First Time Buyer Mortgages
As a first time buyer there are various options open to you on how you can buy your first property. You can either buy on your own, or with someone, or with several people, or use your family as guarantors for your mortgage.
When you don't have a deposit...
Most First time buyers either have limited deposit available or insufficient income to borrow the amount they need to buy their first property. If you have a limited deposit saved up then your options are to get a 100% mortgage.
Now when buying any property you will have closing costs to pay which are solicitor fees, stamp duty, mortgage broker fees and other costs associated with your purchase. This normally comes to around £3,000 to £5,000 depending on the property price, so you will need this amount in addition to your deposit.
So then if you have saved up £5,000 for example and this is all that you have available, then you need to get 100% borrowing to buy your property. 100% mortgages work purely off your income and you'll be able to borrow approx 4 to 5 times you gross annual salary.
E.g. if your annual salary is £25,000 then you would be able to borrow 5 times your income which will come to £125,000. This is a big help in getting you on the property ladder but beware that 100% mortgages have a higher interest rate compared with the type of rates you would get if you were putting down a deposit.
When you have a deposit...
For those of you who have a deposit saved up then normally you'll be able to borrow around 4 or 5 times your income. However, we have lenders who will lend you up to 6 or 7 times your income!
How much deposit do you need as first time buyers? This depends on how much you have available but you should aim to put down at least 5% deposit - 5% of the property value and even more if you can. If not then remember you can still get 100% lending.
The exact amount you'll be able to borrow depends on your credit, if you have a lot of borrowings already and of course your income. You can use the calculator on the left to work out the maximum borrowing open to you based on your income to get a better idea.
Obviously the more you borrow the higher the interest rate - there are very few lenders who will lend you up to 6 times your income and they normally charge a higher rate of interest as a result.
Buying with someone...
The other option is to buy with someone else such as another member of your family or with a friend and increase your borrowing power. If you're a couple looking to get your first property then your combined income should give you sufficient borrowing power to buy a home.
You can still get 100% lending as joint borrowers and normally will be able to borrow approx 3 to 4 times your joint gross salaries. E.g. if your combined annual salaries are £50,000 then you'll be able to borrow up to £200,000 on a 100% lending basis.
Buying using a guarantor...
A viable alternative for first time buyers is to buy using their parents or close family members as guarantors. A guarantor is basically someone who guarantees your mortgage on your behalf so that if you fail to make payments then there is a legal come back on them as well.
Although it sounds scary, many first time buyers especially recent graduates have used this method to get their foot on the property ladder. We have a scheme whereby you can combine your income with your parents or other close relative and borrow more as a result.
E.g. let's say your income is £20,000 a year, on your own you'd be able to borrow approx £100,000. But let's say that your parents have a joint income of £60,000 and their mortgage is almost paid off.
Adding their income to yours gives you a combined income of £80,000. Now you would be able to borrow 3.5 times this combined earning (3.5 times income is what this specific lender which does this scheme offers) meaning you could borrow £280,000! Could that help you onto the property ladder! The lending is capped at £250,000 by the lender that does this scheme but still this is a lot better than being limited to £100,000!
To find out how the maximum you'd be able to borrow then click here.
If you would prefer some specific advice then click here.