MSE First Time Buyer Mortgage Guide

MoneySavingExpert.
com
SECTION TITLE
First Time Buyers

Your Free Guide to Mortgages
MoneySavingExpert.com Guide to Mortgages,

Mortgage Guide 2016
A pleasant surprise
Freephone 0800 694 0444
Written by Martin Lewis, Liz Phillips and Guy Anker

Phillip Cartwright
Managing Director
MoneySavingExpert.com 3
SECTION TITLE FOREWORD
CONTENTS Independence and integrity

Foreword Independence and integrity
Whos this guide for?
Martins Mortgage Introduction Page 3
Is a mortgage right for me? Page 4
This guide is
Have you got a big enough deposit?
written with
absolute editorial
independence
Boost your chances of getting a mortgage

What type of mortgage to choose?
Mortgages for the self-employed / contract workers
Dont forget the fees Page 37
How to get a mortgage
Watch out for the hard sell on... Page 47
First time buyers quick Q&A
Happy hunting
www.moneysavingexpert.com/mortgagebrokers
4 MoneySavingExpert.com MoneySavingExpert.com 1
WHO IS THIS GUIDE FOR? INTRODUCTION
Whos this guide for? Martins Mortgage Introduction
New buyers
Who this guide isnt for.

Remortgagers
www.moneysavingexpert.com/remortgageguide
Buy to Let
www.moneysavingexpert.com/buytolet
CHAPTER 1 CHAPTER 1
Is a mortgage right for me? What will they lend to you?
Can you really afford a mortgage? Martins Mortgage Moment

Renting isnt a dirty word
www.budgetbrain.com
www.moneysavingexpert.com/mortgagecalc
CHAPTER 2 CHAPTER 2
Have you got a big enough deposit?
Q. In the best buy tables it says LTV, not deposit

what does that mean?
www.moneysavingexpert.com/moneymakeover
Q. How big a deposit will I need to get a mortgage?
LTV Equals deposit of LTV Equals deposit of

95% 5% 70% 30%
90% 10% 65% 35%
85% 15% 60% 40%
80% 20% 55% 45%
75% 25% 50% 50%
The effect of having a bigger deposit

Deposit 5% 10% 20% 25% 40%
Interest rate 3.04% 2.18% 1.53% 1.29% 1.14%
Loan amount 142,500 135,000 120,000 112,500 90,000
Monthly cost 679 584 482 439 345
Total cost over 2 years 16,296 14,016 11,568 9,536 8,280
CHAPTER 2 CHAPTER 2
A practical example lets say you have a 10,000 deposit on a 100,000 house that means you
owe 90,000 at the start. Thats an LTV of 90%.
divided by 120,000 multiplied by 100). This means youll be likely to get a much better mortgage
Q. OK. I think Ive got it. So for a 90% LTV mortgage I need a
deposit of 10% of the property price?
www.moneysavingexpert.com/helptobuyisa
lower
Q. Is a Help to Buy the best type of 5% deposit mortgage?
less
Youre buying a house and you agreed a 200,000 price with the seller and have a 20,000 deposit.
Yet the mortgage valuation says its only worth 190,000. For a 90% LTV mortgage the company
Q. What about Help to Buy ISAs?
CHAPTER 2 CHAPTER 2
Q. Isnt there another Help to Buy scheme just for new builds?
Q. What are shared ownership schemes?
A practical example
www.moneysavingexpert.com/sharedownership and
Purchase price: 200,000
The Government will lend you 20%: 40,000
Further down the line, you sell the property for 220,000.
You need to pay back the Government its 20%.
20% of 220,000 is 44,000.
You need to pay the Government back 4,000 more than you originally borrowed from it.
CHAPTER 2 CHAPTER 2
Q. Any other schemes I should look at if Im struggling

to afford a mortgage?
Asking family/parents to act as a guarantor
Mates mortgages
www.moneysavingexpert.com/stampduty
CHAPTER 2 CHAPTER 3
Martins Mortgage Moment Boost your chances of getting a mortgage
Boost your credit score
www.moneysavingexpert.com/creditrating
Think of it like a beauty parade

where you need to make yourself as
attractive as possible to lenders.
CHAPTER 3 CHAPTER 3
Quick tips Break with past relationships
Get on the electoral roll

www.gov.uk/register-to-vote
Build / rebuild your score
www.moneysavingexpert.com/badcredit
Time it right
see www.moneysavingexpert.com/creditcheck
notice of correction Dont miss payments / pay late
Keep other applications to a minimum in the months before a mortgage
Never withdraw cash on a credit card
Dont bother paying for credit

Never apply after rejection
you, theyre only loosely indicative.
Again, please remember, these are just the tip of the iceberg. For a full guide to boosting your
credit score, go to www.moneysavingexpert.com/creditrating.
CHAPTER 3 CHAPTER 4
More tips to boost acceptance chances

An extra 100 can secure a mortgage
What type of mortgage to choose?
It takes a long time to repay
Stay out of your overdraft
The loan is secured on your home
Avoid payday loans like the plague
www.moneysavingexpert.com/payday
Close unused credit cards
Its important to understand

a mortgage is just a loan.
Though, admittedly, a big one.
www.moneysavingexpert.com/closeoldcards
CHAPTER 4 CHAPTER 4
Choice 1: Repayment mortgage or interest-only? Beginners Briefing

What is an interest rate?
Its hard to get interest-only
CHAPTER 4 CHAPTER 4
Choice 2: What type of deal do you want?
Fixed-rate mortgages
How it works with mortgages

Repayment
PROS & CONS OF FIXED RATE
PROS
CONS
Interest-only mortgages
CHAPTER 4 CHAPTER 4
Martins Mortgage Moment PROS & CONS OF TRACKERS

PROS
CONS
2. Standard variable rates (SVRs)
Variable rates
1. Trackers
PROS & CONS OF SVRs

PROS
www.moneysavingexpert.com/boi
CONS
CHAPTER 4 CHAPTER 4
3. Discount rates
PROS & CONS OF DISCOUNTED RATES

PROS
CONS
4. A hybrid option capped deals
PROS & CONS OF CAPPED DEALS

PROS
CONS
CHAPTER 4 CHAPTER 4
Choice 3: Do you want your mortgage to be flexible?

Martins Mortgage Moment
Can you overpay?
Total amount repaid: 263,000
interest.
Dont look back in anger www.moneysavingexpert.com/mortgagecalc
I think its time for an analogy Timing your overpayment
CHAPTER 4 CHAPTER 4
Does it have a borrow back facility?

Why overpaying pays so well Can you take payment holidays?
Are you allowed to overpay?
Do you have other debts? Something a bit different offsetting
Do you have a cash emergency fund?
Offset mortgages
CHAPTER 4 CHAPTER 4
Current account mortgages
If you put spare cash in an
savings rate is huge.
Is it worth it?
CHAPTER 4 CHAPTER 4
Watch out for early repayment charges
Am I free to move after the deal ends?
www.moneysavingexpert.com/remortgageguide
What happens if I need to move house within the mortgage term?
CHAPTER 5 CHAPTER 6
Mortgages for the self-employed / contract workers Dont forget the fees
What youll need to get a mortgage
Business accounts.
Tax returns.
Arrangement fee.
Youll need cast-iron

proof of your income,
which isnt easy.
CHAPTER 6 CHAPTER 6
Booking or reservation fee. Stamp Duty in England, Wales & Northern Ireland
Valuation fee.
Stamp duty % Stamp duty

Price brackets Stamp duty Price of property Stamp duty
Special rule in Scotland.
Stamp Duty in Scotland
Legal fees
Stamp duty % Stamp duty

Price brackets Stamp duty Price of property Stamp duty
Stamp duty.
www.moneysavingexpert.com/stampduty.
CHAPTER 7 CHAPTER 7
How to get a mortgage Using a broker

What is a broker?

Mortgage brokers can make it easier and faster
A mortgage agreement in principle do I need it?
Now... heres how you get that mortgage
CHAPTER 7 CHAPTER 7
Receiving a procuration fee from the lender.
Charging you a broker fee.
The key questions to ask a broker
CHAPTER 7 CHAPTER 7
How to find a broker
www.unbiased.co.uk www.vouchedfor.co.uk
Always check non-broker deals too
Step 1 Choose a broker
Step 2 Discuss your circumstances with the broker
Step 3 Check direct-only deals
Step 4 Select a mortgage/accept the brokers recommendation
Step 5 You (if you go direct) or your broker will make the application to the lender
Step 6 Valuation and legal work
Step 7 Completion
guide like this) and brokers at least stop people making mistakes. Far better in my view that
theres an active, regulated, broker market to help.
CHAPTER 7 CHAPTER 8
Going solo
Watch out for the hard sell on...
www.moneysavingexpert.com/bestbuys
Mortgage payment protection insurance (MPPI)
Step 1 Select the mortgage deal or deals you fancy
deal, or the life of the mortgage
Step 4 Before you apply, contact the lender to see if you and the property are eligible
Step 5 If you decide to go ahead, apply to the new lender
Step 6 Valuation and legal work
Step 7 Completion
Personalised mortgage best buys Buying MPPI from your mortgage broker
Weve created a mortgage best buys table which compares thousands
of mortgages in one place. Try it and let us know what you think.
www.moneysavingexpert.com/bestbuys
www.moneysavingexpert.com/mppi
CHAPTER 8 CHAPTER 9
First Time Buyers quick Q&A

Q. Will the lender lend on my property?
Bundled buildings / contents insurance
Q. What paperwork will I need?
www.moneysavingexpert.com/homeinsurance
Life cover from your mortgage seller
www.moneysavingexpert.com/lifeinsurance
CHAPTER 9 CHAPTER 9
Q. What is the mortgage APR?
Q. How long should I set the term for?

Q. How do mortgages for couples work?
Q. Can I leave my property and rent it out to someone else?
CHAPTER 10
Happy hunting
Right, thats it. Youve made it until the end. Bravo!
www.moneysavingexpert.com/mortgagefeedback
Happy hunting
www.landc.co.uk/ml/mortgage-guide
52 MoneySavingExpert.com
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MSE First Time Buyer Mortgage Guide

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MoneySavingExpert.

First Time Buyers

MoneySavingExpert.com Guide to Mortgages,

Freephone 0800 694 0444

Written by Martin Lewis, Liz Phillips and Guy Anker

CONTENTS Independence and integrity

Boost your chances of getting a mortgage

Whos this guide for? Martins Mortgage Introduction

Who this guide isnt for.

Is a mortgage right for me? What will they lend to you?

Can you really afford a mortgage? Martins Mortgage Moment

Have you got a big enough deposit?

Q. In the best buy tables it says LTV, not deposit

Q. How big a deposit will I need to get a mortgage?

LTV Equals deposit of LTV Equals deposit of

The effect of having a bigger deposit

Q. What about Help to Buy ISAs?

Q. What are shared ownership schemes?

The Government will lend you 20%: 40,000

You need to pay back the Government its 20%.

20% of 220,000 is 44,000.

Q. Any other schemes I should look at if Im struggling

Asking family/parents to act as a guarantor

Martins Mortgage Moment Boost your chances of getting a mortgage

Boost your credit score

Think of it like a beauty parade

Quick tips Break with past relationships

Get on the electoral roll

notice of correction Dont miss payments / pay late

Keep other applications to a minimum in the months before a mortgage

Never withdraw cash on a credit card

Dont bother paying for credit

you, theyre only loosely indicative.

More tips to boost acceptance chances

It takes a long time to repay

Stay out of your overdraft

The loan is secured on your home

Avoid payday loans like the plague

Close unused credit cards

Its important to understand

Choice 1: Repayment mortgage or interest-only? Beginners Briefing

Its hard to get interest-only

Choice 2: What type of deal do you want?

How it works with mortgages

Martins Mortgage Moment PROS & CONS OF TRACKERS

2. Standard variable rates (SVRs)

PROS & CONS OF SVRs

PROS & CONS OF DISCOUNTED RATES

4. A hybrid option capped deals

PROS & CONS OF CAPPED DEALS

Choice 3: Do you want your mortgage to be flexible?

Can you overpay?

Total amount repaid: 263,000

I think its time for an analogy Timing your overpayment

Does it have a borrow back facility?

Martins Mortgage Moment

Are you allowed to overpay?

Do you have other debts? Something a bit different offsetting

Do you have a cash emergency fund?

Current account mortgages

If you put spare cash in an

savings rate is huge.

Watch out for early repayment charges

Am I free to move after the deal ends?