A first-time mortgage buyer and a second-time mortgage buyer can never become two sides of a coin. They go through different experiences. From the formalities to the affordability checks, conditions are different for both. However, the procedure of mortgage remains the same because when you take the first mortgage or the second one, the lenders have to follow the same process. The struggle can be different.
Here are the details that mention the difference between a first time mortgage buyer and the second time mortgage buyer.
Difference of definition
Both the mortgage buyers differ in their basic introduction, and here it is. A lot can be understood from the difference on this part.
- A first-time mortgage buyer is one who does not own any home. He has applied for the mortgage to buy the first-ever home. Also, he has no previous mortgage obligation in financial records.
- Second-time mortgage buyer is the one who already has a property and may or may not have a mortgage currently. This time he is applying for the mortgage to buy his second house.
NOTE – We should not forget that a second-time mortgage buyer also includes the remortgage applicant. It happens when a person is not buying a second home but only taking a new deal on the existing mortgage.
The Psychological Contrast
It may look a bit odd to talk about psychology in the mortgage, but after all, it relates to humans; thus, the psychological factors will exist always.
|First-time mortgage borrower||Second-time mortgage borrower|
|More prone to the myths related to mortgage.||Informed and try to find out the reason for everything.|
|Anxious about the mortgage procedures as it is their first time and the things sound complicated to them.||Already aware of the process and the documents required because they already have done the same thing.|
|May get some offers from the lender as the first time mortgage buyer.||May get some privileges as the second time borrower. A discount or something like that can be obtained easily.|
Dissimilarity On The Part of Affordability Check
Both the first time buyers and the second time, buyers have to go through the affordability check. But there is a difference in the part of the conditions they go through.
First time buyer – A first-time buyer has to show the following things to prove repaying capacity.
- The payment history of other debts, bills, etc.
- Employment history and stability factor
- A deposit amount of a minimum of 5% to 10%
- Guarantor with a good credit score
Second-time buyer – He also needs to submit similar details, but there is only one difference.
- If the buyer has another mortgage currently, complete scrutiny occurs on its payment record. An existing mortgage makes the comparison of the first-time buyer vs second-time buyer more intense. It is a unique factor that immediately discriminates against the two sides. This point considerably affects the affordability for the second buyer. The applicant needs to have a solid financial background and also a strong guarantor.
- The second time buyers also have to show the papers of the existing property. The value of that property is also essential for the lender at the time of the second mortgage.
The Availability of Options is Not Identical
The first time buyers usually have more number of options than the second time buyers if they already have a mortgage. The reason is apparent. The mortgage providers usually hesitate to offer a mortgage if another exists.
The risk of missed payments is more with the second-time buyer, as the first home loan payments are also there to absorb a considerable part from the income. On the other hand, if the same buyer has property but no mortgage on that, it acts as the decisive point. To get the desired amount on a mortgage with higher LTV, he can use the house as the additional collateral.
If the second time buyer is remortgaging and not taking a new home, then the past payment history of the current mortgage becomes essential. Accordingly, the number of options also increases.
The first time buyers have a broader size of the lending market to explore the options. Also, the fee-free mortgage brokers in the UK give the same type of feedback in case of such buyers. However, for them, the struggle is intense on the part of the deposit and repaying capacity. In this case, also, the lender is insecure about the financial caliber of the person. It is difficult to know if they can handle the monthly installments or not. However, a stable current income status, employment stability, good credit score are the factors that bring easy approval.
The above points should clear the fundamental differences. You know what, on the part of the mortgage, the dissimilarities are not many. It is because the procedures are more or less similar. The actual contrast occurs due to the personal conditions of the mortgage. Obtaining a second mortgage as a remortgage on the same property is more effortless. But taking another one with an existing mortgage to buy a second property completely changes the whole picture.