Owning your own home is a milestone accomplishment, a reason to be proud about. But getting to that point where you are finally the owner is quite a trek for many. And needless to say takes a lot of commitment and dedication.

If you have never been a homeowner and dream of being one, let’s take a look at some ways that will help you reach that goal.

First Homes Scheme (England Only)

While many countries may have their own way of dealing with mortgages, a first-time buyer in England could benefit from the First Homes scheme.

Under the First Homes scheme, first-time buyers may have the benefit of purchasing a home for 30% – 50% less than its market value (subject to eligibility)

The First Homes scheme requires applicants to meet certain criteria before they avail themselves of the benefits offered. Apart from this being your first home purchase, you must also meet the minimum age of 18 or older when applying. The mortgage you obtain must be for at least half the price of the total purchase price. Certain Council conditions also may apply to your eligibility when obtaining the First Homes discount. Essential workers for example may get priority over other buyers according to this scheme. And priority purchases may extend to those living within the area and low-income earners.

On the other hand, if you’re a veteran or a member of the armed forces, these conditions won’t apply. You could also be a divorcee or a civil partner of an armed forces member which entitles you to be exempt from the aforesaid conditions.

How to get the first-time mortgage?

A question that comes up in most instances is ‘can first-time buyers still get a mortgage’. The right deal for you following explains this very question by providing an easy-to-understand guide as to how a first-timer can get their mortgage through.

As in any loan or mortgage, the buyer is required to incur a part of the loan by making a cash deposit to make up part of the total cost of the property that is being purchased. First-time property mortgaging may seem like a challenge to many, but today’s mortgaging firms offer streamlined and comprehensive solutions which make life much easier for borrowers. A borrower may be asked to carry out a 10% deposit for the mortgage, while the balance will be paid by the financing mortgage company. The repayment time period will depend on the buyer’s financial commitment and capacity. Payback periods may typically range from 10 -25 years. While in some cases, up to 40 years.

After applying for the mortgage, a conveyancer (solicitor with specialization in property legalities) will need to assist with the rest of the procedures such as local council matters as well as legal requirements. Once the purchase is agreed upon, the exchange of contracts between buyer and seller will take place. It is at this point that the required deposit will be paid. I.e: 10% of the total value.

If you are new to the mortgaging process, it may seem rather overwhelming at the beginning. Many first-timers opt for getting the services of a mortgage broker. An experienced mortgage broker will not only have good knowledge about how the entire process works, but also have the skills to identify the right deal for you on the market. With many contacts of their own, brokers can bring about pricing that is highly competitive. This is a good way to find the right mortgage for you.

Getting the services of an experienced broker cannot be underestimated and it is certainly recommended that first-time buyers avail themselves of the services offered by a broker.

Will I be accepted for a mortgage as a first-time buyer?

Depending on your savings, you may be required to make a deposit of 10%.The borrowing depends also on your monthly income. The amount available to borrow could be, for instance, about 4.5 times your total income. Prior to obtaining a mortgage, the lending institution will have to make a check on your credit. Keeping a good track record with no defaults, therefore, is important. This may determine if your application is rejected or accepted.

As with any loan, when getting a mortgage, you will have to show the lender if you can afford to carry out the repayments. Having a steady and adequate income that substantiates your spending habits shows the lender that you are able to handle the repayments comfortably with minimum risk.

A tip for keeping a healthy bank balance might be to save up as much as possible prior to applying for the mortgage. Keep your spending tight. Cut down on luxuries than you can do without. Space out big expenses (such as purchasing a car), till your mortgage is approved. Build up your savings which will be looked as collateral in the event of you being unable to carry out the repayments. The sacrifice is worth it. After all you will be the proud owner of your own home at the end of it!

What mortgages are available for first-time buyers?

Basically, a mortgage is a loan. But unlike a bank loan offered in certain instances which might differentiate even between countries, a mortgage in UK presents a few options that a first-timer borrower might be confused about as to what suits them best.

As mentioned above, mortgages can be long-term, going even up to 40 years. So choosing the mortgage that will work for you during this lengthy period is important.

• The interest only mortgage: All loans have the components of capital and interest included in their monthly installments. In the interest only mortgage, the payback is based on the interest alone. This ensures the monthly repayments are fixed during the mortgage period. However, at the end of the payback period, the borrower will be expected to settle the capital payment in full. This method of mortgage although seemingly attractive, is not very popular due to the heavy capital re-payment that might be due at the end of the mortgage period.
• Tracker mortgages: The re-payment rates are dependent on the bank rates. For instance, consider the current base rate of 4%. If you are currently on a 2% payback rate for your ongoing mortgage, you will be expected to pay 6% on the revised rate based on the fluctuating base rate. This could also work to your advantage if the rates come down.
• Fixed rate: Probably the most common form of mortgage. As the term implies, it is a fixed re-payment during the entire period of the mortgage. This offers potential stability and predictability to your payments. While fixed rate mortgages suit many borrowers, some may prefer a mortgage that varies citing the chances of a lower interest rates in the event of a dip in the base rates.

It must be noted that methods of re-payment may differ according to the mortgage company or of preferred choice of the borrower. However, the above described methods are considered to be the most commonly used, where borrowers are assured of a standardised re-payment method.

Conclusion

Getting your first home is always an adventure. And in most instances, for many its a struggle to manage the finances, procedures and payments. But at the end of it, its all worth the effort. As a first time buyer, you are privileged and of course, entitled to the benefits the system has to offer. Gaining the best of these benefits will allow you to manage your financial commitment in a better structured manner. As seen in this article, the many forms of mortgage payments exist which are available to maximize the efficiency of your borrowings and re-payments.

The past year was a challenge to many, however, in time, we hope 2023 will see decreasing interest rates, which could be a stepping stone to accomplishing their dream of owning a home. It could be an opportunity for you to gain the best of whats in offer this year. Time to make your move!

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

Approved by the Openwork Partnership on 9th March 2023