Mortgages

How much to save for a deposit is a big concern for first time buyers.

Prior to COVID-19, many lenders offered 5% deposit mortgages. However, due to the pandemic many lenders have tightened borrowing restrictions and raised the minimum deposit level to 15%. Lenders have said these are temporary measures designed to help banks cope with higher volumes of enquiries and fewer staff members.

Some lenders are able to accept lower deposits and you may also be able to boost your deposit amount – you may want to seek independent mortgage advice to help you find the right mortgage.

As it’s your first time purchasing a property, you’ll likely have many questions about the mortgage process and how it works. Let us break it down for you:

The first step in obtaining a mortgage is to arrange an appointment with an independent mortgage adviser who can look at the whole of the market to get you the best deal. The adviser will begin by discussing your personal circumstances and potential eligibility for a mortgage, taking into account different factors. They can then advise you on potential options, repayments and different types of mortgages.

With your permission, the adviser can pass the information on to a lender to apply for an agreement in principle, which is a document outlining how much a lender is prepared to lend you for a property. It should be noted that this is not a formal mortgage offer as the lender will require a satisfactory property valuation and may also be subject to change if your personal circumstances alter in any way. This means you’re ready to go out and start making offers on properties.

Once you’ve had an offer accepted, you should contact your mortgage adviser, who will gather all the purchase details, advise you about documents to prepare and take you to a meeting to apply for the full mortgage. It can take up to three weeks to get a mortgage approved.

Another key question and one that will determine the budget for your first home, is how much you’ll be able to borrow from a mortgage lender. While in the past, this was simply decided by your income – lenders would lend roughly up to three or three and a half times your annual income – in recent years other factors are taken into consideration as well

Lenders are increasingly focused on affordability, so they will take monthly commitments into account such as loan repayments and car finance. However, if you pay a bigger deposit then you may be deemed less risky and allowed to borrow a little more. Your credit history is also influential in determining how much you can borrow.

Guarantor mortgages are an option for first time buyer. They enhance your borrowing power as a guarantor is provided to the lender, so if the borrower stops repaying the mortgage, the lender can chase guarantors for the missed payments. This makes you less risky as a borrower and as such more likely to successfully apply for a mortgage.

Not all lenders offer guarantor mortgages and there can be a more restrictive lending policy in place for those that do. Get in touch with us if you’d like to find out if this could be a good option for you.

Most mortgages are arranged on a (capital) Repayment basis, which means every month you’ll pay a certain amount of the borrowed amount back along with the interest amount. The interest amount is calculated as a percentage of the total borrowed amount.

If you have a fixed rate mortgage, the interest rate on the amount you have borrowed will remain the same for a certain amount of time.

With a variable rate, the interest rate could change from month to month. Most tracker rates follow the Bank of England base rate.

If you’ve never owned a property before, and are interested in making your first purchase a buy-to-let, you may be limited as many buy-to-let mortgages require you to own your own property before they will offer a buy-to-let mortgage.

It’s worth contacting a mortgage adviser to fully understand the options available to you.

A key question that you’ll be asking yourself with buying your first home and getting a mortgage is where you should begin. We recommend booking an appointment with a Mortgage adviser to get some advice – for First Time Buyers the advice is free at Leaf Financial!

Our independent mortgage and protection specialists will take you through the mortgage process. They will start by arranging an agreement in principle, so that you can go out and start making offers on properties

Once you’ve had an offer accepted, your adviser can take you through the full mortgage application and remaining steps.