I'm a first-time buyer but my partner isn't - will this affect me?

When getting a joint mortgage with someone else, the process can differ if only one of you is a first-time buyer. We break down how in this Mortgage 101 article.

Stamp Duty Land Tax (SDLT)

In the UK, first-time buyers are eligible for stamp duty relief. If your partner has previously owned a property, you may not qualify for this benefit as a couple. This will affect the overall costs involved in purchasing a property together.

However, stamp duty is not charged on properties below £250,000. As such, if your property is below £250,000, you will not need to pay stamp duty even if one of you is not a first-time buyer.

The £250,000 threshold is a temporary measure, however, and the standard threshold for SDLT liability can change. This is accurate as of January 2024.

First-time buyer mortgage eligibility

Some lenders offer specialised mortgages with more favourable terms for first-time buyers. However, your partner's homeowner status might disqualify you from these options. This is, understandably, frustrating.

Deposit requirements

Your partner's previous homeownership experience may be advantageous when it comes to funding your deposit. If they have equity from the sale of their previous property, they might be able to contribute a larger deposit compared to what you can as a first-time buyer. This will affect your loan-to-value (LTV) ratio and the interest rates you can qualify for. The bigger the deposit the more favourable the rate.

Financial obligations and credit implications

Your partner's existing mortgage or financial commitments from their previous property could impact your joint financial situation. Lenders in the UK consider both applicants' credit histories and debt when assessing mortgage applications.

Your partner's existing obligations might affect the loan amount, interest rate, and affordability calculations. Moreover, if one of you has a less-than-ideal credit history, it's crucial to understand how this could impact your joint mortgage application.

Strategies to improve your joint credit standing could include consolidating debts, ensuring bill payments are timely, and reducing credit card usage.

Homeownership experience

Your partner's previous experience as a homeowner can be helpful when it comes to navigating the UK property market. They’ll have an idea of how the process works and what could potentially go wrong, which stands you in good stead.

Joint tenancy vs tenancy in common

When applying for a joint mortgage, understanding the difference between joint tenancy and tenancy in common is critical. The former implies equal ownership, while the latter allows for unequal shares. It's up to you which might be more suitable for your situation, but we advise you to speak to your mortgage broker about the pros and cons of both.

Government schemes and incentives

While certain benefits may not be available, there are still government schemes and incentives you can explore. Shared Ownership allows you to buy a share of a home and pay rent on the remaining share, making it more affordable. This scheme is usually available to first-time buyers or those who used to own a home but can't afford to buy one now.

Another option is the Lifetime ISA, where you can save up to £4,000 a year and receive a 25% bonus from the government, applicable towards buying your first home.

Strategies for enhancing affordability

There are several strategies first-time buyers who are buying with a non-first-time buyer can look at.

Guarantor mortgages

A guarantor mortgage involves a family member or a close relative agreeing to guarantee the mortgage payments. This can increase the amount that the couple can borrow, as the lender takes into account the guarantor's finances in addition to the applicants'. This is especially beneficial if the couple's income alone wouldn't qualify them for a large enough mortgage to purchase their desired property.

Family springboard mortgages

Family springboard mortgages allow family members to help out with home purchases without directly gifting funds. Instead, the family member deposits a certain amount of money into a savings account linked to the mortgage. This deposit often serves as security against the loan, enabling the couple to purchase a home with a smaller or sometimes no personal deposit.

Legal consequences of misrepresentation

It's important to fully understand how your partner's previous homeownership experience affects your eligibility and mortgage options. Being open and transparent with your mortgage lender and seeking professional advice can help prevent any potential misrepresentations that could lead to legal consequences.

Benefits of joint financial planning

Engaging in joint financial planning can be immensely beneficial for couples with different homeownership backgrounds. It helps in understanding how each partner’s financial history affects the mortgage application and prepares them for the financial responsibilities of a joint mortgage. This step is crucial in ensuring that both partners are on the same page regarding their financial goals and mortgage commitments.