First-Time Buyer Guide to getting on the Property Ladder  

From purchasing your first property all the way through to collecting the keys, get ready to take your first steps onto the property ladder, as we’re here to help you every step of the way.

Here at B Mortgage Services, we’d feel privileged to be able to help you on your journey as special as buying your first home. In this guide, you’ll learn about the process involved in purchasing your first property; from finding The One all the way through to collecting the keys.

Before you get started as a first-time buyer

You’re in a position to buy and are now ready to start looking for your first home. We’ve listed some key points to be aware of when you start the search:

Make sure you qualify as a first-time buyer

Firstly, make sure you qualify as a first-time buyer. To be regarded as a first-time buyer you must not have:

  • Previously inherited or been gifted a property
  • Been added to the title deeds of a property purchased by someone else
  • Previously acquired a property through a financial institution

Relief on Stamp Duty for first-time buyers

There are some perks to being a first-time buyer, such as getting relief on Stamp Duty. Stamp Duty is a tax payable when you purchase a property. First-time buyers in England and Northern Ireland will not pay any Stamp Duty on properties valued up to £425,000. For properties worth between £425,000 and £625,000, first-time buyers will pay 5% Stamp Duty on the amount over £425,000. First-time buyers purchasing a property worth over £625,000 do not qualify for Stamp Duty relief.

Get a Mortgage In Principle

If you plan to take out a mortgage to help buy your property, get a Mortgage In Principle (MIP) before you start your search. An MIP is an agreement from your lender to grant you a specific amount provided the information you have given is correct. A mortgage adviser can organise this for you by searching the market for a great deal and it means you’ll know exactly how much you can afford to spend on buying your new home.

Find a conveyancer or solicitor

Some people choose to have a solicitor or conveyancer whose services they’ll be using throughout the purchasing process enlisted at the start of their search. This means they’re in a position to proceed quickly when they find a property they like. This isn’t essential but may help to speed up the process. A solicitor is trained in many branches of the law and is regulated by Solicitors Regulatory Authority (SRA). A licensed conveyancer is a specialist in the legal aspects of property purchasing.

Top Tip! It’s not always necessary to have an MIP or a conveyancer in place before starting to look for your new home, but it usually means you’ll have an edge over other buyers if you’re in the best position to proceed when you are undertaking viewings.

Prepare for your MIP

Most mortgage advisers (if you’re using one) and lenders will usually request the same documents when arranging your Mortgage In Principle. It’s a good idea to have the following ready as early as possible in the process so that there’s no delay in securing your MIP.

You will often need:

  • Proof of identity – e.g. passport or driving licence.
  • Proof of address – e.g. one of the following: driving licence (can only be used if not already used as a form of ID), utility bill from the last three months, council tax bill or bank statement.
  • Latest three months’ consecutive bank statements.
  • Confirmation of the source of your deposit – e.g. a bank statement showing your deposit in your savings account.
  • If you are employed – Your latest three months’ payslips.
  • If you are self-employed – Your latest two years’ tax calculation summaries SA302s with corresponding tax year overviews from HMRC.

Having the above documents ready in a digital format that you can email over to the contact arranging your MIP application, will help to kickstart the process into action.

Top Tip! We understand there’s a lot to take in when it comes to buying your first property. Our advice? Seek help where it’s needed and take it one step at a time, which leads us nicely on to our next section.

The mortgage process

As a first-time buyer, you might not be aware of the property-buying process. Don’t worry! We’ve broken down the main steps for you below:

1. Contact a mortgage adviser

They can ensure the smooth running of the whole process. They’ll inform you of how much you can borrow, make mortgage recommendations and be able to secure your MIP.

2. Find your new home

Once you know the amount you can borrow, you can start looking for your new home. It’s worth drawing up a list of requirements that you have and speaking to different agents to find out what properties they have that match your needs. You may have to compromise on one or two things, or you might find something that suits your budget perfectly.

3. Put in an offer

You think you’ve found The One; now it’s time to make an offer. Having your MIP means you know the maximum amount you can put forward. When your offer has been accepted, you can then proceed with the application.

4. Submit your mortgage application

Your mortgage adviser will work with you to complete your mortgage application. The lender will also arrange for a valuation of the property.

5. Undertake conveyancing

It is then the role of the solicitors and conveyancers to draw the contracts up for purchasing. They will also check the title deeds for any clauses that you need to be aware of and perform searches on things like planning permission applications in the local area that may have an impact on your property.

6. Exchange of contracts

At this point your solicitor and your seller’s solicitor exchange contracts and agree on a date for the sale to be completed. You normally transfer your deposit across at this point.

7. Completion

On the agreed date, provided all goes smoothly, you complete, meaning the final amount is transferred over and the keys are released to you.

Top Tip! Mortgage advisers come in all shapes and sizes. You may want to speak to more than one before committing to using their services to ensure you feel comfortable with them handling your mortgage search. Checking reviews or seeking recommendations from friends and family can also help.

Taking out a mortgage as a first-time buyer

Many people buy their first home using a deposit and taking out a mortgage to make up the rest of the amount.

It may seem complicated, but obtaining a mortgage needn’t be daunting. A mortgage adviser can guide you through the whole process.

Here are some points to note about mortgages:

  • A mortgage is a loan taken out for a number of years, the length of time is called a ‘term’. Mortgage terms can be anywhere between 5 and 40 years.
  • A deposit of at least 5% of the property value is usually required when taking out a mortgage.
  • The lender providing you with the mortgage will secure your loan against the property. This means your home can be repossessed if you do not keep up with repayments.
  • There are many different types of mortgages: fixed rate, standard variable rate, interest-only and repayment mortgage are a few of the terms you might hear. A mortgage broker will usually be able to advise on the best type of mortgage for your circumstances.
  • Interest rates will normally be fixed at an introductory rate when you first take out your mortgage. After this period has passed you may be put onto your lender’s higher standard variable rate. You then might want to consider remortgaging to take advantage of lower introductory offers from new lenders or switch to a new product with your existing lender.
  • If you take out a repayment mortgage, you pay off the interest and some of the capital that you borrowed each month.
  • An interest-only mortgage means you will only pay off the interest you are accruing from your loan on a monthly basis, with the full amount of capital being paid off at the end of your mortgage term.

Top Tip! We believe it’s best to do a whole-of-market search to find the right deal for your circumstances. Unlike our B Mortgage Services’ advisers, not all mortgage brokers are able to perform a search of the whole market, so check this with them before you proceed. 

How do lenders determine the amount you can borrow?

Mortgage lenders calculate the amount you can afford to borrow based on what’s called a loan-to-income ratio. This is the amount you want to borrow divided by how much you earn and is usually capped at around four and a half times your annual income.

Further to this, they will look at how much you can afford to repay each month by analysing your incoming and outgoing finances. This is called an affordability assessment.  

Lenders will take into consideration any funds that make up your total income such as your salary, payments from investments or child maintenance and other earnings. They’ll also look at your outgoing finances including credit card repayments, bills and any other regular payments.

Top Tip! Good financial hygiene is for life, not just for house-buying. That said, it’s a good place to start. You could check your credit score on a free site in advance and put plans in place to improve it if necessary. This may include things like registering on the electoral roll or taking steps to pay off outstanding debt. Seek advice from a financial or mortgage adviser if you’re unsure.

MoneySuperMarket have a mobile app that allows you to see an overview of your credit score, loans and any credit cards that you have.

What other costs are involved?

Deposits are often the most thought about and the heftiest cost involved when you come to buy your home. However, it’s important to be aware of the other fees you’ll need to save and budget for in the process. We’ve detailed some of these below:

Stamp duty

See section one for a brief explanation of stamp duty and the relief you’ll get as a first-time buyer.

Survey costs

Building surveys are not compulsory when buying a house but you may avoid unwanted surprises and having one could save you money in the long run.

Solicitor or conveyancer fees

As well as their service, you may also need to pay for additional costs like search and Land Registry fees.

Mortgage arrangement and valuation fees

These are fees charged by the lender when you sign up with them. The arrangement fee is the charge for the mortgage product. The valuation fee is what the lender charges for completing a valuation of the property you wish to buy.

Removal and moving-in costs

The cost of using any removal companies in the moving process.

Buildings insurance

Many lenders will have a condition in place that requires you to purchase buildings insurance to take out a mortgage with them.

Contents insurance

Contents insurance is not mandatory but it may be something to consider in order to protect your belongings.

Initial furnishing and decorating costs

Owning your own home means you can put your own stamp on it, so you may want to consider saving for redecoration costs.

Top Tip! This is not an exhaustive list and other charges may come up during the process. If possible, it’s worth having a buffer pot to dip into in the event unexpected fees crop up.

What help is available to a first-time buyer?

Seeing all the potential costs written down may seem overwhelming. But there is some financial help available to those looking to get on the property ladder.

Lifetime ISAs

Lifetime ISAs have been introduced to help those saving for their first home or retirement. The government will add a 25% bonus of what you put in, up to a limit, each tax year.

The basics

You can deposit up to £4,000 into a Lifetime ISA each tax year. The government will top this up with 25% of what you’ve put in, up to a maximum amount of £1,000.

The amount you pay in is linked to your annual ISA allowance, so anything you put into your Lifetime ISA will come off your total allowance remaining for that tax year. For example, if you paid in £2000 in the tax year 2022/23 (when the total allowance was £20,000), you will have £18,000 remaining in your allowance to deposit into other ISAs.

Need to know

A couple of points to note about Lifetime ISAs:

  • You need to be between the ages of 18 and 40 to open a Lifetime ISA.
  • You need to be a UK resident or a Crown servant.
  • Only first-time buyers can use a Lifetime ISA to buy a home (you can check what makes you a first-time buyer in Section 1).
  • The home you are purchasing must be no more than £450,000.
  • The scheme is only to be used to buy a home you plan to live in. It cannot be used for holiday homes or buy-to-lets.

Help-to-buy ISAs

It is no longer possible to open a Help to Buy ISAs. However, if you do have one, read on to find out a little more about the scheme.

The Help to Buy ISA initiative closed to new accounts in November 2019. For anyone who has one open, you can still save into it until November 2029. Like all ISAs, the savings are tax-free but there is the added benefit of receiving a 25% government bonus on any money paid in. The contribution limit is £12,000 meaning a potential total of £3,000 from the top-up if this figure is reached.

The maximum amount you can pay in is £200 per month and the scheme is available to each first-time buyer, not each home, so if you plan on buying with a partner who is also a first-time buyer, you could have up to an additional £6,000 to put towards your deposit.

Top Tip! It could be worth opening up a Lifetime ISA and taking advantage of the 25% bonus. You cannot buy a property for at least 12 months after you make your first payment into a Lifetime ISA for it to qualify.

Why should a first-time buyer choose B Mortgage Services?

When it comes to choosing a brilliant mortgage adviser, we’ve listed three key reasons to select us.

Fees explained

As mentioned, while a deposit is important, it’s not the only cost you’ll have to bear when you buy a home. Our mortgage advisers will be able to explain all the different fees to be aware of from the start, such as legal and conveyancing costs.

Finding the best deal

We exist to find you a brilliant deal on your first-ever mortgage. We have a broad range of experience working with all types of lenders and, as mentioned above, we offer a ‘whole-of-market’ service. Take away the stress of trawling through comparison sites and leave the searching to us.

Help at every stage

While buying a property may seem overwhelming, our dedicated advisers can help you navigate every stage of the home-buying process, from offer to completion. We currently have over 100 5-star ‘Vouched For’ reviews, so you can be sure that you’re in good hands.

Next steps

Now that you’ve read our handy guide, we hope you’re feeling more confident when it comes to getting on the ladder.

We’re sure you’re excited to get started so why not get in touch with B Mortgage Services today and let us help you turn finding your dream home into a reality.

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