First Time Buyer Mortgages

To first time buyers the process of obtaining a mortgage can be full of confusing terms and can seem like a maze of jargon.

If you are tenant then your home is not benefitting you in any way other than providing a home over your head. You would be making an investment for the future if you were to buy a property of your own. As a rule property increases in value over the years resulting in your property actually being worth alot more than you paid for it, it would be an asset for your future. As an investment at the event of your death or maybe as you retire your property could be passed on to your family.

In order to get a mortgage relevant factors will be examined. The size of your income will dictate how much money you will be able to borrow, some lenders will consider both your partner’s wage and your own, others will take the highest income and a lower percent of the lowest income. Enquirys made by single people can conclude with a mortgage 3.25 times their income.

House prices can rise very quickly, they can also fall but the sooner you get your foot on the property ladder the better. In a falling market a first time buyer may find that securing a mortgage is rather more difficult. One such route is buying with friends or family. This means that instead of you, or you and your partner getting a mortgage, you have a number of people on the deeds, which can ease the financial burden.

Lenders that allow friends to buy together usually allow a maximum of four people, however this can vary. Not only will different lenders allow different numbers of people to buy together, the amount you can borrow varies as well. Some may only consider the two highest incomes, whereas others could take all four into account.

It is always better to have a large down payment saved towards a property as down payments do not cost you any interest. Many lenders prefer to lend you only a percentage of the value of your property. You should also be aware that if payments are not kept up they can legally take possession of your property in order to resell it to recoup the debt that they are owed.

Some properties have additional charges. Since March 2005 budget the exempt stamp duty limit for property purchases in the UK has been raised from £60,000 and is now only payable on properties purchased over £120,000.

Stamp Duty is paid at a variable rate-1% for properties between £120,000 and £250,000, 3% between £250,001 and £500,000 and 4% above that. The duty is paid on the whole of the purchase price and not just the amount above the cut off. For example a house costing £195,000 would produce a stamp duty bill of £1950 Some properties have additional charges, Stamp duty being one of them.

• Residential property - purchase price Rate of Stamp Duty Land Tax
  up to £125,000 - 0%
  £125,001 - £250,000 - 1%
  £250,001 - £500,000 - 3%
  £500,001 or more 4%.
  

There is usually an arrangement fee which is charged to set up your mortgage. Sometimes there is a fee which is called an Mortgage Indemnity Guarantee it is paid by you but it gives the lender protection should you fall behind with the payments. If you fall heavily behind with payments the mortgage lender can repossess the property and sell it to recoup their losses.

• Mortgage Indemnity insurance is arranged to help lenders recover their losses incase a repossessed property went into negative equity.

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Related glossary terms to First Time Buyer Mortgages:
Adverse Credit | First Time Buyer | Credit Checks | Credit Rating | Stamp Duty | Estate Agents | Gazumping | Land Registry Fees