First Time Buyer Mortgages with No Broker Fee To Pay

Helpful Mortgage Advice for First Time Buyers

House purchase can be stressful even for seasoned home movers so we fully appreciate how daunting a task it must seem for First Time Buyers. Mortgage of Choice will guide you from start to finish and as our service is free you can put the savings towards your other outgoings!

Early Days
If you’re just starting to think about getting onto the property ladder it can pay dividends later on if you get organised now: lenders are like judges - they love to see evidence!

• Create a file and start filing those payslips, P60 and bank statements
• Phone your local council office and ask to register on the Electoral Roll
• If you have loans / credit cards ensure payments are correct and on time – missing a pay by date, even by a few days, can result in arrears showing on a credit report. There is a case for setting up minimum payments by direct debit on credit cards to ensure a consistently good profile BUT always manually pay extra where budget allows - credit card providers thrive on minimum payments!
• The last two points help build a good credit profile – a lender can see that you are registered to an address and that you have handled credit responsibly.
• Lenders will only accept income that is evidenced so at this stage focus where possible on maxing earnings from your main job ie overtime, rather than casual work which is unsupported by payslips.

Working Out How Much You Can Borrow
There are umpteen online calculators giving a guide to how much you can borrow but remember that these are just that – a guide. Feel free to get in touch for a no-obligation appraisal, we can quickly and accurately determine how much you can borrow relative to your individual circumstances.

Borrowing is ultimately subject to credit scoring as applied by each individual lender but they do differ in how they treat outstanding credit and additional earnings like bonus, commission and overtime in calculating how much they will lend.
Mortgage of Choice can search the whole of market - not just a small panel of lenders - to ensure that your individual needs and circumstances are given the fullest consideration. This can save you the time and frustration of making multiple 'blind' applications which may prove unfruitful but still leave a credit search recorded on your credit file.

With your consent we can assist with the majority of form filling when you’re happy to proceed, and remember, with Mortgage of Choice there is no broker fee to pay.

Working Out How Much You Can Afford to Borrow
With ever rising house prices it’s understandable that first timers tend to focus on how much they can borrow but ultimately it is your monthly disposable income that determines how much you can afford to borrow.

The Office of Fair Trading provides an in depth budget planner leaflet to encourage responsible borrowing and it can be printed off by following the link below. Some of the fields will not apply to first time buyers but try to get a realistic idea of monthly household costs and deduct these from net monthly income – what’s left is disposable income to cover the mortgage and protective insurance, leaving something in the pot as a safety margin.
Getting your foot on the property ladder is an exciting prospect but be realistic about all the other costs in addition to the mortgage – i.e. if running a car is a must, budget for the monthly costs of any ongoing finance; road tax; insurance; petrol; MOT; servicing / repairs.

http://www.connexions.gov.uk/partnerships/documents/Budget_Leaflet.pdf

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Deposit versus No Deposit
It’s always preferable to have a deposit, and ideally 5% as a minimum, but with ever rising house prices this is easier said than done. With a 5% deposit you would be borrowing 95% of the purchase price or 95% Loan to Value (LTV). Many lenders will levy a Higher Lending Chargewhen borrowing exceeds 90% as they perceive there to be a greater risk attached. Mortgage of Choice will endeavour, where possible, to arrange lending without this charge being applied.

Could parents help in raising a deposit by extracting some equity from their property?
If they are paying their lender’s standard variable rate, a remortgage onto a lower rate might allow some capital to be raised at little extra monthly cost.

Some lenders will provide no-deposit or 100% loans and a few will allow extra borrowing on top to cover things like survey and solicitors fees. As can be expected, the interest rates will be higher than that for a 90% loan and credit scoring will be more stringent.
Be aware that loans of 100%+ carry the increased risk of negative equity if property prices were to drop below the outstanding balance of the mortgage. That said, sometimes this is the only way to get a foot on the property ladder.
We will always take you through both options, highlighting the pros and cons, to determine which is the best way forward.

Guarantor Mortgages / Parental Income Boost / Offsetting
Some lenders will accept parents or guardians as guarantors for the mortgage whereby the guarantor would be responsible for making the monthly mortgage payments should the borrowers run into difficulties. As part of the underwriting process the nominated guarantor’s income, credit expenditure and credit rating is taken into account.
It is advisable for any prospective guarantor to seek independent legal advice prior to making any commitment.

A number of lenders offer mortgages where a parent’s income is used in addition to that of the first time buyer. The parental income used is net of their own annual mortgage / credit payments if any. Credit scoring applies to all applicants. The lender will require the parent to stay on the mortgage until it can be serviced independently of their income.

Offsetting can be useful when the first time buyer’s income is sufficient to achieve the loan amount required but monthly payments may be a stretch in the first few years of the mortgage. If parents have funds in a savings / deposit account (which may be incurring income tax) this could be utilised to reduce the mortgage balance on which interest is being charged i.e. Mortgage Loan = £130000
Offset Savings Pot = 30000
------------
Monthly Payment Based on Balance £100000

No interest is paid on savings balance (thus no tax incurred) but mortgage interest is not charged on £30000 for as long as it remains in the savings ‘pot’. In this sense you achieve ‘savings’ at the same rate as the mortgage with no tax deducted (which would appeal even more to a higher rate taxpayer) - the savings being realised as a reduced monthly payment for the mortgage holder.

Be aware that offset mortgages are generally built around flexibility which means the interest rate will not be the lowest available and they are generally based on tracker rather than fixed rates so monthly payments can fluctuate in line with Bank Base Rate.

Buying With Friends
Some lenders will allow up to four first time buyers to purchase jointly and in a highly priced market this can be another way forward. Each lender will apply their own criteria regarding which incomes are used in calculating loan amounts.
Possible downsides of this route are the problems that arise if joint buyers don’t get on or one has to relocate through work and wants to extract his / her equity share. Again, it’s best to have a broker highlight any pitfalls at the outset.

Shared Ownership

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