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A first time buyers guide: everything you need to know

In today’s budget, Chancellor Rishi Sunak announced a new 5% deposit mortgage guarantee scheme, enabling lenders to offer mortgages of up to 95% of the purchase price on properties.

This is great news for keen young home buyers, as there’s been a real shortage of five per cent deposit mortgages deals since the start of the pandemic.  

For first time buyers hoping to take that crucial first step onto the property ladder, here’s everything you need to know.

All things money

Is now the right time to buy or will prices come down?

The government scheme launches in April. That means many lenders are likely to start offering 95% mortgages once again (they’ve been almost impossible to find over the last year or so). 

Although it’s true that house prices have been creeping upwards, especially in popular areas, the availability of new mortgages and the continued low interest rates, mean that first time buyers should definitely consider making their first move into the housing market this spring.

How do I work out how much I can afford?

Before you can even think of buying your own place, you need to go through your finances very carefully and work out what you can afford.

Even with a 95% mortgage, you’ll obviously still need to find a deposit of at least 5% and have some other budget put aside to help with the costs of moving too. However, the bigger the deposit you’re able to put down, the better the interest rate you’ll get and the lower your monthly repayments will be.

As well as the deposit, when you’re thinking about the kind of house you should buy, you need to think very carefully about what you’ll be able to afford over the next few years. What would you do if your circumstances change or if interest rates go up? It’s important to leave a ‘buffer’ and make sure that the mortgage is within your financial ‘comfort zone’.


What other costs do I need to budget for? 

As well as your deposit, you need to make sure you’ve budgeted for various other costs when buying a home.

These include:

  • The cost of having a survey done on the home you want to buy 

  • The solicitor’s fee

  • Removal costs or van hire

  • Buildings and contents insurance for your new house

  • Furniture and painting and decorating 

  • Mortgage arrangement and valuation fees

  • Stamp Duty - unless you complete the purchase of a house before 30th June 2021 in which case you’ll pay no Stamp Duty on a property costing up to £500,000. From 1st July to end of September 2021 you'll pay no Stamp Duty on a property costing up to £250,000.

What’s the right mortgage for me?

There are several different types for mortgages and the right one for you depends on your situation.

There are two main types of mortgages:

Repayment: Repayment mortgages mean each monthly payment reduces the total loan amount, so it’s the original amount plus interest. These are the most common types of mortgages and are often viewed as the ‘safest bet’ because you know that your whole mortgage loan is being paid off.

Interest-only: Interest-only mortgages mean you only pay the interest on the loan each month - with the understanding that you’ll then have to make a one-off payment at the end to pay off the original sum. 

And then you can choose between different interest types: 

  • Fixed-rate: Fixed-rate mortgages means your interest rate stays the same for a certain period of time (usually around 2 - 3 years.) These mortgages are popular because the amount you’re paying each month stays the same for the length of the agreement

  • Variable-rate: The interest rate for variable-rate mortgages can change: your lender can decide to raise or lower the interest rate depending on economic conditions - usually influenced by interest rate decisions taken by the Bank of England

  • Tracker: Tracker mortgage interest rates can also change, but this is based on ‘tracking’ another interest rate – usually the Bank of England base rate. 


Finding the right property

What’s the right house for me?

When you’re thinking about where to buy, it’s worth taking the time to research different areas and think carefully about where you want to live. Given your first home is likely to be your base for the foreseeable future, snagging a property in an area on the rise will pay dividends down the line. Take time to discover what’s in store for the area, what facilities will be on your doorstep and what the local community is like.

If you’re able to work remotely - or only have to go into the office once or twice a week - you  might be able to look further afield than you’ve previously considered: new and potentially cheaper areas could be a good option.

You should also think about how your life will change over the next few years. On average people move house once every seven years so the house you choose could be your base for the best part of a decade. Could you want to start a family there? Do you need somewhere quiet to work from home? Is a decent outside space a deal breaker? Think about what your property requirements will be over the coming years and make a clear list of requirements.  


How do I get the most from a viewing?

You can do a lot of research about a property before you even set foot through the front door. Check out the property on Google Earth and Street view and see if there’s a virtual tour available first - it’s a great way of getting a sense of the house and a smart first step before you decide to view in person. 

When you get a property, do take your time to walk round the area and look at the outside of the property carefully. Are there signs of damp or loose tiles - and does the house look well-cared for?

When you’re inside, as well as looking round carefully, it’s worth asking about all the bills and how much they are each month. Also make sure you know exactly what fixtures and fittings will be included. 

If you’re being shown round by the home owners, ask for advice about the local area - good places to eat, walks and local activities - as well as what the neighbours and the community is like.


What should I consider when making an offer?

You’ve done all your research, got your deposit saved up and your finance agreed. You’ve seen several properties and found your dream home. How can you make sure your offer is accepted? 

A good first step is talking to the local estate agent to understand what the seller is hoping for and what offer is likely to be considered: the agent will have a good sense of what the seller is thinking and what position they’re in. It’s also worth making sure you know how long the property has been on the market and how urgently the seller needs to move as this may influence the price.

As well as coming up with the right offer, the fact that you’re a first time buyer and therefore chain free is in your favour. And, if you are in a position to move quickly and have a pre-arranged mortgage offer, that’s even better. 


Looking for some inspiration? You can find all the amazing properties on sale with Purplebricks here

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