IF you think you’re ready to buy your first home, use our free calculator to reveal how much you could borrow.
To use the calculator, which is provided by Mortgage Advice Bureau, a national mortgage broker, you’ll need to enter a few basic details.
Working out what you can realistically afford is one of the most important steps to take before you start house hunting.
Mortgage lenders will look at things including your income, regular spending, debts and credit history when deciding how much they may be willing to lend.
Rightmove, an online real estate firm, said property prices in the UK have remained broadly flat over the last year, which can be helpful for some first-time buyers.
That’s because if property prices aren’t rising rapidly, your deposit doesn’t need to grow as quickly to keep up with the cost of a home.
But getting a mortgage isn’t just about having enough saved for a deposit – you’ll also need to make sure you can comfortably afford the monthly repayments and other costs that come with buying a home.
Using our calculator can help establish how much you can borrow, and what this might get you in your area.
If you’re happy with this estimate, you can book a free consultation with Mortgage Advice Bureau to evaluate your borrowing options in more detail.
As a whole of market mortgage broker, it’ll look at every lender across the country and determine the most affordable option for you.
How can I increase my chances of getting a mortgage?
If you’re not ready to borrow enough to buy your first home, then focus on saving towards a bigger deposit.
Lenders typically require you to put down between 5% and 10% of the property’s value as a deposit to get a mortgage.
This means if you’re looking to buy a home with £250,000, you’ll need between £12,500 and £25,000 as an upfront payment for your property.
A larger deposit can also mean you need to borrow less, which could reduce your monthly repayments.
There are ways to boost your savings towards your first home, like using a Lifetime ISA.
With these accounts, you can save up to £4,000 into your account each tax year – and the government will top that up with a 25% bonus.
So, if you deposit the full amount each tax year you’ll receive a £1,000 bonus from the government.
The Government has also announced plans for a new first-time buyer ISA to replace the Lifetime ISA, although some details are still to be confirmed.
Sign up to our first-time buyer newsletter series below to learn more tips on saving towards your home.
Is it worth getting a mortgage with no deposit?
Skipton Building Society and April Mortgages offer no-deposit mortgages in the UK.
For Skipton Building Society, you need a good credit score and a history of paying 12 months of on-time rental payments.
April Mortgages, meanwhile, fixes your rate between 10 and 15 years. But as you pay more of your home loan off, then your rate drops.
No deposit mortgages are controversial because you’re at greater risk of falling into “negative equity” – where the amount you owe is greater than your home’s value.
Falling into negative equity can make it difficult to move home or remortgage.
What schemes are there for first time buyers?
Depending on the home you’re looking to buy, you could be eligible to buy your home through a support scheme.
The Shared Ownership scheme is one example, although you might still decide to use a traditional mortgage instead.
Shared Ownership allows first-time buyers to take out a mortgage on a portion of the property. Rent is then due on the remaining value.
In theory, once you’ve paid off that part of your property, you can then buy out the housing association’s stake to take 100% ownership of your home.
But from the offset, you’ll be responsible for service charges and other costs. And after a couple of years of heavy increases, one resident in London saw it stretch their budget.
It’s also worth noting that until you pay off the part owned by the housing association, you’ll still be considered a tenant of the property. This means you could be evicted for not paying your rent on time or breaking the rules set out by the landlord.
First-time buyers using shared ownership are also at risk of negative equity too – where if their home fell in value it would be worth less than what they owed.
So, when it comes to buying out the housing association’s share of the property, you could owe a more significant sum than what it is worth. Also, if you want to sell your home, you may be forced to wait.
If you’re buying a new build and you’re considered a “key worker” – like a police officer or a nurse – then you may qualify for the First Homes scheme. Here the housing developer might offer one of the new homes at a discount – normally between 30% and 50% of its value.
Outside of London, these homes can’t be worth more than £250,000.
What should I do before applying for a mortgage?
Before applying, it’s worth getting your finances in order and checking your credit report for any mistakes.
You should also work out how much you can comfortably afford to repay each month, rather than simply borrowing the maximum amount a lender offers you.
Getting a mortgage in principle can also give you a clearer idea of your budget before you start making offers on properties.
It isn’t a guarantee that you’ll get the mortgage, but it can show sellers that you’re serious about buying and ready to proceed.