Moneytree Wealth Management
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First time buyers

Buying your first home is an exciting time, but before you can move into your dream place, you’ll more than likely need to borrow money to buy the property. This is done through a mortgage provider.

These mortgage providers must assess your affordability before they lend to you. They’ll ask for evidence of income and expenditure details and will conduct a credit search on anyone named on the mortgage application. They’ll use this to decide if they’ll lend to you, and how much if so. 

The interest rate you pay back on your mortgage is also influenced by these factors. Having a big deposit helps too – the bigger your deposit, the lower the interest rate you’ll be charged in the majority of cases. With most lenders, you’ll need to have at least 5% of the amount you want to borrow available as a deposit. 

Lifetime ISAs (LISAs) are good ways to save for this as they’re free of income and capital gains tax and the government will give your money an extra boost on top if what you’ve saved.

Investors do not pay any personal tax on income or gains. Tax treatment varies according to individual circumstances and is subject to change.

For Lifetime ISA you will incur a lifetime ISA government withdrawal charge (currently 25%) if you transfer the funds to a different ISA or withdraw the funds before age 60 and you may therefore get back less than you paid into a lifetime ISA.

By saving in a lifetime ISA instead of enrolling in, or contributing to an auto-enrolment pension scheme, occupational pension scheme, or personal pension scheme:
(i) you may lose the benefit of contributions from your employer (if any) to that scheme; and
(ii) your current and future entitlement to means tested benefits (if any) may be affected.

The value of investments can fall as well as rise. You might get back less than you invested.

Investors do not pay any personal tax on income or gains, but ISAs may pay unrecoverable tax on income from stocks and shares received by the ISA managers.

Tax treatment varies according to individual circumstances and is subject to change.

Stocks and Shares ISAs invest in Corporate bonds; stocks and shares and other assets that fluctuate in value.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Some of the first-time mortgage types available

Fixed rate mortgages

Your monthly mortgage payments stay the same for a pre-determined length of time. They’re ideal if you like knowing your repayments won’t shoot up if interest rates rise.

Tracker mortgages

The lender will set your mortgage will track a base rate - usually the Bank of England's (BoE) base rate and your repayments move up or down accordingly. For example, if the BoE base rate is 1.75%, you might be charged 2.50% (0.75% above the base rate). 

Tracker rates can be for an introductory period (typically anything from one year to five years), or you can get a lifetime tracker, which means that you'll be on it for the whole term of your mortgage.

If you’ve had a mortgage since before 2014, you may not have had to do this before. 

Discount rate mortgages

These are mortgages with an introductory offer that lasts for a certain time-period. Once that time-period ends, you’ll be charged a higher rate.

Standard variable rate mortgages

This is usually the rate your mortgage reverts to after an introductory offer comes to an end. Rates vary by lender and will rise and fall as the BoE base rate does.

There are also a range of schemes available to help first time-buyers get on the housing ladder, including Help to Buy and shared ownership. This now is only available in Wales.

Things to consider

  • Your home may be repossessed if you don’t keep up with repayments on your mortgage.
  • You’ll need to budget for legal charges, as well as valuation and booking fees, on top of the amount borrowed.
  • Stamp duty might be payable too, depending on the value of the property you buy.

If you’d like to talk to us about a first-time mortgage, please use the pop-up form on the right-hand side of this page. Alternatively, you can give us a call on 01244 47010  or send us an email to: info@moneytreewm.co.uk .

Tom Lenton

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