First Time Buyer Mortgages
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If you’re buying your first home and would like help and advice with the process, why not get in touch?
How does a Mortgage work?
A mortgage is a loan that you use to buy a house. You pay it back over a number of years. The length of the mortgage will depend on you, but it can be between 5 and 40 years.
A mortgage is a type of secured borrowing. This means that the loan is secured against the property. If you don’t pay the mortgage, the lender can take the property back (repossess it)
It is unusual to be able to borrow 100% of the value of the property, so you will need to have some money as a deposit. Often this is 5% of the value of the property.
How do interest rates work?
When you take out a mortgage, often you have an introductory period with a lower interest rate for the first few years. This means that you will pay less for your mortgage during this time, and at the end of the introductory period your mortgage payments may go up
Fixed Rate Mortgages
With these mortgages, the interest rate is fixed. This means that your mortgage payment will be the same each month. If you like to know how much you will be paying every month, this may be a good option for you.
Variable Rate Mortgages
Are where the interest rate varies according to the Bank of England rates. This means that your payments may go up or down each month. Depending on how much you have borrowed, this can be by quite a lot.
How do I pay back the mortgage?
This type of mortgage means that each month you pay back the monthly interest, and a bit of the loan amount. This means over time you owe less, because you are slowly paying off the loan amount itself, as well as the interest
This type of mortgage means that you only pay back the monthly interest each month. You will still owe the full amount of the loan at the end of the term, and you will need to have a plan in place (which is acceptable to the lender) to pay this off
Frequently Asked Questions
Buying your first home will naturally bring up lots of questions! Here, our advisers have compiled and answered the most frequently asked questions from their first-time buyer clients. For more information, why not speak to one of our friendly advisers?
When you take out a mortgage, you owe the loan amount, and the interest charged for the loan. This type of mortgage means that each month you pay back the monthly interest, and a bit of the loan amount. This means over time you owe less, because you are slowly paying off the loan amount itself, as well as the interest
When you take out a mortgage, you owe the loan amount, and the interest charged for the loan. This type of mortgage means that you only pay back the monthly interest each month. You will still owe the full amount of the loan at the end of the term, and you will need to have a plan in place to pay this off. Your lender will probably want to know what this plan is, and may use this in their decision to lend the money
A fixed rate mortgage is where the interest rate is fixed. This means that your mortgage payment will be the same each month. If you like to know how much you will be paying this may be a good option for you.
Lenders have a standard rate at which they lend money. This commonly follows the bank of England base rate and so varies from time to time. Often this is not the best rate a lender can offer, and you may find that you have taken advantage of a special lower rate at the beginning of your mortgage.
The special rate will only last for a fixed period and after that you automatically go onto the standard variable rate (SVR). At that point, there is often a better deal out there for you, and that is a good time to come back to McRobieAdams so that we can help you get the best deal.
A secured loan means that the amount of money you have borrowed (the loan or mortgage) is secured against something – in the case of a mortgage, it’s a property.
If you don’t pay your mortgage then your property is at risk of being repossessed.
You are buying your property with a loan. If you find that you can’t pay the mortgage, then the lender is entitled to take the property back.
A deposit is a small amount of the value of the property that you use to part pay for the property. Often this is 5% of the value of the property to begin with.
As your property increases in value, you may have more money to use for your next purchase.
Property values change over time. Often, property values increase over time, but not always. This means that your property could be worth more than you paid for it in a few years, but it might be worth less.
If you put in at least a 5% deposit, then it is less likely that you will have borrowed more money than the property is worth
You will need a Solicitor to deal with the transfer of the property deeds so that you become the legal owner of the property (but see leasehold and freehold below). You will also need to have someone carry out local searches for any planning issues which might apply to the local area. This legal work is known as Conveyancing.
We can help you to find a conveyancing solicitor and we take a proactive approach with associated professionals to keep the process on track.
Typically a house is purchased on a ‘Freehold‘ basis. This means that when you purchase, you own the house and the land that it stands on. However this is not always the case, and there have been occasions recently where builders have sold new houses on land which is leased (Leasehold).
You need to check whether the house you want to buy is Freehold or Leasehold. If it is Leasehold, then someone else owns the land the house stands on, and it is sensible to check how long the existing lease is. Additionally, you may be liable for payments to effectively rent the land your home stands on.
Need some more advice?
If you’re buying your first home, McRobieAdams will be happy to help.