First Time Buyer Mortgages

Some First Time Buyer mortgage lenders do offer a multiple of up to five times the applicant’s salary or even 100% of the property's market value.

Now we must draw your attention to the fact that the governing body (FSA) the Financial Services Authority recommend that single people should borrow up to a total of three times their salary and two and a half times their salary for couples. Most mortgage lenders will require at least a 5% deposit on the mortgaged property.

There are plenty of specific first-time buyer mortgages such as, guarantor mortgages, 100 % loan to value mortgages and shared ownership mortgages.

Upon successfully attaining a first time buyer mortgage, it is often considered wise to investigate other mortgages options around 3 years after (or after any redemption penalties) the mortgage term has commenced. This called remortgaging.

When investigating a mortgage for a first time house purchase, there are a number of industry buzz words (terms) you should know. Helping you to make a more educated and informed decision, when deciding which home you want to purchase.

Before you go any further the most important thing you need to accept is that when you sign a mortgage contract, your home is used for collateral and it is your responsibility to make sure your payments are made on time each month. This is a big step, so make sure you can afford it.

Mortgage Terms

Down payment or deposit:
This is the percentage that you or the property developer will put towards the mortgage value. The level of down payment (deposit) will depend on the cost of the property. Some developers will offer a 5% deposit, some first time applicants may be eligible for an FTBI scheme, covered under the new Government Home Buy Scheme.

Interest:
Interest is a percentage that you are charged to borrow mortgage capital. Different mortgage options pay back the interest on the mortgage in a variety of manners e.g., interest only mortgages will pay back the interest only, "they do exactly what they say on the tin", but a repayment mortgage will pay back a portion of the mortgage capital in addition to the interest.

Amortisation:
Amortisation is the repayment of a loan by regular payments. An Amortisation Schedule is the schedule for repaying the interest and principal amounts borrowed on a loan. Amortisation is the method by which your loan is reduced over a given period of time. Your payments for the first few years will cover the interest, while payments made later will be applied towards the mortgage capital.

Mortgage Term:
Mortgage Term is the period of time you have to repay the mortgage repayments. Most mortgages will run for 25 years. You can use the mortgage term to calculate the total value repayable, by multiplying the number of years by 12 months, then multiplying the monthly payment (£) by the number of months. If you want to identify the interest you will pay on the mortgage value over the mortgage term, subtract the sum borrowed from the total figure of your previous calculation. You might want to sit down...

Broker Fee:
Broker Fees are charged by a Mortgage Broker to source the mortgage deal from a panel of mortgage lenders. The fee can be a static figure or can often be a percentage of the loan value. The broker fee will be paid after you have attained the mortgage and are often added to the mortgage value. If you are able to clear this charge and avoid having it added to the mortgage value we strongly advise that you do, as you will avoid paying interest on the Broker Fee.

Procurement Fee:
Procurement Fees are the total amount paid by the mortgage lender to a mortgage adviser/ intermediary / broker for successfully providing applications from customers to enter into regulated mortgage contracts with the mortgage lender.

London Inter-Bank Offered Rate (LIBOR):
LIBOR is the interest rate at which leading banks lend to one another. Sometimes used as an alternative to base rate in setting the benchmark for a tracker mortgage. There are separate LIBOR rates for different periods up to a year but either "1" or "3" months LIBOR is what is normally used in setting mortgage rates.

Non-Status or Self Certification Mortgages:
Self certification is where your income is not disclosed, maybe for reasons of bad (sub prime or adverse credit). The mortgage lender will loan you the value based upon your deposit and the loan to value ratio. They may even wish to see a letter from your accountant so be prepared. Check out Self Cert Mortgages.

Overpayment:
Overpayment is a mortgage repayment larger than the one needed to meet the loan's minimum repayment requirements. Mortgages that allow these without penalty are often useful for people whose type of employment means that from time to time they receive significant bonuses or other injections of capital. You can pay off your mortgage allot quicker if you are able to make overpayments.

Payment Holiday:
Payment Holidays enable you to have a short break from regular mortgage repayments, sometimes offered with flexible mortgages. This can sometimes be a useful feature for self-employed people or others with irregular incomes.

Penalties or charges: Penalties or charges for non payment can happen if you are unable to make consistent repayments to the mortgage lender. These can be expensive so watch out and read the small print.

Pension Mortgage:
A Pension mortgage is where the capital repayment is funded by contributions to a personal pension. The generous tax breaks given to pension saving boost contributions by making them gross instead of net of tax. There is an option to take a lump sum, of up to 25% of the value of the accumulated pension fund. This lump sum aims to repay the mortgage's capital at the end of the mortgage term. But remember when researching this topic the past performance is not necessarily a guide to future performance.

Remortgaging:
Remortgaging is the process of switching your mortgage loan from one lender to another without moving house.

Repayment vehicle:
Repayment Vehicles are the means by which a mortgage loan's capital is repaid. Examples include endowment policies, ISA’s, and personal pensions.

Home Insurance:
Home Insurance is important to many lenders as you will be unable to close on your mortgage if you don't have insurance for your home. Home insurance covers your home against floods, fire, theft, or other problems. If your home is located in a region that is known for having floods, you will need to take out flood insurance.

Mortgage Payment Protection:
Mortgage Protection will cover the mortgage repayments should you fall ill, be made redundant, unemployed etc.

These are the basic terms you will need to know before you purchase a home. Understanding these things will allow you to avoid many of the pitfalls that exist in the UK property market, equally making you sound like a seasoned property purchaser.

What's the best First Time Buyer Mortgage Deal

  • Capped mortgages or variable mortgages?
  • Tracker mortgages or fixed rate mortgages?
  • Discount rate mortgages or self certification Mortgages?

Home Buying Blunders

When buying a new house, one is generally enthusiastic about the venture. However we urge you to be prudent and take cautionary steps in buying a home. This way, you would avoid a lot of home buying blunders, and of course wasting money in a poor investment.

First time home buyers should beware of the pitfalls in buying a house. There are estate agents that sell houses - from the most to the least expensive, and in different locations. When talking to a adviser, ask many questions, remember, it’s you, not he who is shelling out the cash.

Many buyers, especially those buying a house for the first time, commit home buying blunders they cannot undo. They tend to fall in love easily with a beautiful home. Who wouldn’t? But it would be unwise to buy at first sight and forget the cost that it would entail. Buyers should stay within a budget and look around at homes for sale until they get one that is really affordable. A friendly tip - buyers should also think of the viability of reselling the house should the need arise.

The buyer should take into account the expenses to be incurred in making over the new home they are about to buy. Once the buyers have selected the price range of the house, he should make an assessment of the repairs to be done and their corresponding cost. This will give the buyers an idea of the entire cost of the purchase.

Another tip - the buyer should take the entire family along to view the homes for sale. Bring along a checklist of what is needed in a particular house. Sometimes first time home buying generates a lot of excitement and buyers get carried away with the features of the house for sale and forget the actual requirements.

During an outing for first time buying, the buyer should not let on that he or she is in love with the house. They should visit the house twice or thrice - in good and bad weather. A lot of grief has come to couples who bought the first property they liked.

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