First Time Buyer Mortgages - Mortgage Advice

What are First time buyers mortgages?

The biggest financial commitment you'll undertake is your first home. Yet most people jump into getting a first-time buyer mortgage without having a clue about them. Mortgages are competitive as there are over 7000 deals from which to choose. The flip-side of so many mortgage deals is that it is very confusing for first-time buyers.

First, and most confusing is the amount of words, terms and jargon thrown around. How do you wade through "capped rates", "stepped discounts", "Aussie mortgages", "offset mortgages" and the long list of deals without getting stuck. If you go to an advisor to guide you through the market, will they just sell you the mortgage that pays the most or the quickest commission? So many questions.

But don't give up. You have to consider the fact that your rental payments are being thrown down the drain, and how good an investment a property is. You should get your foot on the property ladder as soon as you can, otherwise the first rung becomes higher and higher up quicker than you can keep up with it. So, let's begin with the costs.

The amount of mortgage you can get depends on your income. Usual multiples are 3.25 times the gross salary of single borrowers. A couple can get 3.25 times the first income plus one times the second income. However, you could get 2.5 times the combined income of both of you. Add onto this the amount that you can afford to pay as a deposit and you have the amount you can pay for your first property.

Some lenders will only lend you a certain percentage of your property. This is lessen the chances for them of the property being worth less than what they owe should you default on your payments. The amount of the mortgage expressed as a percentage of the of lender's valuation of the home is the loan to value (LTV). So, if you have no deposit at all, you will need a loan to value of 100%.

Remember, buying the house is only a small part of the costs you are liable for. You have to pay stamp duty, which is 1% of the purchase price for properties between £60,000 and £250,000, then 3% up to £500,000 and 4% over that amount. Plus you have to pay for the survey, the valuation, and the solicitors fees.

You may also have to pay an arrangement fee for the mortgage and a Mortgage indemnity Guarantee - which is insurance for the lender for you defaulting on your payments when your property is worth less than the loan. Add all these costs to the cost of your property and you may need a mortgage of 105% or more, which is still possible.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

© AskFinancially.com 2009

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