Guides – First Time Buyer Support

An Agreement in Principle (AIP), also known as a Decision in Principle (DIP), is a certificate or statement from a mortgage lender that indicates how much they are likely to lend you, based on an initial assessment of your financial situation. Here are some benefits of obtaining an AIP:

1. Help with property search: An AIP can help you narrow down your property search by giving you a clear idea of how much you can borrow. This can help you avoid wasting time looking at properties that are out of your price range.
2. Increased bargaining power: Having an AIP can also give you more bargaining power when it comes to making an offer on a property, as it shows the seller that you have already been approved for a mortgage up to a certain amount.
3. Streamlined application process: Once you have an AIP, the mortgage application process may be streamlined, as the lender has already assessed your financial situation and is familiar with your circumstances.
4. Reduced stress: Knowing how much you can borrow and having an AIP in place can also reduce stress and uncertainty during the property buying process.

In terms of validity, AIPs are typically valid for around 30 to 90 days, depending on the lender. However, this can vary depending on the lender and the specific mortgage product you are applying for. If you don’t find a suitable property within the validity period, you may need to apply for a new AIP. It’s important to note that an AIP is not a guarantee that you will be approved for a mortgage, and the lender will still need to conduct a full assessment of your financial situation before making a final decision.

Several factors can determine how much you can borrow with a mortgage, including:

• Income: Your income is a key factor in determining how much you can borrow. Lenders typically use a multiple of your annual income to calculate the amount you can borrow. This multiple can vary between lenders, but it’s usually capped at around 4 – 5 times your income.
• Employment status: Lenders will want to see that you have a stable source of income and may ask for proof of employment, such as payslips or a letter from your employer.
  
• Credit score: Your credit score can affect how much you can borrow and the interest rate you are offered. Lenders will look at your credit history to assess your ability to repay the mortgage.
• Outgoings: Lenders will also consider your monthly expenses, such as bills, loans, and other debts, when assessing how much you can borrow.
• Deposit: The amount of deposit you have can also affect how much you can borrow. The larger your deposit, the less you may need to borrow, and lenders may offer you more favourable interest rates.
• Interest rates: The interest rate you are offered can affect how much you can borrow. Higher interest rates mean higher monthly payments, which can affect the amount you can borrow.

It’s important to keep in mind that each lender may have their own criteria for determining how much they will lend, and the factors they consider may vary. Additionally, it’s always a good idea to seek professional advice from a mortgage broker to help you understand your borrowing capacity and to ensure that you are getting the best possible deal.

When it comes to paying stamp duty, a First-Time Buyer (FTB) is defined as someone who has never owned a property before. It’s important to note that all buyers involved in purchasing the property need to meet this criterion to be eligible for any government incentives that may be available.

However, certain mortgage lenders may consider someone to be a First-Time Buyer if they haven’t had a mortgage in the past three years. Additionally, there are mortgage options available that allow one borrower on a joint application to be considered a First-Time Buyer in order to take advantage of FTB-specific products.

As a first-time buyer, it’s a good idea to start thinking about applying for a mortgage well in advance of when you plan to buy your first property. This will give you time to research your options, get your finances in order, and make sure you’re in the best position to get approved for a mortgage with favourable terms.

Here are some general guidelines to keep in mind:

1. Start saving for a deposit as early as possible: The larger your deposit, the better your chances of getting approved for a mortgage with a lower interest rate. Aim to save at least 5% of the property’s value, but the more you can save, the better.
2. Check your credit score: Your credit score will play a big role in determining whether you’re eligible for a mortgage and what interest rate you’ll be offered. Check your credit score and report regularly and take steps to improve it if necessary.
3. Research different mortgage options: There are many different types of mortgages available, each with their own pros and cons. Research different options, including fixed-rate, variable-rate, and tracker mortgages, and consider what would work best for your individual circumstances.
4. Get pre-approved for a mortgage: Before you start house hunting, it can be helpful to get pre-approved for a mortgage. This will give you a better idea of how much you can afford to borrow, which can help you narrow down your search.
5. Apply for a mortgage when you’re ready to make an offer: Once you’ve found a property you’re interested in buying, you can apply for a mortgage. Keep in mind that the process can take several weeks or even months, so it’s a good idea to get started early.

Overall, it’s best to start thinking about applying for a mortgage as early as possible, ideally several months before you plan to buy your first property. This will give you plenty of time to research your options, get your finances in order, and make sure you’re in the best position to get approved for a mortgage with favourable terms.

The amount of deposit you’ll need as a first-time buyer will depend on several factors, including the price of the property you want to buy and the type of mortgage you’re eligible for.

In general, most mortgage lenders will require a deposit of at least 5% of the property’s purchase price. However, if you can afford to put down a larger deposit, you may be able to access more competitive mortgage rates and have a wider range of mortgage options available to you.

The average house price in the UK (at time of writing) is around £255,000, so a 5% deposit would be £12,750. However, keep in mind that house prices can vary significantly depending on the location.

It’s worth noting that there are some government schemes available to help first-time buyers get onto the property ladder, such as Shared Ownership. These schemes may require a smaller deposit than a standard mortgage, but they have their own eligibility criteria and terms and conditions.

As a first-time buyer in England, you may be eligible for a reduced rate of Stamp Duty Land Tax (SDLT) on the purchase of your first property. The amount of SDLT you’ll pay will depend on the purchase price of the property.

As of March 2021, the following SDLT rates apply to first-time buyers in England:

• No SDLT is payable on properties up to £300,000
• 5% SDLT is payable on the portion of the property price between £300,001 and £500,000

For example, if you’re buying a property for £400,000, you’ll pay no SDLT on the first £300,000 and 5% SDLT on the remaining £100,000. This means your total SDLT bill would be £5,000 (5% of £100,000).

It’s important to note that if you’re buying a property that costs more than £500,000, you won’t be eligible for the first-time buyer SDLT relief and will instead be subject to the standard SDLT rates.

Keep in mind that these rates and thresholds are subject to change, so it’s a good idea to check the most up-to-date information on the UK government’s website or consult with a qualified tax professional.

As a mortgage broker, Thameside Mortgages has access to a wide range of mortgage lenders and products, which means we can help you clients find the right deal for your individual circumstances.

1. Initial consultation: We will have an initial consultation with you and understand your individual circumstances, including your income, credit history, and the type of property you’re looking to buy.
2. Mortgage search: Based on your needs and circumstances, our team will then search the database of over 90 lenders to find mortgage products that are a good match.
3. Comparison and recommendation: Once we’ve identified several suitable mortgage products, we will compare them side-by-side and make a recommendation to you based on your individual circumstances and preferences.
4. Application process: Once you’re happy with the recommended mortgage product, we will then help you through the application process, including submitting the application to the lender and providing any additional documentation or information required.
5. Ongoing support: Even after the mortgage has been approved, we will continue to provide support and advice throughout the term of the mortgage, helping you to manage your mortgage and making sure they’re aware of any changes or updates that could affect their mortgage, such as a fixed rate deal coming to an end. 

Overall, by having access to more than 90 lenders, we can offer our clients a wide range of mortgage products, giving you a better chance of finding a mortgage that fits your individual circumstances and needs. 

This can save our clients time and effort in searching for the right mortgage product themselves and can also help them get a better deal overall.

Usually, you can simply declare you are a first time buyer, but it’s important to be accurate and honest, because it’s quite easy for a non-first time buyer to be recognised:

1. Declaration: Your solicitor may ask you to sign a declaration stating that you have never owned a property before. This is a legal document.
2. Credit report: Your credit report will show any mortgages or loans you have taken out in the past, so if you have never taken out a mortgage or loan for a property, your credit report will reflect that.
3. Land Registry: The Land Registry keeps a record of all property transactions in England and Wales. You can search the Land Registry to confirm whether you have previously owned a property.
4. Solicitor’s statement: If you have used a solicitor in the past to buy or sell a property, they may be able to provide a statement confirming that you were acting as a representative for someone else and were not the legal owner of the property.
5. HMRC form: If you have previously claimed the Stamp Duty Land Tax (SDLT) exemption for first-time buyers, HM Revenue and Customs (HMRC) will have a record of this.

It’s important to note that the requirements for proving that you are a first-time buyer may vary depending on the lender or mortgage product you are applying for. It’s best to check with your lender or mortgage broker to find out what specific evidence they require.