This guide is for general information only and does not constitute individual advice. Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it. Miller Homes cannot advise you on a mortgage, please consult an independent mortgage adviser for any personalised illustrations.
You’ll never forget the moment you pick up the keys to your dream home - especially if you’re a first-time buyer. But before starting the buying process (including applying for a mortgage), you’ll need to work out how much you can afford to spend.
If you find property finance daunting, you’re not alone. Only 13% of young adults feel that the financial lessons they received in school were applicable to their personal finances – so it could be the first time you encounter terms like ‘loan to value’ (LTV) or ‘capital’. You might also be wondering how much you need for a deposit, or even where to start when applying. This handy guide breaks down the process and answers some common questions.
How to get a mortgage
A mortgage is simply a loan for a house – and it is secured against the property itself, making it a secured loan. This makes it different to an unsecured general loan or credit card, which isn’t linked to a specific asset.
You could apply for a mortgage online via a comparison site or directly with a bank or building society. However, many people choose to work with a mortgage adviser (or broker) – either independent or attached to a lender – to help you understand the mortgage products available to you and assess which may be suitable for your circumstances. At Miller Homes, we have a network of advisers who should be able to support you, whether you’re a first-time buyer or remortgaging.
The first stages of buying a house can typically be broken down into six steps:
- Finalising your deposit. You’ve saved as much as you can, and now it’s time to buy your home. Check how long it will take to withdraw from savings accounts and speak to family members if they are making a contribution (buyers and family members providing any such contribution should obtain independent financial and legal advice before proceeding with this). Typically, you need at least 5-10% of your property’s value. While 95% or even 100% mortgages may be available in the market, they are rarer, subject to availability, eligibility, personal circumstances and come with strict lending conditions.
- Try a mortgage calculator. A mortgage calculator can give you an indicative estimate of potential borrowing based on the information entered (including any level of deposit you may have), although actual borrowing will depend on lender criteria, availability of lending products, affordability assessments, credit history, interest rates and your personal circumstances. You can use the free Miller Homes’ Mortgage Affordability Calculator or get an idea of your available budget by clicking on the “What could I afford?” button on any of our development pages.
- Check your credit score. Lenders need to be confident you won’t default on your mortgage repayments, so they’ll run a credit check. Before they do, it’s worth checking your own score to see where you currently stand and if there’s anything you can do to improve it, which could potentially help you in the process of obtaining a mortgage. This ‘soft search’ won’t affect your credit score the way a ‘hard search’ (making multiple credit applications) would.
- Gather your paperwork. Now it’s time for some admin. You’ll need to provide proof of identity, along with payslips, utility bills and bank statements. This proves you are who you say you are, confirms your home address and income.
- Get professional advice. Speaking to a professional mortgage adviser can often assist in taking some of the time and stress out of finding and applying for a mortgage. They can explain your options, break down the jargon and find the right product for your personal circumstances.
- Get a mortgage in principle. This will give you an idea of how much you could borrow before beginning your home search, however, a mortgage in principle is not a guarantee that you will receive a mortgage as it is subject to further assessment by the lender. Once you’ve had an offer accepted on a property, you can apply for the mortgage itself.
How to get a mortgage for first-time buyers
The process of getting a mortgage as a first-time buyer is no different to securing any other type of mortgage – albeit the options available to you may be different to those who have owned a home previously. You’ll need a deposit and credit check to get a mortgage in principle and complete the mortgage application once your offer has been accepted.
There are specific first-time buyer mortgages on the market, which reflect their unique needs and circumstances. However, these are subject to availability, eligibility and may also be subject to stricter lending criteria. You should seek independent financial advice as to what product may be suitable for you and your personal circumstances. For more first-time buyer advice, read our guide on buying your first home.
What percentage of your income should your mortgage be?
As we’ve seen in recent years, a sudden rise in interest rates can push up mortgage repayments, sometimes to unaffordable levels once you’re at the end of the fixed term.
According to the government-backed MoneyHelper, people typically spend around 28%-35% of their income on monthly mortgage repayments, so it’s important to plan ahead and factor in any changes in your financial situation such as becoming self-employed or starting a family. However, the percentage of income spent on monthly mortgage repayments is individual-specific and as such, you should consult with your lender or broker around the short-term and long-term affordability of any chosen mortgage product.
Can a parent go on a mortgage?
Yes, it is possible for you to apply for a mortgage with a parent to give lenders confidence that you will meet the repayments. There are two options:
- Joint Borrower Sole Proprietor (JBSP) mortgages: You may see these advertised as ‘family backed mortgages’. Depending on your parents’ income and credit score, a JBSP mortgage may allow a lender to take the parent’s income into account when assessing the affordability of a specific mortgage product. However, you and your parent(s) are each responsible for making the full repayments (and so, if you were to default in any payment, your parent(s) would be responsible for meeting the payment(s) due), but they won’t appear on the property deeds (which would incur Stamp Duty).
- Guarantor mortgages: A parent can act as a guarantor, agreeing to cover any missed mortgage payments. Failure to do so will affect their credit score and could lead to their own assets being repossessed.
Miller Homes’ Family Deposit incentive allows parents to lock in their contribution towards a brand-new home and potentially receive a financial reward, subject to availability and eligibility on selected plots and developments. Any payment may be subject to income tax with the recipient of any reward being responsible for declaring and paying any tax that may be due on this payment.
Any parent or family member considering either option should seek independent financial and legal advice around any legal implications of such a decision as well as any possible ramifications on their credit score or finances.
Mortgage application: How long does it take and how long does the offer last?
Typically, it takes two to six weeks to find out if your mortgage application has been approved – however, this is dependent on personal circumstances and the complexity of the application in hand (as well as any specific lender timescales). The lender will often arrange a valuation survey during this time to check the property value versus the sum being borrowed by the individual.
Generally, a formal mortgage offer is valid for three to six months, but any mortgage broker (or your chosen lender) will be able to guide you if you may require an extension to the mortgage offer, or if you need assistance in the event that there are delays with your chosen property.
Find your new home now
If you’re thinking about making your first or next move on the property ladder, browse our developments across the UK to find the home that’s right for you.