Tips for First-Time Buyers
Buying your first home can be as daunting as it is exciting. Searching for a mortgage when you’re a first-time buyer can seem really overwhelming.
There’s so much to sort out – you’re dealing with solicitors, the vendors, and working out how you’ll move all your stuff! Then there’s finding a mortgage: you’re trailing through bank websites, reading what first-time buyer deals are out there, but it can seem massively confusing: the rates, the terms, the fees – where should you start?
In this guide we’ll take a look at:
- First-time buyer advice
- Stamp Duty
- Fixed-rate mortgages
- Variable-rate mortgages
First-time buyer advice
Getting a mortgage is your first step to getting on the property ladder – but it can be more than a little daunting. Mortgages are an enormous financial commitment, and so finding one that suits your needs now, and will also be affordable in the future, is key.
If you’ve been searching for a mortgage online, you’ll have probably been trying to compare the rates that banks are offering, and any special deals they have for first-time buyer mortgages. This can be incredibly confusing, and comparing yourself can be really tricky.
Here are a few questions we often hear from first-time buyers:
Will I be able to get a mortgage?
Whether or not you’ll be seen as eligible for a mortgage will be down to several factors, including:
- Your income, and how long you’ve been in your job.
- Your outgoings – including any current loans, and if you have any dependants.
- Your credit score – particularly important for first-time buyers, as it indicates to a lender whether you can be trusted to borrow a large amount of money.
- Your age – and whether it’s realistic for you to pay the mortgage back within the time you’re taking it out for.
- Whether you’re taking out the mortgage with anyone else – if this is a joint application, then both of you will be reviewed in the above way individually.
- How much will my mortgage cost? This depends on a few factors, such as the term of the mortgage (i.e how many years you’ll be paying it off over – often 25 or 30 years for first-time buyers), what the interest rate is on the mortgage, and also the total amount you’re borrowing. Make sure you know the monthly repayment figure (and if it’s a variable rate it can change) and be totally sure you can afford it along with all your other outgoings.
- What’s a mortgage broker? A mortgage broker is a person or company who can help you when you’re getting a mortgage. Many first-time buyers find it really useful and reassuring to get a broker to help them with applying for mortgages, and finding the best deal for them.
At Better Chance Finance, we use our trusted broker Clever Mortgages, who help first-time buyers take their first important step on the property ladder. Just by giving us a few details about your situation, we ask Clever Mortgages to search their lenders for the one most likely to give you the best deal.
Stamp Duty is a tax that home buyers in England and Northern Ireland have to pay, usually if they’re buying the property for more than £125,000, or for more than £40,000 for second homes.
If you’re a first-time buyer though, there’s good news… You don’t need to pay Stamp Duty unless the property is worth more than £300,000.
If you’re in Scotland you’ll pay Land and Building Transaction Tax, and in Wales it’s Land Transaction Tax, instead of stamp duty.
How much Stamp Duty you pay will depend on the property price band your new home falls into, and it’s your responsibility to make sure you do the transaction, although in reality your solicitor usually organises this.
A fixed-rate mortgage is exactly how it sounds – you pay a fixed repayment each month, as interest rates stay the same throughout the time period (the term) of the mortgage.
Fixed-rate mortgages have the advantage that you know exactly what you’ll be paying each month, however the disadvantage that if the Bank of England Base Rate changes, you won’t reap any potential rewards either.
Variable rate mortgage
Variable-rate mortgages can either be tracker mortgages, or standard variable rate mortgages. Tracker mortgages follow the interest rates of, for example, The Bank of England, whereas standard variable rate mortgages follow the rate the lender decides.
With variable-rate mortgages your mortgage rate, will move up and down over the time you have it, meaning that your mortgage repayments won’t always stay the same. The main cause for this is the UK economy. If you’re using a mortgage broker, they might be able to offer their opinion on whether it’s a good time for a variable rate mortgage for first-time buyers.