A guide to mortgages for first-time buyers

Buying your first home is an exciting milestone, but it comes with many financial decisions. One of the biggest decisions you’ll face is choosing the right mortgage. This guide will walk you through everything you need to know about mortgages for first-time buyers, helping you make an informed decision.

What is a mortgage?

A mortgage is a loan provided by a lender to help you purchase a property. What makes a mortgage different from other loans is that it’s secured against the property you're buying. This means if you fail to make the repayments, the lender can sell your property to recover the money you owe.

Mortgages usually offer lower interest rates compared to other loans because they’re secured against your home. However, if you don’t keep up with the payments, it can result in your home being repossessed. It's a big commitment, so it’s essential to understand the details before you proceed.

Types of mortgages

There are various types of mortgages, and choosing the right one for you depends on your financial situation and how long you plan to stay in the home. Here are some of the most common types:

Fixed-rate mortgages:

The interest rate remains the same for a fixed period (typically 2, 5, or 10 years), making it easier to budget with predictable monthly payments.

Variable-rate mortgages:

The interest rate can fluctuate based on the market, which means your monthly payments may change. This type of mortgage might be cheaper in the early years but comes with more risk if rates rise.

Shared ownership:

This allows you to buy a share of a property and rent the remainder, making it a more affordable option for those who can’t afford the full price of a home.

How much can you borrow?

The amount you can borrow depends on your income, financial situation, and credit history. Lenders typically offer loans based on a multiple of your income (usually between 3 to 4.5 times your annual salary). However, the exact amount will vary by lender and your individual circumstances.

When applying for a mortgage, the lender will assess both your income and outgoings to determine how much you can afford to repay each month. They will consider:

• Your income (including salary, bonuses, and other sources)
• Your essential living costs (e.g., bills, groceries, transportation)
• Other financial commitments (such as existing debt repayments or loans)

It’s important to be transparent about your finances to ensure that you can comfortably manage your mortgage repayments.

Deposit requirements

Most first-time buyers are required to pay a deposit, which is typically a percentage of the property price. While some mortgages may only require a 5% deposit, others may require 10% or 20%. The larger your deposit, typically the better the mortgage rates available to you.

A higher deposit reduces the amount you need to borrow, which means lower monthly payments and less interest over time. If you're able to save a larger deposit, it's worth considering as it could save you money in the long run.

The mortgage application process

Here’s a step-by-step breakdown of what to expect during the mortgage application process:

Pre-approval: It’s often a good idea to get a mortgage pre-approval before you start house hunting. This gives you an idea of how much you can borrow and helps narrow down your property search.

Submitting your application: When you apply, the lender will ask for documents like proof of income, bank statements, and proof of identification.

Property valuation: The lender will conduct a property valuation to ensure the house is worth the loan amount.

Offer and acceptance: If everything checks out, you’ll receive a formal mortgage offer. After you accept the offer, you’ll proceed with the purchase.

Mortgage advice

Getting professional advice can make all the difference in finding the right mortgage for your needs. You can receive advice from:

Lender Advisors: Advisors at banks or building societies can only recommend the mortgages offered by their institution.

Mortgage Brokers: Mortgage brokers can compare a wider range of mortgage products from different lenders and recommend the right deal for you.

Financial Advisors: They offer broader financial advice and can help you plan your finances alongside securing a mortgage.

Choosing the right advisor ensures that you get expert guidance and find a mortgage that suits your specific needs.

Costs beyond the mortgage

In addition to the monthly mortgage repayments, there are other costs associated with buying a home:

Stamp Duty

This is a tax paid on property purchases over a certain price. First-time buyers may be exempt from stamp duty on properties under a set value, so make sure you’re aware of any exemptions.

Legal Fees

You’ll need a solicitor or conveyancer to handle the legal paperwork and ensure the property transaction goes smoothly.

Home Insurance

Lenders typically require home insurance to protect the property.

Protection

You should budget for other protection including life insurance, income protection etc.

Surveys and inspections

It’s wise to have the property inspected before you buy, especially if it’s an older home, to avoid any hidden issues.

Managing your mortgage after approval

Once your mortgage is approved, it’s essential to stay on top of your repayments. Keep in mind that some mortgage deals are for a fixed term, meaning your interest rate will remain the same for a set number of years. After that period, your interest rate may change.

If interest rates rise, or if your financial situation changes, it may be worth considering remortgaging. This could help you secure a better deal or adjust your payments to fit your current budget.

The importance of seeking professional help

Securing the right mortgage is a big decision, and professional guidance can help you navigate the complexities. Whether you’re buying your first home, remortgaging, or investing in a property, expert advice ensures you get a suitable deal for your needs.

Why choose Andrews Mortgage Services?

With over 30 years of mortgage experience, we’re here to guide you through the mortgage process every step of the way. Whether you’re buying your first home, re-mortgaging, or seeking help with a buy-to-let mortgage, our specialist mortgage advisors will help guide you through the complexities of the mortgage process.

With access to over 90 mortgage lenders and thousands of products, we have a comprehensive range of mortgage and insurance options available, and will work to find the best option for you.

If you have any questions or want to get started, call us on 0117 2050240 for more information and first-time buyer deals.

YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

Most Buy to Let mortgages are not regulated by the Financial Conduct Authority.

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