Do you know the difference between a fixed and a variable mortgage? Have you heard of 'loan to value'? Are you curious about what help is available for first-time buyers? Or are you a supportive parent who wants to help your loved ones with their first purchase? The easiest way to get quick answers to all these questions is to hit the 'Contact Us' button. But in the meantime, here are our answers to some frequently asked questions. (Feel free to forward the article to any friends or family who would find this relevant!)
Q. How big a deposit will I need to get a mortgage?
A. You likely need a minimum deposit of 10% to get a good variety. This is changing with lenders offering low-deposit deals. Yet, to get a good mortgage interest rate, you'll often need more than 10% of the home's value as a deposit.
The bigger the deposit, the better the interest rate. Plus, the lower your monthly repayments, the cheaper the mortgage! The difference between a 5% and 10% deposit is huge; the next big jump is 20%, then 40%. So, if you can push yourself up a band (or perhaps ask parents to help), do it.
However, we are seeing the introduction of the 99% mortgage, meaning you’ll need to save much less to secure a home. Ideal for those without family support or extensive savings. The flipside is a much (much) bigger mortgage. This is one to speak to a broker about to ensure you can afford to pay the extended repayments.
Q. Can you explain what "LTV" means?
A. LTV stands for the loan-to-value ratio (LTV), the percentage of the property value you're loaned as a mortgage. It's the proportion that you're borrowing. Lenders often use it to indicate how big a deposit you need, and you'll see it in Best Buy tables.
To calculate this, subtract your deposit as a percentage of the property value from 100%. So if you have a £20,000 deposit on a £100,000 home, that's a 20% deposit, meaning you owe 80%. The LTV is 80%.
Q. There is a lot of talk about the mortgage guarantee scheme, how does this work?
The government’s mortgage guarantee scheme enables lenders to offer 95% mortgages for first-time buyers as long as they have a 5% deposit. It’s available for buying a property that will be your only home, and you’ll need to submit your mortgage application to us by 30th June 2025.
Several major lenders are taking part in the Government's mortgage guarantee scheme, but as far as you are concerned, there is no difference between a 95% mortgage offered through this scheme and a 95% mortgage offered outside this scheme.
Q. Should I be looking for a mortgage first or a property?
At Fairview Financial, we recommend you arrange your mortgage agreement first – in fact, we insist on it. There are so many factors involved that we want you to feel confident that your mortgage is ready to go.
We need to take into account your income, deposit, credit history, outgoings and commitments, property type, employed or self-employed income and so much more. If we know we have covered all this upfront, you know you can be confident to make an offer on the property of your dreams.
Q. Are there any other schemes I should look at if I'm struggling to afford a mortgage?
A. Firstly, we would initiate a whole of market calculation to calculate who can lend you the higher amounts and hopefully this would be enough. If not, there are additional schemes available to help you enhance your borrowing options. One option is asking family/parents to act as a guarantor. Many first-time buyers rely on help from mum and dad for their deposit. Several mortgage schemes incorporate parental finances in one way or another. A joint-borrower-sole-proprietor mortgage will let you buy a property with the help of up to four people, including your parents or siblings. Shared Ownership is another way to get onto the housing ladder without having to save up for too large a deposit – it enables you to buy a share of a new-build or existing home from a housing association, then pay rent on the rest.
Q. Are there any other costs to pay?
At Fairview Financial, we aim to discuss all additional fees when we initially speak to you. These early conversations are pivotal in understanding the costs and the process from start to finish. We will cover stamp duty, solicitors’ costs, insurance, surveyors, and any other associated costs so you know what to expect and when.
Q. What about insurance?
Your insurance requirements are as important as the mortgage. We have a protection specialist who can look after your specific needs.
Q. What paperwork will I need?
A. Before you start, gather everything you need, but double-check with a broker as early as possible. You don't want to waste time waiting for paperwork to arrive.
Checklist:
- Proof of income (often last three months' pay slips; accounts and/or tax calculations if self-employed).
- Proof of bonuses/commission (payslips, contract or your P60 tax form)
- Proof of deposit (plus written confirmation if getting a gift towards the deposit that it really is a gift & not a loan).
- Your last three months' bank statements.
- Proof of ID and address
- Credit report
Don't forget, speaking with a broker can help massively. Make the most of expert advice, as a broker can ensure help and guidance through the whole process of buying your first home, until you move in!
Chat with us today to take the stress out of mortgage planning!
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Think carefully about securing other debts against your home. Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other debts secured on it. You may be charged a fee for mortgage advice.