First Time Buyer FAQ’s
What is a First Time Buyer?
A first time buyer is typically someone who has never owned a property before whether they have bought the property themselves with a mortgage, cash or inherited a property. However, some mortgage lenders may treat you as a first time buyer if you’ve not owned a property in the past 12 months and therefore you may benefit from preferential deals.
With regards to Stamp Duty only people who have never owned a property before will qualify for the first time buyer stamp duty relief.
How much deposit do I need?
This is individual to yourself. Everyone’s situation is different as this can be affected by credit score, income, employment situation, type of property being bought etc.
Generally the minimum deposit is 5% of the purchase price for second hand homes.
10% for New Build Homes.
5% for New Build when using the Government’s Help To Buy scheme.
You should speak to us prior to viewing properties to get an idea of all the costs involved and your eligibility for a mortgage.
What is Help To Buy
Help To Buy Shared Equity:
This is a government initiative to help buyers purchase a brand new home by offering them a deposit contribution of up to 20% of the purchase price.
Many people think this is just for First Time Buyers but it’s not – this scheme is open to anyone who doesn’t own a home on completion of the new home. It is only available on newly built homes though.
The buyer contributes a minimum of 5% (can be more if available) and the government allows you to take a 20% equity loan from them to assist in the purchase.
5% Deposit from you
20% Equity Loan
The government loan is interest free for the first 5 years meaning you are only required to pay £12 per annum for the first 5 years. After 5 years you will then be charged interest on the loan of 1.75% which will rise each year by RPI + 1%. The loan becomes payable after 25 years or upon the sale of the property whichever is sooner.
When your interest free 5 years is up, we will discuss your options to see if it’s feasible to remortgage your property to release equity and pay the government equity loan off. Or you may wish to continue as is knowing that you will eventually sell your home and pay the equity loan back at that point.
Help To Buy ISA:
This is simply a savings account for First Time Buyers that allows you to increase your savings with the help of the government.
This ISA can be with any bank or building society and this does not affect who you take your mortgage with when the time comes.
You can save up to £12,000 and the government will boost your savings by 25%
When you are close to completing on your new home, your solicitor will advise you to close your Help To Buy ISA – the funds will be transferred into your account and the bank will provide you with a closing statement. You will provide your solicitor with the statement evidencing how much was saved upon closing and they will apply to the government for your 25% bonus which is sent direct to your solicitor to assist with the purchase.
What Fees are Involved in buying your first home?
There can be costs involved in buying your first home that you may not have considered, we ensure that you aware of all the costs involved in the buying process and those costs going forward once you’ve moved into your home.
Typical costs involve:
Mortgage Arrangement Fees
Some of the above may not apply to you and your individual case, we also get exclusive deals with incentives to help with the costs so always speak to an adviser like us who will shop the market for the most competitive deal.
Buying your first home can be daunting and you will have a lot of questions around the process, costs involved, chances of being approved for a mortgage etc. The best advice we can give you is come and speak to an expert who is independent and has your best interests at heart. We do this for a living and act for you to ensure you are given the best mortgage advice to your situation.
You will no doubt have more questions than those above so pick up the phone and book a free appointment or drop us an email and we will be happy to help.