First-time buyer mortgages

First-time buyer mortgage affordability

Traditionally, lenders would work out how much you can borrow by applying a multiple to your annual income. They would look at your total income and multiply it by 4, or sometimes 5, to get an amount.

However, in 2014 changes to the market meant that lenders needed to change the way they calculated their offers. Now lenders base their assessments on an affordability model rather than simply an income metric. While income is still a major factor in their calculations, lenders take a number of other elements into account, including:

• An applicant’s age (i.e. how long can they maintain the loan?)
• The level of deposit or amount of equity
• Number of dependants
• Outstanding credit commitments
• Childcare costs
• Pension contributions and other salary deductions
• Council Tax
• Travel costs
• Ground rent and/or maintenance payments, where applicable (i.e. leasehold properties)

This is not an exhaustive list and remember every lender will have their own criteria. This means some lenders will take more factors into account, and some less. But it does go some way to show you how lenders calculate how much you will be able to borrow.

In general, lenders will not make a distinction between a first-time buyer and borrowers moving home. But people moving will usually have a level of equity already tied into their existing property. This does make a difference to decisions on lending terms, rates and amounts. It’s also very rare that a lender will offer more than 5x the applicant’s annual income.

If you want to get a rough idea of what you could borrow, why not try our free mortgage affordability calculator? Or if you want a more accurate representation, get in touch today!

Mortgage costs for first-time buyers

When buying your first home, it’s important to understand all the costs involved, both up front and ongoing. Here’s a list of the key costs you’ll need to keep in mind:

• The deposit: This is usually a minimum of 5% ^[1] of the value of the property you plan to buy. But policies may vary from lender to lender and 10% is not uncommon.
• Stamp Duty Land Tax (SDLT): You may be eligible for a discount (relief) on your property purchase if it’s your first home. This applies if both you and any co-buyers are first-time buyers ^[2].
• Solicitor or Conveyancer Fees: These fees cover the legal work involved in the purchase, including contracts, property searches, and registering the property with the Land Registry. The cost can vary depending on the complexity of the transaction.
• Land Registry and Third-Party Fees: You may need to make payments to the Land Registry and Local Authority as part of the legal process. These fees will be handled by your solicitor.
• Mortgage Valuation and Survey Fees: Lenders typically require a property valuation to confirm its value before approving your mortgage. You may also need a property survey, depending on the lender and the type of mortgage you’re taking.
• Mortgage Advisor Fees: At The Mortgage Centres, we are committed to providing you with peace of mind through full transparency in all aspects of our service. We ensure that all fees and charges are clearly explained and agreed upon upfront, before any commitment is made. Our goal is to ensure you have all the information you need to make an informed decision with confidence.
• Mortgage Insurance: If your deposit is less than 20%, you may be required to pay mortgage insurance. This protects the lender in case of missed repayments but is an additional monthly cost to budget for.
• Early Repayment Charges (ERCs): If you decide to pay off your mortgage early, many lenders impose early repayment charges. These fees can apply if you want to make overpayments or pay off the mortgage before the term ends.