Essential First-Time Buyer Mortgage Guide | UK First-Time Buyers

first-time buyer mortgage

When looking for a first-time buyer mortgage, it’s important to explore the full range of options available on the market. Since a first-time buyer mortgage is typically the largest financial obligation you’ll take on, finding the best deal is vital.

By reading this all-encompassing page of advice, tips and tricks from mortgage experts, you’ll learn everything you need to secure a first-time buyer mortgage that meets your needs.

How do I get a first-time buyer mortgage?

  1. Check your credit file with credit-rating agency to ensure accuracy and make improvements if needed.
    Ensure you are in the perfect financial state to apply for a mortgage by reviewing your credit rating for free, and verifying the accuracy of all your details. Additionally, here are some straightforward methods to enhance your credit score.
  2. Save up a cash deposit to reduce the amount you need to borrow and access better rates.
    The more savings you have to put towards your first home, the less you will need to borrow from a mortgage lender. This will result in a lower loan-to-value (LTV) ratio, allowing you to secure better interest rates on your loan.
  3. Speak to an Independent Mortgage Advisor or Broker to get an estimate on how much you can afford to borrow.
    Before beginning the process of house hunting, it is recommended to consult with a mortgage broker who will help determine the amount you are eligible to borrow for a first-time buyer mortgage. By understanding this figure, you can establish the type of property that is within your budget in your desired location.

Do I qualify for a first-time buyer mortgage?

To qualify for a first-time buyer mortgage, you must be purchasing your first residential property, and not have previously owned one in the UK or abroad.

If you are purchasing your first residential property with another person, you must both be making your first property purchase.

If you have previously owned a property in the UK or abroad, you may not be eligible for certain programs aimed at helping first-time buyers such as the shared ownership scheme. This applies whether you owned the property outright or had a share in it, such as through joint tenancy or a shared ownership scheme.

Even if you inherited a property that you never lived in and was later sold, you may still not qualify as a first-time buyer.

Additionally, if someone who already owns a home is buying the property for you, (e.g. a parent or guardian), you will not be classified as a first-time buyer. It is important to carefully review the eligibility criteria for each specific scheme before applying, as those requirement can vary.

How do first-time buyer mortgages work?

The steps below explain the how the process works, and what happens when you apply for and obtain a first-time buyer mortgage.

Explore the options for financial help

The UK government offer financial schemes to help house hunters in their search. For example, a lifetime ISA can help you improve your deposit and the help to buy scheme can help reduce the amount of deposit you need.

Get a mortgage in principle to determine how much you can borrow

A mortgage in principle, also known as a decision in principle, is the highest loan amount that a lender is prepared to provide based on your income and expenses. When combined with your deposit, it gives a rough estimate of the property price within your budget.

Secure the mortgage

After identifying a suitable property, you should complete a comprehensive mortgage application with the lender for a thorough evaluation and final approval. The mortgage provider will typically require a property valuation to ensure that the loan amount aligns with the property’s value.

Make monthly repayments

Once the lender gives approval for your mortgage and you buy the property, you will need to make monthly payments, which include interest, over the agreed loan term until the mortgage is paid in full.

Consider remortgaging at the end of your initial deal

Many new home buyers opt to secure a mortgage with favourable rates for a specific period, typically 2, 3, or 5 years. As the initial period nears its end, it is advisable to consider refinancing to secure a more advantageous loan.

Types of first-time buyer mortgages

The amount you will need to pay each month towards your mortgage will be determined by the size of the loan and the specific type of mortgage you choose. Types of mortgages available are:

Fixed-rate mortgages

Fixed-rate mortgages offer set monthly repayments for a certain period.

Opting for a fixed-rate mortgage ensures that your monthly mortgage payments will remain constant for a period of two, three, five, or even up to ten years in some instances.

It is advisable to consider switching mortgages once this initial fixed-rate period ends to avoid being subjected to your lender’s standard variable rate (SVR), which is typically higher than the rate you were previously paying.

Tracker mortgages

Tracker mortgages follow the Bank of England base rate.

A tracker mortgage follows the movements of the Bank of England base rate, so your monthly interest payment may fluctuate based on changes in the base rate. Specifically look for ‘capped tracker mortgages’, which limit how much you have to pay in interest, even if the base rate increases.

Discounted variable-rate mortgages

Discounted variable-rate mortgages provide a set percentage below the lender’s SVR.

Typically lasting between two to five years, a discounted variable-rate mortgage is set at a percentage below your lender’s standard variable rate (SVR). It’s important to note that your mortgage rate may fluctuate with changes in the SVR, so be sure to factor this in when calculating your finances.

Offset mortgages

Consider Offset mortgages, if you have savings.

By having an offset mortgage, you have the option of connecting a savings account to offset the total amount you owe on your mortgage. As opposed to earning interest on your savings, the amount of interest you pay on your mortgage decreases. This is because your savings balance is deducted from your mortgage debt, meaning you only pay interest on the remaining debt balance.

Guarantor mortgages

Specifically for if you have a family member willing to guarantee your repayments.

In a guarantor mortgage, a third party, often a family member, steps in to take responsibility for making repayments in the event that the borrower is unable to do so. This gives the lender added reassurance, enabling individuals with low income or savings to qualify for a mortgage.

Interest-only mortgages

Not commonly a first time buyer option.

An interest-only mortgage is a loan that requires borrowers to only pay the interest charges each month, resulting in lower monthly payments.

However, it is crucial to have a strategy in place to repay the original borrowed amount at the end of the mortgage term.

image of first-time buyer mortgage documentation being handed over to a first-time buyer

What size deposit will I need for a first-time buyer mortgage?

A higher deposit percentage reduces the risk to the lender and can lead to better rates. Saving up more than the minimum can provide access to a wider range of mortgage deals.

The percentage of your property value that you are able to deposit, is known as your level of deposit. This is crucial to the bank or building society providing the loan as it determines the level of risk they are undertaking by providing the loan to you.

The minimum level of deposit to aim for is 5% for most lenders in 2024. In the past, there were products available that required less, right down to 0% or even negative percentages (where you could borrow extra to cover your legal fees too), but those days are long gone and won’t be returning anytime soon.

For instance, if your first home costs £250,000 and you have £25,000 saved for it, you have a 10% cash deposit which means you will need to borrow £225,000 as a mortgage with a 90% loan to value (LTV) ratio.

Conversely, a 20% deposit of £50,000 means a mortgage with a lower risk at 80% LTV.

Having a larger deposit typically allows access to more competitive mortgage rates, so saving up more is advantageous. With a 10% or 15% deposit, you are likely to have more mortgage options at better rates, saving significant money in the long run.

How do I choose the right first-time buyer mortgage?

Consider factors such as your financial circumstances, long-term plans, and potential interest rate changes.

Selecting the right mortgage as a first-time homebuyer depends on your specific needs.

Fixed-rate mortgages provide a stable repayment amount for a specified period, shielding you from interest rate changes.

Tracker mortgages and discounted variable rate mortgages offer the possibility of cost savings if interest rates decrease, but could become pricier if rates increase.

Before making a decision, it is crucial to check your financial situation, future goals, and seek guidance to identify the most appropriate mortgage option. Factors such as affordability, repayment choices, and potential interest rate fluctuations should all be taken into consideration.

Are there any mortgages schemes specifically tailored to first time buyers?

The latest first-time buyer mortgage schemes:

There are schemes in place to help people looking to purchase their first home. One such program is the First Homes Scheme, which provides a 30% discount on new build homes, primarily targeting eligible first-time buyers, with a priority shown to key workers and army veterans.

Additionally, many mortgage lenders now offer loans to home buyers with as little as a 5% deposit through the 95% mortgage scheme, in which the government guarantees part of the loan. Eligibility requirements exist, such as a property purchase limit of up to £600,000.

Are there any other schemes available to help first-time buyers?

Yes. For individuals between the ages of 18 and 39 who are in the process of saving for their first home deposit, there is an option to contribute to a Lifetime ISA. This account allows you to save up to £4,000 annually, which can be either a cash ISA or a stocks and shares ISA, with the government topping up your savings by 25% through a bonus.

This means you could receive up to £1,000 in government bonuses each year. The funds from this account can then be used towards the purchase of a property valued at a maximum of £450,000.

What factors should I consider before applying for a mortgage?

Before jumping into the mortgage application process, here are 9 key factors to research and consider:

  1. Build a deposit
    A substantial deposit can greatly impact the amount you need to borrow and the interest rate you are offered.
  2. Improve your credit rating
    Improving your credit rating is also crucial in order to secure the most favourable terms from lenders.
  3. Include mortgage fees
    It is important to have the necessary funds on hand to cover various mortgage fees such as application fees, surveys, and legal costs. Some mortgages allow the fees to be added to the mortgage, so you don’t need to find that extra dosh.
  4. Choose a mortgage type
    Choose between fixed-rate, variable-rate, or other types of mortgages based on your preferences and the current deals available.
  5. Initial fixed rate period
    Consider the initial period of any introductory rate or discounted period, typically lasting 2, 3, or 5 years.
  6. Mortgage duration
    Carefully select the length of your mortgage term, taking into account what you can afford and how much you are willing to pay back overall.
  7. How affordable is it
    Check the affordability of the monthly repayments to ensure they fit your budget and financial stability.
  8. Can I repay early
    Read the terms and conditions regarding early repayment, such as overpayments or clearing the mortgage ahead of schedule.
  9. Is it a portable mortgage
    Check whether the mortgage is portable in case you decide to move house before your fixed term is up, as there can be penalties if you have to pay off your mortgage during a fixed rate deal.

By carefully considering these factors before applying for a mortgage, you can make a more informed decision that aligns with your financial goals and circumstances.

How do I compare different mortgage options for first-time buyer mortgages?

If you’re ready to pull the trigger on getting a first-time buyer mortgage, this is how we recommend you proceed.

Begin by comparing options via the big UK comparison websites (links to them are below).

We recommend this first because:

  • It gives you a feel for how many lenders are happy to lend, based on your personal circumstances
  • It can also reveal which lenders are doing deals (if any) with which comparison sites, e.g. you might find one site gets cheaper deals than the others, for a specific lender.
  • It also gives you an idea on what interest rates you will get for your LTV percentage.

Research them all and make notes of any deals that look appealing. i.e:

  • Who was the lender?
  • What was the LTV?
  • What was the interest rate?
  • Which comparison site was it on?

This information will be useful to compare with the deals an Independent Mortgage Advisor can find for you.

Here are a list of comparison sites to begin researching:

Most of these website’s contain calculators for working out how much you can afford to borrow, or you can use the mortgage calculator on the Money Helper website. Use them, and be honest with the data you input.

The more accurate you are, the more accurate your calculated mortgage value will be.

What is an Independent Mortgage Advisor?

An Independent Mortgage Advisor is a mortgage expert that works privately as opposed to working for a broker or for a lender.

As they are completely independent, they have software systems that tap into the product offerings from many different lenders, including many that comparison websites don’t use.

They earn money through commissions paid to them by the lender, whenever they secure a first-time buyer mortgage, so their service to you is usually free (if one tries to charge you in addition, avoid them!)

Should I use an Independent Mortgage Advisor?

100% Yes.

Once you’ve done the comparison sites, if you know of an independent mortgage advisor who can help you navigate the mortgage options, we recommend speaking to them next. Take your research with you, and see what the mortgage advisor can do in comparison.

Remember an experienced mortgage advisor will have invaluable knowledge on the first-time buyer mortgage products and current market conditions, so can offer advice in a way comparison websites simply cannot.

They’ll also keep your details on file and get in touch with you before your current mortgage deal is due to end, to start the hunt for a new deal (so you don’t need to worry about forgetting to do it in 2, 3 or 5 years time!).

We believe, going through a local mortgage broker is a much better experience than rolling the dice with a lender direct. Quite simply, they take the pain out of the process, offer advice personal to your circumstances, and they get paid their commission from the lender if you take out a first-time buyer mortgage through them, so their expert advice comes at no cost to you.

We recommend finding one through word-of-mouth, taking advantage of their expertise, and eventually getting your mortgage through them.

image of first-time buyers holding the keys to their first home

What information do I need to apply for a first-time buyer mortgage?

Each lender, broker, mortgage adviser or comparison website will ask for similar things, so it’s best to get all your ducks lined up before you begin the application process. Get everything prepared early! Here’s a quick breakdown of what to do:

What is your situation?

You’re a first time buyer, but this also applies if you were looking at moving house or applying to remortgage your current house.

What are your details?

Basic personal information about you, your current address and contact information, what type of application you’re making (single, joint, etc)

What property are you looking for?

If you’ve already found something, share the details. If you haven’t started looking yet, think about the type of home you’re realistically in the market to buy. Is it a flat or a house. New build or pre-existing.

How much are you looking to borrow?

This is where your homework comes in. By now you will, no doubt, have used mortgage calculators to give you a rough idea on how much you can afford to borrow and your Loan To Value ratio.

What are your earnings?

Your salary before tax (gross salary), bonuses, overtime, savings, investments, dividend income and so on.

If you have all of these ready to hand, the process will be buttery smooth…


How can I get a first-time buyer mortgage?

When applying for a first-time buyer mortgage, your lender will evaluate your ability to afford the loan by reviewing your annual salary, other sources of income, expenses such as credit card and loan payments, household expenses, childcare costs, and general living expenses.
Additionally, they will review your credit history to determine your reliability as a borrower and use this information, along with their affordability assessment, to establish the amount you can borrow.
Your deposit towards the home purchase will also play a significant role, as mortgage providers typically have a maximum loan-to-value (LTV) ratio they are willing to offer.
For instance, if you are looking to buy a £200,000 property with an 85% LTV mortgage, you would need a 15% deposit totalling £30,000.

If I’m self-employed, can I still get a first-time buyer mortgage?

Absolutely, obtaining a mortgage is possible but you will need to demonstrate your income.
This typically involves submitting at least two years of tax statements or company accounts verified by an accountant.
If your financial documents reflect stable or growing profits, you are on track to qualify for a first-time buyer mortgage.

When is the best time to apply for a first-time buyer mortgage?

Before you begin viewing properties, it is advisable to obtain a mortgage agreement in principle from one or multiple lenders. This will provide you with an indication of the amount you can potentially borrow.
Additionally, estate agents may request to see this agreement to verify your commitment to purchasing a property.
Prior to applying for an agreement in principle, it is important to confirm whether the lender will conduct a credit check, which may impact your credit file.
It’s worth noting that an agreement in principle typically remains valid for 30 to 90 days and is an estimation, not a definite mortgage offer.

What other costs will I need to budget for?

When purchasing a property, there are additional fees and charges that may need to be paid upfront.
We recommend enlisting a conveyancer or solicitor to assist with the purchase, as they will inform you of the necessary fees. While some legal fees may be incorporated into your mortgage, there may be instances where they are not. Additional costs to consider may include:

– Property searches
– Property surveys
– Mortgage fees
– Conveyancing fees
– Stamp Duty
– Home insurance

You may also need to buy essential items, such as appliances and furniture, and cover the cost of a removal service – or at least a rental van. 

What options are there for first time buyers struggling to get on the property ladder?

Joint Mortgages: If you’re finding it difficult to borrow enough money to purchase a property on your own, one option is to consider getting a joint mortgage with a partner, friend, or family member. Remember that first-time buyer mortgages are available as long as all parties are first time buyers.
This means you can pool resources to raise a larger deposit and qualify for a bigger mortgage. You can opt for a joint tenancy, where each party owns an equal share of the property, or a tenancy in common, where ownership shares can be based on individual contributions.
It’s crucial to seek legal advice before entering into a joint mortgage agreement to establish clear terms in case of future disagreements.

Shared Ownership: First-time homebuyers earning below a certain income threshold may qualify for a shared ownership first-time buyer mortgage. This arrangement allows you to purchase a portion of the property and pay rent on the remaining percentage. It can be beneficial if you have a small deposit, as you only need to contribute a percentage of the share you’re buying. You may have the option to increase your ownership stake over time, and stamp duty payment can often be deferred until you own a larger percentage of the property.

Help to Buy Scheme: An equity loan from the UK government worth 20% of the property’s value (or 40% of its value if buying in London), Help to Buy makes it easier to obtain a first-time buyer mortgage, because they only need to borrow 75% of the property’s value (with a mandatory 5% deposit making up the remainder).

Guarantor Mortgages: An option for obtaining a larger first-time buyer mortgage is through a guarantor mortgage, where a family member or close relative guarantees to cover your mortgage repayments if you’re unable to do so. Even though the guarantor’s name may not appear on the property deeds, it’s advisable to seek legal advice to ensure everyone involved understands the responsibilities and implications of this type of arrangement.

100% Mortgages: While rare, mortgages that allow you to borrow the full value of a property come with strict eligibility criteria, such as demonstrating that your rental payments have consistently exceeded potential mortgage repayments for a certain period. There is an increased risk of negative equity with these mortgages, meaning you may owe more on the property than its current value if prices decline, which can complicate the process of selling or moving. This type of mortgage is pretty rare as a first-time buyer mortgage, as they more commonly appeal to buyers looking to buy-to-let a property.

What is LTV (Loan To Value)?

The loan-to-value (LTV) ratio is a financial metric that indicates the percentage of a property’s value that is funded through a mortgage.
This ratio is determined by dividing the loan amount by the property’s value or purchase price and is typically shown as a percentage.
For instance, if you bought a property for £100,000 and took out a £60,000 mortgage, the LTV would be 60% (£60k divided by £100k equals 0.6 or 60% of the total value).
It is important because the lower the LTV ratio, the less risk there is to the lender. If instead of a £60,000 mortgage, I needed a £95,000 mortgage, my LTV would be 95%. A lower LTV brings with it, the benefit of a lower interest rate in most cases.

What is an Agreement In Principle (AIP)?

An Agreement in Principle (AIP) is often referred to as a mortgage in principle.
It indicates that a lender is prepared to lend you a certain amount of money, in theory, after reviewing your income, expenses, and debts.
Having an AIP can be beneficial when purchasing a property as it shows that you have access to the necessary funds for the transaction.
You are not obligated to use the lender who provided the AIP when applying for an official mortgage. However, the AIP would have been approved based on the criteria of that particular lender, which could complicate the process of securing a similar agreement from a different lender.

Does obtaining a Mortgage in Principle affect my credit score?

No. The credit check for an AIP is a ‘soft’ check which doesn’t affect credit ratings. A full check would not take place until you make the actual mortgage application.

How long can I have a first-time buyer mortgage for?

The duration of any mortgage varies depending on your circumstances. Most common at 25 and 30 year mortgages but there are durations from 15 years to 35 years and even those for shorter and longer periods still.
We advise getting a mortgage for the shortest duration you can, that enables you to comfortably afford the repayments. The longer your mortgage, the more interest you’ll pay on the total borrowing.

Can I overpay my monthly first-time buyer mortgage amount?

Yes you can. Most mortgage lenders allow you to pay up to an additional 10% of the outstanding balance every year without incurring any penalties for ‘early repayment’.
Each lender has it’s own terms for overpaying so check the terms before you sign up with a lender.

Can anyone get a first-time buyer mortgage?

Not everyone, but most people can. It all depends on your income, credit rating and having enough money saved to afford the financial side. Even if your credit score is poor, there are still lenders that offer products specifically for that. Interest rates are higher because poor credit score present more risk to the lender, but there’s no harm in testing what’s possible if you are in that position.

Do I need a solicitor or a conveyancer?

There’s little difference between the two. A conveyancer is a solicitor that specialises in property matters, so from that point of view, a conveyancer is a specialist in the field, but that said, most solicitors will have conveyancing departments with people that do exactly the same thing. It’s really more about reputation than anything else. Do your own research and ideally, find one that is highly regarded AND local to you. It makes a difference when paperwork needs signing, if you have the option of visiting your conveyancer in person to get stuff done fast.

From experience, avoid legal representation through an estate agent. Many estate agents work with conveyancing firms and receive a commission for that recommendation. Our preference is to seek local, independent mortgage advice from an advisor with a good reputation.
If you get on well, ask them if they recommend a local conveyancer. Failing that, DYOR into who has the best reputation in your locale and compare costs.

Should I get a solicitor or a mortgage first?

This is entirely up to you. As long as you’re prepared early, that’s what really matters. An independent mortgage advisor should be able to recommend a local conveyancer with a good reputation and reasonable pricing.