First Time Buyer

You do not have to use a mortgage to buy a property, but not many people can afford to buy a home without the help of a loan.

When you buy using a mortgage, the property acts as security for the money borrowed – this means if you miss your mortgage payments, you would incur defaults which damage your credit score and ultimately could lead to the lender repossessing your home. Once you have repaid your entire mortgage, your monthly payments will end, and the property becomes unencumbered – meaning the lender no longer has any stake in your property, and it cannot be repossessed by them.

Lenders will assess your affordability by looking at your income and expenses and will require certain documents to show this.

They will ask for ID, so a valid passport or driving licence registered at your current address is the most common. Additional documents may be required for non-UK nationals.

It is also beneficial to be registered on the electoral roll at your current address. You will need to be able to provide at least 3 years of address history.

You will need to provide evidence of your income by showing your payslips if you are employed, company accounts or tax calculations if you are self-employed, and the bank statements for the account they are paid into.

You will need to show your proof of deposit, for example the statements from the savings account holding your deposit money.

Lenders will also look at how you conduct your finances by doing a credit check and looking at your bank statements. You need to inform us of any credit cards, loans and finance agreements you have and we will request a copy of your credit file to help us with this.

Lenders are not looking to see where you buy your clothes or how often you eat out – they are looking for any patterns they deem to be risky, such as frequent use of your overdraft, bounced direct debits, unusual deposits and frequent payments for things like online gambling.

10% of the purchase price used to be considered the norm; however, more and more lenders now offer low deposit mortgages that allow you to buy with 0% deposit or as little as £5,000. As these schemes present a higher risk to the lenders, they come with particular eligibility requirements and higher interest rates, but these schemes can be very helpful for getting first-time buyers on the property ladder.

The higher the deposit you can provide, the better the loan-to-value (percentage of your loan amount compared to your home’s value) and better interest rates would be available to you.

Some lenders also accept gifted deposits – these are where family members or friends are willing to gift you part or all of your deposit. They will still need to prove where the money has come from, e.g. through regular savings or inheritance and sign a form to say they are happy to gift it to you, understand they won’t have any interest in the property and don’t want it back.

If your income alone does not meet the lender’s affordability criteria, some lenders accept applications that are called Joint Borrower Sole Proprietor. This means you could have a relative or friend on the mortgage with you – their income would be taken into account, and they would also be liable for the mortgage payments, but it would only be your name on the deeds – you would be the only person to legally own the property.

When you buy a house, you will need to instruct solicitors to represent you in the legal part of the process. They manage the transfer of the legal ownership of the property, conduct property checks and manage the money transfers.

They will order searches from the local authority, water and environmental agencies to discover any potential risks such as flooding or planning issues.

Solicitors will check the legal title deeds of the property to make sure the person selling it is legally able to do so and if there are any covenants or restrictions placed on the property’s use or boundaries.

Your solicitor will also ask the seller’s solicitor detailed questions about the search results and property forms.

Whenever you buy a property in the UK, you have to pay a tax called Stamp Duty Land Tax in England and Northern Ireland, or Land Transaction Tax in Wales and Land and Buildings Transaction Tax in Scotland.

The amount you pay is determined by a portion of the purchase price that falls within each tax band.

First-time buyers pay 0% tax on the first £0-£300,000 (as long as the purchase price is below £500k), then 5% tax on the portion from £300,001 to £500,000.

If you are a first-time buyer purchasing a property worth over £500,000, you do not benefit from the First Time Buyers relief and would follow the normal stamp duty tax thresholds that all other buyers are subject to.

We can help you to figure out how much tax you would pay on a property.

When you get a mortgage, the lender will have someone conduct a mortgage valuation survey on their behalf to make sure the property is sufficient collateral for the loan amount and to identify any risks that would make it unmortgageable. This report belongs to the lender, and you might not even get to see a copy. Even though this valuation report is for the lender’s benefit, sometimes you, as the buyer, are required to pay for it; however, many lenders offer to cover the cost of this as an incentive in their mortgage product.

Unlike a mortgage valuation, these surveys are for your benefit to help find any hidden defects or structural problems with the property. You can look at the results and either negotiate for necessary repairs to be carried out before you buy, or you can pull out of the sale completely if you find something troubling.

The level 1 report is most suitable for new builds and conventional homes in excellent condition. Level 2 is useful for standard modern properties that appear to be in reasonable condition (less than 50 years old), and a level 3 is recommended for older properties, listed buildings, unusual properties or those in need of major refurbishment.

RICS reports are not mandatory, and we can help you decide if they might be beneficial to you when buying a property.

To get a report done, you would need to instruct an independent, qualified surveyor. We can help point you in the right direction. It is a good idea to get quotes from a few firms before you decide who to go with. The surveyor would then contact the seller of the property to arrange a time to go and conduct their survey. The results would be made available to you, but not your mortgage lender.

Mortgage advisers/brokers earn a commission called a procuration fee from the lenders when a sale successfully completes with that mortgage.

Some brokers also charge a broker fee to cover the admin involved in processing your application, the time taken to assess your case and provide their advice and to guard against uncompleted loans.

Many hours will be spent by your adviser assessing your documents and affordability, researching the market and processing applications for you. If the loan does not complete or your purchase falls through, the broker would not receive any payment for their work.

We charge a broker fee of £499 on purchases (or £999 on complex cases such as if you have a poor history of managing credit or are purchasing an investment property through a limited company).

The exact amount of our fee will be discussed and agreed with you at the earliest opportunity.

With our industry knowledge, experience and access to products from hundreds of lenders, we believe our fee is justified and offers fair value for our time and commitment to you. We do not charge a fee for remortgages, so if you come back to us to help find you a remortgage deal when your initial product deal expires, you will not pay a fee again.

If you are buying a property with a mortgage, then the lenders will require you to have buildings insurance in place at the time you legally take charge of the property (at exchange of contracts).

For leasehold properties, the freeholder usually insures the flat and your share would be covered in the service charge.

Many people also take out contents insurance to cover their personal possessions inside the home if they are damaged or stolen. It includes cover for things like furniture, appliances, curtains, carpets, clothing and valuables.

Unlike buildings insurance, the following types of insurance are not mandatory but are definitely worth considering, and we can discuss these with you in more detail.