First-time buyer mortgage advice

Huuti offers first-time buyer mortgage advice to prospective first-time borrowers who are looking to get on the property ladder.

When looking to get a mortgage as a first-time buyer there are a lot of things you may want to consider such as:

  • First-time buyer government schemes
  • Mortgage types 
  • Saving a mortgage deposit
  • First-time buyer stamp duty relief

Huuti can provide you suitable first-time buyer mortgage advice on all of these things so you are able to make an informed decision, find a suitable home and complete on your mortgage.

Our first-time buyer mortgage advice is free and digital.

How much mortgage deposit will you need for a first-time buyer mortgage?

The amount of mortgage deposit you will need for a first-time buyer mortgage is dependent on your own personal circumstances but most first-time buyer mortgages will require a 5% mortgage deposit.

As with all mortgages, the bigger your mortgage deposit the more likely you are to get the mortgage and get a cheaper mortgage rate.

If you are looking to buy a £200,000 house this means you will need £10,000 as a mortgage deposit.

Costs of buying a home

There are other costs of buying a home which you should take into account.

They include:

  • Mortgage fees
  • Property Survey costs
  • conveyancing fee
  • House insurance
  • Council tax
  • utilities
  • Removal costs
  • Stamp Duty (Land and Buildings Transaction Tax in Scotland, or Land Transaction Tax in Wales).
  • The costs of furnishing the house

First-time buyer stamp duty relief

As you are a first-time buyer, you will be eligible for first-time buyer stamp duty relief when you take out a mortgage.

First-time buyer stamp duty relief is only available to you if you are buying a property which is less than £500,000. This means you will pay no stamp duty on the first £300,000 and pay 5% on anything above £300,000.

Example: You buy a home worth £400,000. 

You will be eligible for first-time buyer relief as the home price is less than £500,000.

You will pay £0 on the first £300,000 and £5,000 on the last £100,000.

Can you afford a first-time buyer mortgage?

A good reason for seeking first-time buyer mortgage advice is to figure out if you can afford the monthly mortgage repayments on a first-time buyer mortgage.

To figure out if you will be able to afford the monthly mortgage repayments you can use a mortgage affordability calculator to determine what your monthly mortgage repayments will look like and if you can afford to make these payments based on your current income and other debts.

Every mortgage lender will perform a mortgage stress test to determine if you can indeed afford to make the monthly mortgage repayments.

Government schemes for a first-time buyer mortgage

There are a variety of first-time buyer government schemes which may make it much easier for you to get a mortgage.

Some of these schemes will increase your mortgage deposit whilst others will reduce the price of the property.

These schemes include:

  • Lifetime ISA– gives you a government bonus of £1,000 if you save the maximum £4,000 a year.
  • Help to buy ISA– gives a maximum bonus us £3,000 if you save the maximum allowed of £12,000. Before you get either you should consider which is better. Lifetime ISA vs Help to buy ISA.
  • Help to buy equity loan- gives you up to 40% as a 5-year interest-free equity loan. You begin to pay interest at 1.75 % after the fifth year and 1% plus RPI for every year thereafter.
  • Shared ownership– You can buy between 25% to 75% of the property initially with a shared ownership mortgage and then buy more using a staircasing mortgage.
  • Armed forces help to buy– similar to the help to buy equity loan but specific for the armed forces personnel giving them an increased chance of acceptance.
  • Rent to buy– This is the right to buy scheme on which this guide is currently discussing. A different marketing name is just used. Watch out for this when shopping to avoid missing out on eligible properties due to confusion.
  • Right to buy– allows you to buy your home at a discount price.
  • Preserved right to buy- same as above.
  • Right to acquire- same as above.

Depending on where you live, you may also be able to take advantage of home buying schemes provided by your local council. Example: In Norwich, the local councils provide the Norwich home options scheme.

Should you buy freehold or leasehold?

When considering first-time buyer mortgages you will have to consider what sort of home you want to buy.

Do you want to buy a leasehold or a freehold?

Buying a freehold property means you will own the property in full whilst a leasehold only means you will have to pay ground rent, service charges and other fees.

The leasehold will only be for a particular term which means once it expires the home will return to the freeholder.

If you are buying a flat you will most likely be buying a leasehold or buying into a share of freehold.

What does the mortgage application process look like?

When you apply for a mortgage the mortgage lender will carry out mortgage affordability checks to ensure you can afford the mortgage which you are after.

You may first want to get a mortgage in principle which will allow you to shop for homes with much authority as sellers and estate agents will take you more seriously.

You will then go onto applying for a mortgage offer.

The mortgage lender will want to see:

  • Your bank statements for the past 3 months
  • Your payslips for the past 3 months
  • An overview of all your current debts

The mortgage lender will also carry out a mortgage stress test to ensure you can afford the monthly mortgage repayments under different circumstances.

If you are self-employed then the mortgage lender will want to see your SA302 tax return and your accounts for the past 3 years.

There are self-employed mortgage lenders who could be fine with just 12 months worth of accounts.

Get a guarantor

If you are struggling to prove your mortgage affordability to the mortgage lender then you may want to get a guarantor.

A guarantor will place security on up to 100% of the mortgage with their assets.

Your guarantor must be able to repay the mortgage if you are unable to.

If you fail to keep your monthly mortgage repayments then the guarantor’s assets could be at risk.

There are a lot of guarantor mortgages out there and you could inquire about this when receiving first-time buyer mortgage advice.

You can get free first-time mortgage advice with Huuti.

How our first-time buyer mortgage advice works

You may want to consider using an independent mortgage broker to get a mortgage.

Mortgage brokers are important as they can access mortgage products from across the whole of the market in some cases.

This could be over 11,000 mortgage products. This may have some advantages rather than going directly to a mortgage lender.

A mortgage broker will look to understand your financial circumstances and then provide recommendations on which mortgage products may be suitable for you based on your mortgage affordability.

After giving you these mortgage recommendations, most mortgage brokers will seek your consent to apply for a mortgage in principle. 

This will allow you to shop for your home easier as more estate agents and sellers may take you seriously or it will give you confidence that your mortgage is indeed a possibility before you make a full mortgage application. 

Once you have found a home you want to buy and are satisfied with the mortgage offer for your mortgage then the mortgage broker will then look to get you a mortgage offer.

This will come with a key facts illustration document which details out the features of your mortgage including how much you will pay per month.

It will also contain information on if there are any limits such as early repayment fees, or annual overpayment limits.

If you are happy with everything you can then go on to secure your mortgage with the help of a conveyancer.

Your conveyancer will manage the legal searches on the property to ensure there aren’t any issues with it.

They will oversee the sales agreement to ensure it is in your best interest, they will manage the transfer of mortgage funds, exchange contracts with the seller or their conveyancer and set a completion date with the seller or their conveyancer.

John Bate

John has 22 years of experience in financial services. This spans across financial research, financial services (As a qualified mortgage broker and underwriter), financial trading and sales at global investment banks. While working as a publishing research analyst, he covered European bank credit and advised institutional clients on investment strategies at both JP Morgan and Societe Generale. John has passed all three levels of the CFA (Chartered Financial Analyst) programme.