First Time Buyer



First-time buyer’s deposit

Your deposit is the amount of money you’ve saved up to put towards your first home and it will help determine how much you then need to borrow as a mortgage.

The more money you’ve saved as a deposit, the less you’ll need to borrow from the bank. And if you have a bigger deposit, you’ll have access to more competitive mortgage rates.

As well as saving for your initial deposit, you’ll also need funds to put towards fees like property searches, surveys, mortgage arrangement fees, solicitor’s fees, stamp duty, home insurance, removal costs and so on.

How getting a mortgage works if you’re a first-time buyer

If you’re a first-time buyer, you may have spent the past few years saving for a deposit to help you get on the property ladder.

If so, the next step is to find out how much you can borrow so you’ll have a better idea of the type of property you can afford to buy when you start looking for your first home.

First-time buyer’s mortgage

When you apply for a mortgage, the lender will assess your affordability by looking at your annual salary and any other income you receive, as well as all of your outgoings, including credit card and loan debts, household bills, childcare, travel and general living costs.

The lender will also check your credit history to see whether you’re a reliable borrower and will use this and its affordability assessment to decide how much you can borrow.

Mortgage providers will usually have a maximum loan-to-value – LTV – they’re prepared to offer you. This is the maximum mortgage loan you can take out as a percentage of the property value.

So if, for example, the property value was £200,000 and you were offered a mortgage of £170,000, your LTV would be 85% and you’d need a deposit of £30,000, which is 15%.

When to apply for a mortgage

Before you start viewing properties, it’s a good idea to get a mortgage agreement in principle from a lender or a couple of lenders. This will give you an idea of how much you can borrow and it will prove to estate agents you are serious about buying.

Some lenders will carry out a hard credit check for this - which then appears on your credit file – so keep this in mind when applying for an agreement in principle. And if the mortgage provider does carry out a hard check, it’s best not to get more than one or two agreements.

Some lenders will run a soft search – and this won’t affect your credit score – so it’s a good idea to check with each lender you contact before applying.

Your offer should last between 30 and 90 days. Keep in mind that this is only an estimate and isn’t a guaranteed mortgage offer.

The purchase price of your new home

Having an idea of how much you can borrow will help you work out how much you can afford to pay for your new home, and should give you a better idea of your price range when it comes to viewing houses.

The actual mortgage loan you take out will then depend on how much you pay for the property, and whether you want to use any of your mortgage loan for making home improvements.

You should always make sure you’d be able to afford the monthly repayments before deciding whether to make an offer.