schemes to help first time buyers.

What is a mortgage?

A mortgage is a large loan that you borrow from a lender to buy a property. You pay this loan back, with interest, usually over a long term such as 25 or 30 years. The loan is secured against the property, which means the lender can repossess the property if you can’t maintain the payments.

What are the main types of mortgage?

The two main types of mortgage are Repayment and Interest Only

Repayment Mortgage

The most common form of mortgage is a Repayment Mortgage. With this type of mortgage, you pay a bit of your mortgage debt as well as some interest each month. At the end of the mortgage term, the property is yours.

Interest-Only Mortgage

With an Interest Only Mortgage, you only pay the interest each month. The actual debt remains the same and will need to be paid at the end of the term. You will have to prove that you have the means to pay the outstanding balance at the end of the term.

This may involve paying into an investment plan which can be used to pay off the capital at the end of the term. A financial adviser will be able to suggest a suitable plan.

How much deposit will I need to put down on a property?

The amount of deposit you need will vary. However, in general for a repayment mortgage, you will need 5%- 15% of the property value and for an Interest Only mortgage, it will usually be 25%.

You should aim to pay as much deposit as you can as this will reduce the amount of interest you pay. In addition, a larger deposit often gives you access to more competitive mortgage deals.

Understanding interest rates

Different mortgages offer different interest rates. These are usually expressed as a percentage. 

The lower the interest rate, the less you will pay over the term of the mortgage.

There are a variety of different types of mortgage rates available, including fixed-rate and variable-rate mortgages.

Fixed-rate Mortgages

Fixed-rate mortgages ensure that during the deal period, you will always pay the same amount no matter what interest rates in the mortgage market do. This makes it easy to budget. However, it does mean that if interest rates go down, you won’t benefit.

There are a variety of different fixed-rate mortgages, including tracker mortgages and discount mortgages.

Variable-rate Mortgages

Standard Variable Rate Mortgages (SVRs) can change at any time, depending on the financial market. However, they tend not to have an Early Repayment Charge, which means you can pay your mortgage more quickly if you choose or switch deal entirely without penalty.

Your mortgage broker will be able to tell you more about different interest rates and help you find the best deal for your circumstances.

What is Open Banking?

Open Banking was set up by the Competition and Markets Authority on behalf of the UK Government. It offers a secure way to give providers access to your financial information.

Open Banking makes it safe and easy to apply for products, such as mortgages, digitally and can help you find the best deal based on your actual financial circumstances.

What insurance will I need when I buy a property?

Buildings Insurance

When you take out a mortgage to buy a property, your lender will insist that you also take out Buildings Insurance. Buildings Insurance covers the financial cost of repairing damage to the physical structure of a property. Your mortgage broker or financial adviser can advise you with this. 

Insurance is a vital part of protecting your property and your investment so ensure you are happy with your cover and don’t just go with the cheapest plan. This is the only insurance your lender is likely to require. However, you may like to consider additional insurance for your peace of mind.

Contents Insurance

Contents Insurance protects the contents of your home against accident or theft.

Income Protection Insurance

Income Protection Insurance will cover your mortgage payments if you are unable to work due to sickness or injury.

Life Insurance

Life insurance can protect your family if the worst happens and ensure they can continue to live in the family home.

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What fees do I have to budget for when buying a property?

Stamp Duty

If you are a first time buyer, you will currently not have to pay stamp duty if the purchase price of your property is below 300,000. However, if the purchase price is higher than this, then some stamp duty will be payable.

Valuation

Your lender will require a valuation of the property you intend to purchase. Sometimes this will be paid by the lender as part of the mortgage deal. However, you should check this so you can budget accordingly.

Conveyancing

You will have to pay either a conveyancer or solicitor for the legal work required in buying a property.

Mortgage Broker Fees

You may have to pay mortgage broker fees. However, many mortgage brokers are paid by the lender and do not charge additional fees.

If you want to know more about your mortgage options, give us a call on 0203 0111 898 to speak to one of our advisors.

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What you need to do to buy your first home | Savings | Deposit | Help to buy | Get a Mortgage

Buying your first home is a really exciting milestone in your life, but it can seem a bit daunting.

In this guide, we’ll walk you through the steps you need to take to buy your first home. By the end of this guide, you will be confident that you know what to do at each stage of the process.


Find a mortgage broker

A mortgage broker will help you to decide what kind of mortgage will suit you. They will also let you know how much you could potentially borrow depending on your individual financial circumstances.

You can arrange an appointment or call with a mortgage broker. Alternatively, you may prefer to go online and find a company that can arrange your mortgage end-to-end digitally. This will make the process faster and involve less paperwork. 

Make sure you are comfortable with the mortgage broker you choose. You should ensure that they will guide you through the whole process and follow up with the solicitors on your behalf to keep the case on track. You should also check that they are available out of hours in case you need to contact them in the evenings or at weekends.

 

Choose your mortgage

Choosing the right mortgage is an important decision. If your application is rejected, it can have a negative impact on your credit score. Your mortgage broker will guide you to the right mortgage for your circumstances. They will ensure that you meet the lender’s criteria before you apply so that your mortgage application won’t be rejected. 

In addition, brokers can help you calculate the overall cost of your mortgage to ensure you get the most appropriate deal. Sometimes products with low-interest fees have other costs such as survey fees, booking fees and product fees that actually make the mortgage more expensive. Your mortgage broker will calculate the total costs to ensure you get the most suitable deal

Secure a Decision in Principle

Once you have found the right deal, your mortgage broker will secure a Decision in Principle (DIP). This is an agreement with your chosen lender that they will grant you a mortgage on condition that the information you have given them is correct.

A Decision in Principle puts you in a great position to make an offer once you have found your dream home.

Find a property

Now that you know how much you can afford to borrow, you can start looking for your perfect home. You should register with several local estate agents and they will send you listings as they come onto the market. Take your time when viewing each property – it’s a big decision after all. You might like to take photographs or make notes on each property you view.

 

 

Put in an offer

Once you have found your dream home, you can put in an offer. Make sure you are clear about what is included in the sale. You should check items such as light fittings, white goods, curtain rails and garden items. 

Once your offer has been accepted, you can proceed with your mortgage application. The sale can then proceed subject to an independent valuation, surveys and searches.

Complete your mortgage application

You are now ready to complete your mortgage application. This is when you will need to verify details such as your income and your identity.

You can complete your mortgage online if you choose. Open Banking and Online Identification make it easy to complete the whole process digitally. Alternatively, you can speak to your mortgage broker who can guide you through the process.

Your lender will also organize a mortgage valuation at this stage to establish the value of the property and ensure it is one they can lend against.

Choose a conveyancer or solicitor

For straightforward property purchases, you can use a conveyancer. However, if the situation is complicated in any way, then it may be best to choose a solicitor.

Don’t necessarily go with the conveyancer your estate agents recommend. Ask around for recommendations and compare a few quotes before you decide. Don’t automatically go for the cheapest, though; you should check that the firm you choose has a good reputation and plenty of satisfied customers.

Your conveyancer will now draw up contracts for the purchase. They will also do a number of checks and searches to make sure there is nothing about the purchase that is a matter of concern.

Instruct a survey

You may want to have your own homebuyers report or survey done at this stage. This is especially advisable if the property is very old or unusual or if you have any concerns about the condition of the property.

Exchange contracts

Once all the paperwork is done, your solicitor or conveyancer will exchange contracts with the seller’s solicitor or conveyancer. This means you have legally agreed to purchase the property on a specified date. You will now pay your deposit.

Completion

On the date specified, money is transferred to the seller’s solicitor and the keys of the property are released to you.

Further information

To ensure you fully understand the mortgage process here is some additional information about mortgages, insurance and buying a property.

What is a first time buyer?

There are quite a few regulations covering who qualifies as a first time buyer; however, in general, a first time buyer is someone who has never acquired a major interest in any property or land or inherited property or been given property as a gift.

To receive the benefits of being a first time buyer, all applicants must be eligible.

First time buyers currently receive a stamp duty exemption and may be eligible for certain government schemes to help first time buyers.

What is a mortgage?

A mortgage is a large loan that you borrow from a lender to buy a property. You pay this loan back, with interest, usually over a long term such as 25 or 30 years. The loan is secured against the property, which means the lender can repossess the property if you can’t maintain the payments.

What are the main types of mortgage?

The two main types of mortgage are Repayment and Interest Only

Repayment Mortgage

The most common form of mortgage is a Repayment Mortgage. With this type of mortgage, you pay a bit of your mortgage debt as well as some interest each month. At the end of the mortgage term, the property is yours.

Interest-Only Mortgage

With an Interest Only Mortgage, you only pay the interest each month. The actual debt remains the same and will need to be paid at the end of the term. You will have to prove that you have the means to pay the outstanding balance at the end of the term.

This may involve paying into an investment plan which can be used to pay off the capital at the end of the term. A financial adviser will be able to suggest a suitable plan.

How much deposit will I need to put down on a property?

The amount of deposit you need will vary. However, in general for a repayment mortgage, you will need 5%- 15% of the property value and for an Interest Only mortgage, it will usually be 25%.

You should aim to pay as much deposit as you can as this will reduce the amount of interest you pay. In addition, a larger deposit often gives you access to more competitive mortgage deals.

Understanding interest rates

Different mortgages offer different interest rates. These are usually expressed as a percentage. 

The lower the interest rate, the less you will pay over the term of the mortgage.

There are a variety of different types of mortgage rates available, including fixed-rate and variable-rate mortgages.

Fixed-rate Mortgages

Fixed-rate mortgages ensure that during the deal period, you will always pay the same amount no matter what interest rates in the mortgage market do. This makes it easy to budget. However, it does mean that if interest rates go down, you won’t benefit.

There are a variety of different fixed-rate mortgages, including tracker mortgages and discount mortgages.

Variable-rate Mortgages

Standard Variable Rate Mortgages (SVRs) can change at any time, depending on the financial market. However, they tend not to have an Early Repayment Charge, which means you can pay your mortgage more quickly if you choose or switch deal entirely without penalty.

Your mortgage broker will be able to tell you more about different interest rates and help you find the best deal for your circumstances.

What is Open Banking?

Open Banking was set up by the Competition and Markets Authority on behalf of the UK Government. It offers a secure way to give providers access to your financial information.

Open Banking makes it safe and easy to apply for products, such as mortgages, digitally and can help you find the best deal based on your actual financial circumstances.

What insurance will I need when I buy a property?

Buildings Insurance

When you take out a mortgage to buy a property, your lender will insist that you also take out Buildings Insurance. Buildings Insurance covers the financial cost of repairing damage to the physical structure of a property. Your mortgage broker or financial adviser can advise you with this. 

Insurance is a vital part of protecting your property and your investment so ensure you are happy with your cover and don’t just go with the cheapest plan. This is the only insurance your lender is likely to require. However, you may like to consider additional insurance for your peace of mind.

Contents Insurance

Contents Insurance protects the contents of your home against accident or theft.

Income Protection Insurance

Income Protection Insurance will cover your mortgage payments if you are unable to work due to sickness or injury.

Life Insurance

Life insurance can protect your family if the worst happens and ensure they can continue to live in the family home.

What fees do I have to budget for when buying a property?

Stamp Duty

If you are a first time buyer, you will currently not have to pay stamp duty if the purchase price of your property is below 300,000. However, if the purchase price is higher than this, then some stamp duty will be payable.

Valuation

Your lender will require a valuation of the property you intend to purchase. Sometimes this will be paid by the lender as part of the mortgage deal. However, you should check this so you can budget accordingly.

Conveyancing

You will have to pay either a conveyancer or solicitor for the legal work required in buying a property.

Mortgage Broker Fees

You may have to pay mortgage broker fees. However, many mortgage brokers are paid by the lender and do not charge additional fees.

If you want to know more about your mortgage options, give us a call on 0203 0111 898 to speak to one of our advisors.

What you need to do to buy your first home | Savings | Deposit | Help to buy | Get a Mortgage