A guide to mortgages for first-time buyers

Being a first time buyer can be a daunting and complicated process. For most people, it is the biggest financial commitment they’ve ever made and can feel like a big responsibility. Plus, buying property entails getting your head around a lot of jargon and sums. It’s a steep learning curve!

Unless you’ve got a big lump sum of cash to buy your first home with (that would be nice!), the first thing you’ll need to research is mortgages. If you’re a first-time buyer, you may want to enlist the help of a mortgage broker who can help you ensure you’re getting the right deal for you.

However, even if you decide to take this route, it’s important to ensure that you understand how the process works, as you will likely feel the impact of your decisions for years to come. In this article, we’ll provide a brief guide to mortgages for first-time home buyers, providing the essential information required to get your purchase off on the right foot.

Getting your finances in order

Before you begin shopping around for mortgages, it’s important to thoroughly review your finances to find out what you can afford.

Review your income and outgoings, debt, savings, and credit score to assess your financial situation.

Use a free online mortgage calculator to estimate how much a mortgage will likely cost you each month and consider whether you can afford it.

Don’t forget to factor in what would happen if mortgage rates were to go up.

You should also consider how much you have saved up for a deposit. Most lenders now require a minimum deposit of 10 per cent, but if you can put down more, you will likely get a better rate.

Types of mortgages available for first-time buyers

Once you start browsing mortgages, you’ll soon realise there’s no one size to fit all.

The best type of mortgage deal for you will depend on your individual circumstances.

Let’s take a look at some of the options out there.

Fixed-rate

The mortgage’s interest rate is fixed for a set period, typically somewhere between two and 10 years. This provides stability if interest rates suddenly rocket.

Standard variable rate (SVR)

The interest rate on SVR mortgages can increase or decrease at the lender’s discretion, meaning your monthly repayments will vary. The Bank of England’s base rate usually influences the lender’s rate.

Tracker

The rate is locked in to follow a fixed economic indicator, usually the Bank of England’s base rate. The interest rate on the mortgage fluctuates alongside the indicator it is tracking.

Discount rate

These mortgages offer a discount on the lender’s SVR for a set period. While the discount rate remains constant, the interest rate can still fluctuate.

Capped

Capped mortgages are a type of SVR mortgage. The interest rate can still fluctuate, but it is capped at a certain amount, providing protection against soaring rates

Each type of mortgage has advantages and disadvantages depending on your financial situation and the outlook for interest rates.

Getting pre-approved

Once you know what you’re looking for, it’s time to gather all the necessary documentation and start approaching lenders.

At a minimum, you will be required to show lenders proof of identity and address, recent payslips, bank statements, proof of deposit, and details of your employment and employment history.

You can go directly to a mortgage lender if you’re confident about the deal you want. Or, you can use the services of a mortgage broker, who will offer advice and compare the different deals on the market.

Before you are accepted for a mortgage, you must go through a pre-approval process, sometimes called an ‘Agreement in Principle’. During this process, the lender assesses your financial circumstances and, based on this information, estimates how much they are willing to lend you.

Start your property search

Once you have your Agreement in Principle in hand, you’ll have a good idea of the type of property that is within your budget. It’s time to approach estate agents and start your property search in earnest.

Are you a first time buyer looking for a home? We have a number of property’s for sale.

Mistoria Estate Agents have offices in Bolton, Little Lever, Salford, Worsley, Cheadle Hulme, and Liverpool.

As a leading estate agent in the North West, we’ve helped numerous first-time buyers find their dream homes – will you be next?

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