First Time Buyer Mortgages
First Time Buyer Schemes in England
Sometimes getting onto the property ladder appears to be difficult for some people looking to buy their first home.
You must be at least 18 years old to apply. You can apply for a mortgage on your own or with someone else.
As long as at least one person has never owned a property before, you can often apply for a first time buyer mortgage.
There are however some financial Government Schemes available that are designed to make buying a home for the first time easier.
Help to Buy is for first time buyers looking to purchase a new build property. This can be a house or a flat. Customers can borrow up to 20% of the purchase price (subject to limits) and put as little as 5% from savings making the deposit 25% and upwards. No interest is payable on the equity loan for the first 5 years. You can read more on the scheme by clicking on the following link Help to Buy
First Home Scheme was launched in April 2021 and will run until March 2023.
The Government’s First Home scheme in England allows first time buyers to purchase a New Build property at a discounted purchase price under a Resale Price Covenant. The discount (which will be a minimum 30%) must be passed on if the property is sold in the future.
A 5% personal deposit is required in addition to any incentives from the builder. The mortgage amount together with any incentives and any lender product fee being added, cannot exceed 95% of the discounted purchase price. Government First Homes
First time buyer deposit and how much can be borrowed
The main obstacle a first time buyer has faced in the last few years is the level of deposit. Some lenders will allow a deposit as small as 5% of the purchase price. This is not normally for people that wish to purchase a new build as a higher level of deposit is normally required. It is important to point out that the lower the deposit, the higher the initial interest rate as the risk is higher for a lender with a lower deposit. Interest rates offered by lenders generally reduce for every 5% so people with a 10% deposit will have a lower interest rate offered than if they only had 5%.
A higher level of deposit can also help with the initial credit checking with a lender. Someone with a higher level of deposit would represent a lower risk which can help with a mortgage application.
The maximum borrowing with a lender is mainly based the ability to pay for the mortgage. Each lender has their own affordability calculator and criteria for additional income like overtime, bonus and Government benefit income. Not all lenders are the same which is why it is so important to speak to an Independent Mortgage Broker. A Broker like Impartial will be able to advise how much can be borrowed and the potential costs before properties are viewed so there are no surprises later.
The level of deposit can make a difference to the maximum that a lender will allow someone to borrow but sustained income ‘ability to pay’ is far more important.
Over the years lenders have had to adapt with changes in employment contracts and self employed. Contractors, fixed term contracts, zero hour employment and flexible hours are now far more common and these people can now apply for mortgages subject to individual circumstances. Just because one lender may not accept someone, it doesn’t mean that all lenders would take the same decision.
