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First Time Buyer Mortgage Planning

Due to the volatility of the current housing market, it is crucial that first time buyers plan ahead to ensure they take their first step onto the property ladder with minimal risk.

Building a deposit as a first-time buyer

A deposit can be the most important aspect of getting on the property ladder for first-time buyers; and acts as a lump sum reducing the mortgage payments that will be received by the mortgage lender.

A first-time buyer mortgage deposit is the amount of money that the buyer is expected to provide towards the purchase of a property and to secure a mortgage. The balance of the value of the property is made up by a mortgage. Building a deposit for a house is not easy, and first-time buyers need to save hard to buy a house.

Beside saving for a deposit, first-time buyers can use a different sort of mortgage (such as a 100 per cent mortgage or a professional mortgage) or rely on their parents to gift them with a deposit. The size of a deposit on a house can significantly affect how much a first-time buyer pays in interest on their mortgage. Typically, a first-time buyer mortgage deposit would be between five and ten per cent of the price of a house.

Mortgage lent to first-time buyers and other borrowers over 85 or 90 per cent usually attract higher lending charges. Affording a deposit, whether using your parents or saving up, is the first step in getting a mortgage loan. The discipline needed to save for a deposit as a first-time buyer is useful to learn in order to meet monthly mortgage repayments.

Financially sorted first-time buyers

One important part of first-time buyer planning to get a mortgage is the ability to get financially sorted out. Many first-time buyers leave university with considerable debt, and the ability to show a mortgage lender that you are prepared to take on mortgage repayments and be financially responsible is key.

Building up a solid savings balance is essential for first-time buyers. Beyond a deposit, it is necessary for first-time buyers to have extra finance to meet mortgage costs and fees. As well as 5 per cent plus of the property value, first-time buyers need to be able to cover stamp duty, survey fees and legal fees, as well as cover the cost of moving.

Cutting down on borrowing is another essential part of first-time buyer planning. For instance, most mortgage lenders calculate how much they can lend to first-time buyers by evaluating their outgoings as well as their income. Reducing the level of outgoings will give first-time buyers the possibility of spending more on a mortgage and potentially being able to afford a nicer home.

Keeping a clean credit record, and polishing up any faults in your credit record, is a key aspect of planning for a first-time buyer mortgage. Lenders consider a number of things to assess whether you are credit-worthy, including electoral roll registration, regular employment, accurate records of income and tax, copies of bank statements and salary slips.