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A Guide to First Time Buyer Mortgages

The market for first time buyer mortgages is vibrant. Many elements of the first time buyer market have changed over the years, including criteria for eligibility, however first time buyer mortgages are still available to obtain both quickly and easily.

Obtaining a Deposit for First Time Buyer Mortgages

The average deposit right now is £50,000, which represents approximately 25% of typical first time buyer mortgages. The greater a deposit you are able to make the more lenders you will have to choose from and the more competitive your interest rates will become; however mortgages are available for first time buyers with a deposit as little as 5%.

Gifted deposits are a great way to raise funds for first time buyer mortgages and the majority of lenders will accept gifted deposits from close family members. In most cases this will be the only deposit a first time buyer mortgage broker will require you to make, providing a validated letter from the gift giver is provided which states that they have no further recourse to the gift, and that no charges or security are being held on the property.

Guarantor Deals for First Time Buyer Mortgages

Approximately 40% of lenders will offer facilities for accepting guarantor deals on first time buyer mortgages. This type of mortgage is very common amongst first time buyers, but you should consult a first time buyer mortgage broker as to which of the following factors must be taken into account before a guarantor deal can be approved.

  • The guarantor must be able to demonstrate that they can afford both their original and the new residential mortgage.
  • The applicant(s) must be able to take the mortgage on in their own right within a 5 year period.
  • The terms of the loan will differ between lenders. Some operate a maximum age policy but do not limit the term of the loan. Other lenders will have no maximum age policy but may request that the loan finishes between the ages of 75-85.
  • Loan values differ between lenders but it is possible in the current market to find first time buyer mortgages with a 90% rate when using a guarantor deal.
  • Depending on the lender, the guarantor will have either full or limited liability for the loan. Full liability means the guarantor will be liable for the full amount of the loan in the event of a default by the applicants. Limited liability is applicable in situations, for example, where the lender is used to top up a mortgage which the applicant could not otherwise afford alone. In this case, the guarantor would only be liable for the amount they had originally contributed.

The Family Guarantee for First Time Buyer Mortgages

When first time buyers require family assistance but cash is not available, a lender may be offered equity in the family property as security for the deposit. Not all lenders will accept this kind of deal; however it can be a great solution for first time buyers who are unable to raise a deposit but who have family willing to provide a guarantee secured against their residential property.

Family guarantees against residential properties are available for up to 100% of the purchase price and the maximum guarantee period is usually 10 years, which means at the end of this period the charge against the property will be released. Finding the right first time buyer mortgage broker who can advise you of all your options is the first step towards finding out which first time mortgage solution is right for you.

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