For first time buyers, the idea of stepping onto the property ladder can seem daunting and far-fetched. Here, we break down some key initial steps and unravel the complexities of purchasing your first home.
- Begin saving for your deposit
The journey to owning your first home commences with accumulating a deposit. Typically, you’ll need a deposit of at least 5% of the property’s value.
For instance, if you aim to buy a £250,000 home, you’ll require a deposit of at least £12,500. However, it’s advisable to aim for a larger deposit.
A bigger deposit widens your access to mortgage options and secures better rates, as lenders perceive lower risk with larger down payments.
Fortunately, government schemes like the Lifetime ISA can bolster your savings by offering a 25% bonus on contributions up to £4,000 annually.
- Assess your credit score
While preparing to buy your first home, take steps to improve your credit rating for a smoother mortgage application process.
Lenders prioritise borrowers with reliable credit histories, so enhancing your credit score is beneficial.
- Understand stamp duty
Remember that first-time buyers in England and Northern Ireland purchasing homes up to £425,000 are exempt from stamp duty.
For properties valued between £425,001 and £625,000, a 5% stamp duty applies, calculated only on the portion exceeding £425,000. Different regulations apply in Scotland and Wales.
- Familiarise yourself with the Mortgage Guarantee Scheme
The Mortgage Guarantee Scheme, operational until June 2025, facilitates mortgages with just a 5% deposit for properties valued at less than £600,000.
However, participation in the scheme varies among lenders. Therefore, it’s essential to research and not solely rely on lenders associated with the scheme.
- Organise your finances
When determining your borrowing capacity for a first home, lenders conduct affordability assessments based on your income and expenses. It’s advisable to review your current account six months before applying for a mortgage.
Identify areas where you can reduce spending, such as cancelling expensive subscriptions or curbing discretionary expenditures, to present a more favourable financial picture to lenders.
If you’re purchasing your first home, choosing an experienced and reliable mortgage broker can be invaluable. Contact our team if you’d like to discuss how we can help.