Help to buy and First-time buyer mortgages with Finer Credit

Start your easy online application to check your affordability, get your mortgage in principle certificate and free mortgage advice. 

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First Time Buyer Guide

Deposits for first-time buyers

 

A deposit is the percentage of the property's price that you as the buyer will contribute. It is the sum of money you pay towards your home upfront.

 

You will need to contribute a deposit of at least 5% to get a mortgage. As a reminder, If you are buying a home worth £200,000, for example, the deposit is £10,000 (5%), and the LTV is the remaining 95%.


Should I save for a bigger deposit? 

It is essential to highlight that with a 5% deposit, the mortgage options available to you will be limited. Occasionally, lenders might ask you to contribute more, depending on your circumstances. 

 

Generally, with a larger deposit, you will get better mortgage deals as you pose less risk to the lender. A greater than 5% deposit will give you access to a broader range of cheaper mortgages available on the market. 

 

When saving up for a deposit, remember to review and adjust your finances constantly. Planning for your outgoings and monthly expenses will significantly influence your chances of getting a mortgage. 

First-time buyer government schemes
 

1- Lifetime ISA
 

For first-time buyers, the Lifetime ISA (LISA) might be a great option worth considering.

A lifetime ISA (Individual savings account) allows you to save up to £4000 every tax year to put towards your first home or your retirement. To be eligible to open a LISA in the UK, you must be aged 18 or older but under 40 years old.

 

Once you open your tax-free savings account and invest the maximum amount of £4000 a year, you will also receive a 25% bonus from the government on top. You can use your LISA to help you buy your first home if the property is worth £450,000 or less. If you are buying with someone who is also a first-time buyer, you can both use your LISA savings and bonus.

2- Shared Ownership

This scheme enables first-time buyers that may have a small deposit to have the opportunity and get on the property ladder with increased flexibility.

 

With shared ownership, borrowers will buy a share of the property worth between 25% and 75% and pay a subsidized rent on the remainder of the property. You can later buy shares incrementally until you own the whole property. 

 

The housing association determines who qualifies for this scheme and judges based on several criteria. You will not be eligible if your combined household income exceeds £90,000 if you are in London or £80,000 if you are outside of London.

3. Help to Buy Equity Loan

With a Help to Buy Equity Loan, the government will loan you up to 20% of a property’s value.

The equity loan strengthens your deposit, which will give you access to cheaper mortgage rates.

 

Important things to consider when applying for a help to buy equity loan:

 

  • This loan applies to new build properties only

  • There will be a house price cap depending on where you live

  • You will need at least a 5% deposit to apply

  • The loan stays interest free for 5 years

 

Let’s see this in action, If the property is valued at £300,000, you need to put down a deposit of £15,000 (5%), then with a help to buy an equity loan of £60,000 (20%), you would only need to apply for a mortgage of £225,000 (75%).

 

However, it is vital to be cautious. While an equity loan might give you a better mortgage rate initially, the loan could eventually cost you a significant amount.

4. Mortgage Guarantee Scheme

This newly launched scheme is tailored to first time buyers that may be struggling to afford a large deposit. With the Mortgage Guarantee Scheme, first-time buyers have the option of buying a home with a minimum 5% deposit.

This guarantee is geared towards the lender and acts as reassurance when offering a high loan to value mortgage (LTV). 95% mortgages will be available for home purchases with a value of £600,000 or less.

 

If you are interested in one of these government schemes and need additional information, don't hesitate to speak to our team of experts. 

What is a Mortgage in Principle?

 

A mortgage in Principle (MIP) also known as an Agreement in Principle (MIP), Approval in Principle (AIP), or Decision in Principle (DIP) is a certificate from a lender to say that, ‘in principle’, they would lend you a certain amount. 

 

A Mortgage in Principle is a simple way to find out if you can borrow the amount you need to buy or remortgage a house or flat, without a full credit check.

How a Mortgage in principle can help?
 

Before you put in an offer, estate agents will often want a guarantee that you will be able to get a mortgage to finance the purchase. Having a mortgage in principle shows that you can afford to buy a property. This could make you a more attractive buyer.

Does a mortgage in principle guarantee I’ll get a mortgage?

A mortgage in Principle will give you an idea of how much you can borrow from the lender, but this doesn't guarantee you can get a mortgage. When you go through the full mortgage application process, the lender will look at your credit history in more detail and seek to confirm the information you or a broker acting on your behalf provided when submitting the application. This means checking your payslips, bank statements and/or SA302s to name a few.

How to get a mortgage in principle?
 

Finer Credits lets you apply for a free Mortgage in Principle (MIP) online to find out if you could borrow the amount you need – without affecting your credit score. All you need to do is to provide your personal and financial details. 

Do not Forget Fees

1. Broker Fees
 

Finer Credit is a free mortgage broker. Meaning you will never need to pay any fees while using our mortgage services. Most mortgage brokers charge around £500, but we won’t charge you a penny.

2. Arrangement fee

An arrangement fee is an administrative charge paid to the lender to set up your mortgage. You have the option to either pay for the arrangement fee upfront or add it to your mortgage.

It is important to note that adding this fee to your mortgage will cost more as you will need to pay interest on the fee. However, if paid upfront, there is a chance you may lose it if your application falls.

Arrangement fees vary significantly but typically cost around £1000. It could be charged as a flat fee or as a percentage of the mortgage. This fee is a substantial cost that can significantly impact the total cost of the deal. It would be best if you did not overlook it when working out the affordability of your mortgage.

3. Booking or reservation fee

Specific lenders will charge an additional reservation/application fee to secure a fixed rate, tracker, or discount deal. Some lenders may include this charge in the arrangement fee.

The booking/reservation fee cost is usually around £100-£200. You will need to pay this fee upfront (if applicable), and it is non-refundable. 

4. Valuation fee

The lender charges a valuation fee to cover the cost of an inspection of your new home.

An inspection of your home needs to take place for the lender to establish the property’s value.

 

Lenders carry out a valuation of your home to ensure their loan is sufficiently secured and that they won’t make a loss should they need to repossess. The cost of these fees is roughly £250; however, this can vary depending on the lender and the property’s value.

5. Legal fees

Legal fees are paid to your solicitor to cover the cost of all the legal work associated with buying a home. This cost will cover conveyancing (dealing with the transfer of ownership), ensuring paperwork is accurate and searching local authority data to uncover hidden nasties such as environmental or drainage issues. 

6. Stamp duty

Stamp Duty is the tax amount that goes to the government when you purchase a new home. Occasionally lenders may have special offers for first-time buyers to help cover the cost. The cost of the Stamp Duty depends on the property’s value and where you want to buy a property in the UK.