First time buyer's guide

1. Consider your needs

When you look for your first home you will no doubt have a list of things you really want from it. Finding a property that meets every single one of those requirements is extremely hard and if not impossible so you must also grade them as must haves and would likes. Be prepared to compromise on the would likes! Consider all possibilities and research everything fully before committing and don't forget non-property related things too such as schools, travel distances to work, friends and relatives, bus routes, train stations, local amenities and medical centres for example. Read our area guides for a little assistance on some of these.

2. How much can you afford?

One of the biggest financial tasks you will ever face is saving for your mortgage deposit. Remember to budget for all the other associated costs of buying a home too such as solicitors, surveys, removals and possibly stamp duty.

Our expert mortgage advisors at Embrace Financial Services will be able to help you plan and budget. To get an idea in the meantime you can use our handy budget planner to see how much disposable income you may have for a mortgage or to save for a deposit.

The Deposit

If you’re one of the lucky few you will have parents who can to contribute. You could pretend you already have a mortgage and start paying into a fund as practise (preferably one you can take the money out of again easily). Not only will you know if you could keep up with the payments but you would be building your deposit fund.

Savings accounts

If you can, get a savings account that restricts your access so you’re not tempted to go on a spending spree. It’s easy to dip into it when something else comes up, which it will.

No more extra luxury items

Work out how much you could save by cutting out the extras like gym memberships, extra nights out at pubs and restaurants, holidays abroad etc... You'll be surprised just how much you spend on things when you sit down to think about it. All of that extra can go into your savings pot.

Keep track of your spending

It's a good idea to try and keep a list of what you spend, when you spend it and what on. There are plenty of smartphone apps out there to help or even a basic spreadsheet will do. This helps you to see where you can make savings and helps you focus on the goal. If it helps, allocate yourself a set amount of spending money each month, week or day and give it to yourself in cash every day. Any leftovers can go in a pot for the rest of the period.

Extra income

If you have the time, can you take on a part-time or evening job? Anything you can do to hit your target, do it. It’s only for a short while and you'll be so glad you sacrificed some time. Be sure not to overdo it though.

Set realistic targets

Set yourself 'realistic' targets to stay focused on that dream. You will make it if you remain dedicated.

3. Mortgages

Most people cannot afford to buy their home outright from savings and will need a mortgage to fund the purchase. A mortgage is a loan secured on a property. You will be required to put down a deposit and you will need to apply for a mortgage to cover the rest of the purchase price.

You then need to repay the mortgage to the lender. Usually this is done in monthly instalments over the term of the mortgage including the interest accrued over that time.

Banks and building societies offer a range of mortgages with different loan amounts and interest rates. A mortgage specialist like Embrace Financial Services can search the market to find the most suitable deal for you.

Lenders now have more rigorous checks in place after the crash of 2008 and stress test each application for changes in circumstances or if interest rates rise for example. You will need to show proof of your income and outgoings, including household bills, regular commitments, bank statements and pay slips.

There are a number of affordable options available when you’re looking for your first mortgage.

Some lenders will offer specific mortgages tailored to first time buyers. Often, they will only require a small deposit.

Help to Buy

Help to Buy is a Government scheme aimed at helping purchasers with limited deposits, generally these are First Time Buyers. This offers buyers the opportunity of securing a property with a deposit as little as 5%, with the government providing a loan of up to 20%, rising to 40% in London. The scheme currently running until 2020, is only available on newly built homes and is capped at purchase prices of £600,000. Find out more about help to buy.

In 2015 the Government introduced the Help-to-Buy deposit ISA to help people save for their first deposit. They will contribute a lump sum to start and a monthly saving bonus of £50 for every £200 saved in deposit. The scheme is only available on properties valued up to £450,000 in London. Further details can be found on their Help to Buy ISA Guidance notes.