First Time Buyer

Stepping onto the housing ladder for the first time is thrilling, though it can feel a bit overwhelming with all the specialised terms and jargon you’ll encounter.

INSIDE THIS GUIDE

• What is a mortgage?
• What deposit do I need?
• Understanding Loan to Value (LTV)
• Ensuring you can manage monthly mortgage payments
• What other costs are expected?
• How to find the right mortgage
• Different types of mortgage
• What is a mortgage in principle?
• The mortgage application process
• Other options if you have little to no deposit

What is a mortgage?

You’re considered a first-time buyer if this is your very first purchase of a home and you haven’t previously owned a property, whether that’s a freehold or a leasehold, in the UK or elsewhere.

A mortgage is essentially a loan specifically for purchasing property or land. The term of the mortgage is typically between 5 and 40 years depending on your needs.

This loan is ‘secured’ against your home’s value until the full amount is paid off. This means, in the unfortunate event you’re unable to continue your mortgage repayments, the lender has the right to take back your home to recover the borrowed amount. This is very much a last resort, but a lender does have the power to do this. This is called a repossession.

To kickstart your home buying journey, typically you’ll need at least 5% of the home’s purchase price saved up for a deposit. The rest of the purchase price will be covered by the mortgage. There are some schemes where a deposit is not required. Find out more by viewing our specialist lending section. (Hyperlink)

What deposit do I need?

Typically, you need some form of deposit to put down towards the
purchase of a property. In almost all instances, the minimum deposit
you’ll need is 5% of the purchase price.

For Example:

Understanding Loan to Value (LTV)

Loan to Value (LTV) is the amount of loan (the mortgage) against the value of the property.

As an example, if you purchased a property for £100,000 and had a £20,000 deposit, the LTV would be 80%. This is because the loan amount of £80,000 (the purchase price of £100,000 minus the deposit amount of £20,000) is 80% of the value of the property.

As a general rule, the lower the LTV, the better rates you can have access to. The rate a lender will offer usually changes at 5% increments.

As an example, a 10% deposit (90% LTV) may have a more expensive rate than a 15% deposit (85% LTV). However a 14% deposit (86% LTV) would not reach the 85% LTV threshold, and so would fall into the rates of 90% LTV. Sounds complicated, but an adviser will be able to advise the best course of action.

The cheapest rates are typically available for people with a 40% deposit, which is a 60% LTV.

Ensuring you can manage
monthly mortgage payments

For first-time home buyers, the crucial consideration is truly assessing if you’re financially ready for this big move.

Before diving into property searches, it’s wise to draft a budget. Reflect on your monthly affordability, keeping in mind that daily living expenses like gas, electricity, and groceries, as well as associated insurance costs will still need to be managed alongside your potential mortgage payments. A broker will assess your ideal budget and tailor the mortgage based on this. (Link to affordability calculator)

What other costs
are expected?

There are a host of other costs associated with purchasing a property.

These include:
• Broker fees
• Lender arrangement fees
• Valuation fees
• Solicitor costs
• Stamp Duty
• Removal / moving costs

You will also have a new set of monthly costs to consider depending on your current situation.

These include:
• Buildings insurance
• Life insurance
• Council tax
• Utility bills

How to find the right mortgage

There are 2 main ways in which you can apply for a mortgage. This is either going directly to a lender or through an adviser. Advisers are experts in the mortgage market and can help you find the right deal specifically for your needs. All lenders have their own criteria around multiple areas such as:

• Income types
• Employment types
• Credit
• Deposit source
• Residency
• Property type

Different types of mortgage

The mortgage market is filled with various options, and getting to know these can help you choose the one that suits you best.

The most common type is a repayment mortgage, where your monthly payments go towards both the capital amount you’ve borrowed and the interest on it.

There’s also the ‘interest-only’ mortgage, which isn’t typically available unless you’re investing in a buy-to-let property or you tick specific criteria boxes.

Another vital aspect to consider is the interest rate. Many opt for a fixed-rate mortgage initially, which lasts for a predetermined period. Once that period ends, you’ll likely switch to your lender’s standard variable rate, unless you decide to stick with the same lender but switch to a different mortgage plan, or refinance with a new lender.

When it comes to deal types, the most common are:
• Fixed
• Tracker
• Discount
• Standard Variable Rate (SVR)
• Offset

When choosing a deal type, you typically choose a deal period. For example, a 2 year fixed deal will fix the mortgage payments for a 2 year period.

For more information, see our detailed guide. (Hyperlink)

What is a mortgage in principle?

A mortgage in principle, also known as an agreement in principle (AIP) or a decision in principle (DIP), is a statement from a lender indicating how much they would be willing to lend you, based on an initial review of your financial situation. It’s not a guaranteed offer of a mortgage, but it gives you a good idea of what you might be able to borrow, which can be extremely helpful when you’re house hunting. It shows estate agents and sellers that you’re a serious buyer with probable funding in place. This can be especially advantageous in competitive housing markets.

Obtaining a mortgage in principle usually involves a credit check and requires you to provide some basic financial information, including your income, outgoings, and debts. It’s worth noting that some mortgage in principle checks are ‘soft’ searches that won’t affect your credit score, while others are ‘hard’ searches that may have a slight impact.

The mortgage application process

The mortgage application process might feel overwhelming at first. The process can be long winded, with lots of forms to complete and documents to send.

You will be required to show proof of your earnings, any debts or credits, and your expenditure habits. For those who are self-employed, this includes submitting your tax returns and business financial statements from the past two or three years.

Lenders conduct what is known as an affordability assessment, which is a thorough examination of your financial situation. They use this to determine whether you’re in a position to manage your mortgage payments over time.

(Hyperlink)

Other options if you have little to no deposit

If you are struggling to save a deposit, there are other ways to acquire a mortgage. This includes
• Gifts from family or friends
• Equity from a family property
• Lender specialist schemes

At Forest Hall, we are always available to help. We will take the time to understand your requirements and recommend the best solution to fit your needs.

What our customers have to say

Hear from our satisfied clients who have turned their financial dreams into reality with Forest Hall Financial Solutions.

“I used Forest Hall Financial Solutions for my mortgage on my first house. Jordan was very helpful and advised me on the best course of action to get the best deal we could. We had a few hiccups due to my credit history but he found a deal that worked for me and then went above and beyond to help me with the rest of the purchase. Jordans no bull tell it how it is honesty is great as you know exactly where you stand and what to do next. If it wasn’t for Jordans assistance I would have walked away from the sale. He has stepped in and helped when my estate agent has not responded to emails etc and has helped me navigate this absolute minefield that is property purchase. I highly recommend these guys.”

Sam was absolutely brilliant throughout my entire mortgage process. I wasn’t very confident at all and he put my mind at ease, supporting me throughout all the steps until completion. He discussed all options with me and ensured I was happy throughout. Sam is friendly, professional and extremely helpful and I would greatly recommend him to anyone applying for or porting a mortgage.

I recently bought my first home with my partner, and I couldn't have done it without the incredible support of Sam at Forest Hall. From start to finish, he was professional, knowledgeable, and genuinely caring. Sam took the time to explain every step of the process, answering all of our questions with patience and clarity. His expertise helped us secure a mortgage that suited our needs, and he made what could have been a stressful experience feel smooth and manageable. I highly recommend Forest Hall and Sam to anyone looking for a reliable and friendly mortgage advisor.

Great service during tough times. We renewed our mortgage during contrasting reports of bank rates changing. Jordan kept us in the loop at all times and explained in great detail the various different mortgage rates and what comes with them. Whenever I asked a question there was always an informative answer. Highly recommend and will be using again.

Fantastic service as always. Jordan and the staff at Forest Hall made our house purchase easy and stress free. We have used Jordan multiple times now and his knowledge and efficiency has been excellent. We continue to recommend forest Hall financial solutions.