First time buyer

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Buying a home is one of life's exciting experiences, and there's a lot of information you can sink your teeth into. Where to start? We have answered some of the common questions to give you a head start in the process.

Jarlands Financial Services will be on hand throughout the whole process with advice from start to finish working with your dedicated advisor.

A little help can go along way.

 There are lots of ways that people refer to a mortgage in principle. 

You might have heard it called a:

• Decision in principle (DIP)
• Mortgage agreement in principle (MIP)
• Mortgage promise
• Agreement in principle (AIP)

Estate agents, building societies, banks and brokers may call them different names. However, they all mean the same thing.

Why do you need a mortgage in principle?

Without one, you have no idea how much you can borrow. That makes viewing properties tricky because the homeowner and estate agent usually prefer buyers in a position to proceed.

From their point of view, they could have ten people view the house but five of them might not be able to even buy the property, which is a waste of time for all involved.

However, by taking that first step and having an indication of how much you can afford, and which lender is likely to approve you, the seller and estate agent have confidence in your ability to buy and may even favour you over people without a mortgage in principle.

How much deposit do I need to buy a home?

When it comes to putting down a deposit to buy a property, the more you can save up, the better. Your mortgage deposit will normally need to be for at least 5% of the value of the property you are buying. So, for example, if you want to buy a home costing £200,000, you’d need to save up a minimum deposit of £10,000. However, the bigger the deposit you can build up the wider your choice of mortgage options will be. You’ll also benefit from lower and often better mortgages rates. That’s because lenders consider homebuyers with bigger mortgage deposits as lower risk than those with only a small amount to put down, so if you can afford to save up 10%, 15% or 20%, you’ll find you have access to more mortgages at better rates. Lenders’ very best deals are usually reserved for people with either a 35% or 40% deposit, or the equivalent of equity if they are an existing homeowner looking to remortgage when their house price has increased. 

Your Jarlands Financial Services adviser can discuss the many options available to you. A mortgage is a long term  commitment, our advisers will work with you by listening and understanding your needs, and help find the right mortgage solution for you.

Repayment mortgage

Every month you pay back some of the money borrowed and interest too. At the end of your mortgage term you will have fully repaid your mortgage in full, assuming you have made all your mortgage repayments. 

Interest-only mortgage

Each month you pay the interest only of the mortgage, not the capital. This means payments are lower but the amount you borrowed will remain outstanding at the end of the mortgage. If you choose this type of mortgage you will need to have arrangements to repay the capital off, such as investment or savings plans.

Fixed Rate Mortgage 

You will pay the same amount every month for a set period of time (this could be one, two, three, five or even 10 years), regardless of what happens to the Bank of England base rate. 

Many people like the peace of mind this brings, as you’ll always know what your mortgage payments will be, however your rate will not drop if the Bank of England base rate does. 

Tracker rate mortgage 

 This type of mortgage tracks the Bank of England base rate, so the interest rate charged is the base rate, plus an agreed margin (an additional rate). Therefore, your mortgage repayments will fluctuate as and when the base rate changes.  

Offset mortgage 

The mortgage is linked to a savings account or  current account. The amount you have in these accounts will be deducted from your outstanding mortgage balance. This means you’ll pay less interest, as you only pay interest on the outstanding mortgage amount. However, you’re unlikely to earn interest on your savings which are offset. This option can potentially be interesting to higher rate tax payers.

Standard variable rate mortgage 

 Once your fixed rate comes to an end, you’ll fall onto a standard variable rate, known as SVR. 

SVR payments will rise and fall at the lender’s discretion, but traditionally they follow the Bank of England’s base rate. For instance, if the base rate goes up, your mortgage payments would follow. If the base rate goes down, so will your mortgage payments. Changes do not necessarily happen instantaneously.  

Jarlands Financial Services advisors perform many roles for clients 

• Access to multiple lenders
• Access to lenders & deals not available on the open market
• Flexible meetings in person, online and over the phone, often a combination of all of these
• Expertise and guidance
• Understanding of options
• Tailored solutions
• Simplified process
• Time saving 
• Pre approval assistance/planning
• Ongoing support

 Shared Ownership Mortgages

 Saving up a large deposit is a barrier to many first time buyers trying to get a foot on the property ladder. A Shared Ownership scheme could help you by allowing you to purchase part of a property, with a housing association owning the rest of it, and you paying rent on the proportion you don't own. 

When you buy a property through a Shared Ownership scheme, you typically purchase between 25% and 75% of the property, and a housing association will own the remaining share which you pay rent on. As of April 2021, it’s been possible to buy as little as a 10% share in your home, which makes the scheme even more affordable for those on limited incomes. Because you only need to secure a mortgage for the portion of the home you’re purchasing - your share, the amount required for a deposit is much lower than if you were buying a home outright.

You can buy further shares in the property as and when you can afford to, using a process called ‘stair-casing’. Previously, you had to buy a 10% share each time, but as of April 2021, it’s been possible to purchase additional shares of just 1% of the property value. In most cases, you can staircase all the way up to 100% ownership of the property, in which case you’ll no longer have to pay rent to the local authority.

The Government’s Help to Buy Shared Ownership scheme is different from the Help to Buy Equity Loan scheme, which helps buyers secure full ownership of a first home rather than shared ownership.

Shared Ownership Mortgage Process

If you want to buy a home through a Shared Ownership scheme, you must first find a shared ownership property through your local authority. You can contact the Help to Buy agent in your area to see what’s available. Once you’ve found your dream home and have confirmed you meet the eligibility criteria, you can apply for a mortgage as you would for a standard home purchase. You may find that some lenders won’t offer you a standard mortgage and instead will insist on a special shared ownership mortgage. Don’t worry - we’re here to help you navigate this as expert shared ownership mortgage brokers. For shared ownership mortgage advice, get in touch with Jarlands Financial Services who will help you to find the most suitable rates for your personal circumstances from a variety of different mortgage providers.

Eligibility criteria

To buy a house under the Help to Buy Shared Ownership scheme, there are some stipulations you must meet. The main Help to Buy shared ownership eligibility criteria are:

• Your total household earnings must be £80,000 a year or less (£90,000 or less in London)
• You must be either:
• a first time buyer
• a previous homeowner but can’t afford to buy one now
• an existing shared ownership property owner who’s looking move

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You will also have to prove that you’re not in mortgage or rent arrears, and that you have a good credit history. As with other mortgages, you’ll be expected to show that you can afford the costs of buying a home and meeting your mortgage repayments.

If you’re over 55, there’s a separate Shared Ownership scheme called Older People’s Shared Ownership (OPSO). If you’re eligible for this scheme, once you own 75% of your home, you no longer have to pay rent on the other 25%.

People with long-term disabilities can apply for Shared Ownership properties if they can't find a suitable home in other Help to Buy schemes (if you need a ground floor property, for example). With this scheme, you could buy a share of between 10% and 75% of the value of your home. This is called Home Ownership for People with Long-Term Disabilities (HOLD).

Help finding the right shared ownership mortgage deal

If you’re not sure whether you qualify for a shared ownership mortgage, or which type of mortgage deal is right for you, get in touch with us today for expert shared ownership mortgage advice.

As with any other type of mortgage application, there are a few things you can do to maximise your chances of being accepted. Your credit score matters, so you should check this and ensure any errors are rectified - and if your credit score is poor, it’s a good idea to try and improve it before applying for a mortgage. It will also help if you have as much proof of income as possible, as lenders will want this to see whether you can afford repayments. You should also ensure you’re registered to vote at your current address.

Shared ownership mortgage repayment plan

If you own 25% of your home and pay off the mortgage on that amount through your monthly repayments, then you will no longer be required to make any mortgage payments, and instead will just pay rent on the remaining 75% of the property.

However, many owners prefer to buy more shares in their home through stair-casing. If you choose to do this, then it’s likely you’ll need a mortgage to buy the next portion of your home. You can do this through a shared ownership remortgage, or through an extension of your existing mortgage.

You can sell your home at any time you like - you don’t need to wait until you own 100% of the property. However, you can’t just advertise it on the open market when you’re ready to sell. You must give the housing association first refusal to buy the property. However, if you do own 100% of the property, then you’re free to advertise and sell it yourself.