drawdown lifetime mortgage
Your go-to guide for first-time-buyer mortgages

So, we believe congratulations are in order!? You’ve found the perfect home and you’re ready to take your first step onto the property ladder. That’s no easy task in 2022, so well done you!

Now that you’ve found your dream home you can begin navigating the minefield that is applying for a mortgage. What sort of mortgage packages are available to you? What extra costs are involved? How long will it take for the mortgage to be approved? When do you get the keys to your new place?  

Let’s find out.

What are my mortgage options as a first-time buyer?

Typically, mortgage lenders will want buyers to contribute a 25% deposit before they will consider bankrolling the rest of the value of the property for you. Even if the property that you want to purchase is worth a relatively low £100,000, that means that you’ll have to find £25,000 from somewhere to get a traditional mortgage for it. That counts a lot of people out straightaway. 

It’s been reported that first-time buyers now take approximately 8 years to save enough money for a house deposit – during which time the prices of houses skyrocket – meaning that the amount they managed to save over those 8 years is now inadequate.

However, there are alternatives if you don’t fancy living with your parents for another 8 years…

Help to Buy scheme 

The Help to Buy scheme (sometimes known as a shared equity scheme) is available from the English, Scottish, and Welsh Governments, and from certain property developers. The idea behind the scheme is that you only have to put a 5% deposit down and then the Help to Buy scheme would then loan you up to 20% (or 40% in London) of the value of the house.

Of course, there are caveats involved:

  • You must be aged 18 or over,
  • You must not have previously owned any property in the UK or abroad,
  • The property that you want to buy must be a new build,
  • You must be able to afford the mortgage and the loan repayments each month

Pros and Cons of Help to Buy

As with all mortgages, there are pros and cons associated with the Help to Buy scheme. The positives are fairly obvious; you only have to find a 5% deposit, which means that you can get on the property ladder much faster. Even better, you don’t have to pay interest on the Buy to Let loan repayments for the first five years.

As for the negatives, if the price of your house rises then so will your loan repayments. If you signed up for a variable rate mortgage, that means that your monthly mortgage payments will shoot up too, so make sure that you have a contingency plan in place for something like this happening. The other major drawback is that if you come to remortgage further down the line, there are very few lenders that will roll the dice on a property with a Buy to Let loan attached to it.

So, if Buy to Let isn’t floating your boat or you don’t want to buy a new-build house, what are your other mortgage options?

How do first-time buyer mortgages work?

Once you know how much you can borrow, applying for a mortgage as a first-time buyer is much the same as anyone else – but with a few added bonuses.

You’ll be pleased to know that there are numerous discounts and incentives for first-time buyers, including 95% mortgages, cashback, and the Government’s First Home scheme, which could allow you to buy a property for 30% to 50% cheaper than the market value.

But the best part of being a first-time buyer is that the amount of stamp duty that you have to pay is massively reduced…

Do I have to pay stamp duty as a first-time buyer?

Stamp duty is a levy that you have to pay to the Government when you buy a property, which ranges from 2% to 12% of the value of the property.

The good news for first-time buyers, though, is that as long as your property is valued under £300,000 then you won’t have to pay any stamp duty whatsoever. If your property is valued between £300,001 and £500,000 then you will only pay 5% of the portion of this bracket in stamp duty. 

It goes without saying that this is a massive help to first-time buyers, saving you thousands of pounds – think of all the essentials that you can buy for your new place with money that would have normally gone on stamp duty.

best lifetime mortgage

What is the buying process for a first-time buyer?

This is the exciting (but still slightly scary) bit. You’ve found your home and are keen to get in – but hold on eager beaver; there’s quite a bit to be done before you can do that! 

First, you have to build up a decent deposit amount. You can do that by cutting back on a few non-essential luxuries, selling some unwanted items, taking out a loan, or even borrowing it from a relative. Then, you need to work out how much you can afford in monthly mortgage payments. If you’re unsure what you can afford each month then you can use a free mortgage calculator

Once you’ve worked this out then you’ll need to know how much you can realistically borrow. As a good guide, most lenders will let you borrow up to 4.5 times your annual salary. So, if you earn £30,000 per annum, you could borrow up to £135,000 on a mortgage. For a more accurate idea of what you can afford, you could complete an Agreement In Principle (AIP), and this won’t affect your credit score.

Next, you’ll do something called an affordability review, which will include a credit check, looking at how much you earn, how much you have in savings, and your job security to determine the risk you pose to the mortgage lender. If everything checks out, then you’ll be eligible for a mortgage and you can start discussing which mortgage offer is the best one for you.

Of course, this process is a lot easier if you have a great mortgage adviser – someone who really takes you under their wing and goes through the process with you step-by-step. The specialist first-time buyer mortgage advisers at PBS Mortgages Solutions have achieved loads of five-star reviews for their level of professionalism, available mortgage products, and knowledge of schemes for first-time buyers, so we’d recommend getting in touch with them for a seamless experience.  

How long does a mortgage take to go through?

This depends on a few external factors, such as if you are in a chain of buyers, but normally your mortgage process will be completed and monies will be transferred in 2-6 weeks. Then, all you have to do is book the removal van and pick up the keys!

First-time mortgages don’t have to be traumatic!

Find yourself a good mortgage advisor to help you, like the ones at PBS Mortgages, and you’ll be in your first home in no time at all. A good mortgage advisor will tell you exactly what to do in terms of getting the correct paperwork together, making sure you can afford your repayments, going through the different mortgage options, and helping you to find a good solicitor to take care of all the legalities. 

Unfortunately, they can’t settle arguments on what colour of curtains complement the sofa, or what style of kitchen you should go for…

Good luck!