Mortgages for first time buyers



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Louise Cuming, Head of Mortgage Services at on how to get on the first rung of the property ladder.

  • What are the main types of mortgage?

    ‘There are really only two types: a repayment mortgage where the balance keeps reducing every month until at the end of the agreed term the mortgage is paid off, and an interest-only mortgage, where only the interest is paid each month so at the end of the agreed term the balance isstill exactly the same. With this type of mortgage it is important to decide how the mortgage will be repaid, whether by savings or an investment plan.’

    Which is the best option for a first time buyer?

    ‘To buy a first home, many buyers need to borrow more than they want to so the level of monthly mortgage payments can be a worry, especially if there is a possibility that rates may rise. A fixed rate mortgage can help in these circumstances as the payments are guaranteed not to change.’

    How do they work out how much I can borrow?

    ‘Most lenders now work out the maximum you can afford by looking at your occupation and how long you have been there, your income, outgoings and also by doing a credit check to find out how existing credit has been conducted. This makes it more difficult to get an exact figure before you start shopping for a house. As a rule of thumb, four times your gross income would be a fair place to start.

    What if I’m buying with someone else?

    ‘If you are taking a joint mortgage, both of your incomes will be taken into consideration. It doesn’t matter if there is only oneincome; you can still get a joint mortgage.’

    How does the amount of deposit affect the mortgage?

    ‘The amount of deposit does affect the type of mortgage product you can get. The lowest interest rate products are available where there is a larger deposit.’

    How much will I need to buy my first house?

    ‘You need to think about a deposit, stamp duty and solicitors’ costs. For a purchase price of £150,000 you would need at least £10,000 if you were to provide a 5 per cent deposit and that’s before thinking about the odd bit of furniture.’

    Who are the best lenders for first-time buyers right now?

    ‘There really isn’t a “one size fits all” best deal because everyone’s needs are different. However, if you want to borrow over 100 per cent, Northern Rock (0845 6050 500/ is a good option. If you’re a graduate and want to borrow more than usual against your income, try Scottish Widows (0845 6080 371/ And if you can come up with a 5 per cent deposit and wanta competitive fixed rate mortgage, the Abbey National (0800 3899 890/ is worth considering.’

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