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.
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.
In this article...
- First-time buyer facts and statistics
- How much deposit do you need to buy a house?
- What are the costs involved with buying your first home?
- What do you need when applying for a mortgage?
- How can you avoid first-time buyer regret?
- What else do I need to think about?
- Glossary of terms for first-time buyers
First-time buyer facts and statistics
House price stats
How much is the average house in the UK?
- The average UK house price June 2022 was £286,000. This is £20,000 higher than the same time the previous year. The average for England was even higher at £305,000 (a 7.3% increase year-on-year), while for Scotland it was £192,000 (11.6%), and for Wales £213,000 (8.6%).
- UK average house prices had increased by 7.8% over the year to June 2022.
How much are first-time buyers able to pay?
- In the government’s most recent English Housing Survey, it was found that 72% of first-time buyers paid a deposit of less than 20%. Approximately 62% of first-time buyers with a mortgage had a repayment period of 30 years or more and 33% had a 20-29 years.
- 5% of first-time buyers bought their first home outright between 2020 and 2021. The same research revealed:
- 91% of first-time buyers used savings towards purchasing their home
- 23% were helped by family or friends
- 6% used an inheritance
- 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 23%.
First-time buyer stats
How many people are buying their first house?
- The number of first-time buyer transactions in 2021 was estimated to be 408,300, the highest level since 2002, when 531,800 households took their first step on to the housing ladder. The same research revealed that:
- Transactions in 2021 are a 35% increase on the 303,000 transactions in 2020
- First-time buyers accounted for half of house purchases with a mortgage in 2021
When do people buy their first house?
The national average age for first-time buyers rose to 32 in 2021 from 29 a decade earlier, and was above 30 for every region:
- The average age remains highest in London at 33
- In Wales, it’s 31
- In the north-east of England, it’s 30
- In the north-west of England, it’s 31
How much are first homes costing people?
- Buyers paid an average of £281,900 for their first home in 2021, which is down from £294,500 in 2020, but 13% higher than the average pre-pandemic price. In terms of how they feel, the same research showed:
- 73% wish they’d started saving sooner
- 56% of first-time buyers are reliant on family support
- 64% of those saving up worry they will never be able to afford to get on the property ladder
- The average income of a first-time buyer (buying solo) has risen from £45,900 in 2019 to £50,300 in 2020, and to £50,800 in 2021.
- The average total income of joint first-time buyers has risen from £63,800 in 2019 to £72,200 in 2020, and dropped slightly to £70,500 in 2021.
How much do people know about buying their first home?
- Research has revealed that over half (55%) of budding or existing first time buyers confess they don’t know how to go about the process of buying their first property.
- 39% said they didn’t know they would need to factor in solicitors’ fees.
- 54% were unaware that they might need to pay stamp duty, if not otherwise exempt.
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 this will improve your loan to value (LTV) ratio, which means you may be able to benefit from cheaper interest rates.
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 your own home 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.
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).
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 mortgage broker, be aware that they could charge up to £1,000 (although the average is £500).
We’ve partnered with London & Country Mortgages Ltd (L&C)** to provide you with fee-free mortgage advice. Get in touch with one of their advisers here.Go to L&C mortgages
You’ll need a solicitor or conveyancer to help with the conveyancing (see below for more details).
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 £425,000.
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 own 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. During your mortgage application, they’ll run an affordability check on you, to review your eligibility for a mortgage. They’ll ask for details about your income, outgoings and check your credit rating. If you have outstanding debts on credit cards or there are other concerns about your credit history, you may find it harder to be accepted for a mortgage or need to pay a higher interest rate.
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. These include fixed-rate mortgages (usually two-five years) or variable rate mortgages such as discounted or tracker rates. You can select your repayment type (repayment or interest only), and the length of the mortgage term. We’ll show you how much your monthly repayments would be and the fees you would 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 offer.
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.
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.
How can you avoid first-time buyer regret?
You're not alone if you feel worried about making the wrong decision when buying your first home.
Indeed, buying your first house is a huge period of change and transition. It’s natural to feel some stress and worry. But you shouldn’t let first-time buyer fear hold you back from owning a home. There are a few things that you can do to improve your confidence in buying a home:
- Make sure that you take your time when choosing your home. Don't rush into anything just because you're anxious to get into the housing market. It can feel like there’s a lot of pressure to get on the housing ladder, especially when the market is busy, but it's important to find a place that you really love and that meets the majority of your needs. Being clear on what you’re looking for in a home can help focus your property search.
- Be realistic about what you can afford. It's easy to get caught up in the excitement of buying a home and overspend on your budget. Make sure to stick to what you can realistically afford so that you don't end up viewing properties you can’t buy. When offering on a property, you should have a clear understanding of the property’s value and how much you are willing to pay for it, especially if it goes for above the asking price. It can be easy to get caught up in the excitement of a bidding war and you don’t want to struggle afterwards with mortgage repayments you can’t keep up with.
- Explore the local area. It’s important to know where you want to live and what the area is like. You can drive, walk or cycle past properties you’re interested in to see them from the outside and explore nearby streets. To get a good feel for the neighbourhood, go at different times of the day. Not only will you see what local traffic is like, but you should get an idea of how considerate the neighbours are to one another.
- Know what work you’re willing to do – and what you’re not. As discussed, getting a home survey will give you expert advice on the condition of a property, but it’s up to you to decide what factors are deal breakers. You may decide to negotiate on the price of the house if costly issues are highlighted by a survey, or you may decide to walk away from the purchase.
- Remember that it's okay to change your mind. If you start to feel like you made the wrong decision or something is raised by a survey. You can pull out of the sale and move on to something that better suits your needs.
Understanding common issues with homes
Whether you’re paying for a survey, asking a professional in the building trade to view the home, or relying on your own expertise, it’s best practice to ensure the home you’re buying is safe and doesn’t need hugely expensive repairs.
There are common issues to be aware of when buying a home. Some of these may worry first-time buyers, especially if they don’t have any experience in building or construction trades, but all buyers 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. There are some issues, which you may come across on your property search that could include the following:
- Moisture damage or damp. One of the most common problems identified in home surveys is moisture damage. This can often be caused by leaks in the roof or walls, or by poor drainage around the property. It can also be caused by poor airflow and ventilation – particularly in rooms like the bathroom or kitchen. Moisture damage can lead to mould growth and other problems, so it's important to understand any potential moisture issues before going ahead with a purchase.
- Structural problems. Home surveys can sometimes identify structural problems with the property, such as subsidence or movement of the foundations. These sorts of problems can be very expensive to put right, so it's important to be aware of them.
- Homes of unusual construction. Any building not of standard brick and mortar construction may be considered unusual – for example, homes built of wattle and daub, cob, concrete or timber frames. You may encounter difficulties when trying to buy a non-standard construction home, notably getting a mortgage and buildings insurance.
- Electrical issues. Another common problem identified in a home survey is electrical defects. This could include anything from outdated wiring to electrical faults. Electrical defects can pose a fire hazard, so would need to be addressed.
- Issues with guttering and roof tiles. It’s always worth checking for loose tiles, moss growth, blocked guttering and ripped flat roof felt.
- Open fireplaces. While they may be on many homebuyers’ wish lists, there are factors you need to check and test before purchase. The property may come with a valid certificate of sweeping which would show when the chimney was last swept, and inspected.
Other things to look out for include:
- Dated decor, appliances or fixtures and fittings
- Rotten window frames
- A dated boiler or heating system
- Cracks in the brickwork
- Loose 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
- Anti-social behaviour or noisy and disruptive neighbours
- Anything that will be expensive to repair
Understanding common legal considerations
When buying a home, it isn’t just the structure and interiors which need to be reviewed. Other legal things that may crop up include:
- Leaseholds. If you buy a flat or apartment, chances are this will be leasehold. Some new-builds are also sold as leasehold properties. The lease outlines the rights and liabilities between you (the leaseholder) and the landlord of the building (the freeholder). It covers matters such as the length of the lease, ground rent, repairs and service charges. Important questions to answer include:
- How long is the existing lease? If the term drops below 80 years, you may need to get a lease extension while you own the lease which would likely involve solicitors’ fees.
- How much is the ground rent and service charge? You need to be aware of what you would be charged while owning the lease, on top of your mortgage payments.
- Any other unusual restrictions in the lease.
- Maintenance fees. Leasehold properties, new-build plots on estates or houses within a gated community may be charged yearly maintenance fees. This goes towards the upkeep of the building, surrounding green areas and roads.
- Rights of way. One of the things you need to consider when buying a house is any existing rights of way. This means that you have the right to pass through someone else's land in order to get to your own property. Or they have a right of access across your property to get to theirs. As part of the conveyancing process, the legal title will be checked to determine if it is ‘good and marketable’ – including whether the property has sufficient access, and has a right of way that enables access to and from the property.
- Flying freeholds. Flying freeholds are a part of a property which underlies or overhangs another freehold property. For example:
- A room above a shared passageway
- A room beneath or above a room of a neighbouring property
- A basement that extends underneath another property
- A balcony that protrudes over another home
Flying freeholds are reasonably common, and most people living with them have little to no problems, but it is important to consider the legal implications. You will probably need specialist cover, which is usually referred to as flying freehold indemnity insurance.
- Tree protection orders. You may have fallen in love with the trees around a potential home, but large trees with unnoticed rot issues can cause problems and potentially damage to structures, pipes and utility lines. What’s more, you mustn't assume you can just cut down any tree. Some trees in the UK are legally protected, meaning you will need the council's permission to fell or prune them. A solicitor's local search should show if there are any Tree Preservation Orders in place.
- Flood zones. Building and contents insurance in flood zones is hard to find and expensive, especially if the property has flooded before. This can also hinder your chances of getting a mortgage.
- Parking permits. If a home doesn’t come with off-road parking, you may want to check whether it comes with a parking permit (and at what cost) before making an offer. A permit will allow you to park in a designated area without having to worry about receiving a ticket. However, parking permits can also be difficult to obtain and are often only available to residents who live in specific areas. It’s also unlikely that you’ll be able to park right outside your home every time, so you should also factor this in.
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.
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.
Glossary of terms for first-time buyers
Conveyancing: Conveyancing is the legal process of transferring ownership of a property from one person to another. It’s typically handled by solicitors or licensed conveyancers. The first step in the conveyancing process is usually to obtain a property valuation, which will help to determine the market value of the property. Then a solicitor or conveyancer can begin the legal work involved in transferring ownership, including conducting searches, preparing contracts, and arranging for the transfer of funds. Once all of the necessary paperwork has been completed, the final step is to attend the completion, at which point the keys to the property will be handed over to the new owner.
Freehold property: One of the most common types of property ownership is known as freehold. This means that the owner of the property has an outright ownership interest in the land on which the property is built. This type of ownership gives the owner a great deal of control over what can be done with the property and how it can be used, within the bounds of law. Additionally, freehold owners have the right to pass on their interest in the property to future generations.
Leasehold property: Another type of property ownership is leasehold. When you own a leasehold property, you only own it (but not the land it’s built on) for a fixed period of time. The length of leases varies, but they are typically long-term between 90 and 999 years. During this time, you'll have to pay ground rent to the landlord, as well as any service charges for maintaining common areas. Most flats are leasehold. It's important to check the terms of your lease before you buy, as some leases can be quite restrictive. For example, you may not be allowed to make certain changes to the property or sublet it without the landlord's permission.
Share of freehold: If you buy a property with a share of freehold, you own your property leasehold as well as a share of the freehold for the building your property is in and the land. This is common with flats – owners with a share of freehold would each own the lease for their home, as well as holding a share of the freehold for that entire building and the land it sits on.
Interest-only mortgage: An interest-only mortgage is a type of home loan that requires the borrower to only make payments on the interest for a set period of time. They can be beneficial for borrowers who expect their income to increase over time or who plan to sell their home before the end of the interest-only period. However, these loans also carry some risks. Because borrowers are not paying off the balance of the loan during the interest-only period, they may end up owing more on their mortgage than their home is worth if property declines in value. Also, as part of the application process, a lender will want to check how you’ll repay the balance at the end of the term.
Repayment mortgage: A repayment mortgage is a type of home loan in which the borrower agrees to make regular payments toward both the balance and the interest accruing on the loan. The majority of home loans are repayment mortgages, as they allow borrowers to gradually build equity in their property while also paying down the debt.
Life insurance: At its most basic, life insurance is a contract between an insurer and a policyholder. The policyholder pays premiums and, in exchange, the insurer agrees to pay a sum of money to the policyholder’s beneficiaries in the event of the policyholder’s death. There are different types of life insurance, but all policies can be an essential part of financial planning, providing peace of mind in knowing that your loved ones will be taken care of in the event of your death.
Exchange date: The exchange date is an important milestone in the conveyancing process. It is the day on which the sale of a property is legally completed and the ownership transfers from the seller to the buyer. In order to exchange contracts, both parties must be ready to go ahead with the sale and have signed and returned the relevant paperwork. Once exchange has taken place, neither party can back out of the sale without potentially incurring financial penalties.
Completion date: This is the date on which the purchase of the property will be finalised and the keys will be handed over to the buyer. The completion date is usually set a week or two after the exchange of contracts, which is when both the buyer and seller are legally committed to going ahead with the sale, but exchange and completion can happen on the same day.
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.
Alex Hasty - Insurance comparison and finance expert
At Compare the Market, Alex has had roles as Commercial Associate Director, Director of Trading and Director of Growth. He’s currently responsible for the development and execution of Comparethemarket’s longer-term strategic options, ensuring the right breadth of products and services that meet customer needs.