Buying your first home explained

As exciting as the prospect of becoming a homeowner is, there’s a lot to consider, not least of all getting a mortgage in place. That’s why we’ve created a guide to help first-time buyers get onto the property ladder.

Please note: the information in this article was correct at the time of publication on 8 November, 2021 but, because of the impact of COVID-19, things can change. We aim to keep this page updated, but please check with GOV.UK to confirm any details. 

As exciting as the prospect of becoming a homeowner is, there’s a lot to consider, not least of all getting a mortgage in place. That’s why we’ve created a guide to help first-time buyers get onto the property ladder.

Please note: the information in this article was correct at the time of publication on 8 November, 2021 but, because of the impact of COVID-19, things can change. We aim to keep this page updated, but please check with GOV.UK to confirm any details. 

Daniel Evans
Head of Mortgages
9
minute read
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Posted 8 NOVEMBER 2021

Please note: The information in this article was correct at the time of publication on 8 November 2021 but, because of the impact of COVID-19, things can change. We aim to keep this page updated, but please check with GOV.UK to confirm any details. 

How much deposit do you need to buy a house?

To get a mortgage, you’ll usually need to save at least 5% of the price of the property you’d like to buy to put down as a deposit.

For example, if the home you’re interested in costs £200,000, you’d need to put at least £10,000 (5%) of your own money towards it, with the rest borrowed from a mortgage provider. The more you can save for a mortgage deposit the better, as you may be able to benefit from cheaper interest rates. 

Lenders had become less willing to offer mortgages to borrowers with a 5% deposit, in light of the coronavirus pandemic. But the new government-backed mortgage guarantee scheme, announced in the 2021 Budget, is designed to encourage more lenders to offer 95% mortgages, helping people buy a home up to the value of £600,000 with just a 5% deposit. The scheme is due to run until December 2022.

It is still possible to find 100% mortgages, but these are usually guarantor mortgages, where a family member or trusted friend guarantees they will make the payments if you can’t. This is a big ask, because it means their home could be repossessed if they don’t. 
 
To help you work out how much you could afford to borrow based on the size of your deposit and income use our mortgage calculator. But don’t forget you’ll also have other costs that you’ll need to be able to factor into your sums. Let’s take a look at how these can add up. 

What are the costs involved with buying your first home?

We all know that buying a house is one of the biggest purchases you’re ever going to make. But you might not be clued up on all the additional costs involved in buying a new home, which can add up to another 10% on top of the house price. Here’s a quick rundown of what these extra costs might be, to help you budget. 

Home survey

You might want to  get the house checked to make sure it’s structurally sound before you take the plunge and buy it (see the survey section below for more details). 

Mortgage fees

There are mortgage costs and fees you may need to pay when you take out a mortgage, although not all lenders charge them. A valuation fee costs between £150 and £1,500, and is based on the value of your new home. A mortgage arrangement fee can be anything up to £2,000. If you feel you need help choosing your mortgage and decide to use a broker, be aware that they could charge up to £1,000 (although the average is £500). 

Legal fees

You’ll need a solicitor or conveyancer to help with the conveyancing (see below for more details). 

Stamp duty

Stamp duty is a tax on transactions that involve property or land. It’s payable on property purchases in England and Northern Ireland. Scotland and Wales have their own systems. For first-time buyers in England and Northern Ireland, stamp duty is normally only payable on properties worth more than £300,000. 

You can find out exactly how much stamp duty you’ll have to pay, no matter where in the UK your new home is located, with our stamp duty calculator

What other costs might you have to budget for?

Once you’ve bought your home, the costs don’t end there, unfortunately. So, remember to allow for some or all of these when you’re working out how much you can afford to borrow. 

  • Buildings insurance. This is usually a condition of your mortgage and you’ll need to have it in place by the time you exchange contracts. You may also want contents insurance for your possessions. 

  • Professional movers, unless you know someone with a van who can help you move.  Make sure your stuff is protected by insurance during the move.  

  • Buying appliances and furniture for your new home.

  • Maintenance work, DIY or a general spruce up of your new place.

  • Getting connected to a broadband provider. For more information, check out our guide to comparing broadband packages.

  • Paying for mail to be redirected to your new address.

The list above is certainly not exhaustive, but gives you a general idea about the sort of things you’ll need to account for. It’s a good idea to keep these costs in mind throughout the whole buying process and have a contingency fund in place to cover them.

What do you need when applying for a mortgage?

Mortgage providers are lending their customers large quantities of money, over long periods of time. Because of the risk involved in that, they’ll want to understand your creditworthiness. That means asking for details about your income and outgoings, and checking your credit rating. 

Before you even contact possible mortgage providers, it might be a good idea to check your credit rating with a credit reporting agency to make sure everything is looking good. 

Your mortgage provider will ask to see:

  • Payslips from at least the past three months
  • Your P60 form
  • Three to six months of statements from your current accounts
  • Statements from your savings accounts
  • Information regarding any benefits received
  • Two to three years’ worth of accounts or evidence of your earnings on a SA302 tax calculation form from HMRC, if you’re self-employed,
  • Your self-assessment tax return, if you have more than two jobs or are self-employed
  • Recent utility bills
  • Proof of identity, like your passport 

If you compare mortgages with us, we’ll show you all the types of mortgage available, how much your monthly repayments could be and the fees you might have to pay, to help you decide on a mortgage that’s right for you. 

Read our guide to first-time buyer mortgages to learn about all the key stages of getting a mortgage.  

All applications are subject to status and lending criteria and are based on your individual circumstances. Applicants must be 18+ and a UK resident.

What type of home survey should you choose?

A home survey will give you expert advice on the condition of a property. You can choose from three levels of survey, and it’s best to select based on the condition of the property you want to buy, rather than the price of the survey. The size, location and nature of the property may also affect the cost once you’ve chosen the type of survey you want, so make sure you get quotes before you book.  

RICS Home Condition Report (HCR) This is the most basic survey and uses simple ‘traffic light’ ratings on key areas of the property. It’s best suited to conventional properties and newer homes, and costs around £400 but may be more. 

RICS HomeBuyer Report (HBR) This is most suitable for conventional properties that are in a reasonable condition. You can opt for a survey only, which includes all the features of the HCR but will help you find out if there are any structural problems, or a survey and valuation that also advises on problems that could affect the value of the property. Costs for an HBR costs start at around £450. 

RICS Building Survey This is a particularly good idea if you’re buying an older house or one that needs repairs. It’s the most comprehensive survey available and provides detailed advice on repairs, although it doesn’t usually include a valuation. Starts at around £600 but again could be higher – up to £1,500. 

Why is a solicitor needed when buying a home?

When you’re buying your first home, you’ll need a solicitor or licensed conveyor to handle all the legal aspects. This involves drawing up contracts, registering the property with HM Land Registry and organising the payment of stamp duty. The legal fees can vary but, typically, they’ll be between £850 and £1,500 (including VAT). They may be more if the property has a leasehold or complex title. 
 
Your solicitor or conveyor will also do local searches to check whether there are any problems with the property you intend to buy and the area around it, and to see if there are plans for any nearby developments. The average cost for these searches is £250 to £450 on top of any legal fees.  

What should you look out for when buying your first home?

Buying a house is a big deal, especially when you’re a first-time buyer. In fact, in August 2021, the average price for a first home in the UK was £264,000.

It’s important to remain level-headed throughout the buying process and to think carefully before making any decisions. Fortunately, we know some of the pitfalls awaiting the first-time buyer and we’re happy to share them with you.

When viewing your potential first home, it’s easy to look at it through rose-tinted glasses and you might fail to spot things that can cause serious problems later on. If you have a family member or friend who’s in the building trade, it may be a good idea to take them along to view the property. They could see issues that you miss, and you can even use these problems as bargaining tools to drive down the price of the house.

Some mortgage lenders won’t lend on particular types of property, so you may find it harder to get a mortgage for a flat above a shop, or high-rise properties or homes made from non-standard construction. It may limit your choice of mortgage provider if you opt for this type of property. 

Some things to look out for include:

  • Damp and mould
  • Structural issues, such as cracks in the brickwork or other signs of subsidence 
  • Faulty wiring and leaking pipes 
  • Chipped and cracked plaster 
  • How long it takes for hot water to come through, and whether there is good water pressure 
  • Anything that will be expensive to repair

While it’s best practice to ensure that the home you’re buying is safe and doesn’t need hugely expensive repairs, you also need to be realistic. You may need to settle for certain things – poorly laid carpet or ugly wallpaper may not be your first choice, but they’re certainly things you can fix once you’ve settled into your mortgage payments. As long as your basic needs are met and the house is safe, don’t write it off. 

What else do I need to think about?

If you’ve seen the home of your dreams, you’ll have to consider how much you want to pay for it and make an offer, so you are not paying any more than you need to. You may negotiate on the price, especially once you’ve seen what the survey says. Once your offer is accepted, you’ll need to get things moving with your mortgage and your solicitor.  
 
One important thing to know is that you should sort out your home insurance from when you exchange contracts. You need to be covered should anything happen to the property before you even move in. You might want to sort out life insurance too. Generally mortgage lenders want to see this in place, but you don’t have to buy it from them.  
 
When you know when you are likely to move in, you might want to try to find a good deal for your energy and broadband, especially if money is likely to be tight to start with. 

How can you get a great deal on your first-time buyer mortgage?

There’s a lot to think about when it comes to buying your first house, but you can reduce the fuss of finding a mortgage provider by visiting our website and comparing mortgages from some of the most popular providers in the UK. 

First-time buyer facts and statistics 

  1. The average UK house price in July 2021 was £256,000. This is £19,000 higher than the same time last year. The average for England was even higher at £271,000, while for Scotland it is £177,000 – a record at the time – and for Wales £188,000. 
  2. By August 2021, the average UK house price had increased further to £264,000, which is £25,000 more than the same time the previous year. 
     
  3. UK average house prices had increased by 10.6% over the year to August 2021, up from 8.5% in July 2021. 
     
  4. In the government’s most recent English Housing Survey, it was found that 71% of first-time buyers paid a deposit of less than 20%. Approximately 47% of first time buyers with a mortgage had a repayment period of 30 years or more and 49% had a 20-29 years. 
     
  5. 7% of first-time buyers bought their first home outright between 2019 and 2020.
  6. The same research revealed:

    a. 85% of first-time buyers used savings towards purchasing their home
    b. 28% were helped by family or friends
    c. 6% used an inheritance
  7. The percentage of first-time buyers who used savings towards purchasing their home increased between 2017 and 2020, going up from 76% to 85%.
  8. However, the percentage of first-time buyers who were given a gift towards a deposit or loan from family or friends decreased within the same time period, going down from 39% to 28%. 
  9. 60% of first-time buyers purchased their home jointly with a partner or spouse. 39% purchased their home in their name only. 
  10. According to Property Mark, first-time buyers made up 28% of sales in August 2021, up from July’s figure of 20%.  

Frequently asked questions

Can you buy your first home if you have bad credit?

Poor credit doesn’t necessarily put an end to your dreams of getting onto the property ladder, although there may be certain difficulties to navigate. If your credit rating is poor, your mortgage provider will typically ask for a large deposit. Charges and interest rates may also be higher. If you know you are planning on buying a house, see what you can do to improve your credit score in the meantime.

Bad credit mortgages, also known as subprime mortgages, do have one advantage though. After continuously paying on time, you should see your credit rating improve. As long as the rest of your finances are in order, you’ll probably be in a position to switch mortgages eventually. 

How long does the house-buying process take?

That’s the million-dollar question. It’s not easy to give a definitive answer because it’s different for everyone. Broadly speaking, the whole process, from starting to look for a home to moving in, could take up to six months if you’re a first-time buyer. One thing you’ll learn is that you have to be patient, as delays inevitably happen when there are so many processes involved. 

What is an agreement in principle?

An agreement in principle, or mortgage in principle, lets you know how much you could borrow to buy a property without undergoing a full credit check. It can help with house-hunting as it gives you an idea of what you could afford and also shows estate agents and sellers you’re a serious buyer. But it’s by no means a guarantee that you’ll be approved for a mortgage. For that, you’ll have to go through a full application process. 

When do you pay the deposit?

It’s towards the end of the house-buying process. The deposit is paid to the seller’s solicitor by your solicitor, usually before you exchange contracts. So you’ll need to make sure you’re in a position to transfer the funds to your solicitor for this. 

When do you pay stamp duty?

If you have a solicitor, agent or conveyancer, they’ll usually file your return and pay the tax you owe on the day of completion and add the amount to their fees. They’ll also claim any first-time buyer relief if you’re eligible for that. If not, you will have to complete the tax return and pay the money yourself.

What help is available for first time buyers?

This will depend on where you are buying your first home.  There are Help to Buy schemes available via the government for England and each of the devolved authorities. There may also be some stamp duty reliefs too. 

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