Buying Your First Home

Buying Your First Home

Moving home is an exciting and rewarding time for a buyer. You get to choose a new property to make your own and start a new chapter of your life. For a first time buyer, the whole process of moving home is exciting but nerve-wracking. There is so much to know and do when you are committing to buying your first property that it can leave you feeling confused. From understanding jargon to finding out about those hidden costs, we have made it easier for you with everything you need to know here in one guide. We have gone through every part of the journey so that you are in the know before you do take that first step.

First things first, work out if you are a first-time buyer and the benefits to be had

A lot of people are left confused by the term first-time buyer. It means you have never bought or acquired property previously. If you have inherited property or have been added to property deeds at any point, you will not be classed as a first-time buyer. Also, if you are purchasing a property with others, you need to all count as first-time buyers. While inexperience might leave you at the bottom of the list when it comes to other services, there are rewards to be had if you are a first-time buyer. Here are just a few rewards and schemes you will be entitled to.

Stamp duty which can cost thousands for home buyers is a top saving for first-time buyers. When you purchase your first home under £300,000, you will pay no stamp duty. If you are going for a property over this amount, you will have to pay 5% stamp duty, unless your property is shared ownership. In this case, you will not have to pay any stamp duty. If your property of choice is over £500,000, you will have to pay the normal stamp duty amount.

Help to Buy ISAs (only if you have opened one already) let you get help from the government for your first-time property purchase. Unfortunately, the government have stopped help to buy ISAs. But if you did think ahead and opened one of these accounts before the deadline, you can use it to raise your deposit up until 2029. You can claim the bonus when you are ready to make your purchase.

Lifetime ISAs are applicable for homes up to £450,000. A lifetime ISA is a great way to raise some much-needed cash for your first-time house deposit. The government will add 25% when you put up to £4000 in the account. The lifetime ISA is valid for those who are 18-39.

A help to buy equity loan scheme is a great option for those who are first-time buyers and want to purchase a new build. You only need to save 5% and the loan will cover the remainder of the deposit, up to 20%.

Shared ownership is another great incentive and helps to get people on the ladder. First-time buyers can purchase part of a property from a housing association. Note: because you will need a smaller mortgage as you are only buying up to 50% of the property, you will require a smaller deposit and you can even buy more of a share of the property as time goes on.

Time to look for your dream property

Now you know you are a first-time buyer, you can look at what is for sale. While most properties up for sale are online on platforms such as Rightmove and Zoopla, some estate agents just have the properties for sale on their website. It’s worth viewing a few properties to see what you do and don’t want from your new property. That way, you know the budget you will need to buy the house of your dreams.

Now to look at the mortgage you require

To help you secure your property, you will need a mortgage. Just like a loan, you will pay this via monthly payments. The amount of mortgage you can borrow depends on a number of factors including your deposit. To receive a mortgage, you will need to put down at least 5% of the property value. The larger the deposit, the smaller mortgage you will need. If you can’t raise enough deposit, there are mortgages out there which can take parents’ savings or own home into account. You need to make sure you choose a mortgage with payments you can afford as the mortgage suppliers can repossess the property if you default. You should decide how long you want the mortgage for before talking to us. The shorter the term, the higher the payments will be every month. Here are the mortgages we offer at Orchard Mortgage Solutions.

A repayment mortgage is the most popular type of mortgage. You can take this mortgage over a certain amount of years such as 30 or 35. Each month, you will make a capital payment towards the mortgage to clear some of the money owed and the interest. By doing this, you should clear the debt owed by the end of the mortgage and own 100% of your property. You can choose a fixed or variable interest rate to repay your mortgage. A lot of first-time buyers opt for a fixed-rate mortgage as it’s a set amount every month.

An interest-only mortgage is another option which might suit you when buying your first home. You can choose a term to pay back the interest and the maximum loan-to-value (often referred to as LTV) is 75%. During your chosen term, you only pay the interest which adds up during your mortgage length. At the end of the term, most commonly 30 years, you will have to pay your mortgage loan off in total. This mortgage is good if you are receiving an amount at the end of the term or are planning to save to pay it off in one go. The amount of interest is decided by the interest rate, which is then taken from the loan amount.

What can affect your mortgage?

As well as your deposit, there are other things which can affect your mortgage. A lot of people talk about potential mortgages with lenders and are surprised by how much they are offered, especially if they have saved a large deposit. Here are a few things which can affect your mortgage amount.

Your income
When you come to talk to us at Orchard Mortgage Solutions, we will look at your personal circumstances. We will want to know your yearly income, so it’s worth bringing along your payslips.

Your financial commitments
If you have any other financial commitments such as car loans or personal loans, you need to tell us about this when you come in. We want to make sure you have mortgage payments you will be able to afford.

Your credit history
If you have bad credit history, you might struggle to get a low-interest rate. It’s worth being honest at the beginning as we will do a credit check at your appointment.

Put money aside for other payments

If you decide to go for a mortgage, you need to make sure you have put money aside for a valuation of the chosen property. We will conduct a homebuyer report or a structural survey, depending on the age of the house, to ensure the home is worth its value. The report will tell you if there is any work that needs carrying out. You will also need to put money aside for a conveyancer who will complete the legal side of the sale. Also, if you go with a mortgage broker, you will have to pay a fee for the paperwork and setting up the mortgage. It’s important to look into insurance as you will need to tell us who you will go with for buildings and contents insurance..

Time to buy your first home

Once you have sorted your mortgage application, the full conveyancing process can occur on your chosen property and you will then exchange contracts. Once you have completed, you can officially say you are a first-time house buyer.

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