Should I have a mortgage in place before I search for properties?

In our experience, getting a mortgage agreement in place first will help you to know what properties and areas are on and off the table for your budget. This will save a lot of time searching and put you in a good position when you want to put an offer in.

A mortgage provider or adviser will need to assess your household income, deposit, credit history, commitments and outgoings, employment status and more. Getting this information together and your mortgage agreement in place will allow you to approach buying your first home with confidence.

What deposit will I need?

As a standard, we would recommend having a deposit in place of 10% of the value of the property. With house prices increasing to 8% in 2022, we understand that this is no easy task. While there are 95% mortgages available from lenders as part of the mortgage guarantee scheme, which is ending in December 2022, as a first-time buyer you need to be wary of the level of debt and repayment terms you are taking on. The larger the deposit you have, the less your repayment will be and it can also open up better market rates to you.

What type of mortgage should I take out?

With the rise in the Bank of England interest base rate to 3%, lenders have also raised the interest on their products, meaning the current average interest rate on a mortgage is 6%. Tracker and variable rate mortgages will be most affected by the recent economic turmoil, but fixed-rate mortgage rates have also been rising sharply.

In our opinion, the best course of action for first-time buyers is to secure a long-term fixed-rate mortgage. This option will give the best rates currently available on the market and will allow homeowners to budget their monthly outgoings more accurately. It will also protect first-time buyers from being caught out by further interest rate hikes, which are likely in the coming months.

Are there any other costs I will need to pay?

There are a number of additional fees that you will need to pay when buying a property. These include, stamp duty, solicitor fees, insurance, land registry, surveyor fees, arrangement fees and any other associated costs.

If you choose to use a mortgage adviser, they will be able to outline the fees involved and when they will become due, so you can plan for these costs.

Is there a discount on stamp duty for first-time buyers?

The government has recently upped the amount of stamp duty relief for first-time buyers. If you are purchasing a property up to the value of £425,000 in England and Northern Ireland, you do not have to pay any stamp duty. If your new home is worth £425,001 to £625,000, you’ll pay 5% stamp duty, but only on the value above £425,000.

For example, if you were paying £500,000 for your first home you would have a £3,750 stamp duty tax bill. That is 5% of the £75,000 above the £425,000 relief cut-off.

If you are looking to buy a home that is worth more than £625,000 you cannot claim first-time buyer stamp duty relief, even if you are a first-time buyer.

What insurance is available?

As well as home insurance, which will be a mandatory requirement if you are taking out a mortgage, first-time buyers should also consider taking out home buyer’s protection. In the UK, 3 in 10 house sales will fall through, usually between exchange and completion.

This can mean that you will lose any conveyancing and other fees already paid out at this late stage in the process. This can become costly and may mean you no longer have the funds available to buy a property. Home buyer’s protection will allow you to claim back some of the money you have already spent.

How can a mortgage adviser help me?

For a first-time buyer, the mortgage and buying process can be especially daunting and complicated. A mortgage adviser will not only help you to find the best products on the market, but they will also give you honest advice on what you can afford and take you through the process step-by-step. This can take a huge amount of pressure off and put you on the best track from the very start.

Get in touch

If you would like to find out how we can help you to arrange a mortgage and the protection available as a first-time buyer, please get in touch.

Grosvenor Wealth Management’s independent mortgage advice service ensures your mortgage requirements are fully met. Whether you are looking to purchase, re-mortgage or buy an investment property, we are confident we can secure the right arrangement for you.

PLEASE NOTE: Your mortgage is a loan secured against your property. Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it. The information contained in within this article is for guidance only and does not constitute advice which should be sought before taking any action or inaction.