First-Time Buyer and Second-Time Buyer Mortgage 

Are there lenders that specialise in mixed first-time, second-time buyer applications?

Every lender will accept a first-time buyer purchasing jointly with a second-time buyer.

It depends on what we’re looking to achieve. Is it OK for the lender to assume you’re both home movers, or do we want them to look at it as a first-time buyer case?

Essentially, it’s about what numbers we need to get to for affordability. But there’s not too much difference in how they assess a case. Price points and interest rates may vary depending on the lender, which might be a factor – it’s all about choosing the right lender and approach to achieve your goals.

Should we apply for a mortgage jointly or should the first-time buyer apply alone?

On a joint application the affordability will be better, because you’ve got two incomes. If each of you earn £50,000, having a combined income of £100,000 will give you a bigger mortgage. But you might not need that, especially if one of you already owns a property.

The key thing is that if you’re a first-time buyer, if you add that second person onto the mortgage, you will lose your stamp duty relief. That might be a detriment, but it all depends whether you can afford the mortgage in your own right.

We’ll always chat through that and make sure the affordability and costs make sense. We’ll find the most cost-effective route.

Should we choose joint tenants or tenants in common? What’s the difference for us?

It really depends on the individual context. Joint tenants have equal ownership of the property. You both own the property 100%. If one partner passes away, their share passes to the other. That person then owns that property 100%.

When it’s tenants in common, you own a defined share – it could be 50-50, 70-30 or 80-20. A lot of people choose tenants in common if they’re looking to protect their share for future generations. Should one owner pass away, their share doesn’t automatically go to their partner. It could be specifically left to their children or another beneficiary.

It’s often used if one person is putting down a bigger deposit than the other, to protect their interest. Joint tenants is the most common, but neither is better or worse. It all depends on your preferences.

How does the size or source of our deposit affect our application when one of us is a first-time buyer?

The most common sources of deposit are savings or equity from an existing property. The source doesn’t matter too much, although you will need to prove where it’s come from. The source won’t affect interest rates or anything like that.

On any mortgage, lenders focus on the Loan to Value, which is jargon meaning how much you’re borrowing compared to how much the house is worth. If the house is worth £100,000 and you put down a £10,000 deposit, you’re borrowing at 90% Loan to Value.

The interest rates improve as the Loan to Value reduces in 5% increments – so there are slightly better options at 90% than 95%. Better interest rates are available once you reach 60% Loan to Value.

It’s all based on risk. With a first-time buyer, there’s no track record and they may just be putting down a 5% deposit. It’s definitely possible, but it’s more risky for the bank so they price accordingly.

Are there alternative ways to structure the purchase to reduce costs?

As touched on, the first-time buyer could buy alone. As long as the affordability makes sense, you will still maintain your stamp duty relief. You can always add your partner further down the road. It isn’t the case that the first-time buyer owns that property and the partner never does – a few years down the line, we just add the partner on. It’s pretty easy, and there’s not a lot of cost involved – just a nominal solicitor’s charge.

Another option is potentially Joint Borrower Sole Proprietor. It depends on the scenario, but it allows two people on the mortgage, giving you the benefit of joint affordability, but only one person is on the deeds – usually the first-time buyer. Stamp duty is only payable on properties you own, and if one person is going on the deeds, only they are liable for the stamp duty. Some people save money that way.

It can be a little bit more involved, but it could be worth a chat.

What else do we need to know about buying as a first-time buyer with someone who has owned a home before?

A broker will help with rates, affordability, sifting through the jargon and making it all a bit more straightforward and digestible. It’s also so useful to have someone in your corner to give you a hand – when estate agents or solicitors are driving you round the twist. We’re here for you to swear at and help you sort the situation out.

Key Takeaways:

• If a first-time buyer purchases a home jointly with someone who has owned a property before, they will not qualify for First-Time Buyer Stamp Duty Relief. They will be subject to standard stamp duty rates.
• Some lenders will treat a joint application with one first-time buyer and one second-time buyer as a first-time buyer case, potentially offering slightly better affordability and income multiples, while others will not.
• If the second-time buyer plans to retain their existing property, its current mortgage will be counted against the couple’s total affordability for the new joint mortgage, unless the property is being rented out and the rent covers the mortgage.
• To potentially reduce costs and retain the first-time buyer’s stamp duty relief, the first-time buyer could apply alone, or the couple could use a Joint Borrower Sole Proprietor structure, which allows two people on the mortgage but only the first-time buyer on the deeds.
• Joint Tenants means equal, 100% ownership, with the property automatically passing to the surviving partner. Tenants in Common allows for defined shares (e.g., 70-30), which can be protected for future generations or used when one person puts down a larger deposit.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.