Help and advice for first-time buyers getting a mortgage
So, you want to buy a house? Here's everything you need to know to find the help and advice you need.
Navigating the mortgage maze as a first-time buyer can be tricky – which is why using a free mortgage advice service can make the world of difference. With 34% of buyers citing speed as a competitive edge, according to Habito, securing the right mortgage early in the process is essential for those looking to successfully purchase their dream home.
How to choose the right mortgage as a first-time buyer?
One of the most important choices to make when you’re buying your first home is what mortgage to go for. Here are a few things to consider:
- Deposit tier (LTV). You’ll need to decide how much of a deposit you can put down. Stats from Finder show the average first-time buyer deposit is £61,090 – around 20% of the average house price for a first-time buyer (£311,034). However, there are mortgages available where you only need a 5% deposit.
- Fixed or tracker. The type of product you choose will determine your monthly payments. A fixed rate mortgage offers stability with set monthly payments over the term of the mortgage, whereas a tracker mortgage is linked to the Bank of England base rate.
- Mortgage term. The final piece of the puzzle is the length of your mortgage term. A longer term would mean lower monthly payments, but higher total interest costs over time.
What to look for when choosing a mortgage adviser
A mortgage adviser can guide you through the choices you need to make to find the right mortgage.
When looking for mortgage advice, you want to make sure that it’s impartial. You’ll find that some brokers or advice services will have arrangements with certain providers to upsell their mortgages. However, services like Habito offer free, unbiased advice.
Advisers can talk you through the different mortgage types, what your monthly payments would look like and any further details like mortgage fees or overpayment charges.
Once you’ve chosen your mortgage, there are services that can guide you through the application process to make sure it goes smoothly. For example, Habito has a team of expert advisers who can guide you through the process completely online – there’s no need for in-person appointments.
Habito is one example of a free service providing expert, one-to-one advice to first-time buyers. After completeing a simple online form, you’ll be assigned a qualified adviser who will chat with you directly to answer your questions and help you with the process.
First-time buyer testimonial
How did a mortgage adviser make buying your first home a better experience?
"Everything can change up until you lock in your final mortgage rate, so it can be difficult to accurately budget and plan until it’s all signed off. In periods of flux, if the process is delayed too long, it can seriously affect the affordability of your monthly mortgage repayments. My mortgage broker drastically reduced the amount of admin I had to do by making applications on my behalf and anticipating additional documents and requirements in advance. He was available for advice and concerns at all times, and was instrumental in pushing the process along to secure me the best rate possible. For me, having a real human expert to hand was invaluable. My broker became almost like a home-buying counsellor throughout the process (give the guy a raise!), able to answer my very specific questions and support with those expected and unexpected issues that always seem to crop up. "
Government-backed schemes for first-time buyers
As a first-time buyer, there are several government-backed schemes in place to help you get on the property ladder. Your mortgage adviser can talk you through these and help you to decide if they’re a good option for you.
First Homes scheme
As a first-time buyer in England, you may be able to buy a property for 30% to 50% less than its market value under the First Homes scheme.
The home either needs to be a new home built by a developer, or a home bought through an estate agent, which someone else bought before through the scheme.
To be eligible, you’ll need to be:
- 18 or older
- A first-time buyer
- Able to get a mortgage for at least half the price of the home
- Not earn more than £80,000 a year before tax (£90,000 if the property is in London)
It’s also worth noting that councils may set their own local eligibility criteria, which you would have to meet in order to qualify for the scheme.
Freedom to buy (Mortgage guarantee scheme)
Under this scheme, the government will provide a guarantee to the lender on mortgages where the buyer has a deposit as small as 5%.
This scheme is more for the mortgage provider than for you as a first-time buyer, but it does mean that there should be mortgages available which only require a 5% deposit.
Shared ownership
The shared ownership scheme is not just for first-time buyers, but it is designed to help people get on the property ladder. Here you can buy a share of a home from the landlord (typically the council or a housing association) and pay rent on the remaining share.
You’ll need a mortgage to pay for your share of the property, which can be between 25% and 75% of the home’s full value.
Lifetime Individual Savings Account (LISA)
A LISA is a savings account designed to help you save for your first home. You can save up to £4,000 a year until you’re 50, and the government will add a 25% bonus to your savings – up to a maximum of £1,000 a year.
To save into a LISA you must be aged between 18 and 39, and make your first payment into your LISA before you’re 40.
Just a note – if you don’t use the money in the account towards your deposit, then you’ll face penalty charges.
What questions should I ask a mortgage adviser as a first-time buyer?
There are some key questions that you should ask your mortgage adviser. Firstly, ask if they are “whole of market” (like Habito) or if they’re restricted to a specific panel of lenders. When it comes to the mortgage itself, ask what the total cost of the mortgage is over the initial term and if adding more to your deposit will make a change to your interest rate options. Finally, ask if there are any first-time buyer schemes that you may qualify for.
Is it recommended to get a mortgage adviser as a first-time buyer?
For most first-time buyers, it’s highly recommended to use a mortgage adviser. One of the biggest risks for a first-time buyer is a rejected application, which can affect your credit score. An adviser will know which lenders are more likely to accept a first-time buyer application and can often secure a decision in principle within hours to help you prove you’re a serious buyer.
Are mortgage advisers free for first-time buyers?
Not all mortgage advisers are free; many local or specialist brokers charge a fee for their advice alongside the commission they receive from the lender. However, brokers like Habito, London & Country and Mojo are completely free of charge.
What deposit do I need as a first-time buyer?
The average first-time buyer deposit in the UK is £61,090, approximately 20% of the average house price for first-time buyers, according to Finder research. However, there are mortgages available that only require 5%, 10% and 15% deposits. It’ll depend on your individual circumstances and the property you are purchasing as to how much deposit you’ll put down.
Do first-time buyers pay stamp duty?
Yes, first-time buyers in England and Northern Ireland are required to pay stamp duty. How much will depend on the price of the property. You can calculate how much you’ll need to pay using gov.uk’s Stamp Duty Land Tax calculator.
What is a mortgage broker?
A mortgage broker is the middleman between you and mortgage lenders. They’ll use their expertise to find the right mortgage product for you, at the best rate, and apply on your behalf. Mortgage brokers will charge a fee in a variety of ways: a one-off fee, a percentage of the loan or commission from the mortgage provider. They should be upfront about this in advance.
A mortgage broker isn’t essential and you might prefer to research lenders and make the applications yourself (which is no small task). Alternatively, you could look into online mortgage brokers like Habito.
Mortgage brokers or advisers must complete a Certificate in Mortgage Advice and Practice (CeMAP), which is a qualification approved by the Financial Conduct Authority (FCA). Unless you have very specific requirements, ideally you want a full-market broker, which means they have access to the majority of mortgage products available on the market.
More resources on Finder
More guides on Finder
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First-time buyers: Do you need a mortgage broker?
There’s plenty of things you need to find your perfect home. Is a mortgage broker one of them? Here are the pros and cons.
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First-time buyers: Who to speak to about what
If you’re looking to buy your first property this year, here’s our breakdown of who to talk to about what from estate agents to ISA providers.
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First-time buyer definition: Who qualifies and who doesn’t?
The definition according to the UK government.