First Time Buyers Getting A Mortgage | Help Is Here | UK Mortgage Advice

Introduction

Welcome back to Let’s Talk Money and Mortgages. Today, Gemma is joined by Iftika, a trained accountant and mortgage broker with over 10 years of experience and one of the founding directors at WIS. The focus is on helping first-time buyers navigate the process of buying a property.

Where Do I Start as a First-Time Buyer?

Q: Should I find a property first or get a mortgage?
A (Iftika):
First, get a Decision in Principle (DIP) or agreement in principle.
Discuss your circumstances with a mortgage advisor or bank to determine the type and amount of mortgage you can get.
Once you have a DIP, you know your budget and can start looking for a property.

Q: What is a Decision in Principle?
A:
The bank indicates how much you can borrow based on your income, commitments, and expenses.
It is not a guarantee; the full application must still be verified.
Estate agents and developers often require this before considering your offer.
Tip: Decision in Principle is also called Agreement in Principle; they mean the same thing.

Things to Bear in Mind When Looking for a Property

Q: What property factors impact getting a mortgage?
A:
Houses: Standard brick and tile are easiest; unusual houses (e.g., cottages, flat roofs) can be more complicated.
Apartments:
Most are leasehold, and banks prefer long leases.
Building height matters (generally 6 floors acceptable, some banks up to 15).
Certain balcony types and frames (timber/aluminium) may cause issues.
EWS1 certificates are essential for some high-rise buildings.
Lift requirements may apply for buildings 5+ floors.
Location: Areas prone to flooding or near hazardous businesses may affect mortgage approval.
Tip: Always consult a broker to check property acceptability before applying, as a rejected application can negatively impact credit scores.

Documentation for a Decision in Principle

Q: Do I need documents for a DIP?
A:
Technically, no, but it’s recommended to show pay slips and bank statements.
Banks consider deductions, expenses, and commitments when calculating affordability.
Accurate documentation ensures your DIP is realistic and prevents surprises later.

How Much Can I Borrow?

Q: How do banks determine mortgage affordability?
A: Banks look at four main factors:
Income: Pay slips, SA302s for self-employed, contracts for contractors, and secondary income (including child benefits in some cases).
Expenses: Normal living costs are expected; extravagant spending may reduce borrowing.
Financial commitments: Loans and credit cards reduce available mortgage capacity.
Credit history: Missed payments or poor credit can affect the amount offered.
Generally, banks offer 4.5 times your income, though higher earners may get up to 5 times.
Tip: Full details improve accuracy; incomplete info can reduce your borrowing capacity.

Next Steps After the DIP

Q: What comes after getting the DIP?
A:
Solicitor:
Choose a high-quality solicitor; avoid compromising on price.
They verify titles and highlight legal issues.
Survey:
For older houses, a full survey is recommended; banks’ basic surveys only assess value.
New builds generally require less extensive surveys due to warranties.
Advisor support:
Select a digitally-driven mortgage advisor for faster processing (e.g., via Open Banking).

Mortgages for First-Time Buyers

Q: What options exist for first-time buyers?
A:
Deposit requirements: 5% deposit mortgages and government-backed schemes.
Help to Buy scheme: Available for new properties.
Lifetime ISA: Government adds 25% to savings towards your deposit.
Shared ownership: Buy part of the property; housing association owns the rest.

Q: Are first-time buyer rates higher?
A:
Generally, no discrimination; rates similar to home movers.
Some banks may offer slightly higher rates but include incentives (e.g., cashback, free legal fees).

Q: Does Loan-to-Value (LTV) affect rates?
A:
Higher LTV (e.g., 95% for a 5% deposit) usually results in higher interest rates.
Larger deposits reduce LTV and access lower rates.

Stamp Duty for First-Time Buyers

Q: Do I pay stamp duty?
A:
Until June 30: Properties up to £500,000 are stamp duty-free for first-time buyers.
After June: Up to £300,000 is stamp duty-free; above that, rates (~5%) apply.

Ownership and Legal Process

Q: Do I own the property at exchange or completion?
A:
Exchange: Point of no return; typically requires 5–10% deposit. You are committed but not legally the owner.
Completion: Legal ownership transfers; you receive keys and the mortgage funds are applied.
Tip: Arrange home insurance and life insurance at exchange to protect against risks between exchange and completion.

How Long Does the Process Take?

Q: How long does buying a property take?
A:
Straightforward transactions: ~6 weeks.
Factors like pandemic restrictions, surveys, and working from home may delay timelines.
Chains are unpredictable; completion depends on the slowest person in the chain.

Closing Advice

First-time buyer points may not apply to everyone; always consult an advisor.
WIS provides free advice and zero fees for guidance.
Reminder: A mortgage is secured against your home and may be repossessed if repayments are not kept up.