First time buyer

Guide for first time buyers

How getting a mortgage works if you are a first-time buyer

If you are a first-time buyer, you may have spent the past few years saving for a deposit to help you get on the property ladder.

If so, the next step is to find out how much you can borrow so you will have a better idea of the type of property you can afford to buy when you start looking for your first home.

First-time buyer’s deposit

Your deposit is the amount of money you have saved up to put towards your first home and it will help determine how much you then need to borrow as a mortgage.

The more money you have saved as a deposit, the less you will need to borrow from the bank. and if you have a bigger deposit, you will have access to more competitive mortgage rates.

As well as saving for your initial deposit, you will also need funds to put towards fees like property searches, surveys, mortgage arrangement fees, solicitor’s fees, stamp duty, home insurance, removal costs and so on.

First-time buyer’s mortgage

When you apply for a mortgage, the lender will assess your affordability by looking at your annual salary and any other income you receive, as well as all your outgoings, including credit card and loan debts, household bills, childcare, travel, and general living costs.

The lender will also check your credit history to see whether you are a reliable borrower and will use this and its affordability assessment to decide how much you can borrow.

Mortgage providers will usually have a maximum loan-to-value – LTV – they are prepared to offer you. This is the maximum mortgage loan you can take out as a percentage of the property value.

So, if, for example, the property value was £200,000 and you were offered a mortgage of £170,000, your LTV would be 85% and you would need a deposit of £30,000, which is 15%.