What You Need to Know About a First-Time Buyer Mortgage

first-time buyer mortgage

No stress, but – taking out a mortgage is probably the biggest financial commitment you’ll ever make.

We’re not saying this to scare you; rather, we’re just highlighting the importance of weighing up all your options so you choose the ideal first-time buyer mortgage for you. The one you get in the end should be the one that best fits with your circumstances. How do you  know which is the best? This guide should help you get an idea of what you should be looking for when searching for a mortgage. Also, if you need any help or want some advice, just send us an email at gregpendleton@iamassociates.co.uk and we’ll be happy to clear up any doubts.

Research Your Different Mortgage Options

Understanding what options are available is the first fundamental step to finding the mortgage you want. There are three types to look out for:

  • Fixed mortgage: the main advantage of a fixed mortgage is you know exactly how much you will pay per month. The payment installments remain the same, no matter what happens in the market or with the economy. Usually you can choose a 2, 5 or 10 year mortgage but 3, 4 and 7 years are also available. The shorter your mortgage, the cheaper the rate; although what you choose will depend on how much you can pay per month, among other factors.
  • Variable rate: as the name suggests, a variable rate mortgage means your installments can vary. The base rate follows the Bank of England Base Rate plus an additional margin. What this means is that is the interest rates fall, so will your mortgage payments. On the other hand, if the interest rates rise, you will have to pay a higher rate.
  • Discount variable rates: This follows the lender’s (your bank, for example) standard variable rates (known as SVR). This is influenced by the Bank of England Rate too but the rate will be set at your lender’s discretion. In other words, just because the interest rate has gone up or down, doesn’t necessarily mean that your lender will change the mortgage payments.

Get Saving

Before you get a mortgage and buy a house, you need to have savings to pay for a deposit. The minimum deposit you can have is 5% of the property value. So, if the house you want to buy is valued at £100,000, you have to pay an upfront deposit of £5,000. If it’s worth £200,000, then you’ll be expected to pay a deposit of £10,000. And so on.

The more you saved for your deposit the better as it means you get cheaper mortgage rates and have less money to borrow from a lender. Both of these factors will save you money in the long term.

It’s a good idea to speak with a financial advisor when you’re saving for a mortgage as there is a lot of financial help out there that not everyone knows about. For example, you can use a Help to Buy ISA – this is a type of savings account where for every £200 you save, the government gives you £50 up to a total of £3,000. If you’re buying a house with someone, they too can open a Help to Buy ISA so you get double the contributions. Things like this can really make a huge difference to help you to buy your first home.

Another type of government scheme is the Help to Buy equity loan which gives you a small interest-free loan to help you purchase your home. For example, if you pay a 5% deposit, the government will give you an interest-free loan (for 5 years) the equivalent of 20% of the value of the property. The rest – 75% – you take a mortgage from your lender. It means in the long run, you end up paying less interest.

Other Costs

Buying a new home is more than just getting enough savings for a deposit and then paying off a mortgage. There’s a few more extra costs you should be prepared for. These include the valuation fees, the cost of a surveyor to check the property, the solicitor for all the legal work, the removal costs, the initial costs of furnishing your new home and the overall decorating costs. It all adds up and it’s important to have money aside for these extra expenses.

If you buy a home that’s worth more than £125,000, you need to pay stamp duty which varies in bands of 2%, 5% and 10% of the overall value of the property.

Get Your Credit Report Checked

Your potential lender will check your credit report as part of the mortgage application process. To avoid any setbacks at the application stage, check your credit report at least six months before applying for a mortgage. This gives you enough time to iron out any issues or problems and get your credit rating in good condition.

If there has been someone in your past that was financially connected with you in some way and has negatively affected your credit history, you can apply for a ‘notice of disassociation’ which helps remove them from your credit report.

There are some things a lender looks out for during a mortgage application and one of these things includes an affordability check. This involves checking your bank statements for the last 3 to 6 months and using this to evaluate your position of paying the monthly payments. Things you can do to improve your chances of being approved on the affordability check include: not being in your overdraft during this time, avoid huge weekend or holiday blow-outs that show sporadic spending on your account and avoid online gambling and other purchases on similar sites.

Costs To Look For When Property Searching

When you’re looking for a house to buy, there are several things to look out for, such as location, upcoming developments in the area and employment opportunities. All of these will help add value to the property in the future. Another thing to consider – especially when considering costs – is whether the house is a freehold or a leasehold.

Usually if the property your buying is a house, it is probably a freehold which means you get the rights of ownership of the building and the land. If you buy a flat or an apartment, it’s probably a leasehold. This means you will need to pay a service charge for the upkeep of the building and the maintenance of the communal areas. Every few years, the building may undergo major repairs which you will need to financially contribute to. Keep in mind these costs when searching for new homes.


Getting the right mortgage is essential to ensure that you get the best deal for your money. To talk about your options or to clear up any questions you may have, feel free to get in touch with us. Either send an email to gregpendleton@iamassociates.co.uk or send us a message through our Contact Us page.






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