First Time Buyers Mortgages

First Time Buyers

Increasing property prices in the UK have made it more difficult for prospective first time house purchasers. According to Nationwide Building Society, the average house costs £118,500 and the average salary is £25,000.

However there are some pluses to the current situation. Interest rates are at their lowest for more than 30 years. Lenders are competing strongly for your custom. As you have no property to sell, you will be more appealing to the vendor (the person or persons selling the property), as you should be able to move more quickly.

How much can I borrow?

Before you start looking for the home of your dreams you need to know how much money you can borrow. Depending on your credit rating (of which more later), lenders will lend between 3 and 4.5 times annual earnings. I am aware of one lender who has lent up to 9 times income in exceptional circumstances although this would not normally be recommended. If buying as a couple most lenders will lend two and a half times your joint annual income.

The most important thing is to establish affordability. Do not commit yourself to a monthly payment that you will struggle to pay. A good mortgage broker will establish how much your total financial outgoings will be; including things like building insurance, life cover etc.

Although most lenders will lend up to 95% of the value of the property, some lenders will advance 100% of the property value. Again, this is only likely to be available to applicants with a good credit rating or “score”. Buyers who can provide at least a 5% deposit are likely to obtain a better interest rate and subsequently a lower monthly payment.

Costs

If the price of your property is more than £120,000, then you will have to pay a tax called stamp duty, levied at 1%, (up to £250,000 when it starts to increase). For example you will pay £1,300 on completion, for a property bought for £130,000.

The lender will normally carry out a valuation of the prospective home to ensure it is worth what is being lent. This will cost an average of £150. They may l also charge an arrangement or completion fee. Your mortgage broker will normally charge a fee.

Your solicitor or conveyancer will charge a fee starting from £350. Other charges include land registry costs, a local search (between £80 and £150) and other small additional costs which are added to the solicitors bill on which VAT is payable.

Credit rating

Lenders will undertake a credit reference on mortgage applicants to establish the amount of risk there is in lending to them.

To obtain comprehensive advice, simple complete the enquiry form.