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First-time buyer mortgages

Getting a first-time buyer mortgage doesn’t need to be painful if you plan well. Here are the key facts on first-time buyer mortgages, to help if you’re looking to buy your first home.

How do first-time buyer mortgages work?

1. Find out how much you can borrow

When looking for the best first-time buyer mortgage, start by working out how much money you have for a deposit, then find out how much you can borrow. You can get an initial idea by using our mortgage calculator.

2. Apply for a mortgage agreement in principle

It’s a good idea to do this before looking at properties. An agreement in principle isn’t a guaranteed mortgage offer, but it gives you a good idea of what you could buy.

Getting an agreement in principle involves a soft credit check, so your credit score won’t be affected. And it’s commitment-free, which means you don’t need to take the mortgage if you change your mind.

An agreement in principle is usually valid for up to 90 days.

3. Make a formal application for a mortgage

Once you’ve had an offer accepted on a house, you can make a formal application for a mortgage.

This will typically involve an affordability review and a hard credit check. The mortgage provider will look at your salary and other income, as well as your outgoings. Plus, they’ll check your credit history to find out whether you’re a reliable borrower.

If you opt for a variable rate mortgage or fixed-rate mortgage of less than five years, the lender will also ‘stress test’ your ability to repay your mortgage in the future. In other words, would you be able to keep up with your payments if something changed, like a rise in interest rates?

They’ll use all the information they collect on your finances to decide how much to lend you.

What is a first-time buyer?

You’re a first-time buyer if:

  • You’ve never owned a residential property either in the UK or abroad, or
  • You only own – or have only owned – a commercial property with no living space attached to it (for example, a pub with upstairs accommodation).

You’re not a first-time buyer if: 

  • You’re buying a property with someone who owns, or has previously owned, a home
  • You’ve inherited a home, even if you never lived there and it’s since been sold
  • You’re having a property bought for you by someone who already owns their own home, like a parent or guardian.

Always check with your mortgage lender if you’re not sure whether you qualify as a first-time buyer.

How much deposit does a first-time buyer need?

Generally, a first-time buyer is expected to put down a deposit of at least 10% of a property’s purchase price.

It’s possible to have only a 5% deposit and get a 95% mortgage, but there are risks in having to borrow such a large amount, as our guide to 95% mortgages explains.

The more you can save for a mortgage deposit, the more equity (or ownership) ) you’ll have in your first home. You’ll then be in a better position to get lower mortgage rates, which might mean cheaper monthly payments.

The table shows how much you’d need to save for a deposit on a £240,000 home.

Cost of property Deposit percentage How much needed
£240,000 5% £12,000
£240,000 10% £24,000
£240,000 15% £36,000

Which type of first-time buyer mortgage is best for me?

The best first-time buyer mortgage for you depends on your personal circumstances.

Here’s a breakdown of the different types of mortgages available for first-time buyers.

Fixed-rate mortgages

The interest rate on your mortgage is fixed for an agreed time – anywhere between two to 15 years, but most commonly between two and five years. A fixed-rate mortgage offers stability, allowing you to budget for a set period.

When a fixed-rate term ends, you’ll normally move to the bank’s standard variable rate (SVR) mortgage if you don’t switch to a better deal.

Standard variable rate mortgages

Set at the lender’s basic rate of interest. SVRs don’t come with discounts or reduced interest rates, and the lender can choose to change the rate of interest they charge.

Tracker mortgages

Variable rate mortgages that go up or down in line with the Bank of England’s base rate. They’re typically set at a certain percentage above the base rate.

Discount rate mortgage

Track a lender’s SVR (at a lower level) by a set amount. For example, if the SVR is 7% and the discount is 1%, you’ll be charged an interest rate of 6%. But while the level of discount won’t change, the rate of interest might.

Capped mortgage

Variable rate mortgages linked to a lender’s SVR, but with a fixed upper limit. And no matter how much interest rates rise, your payments won’t go above that limit.

Offset mortgages

Available to people who have a savings account and mortgage with the same provider. They allow you to use your savings to reduce the interest you pay on your mortgage.

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How much can I borrow with my first-time buyer mortgage?

The mortgage provider will work out how much you can realistically afford to pay back each month and give you a mortgage limit based on that information. They’ll look at:

  • Your credit rating and history
  • Your salary, along with any additional income
  • Your outgoings
  • How much deposit you have.

As a first-time buyer, you’ll also need to consider how an increase in interest rates might affect your ability to pay back your mortgage. Only borrow what you can realistically afford to repay, ideally leaving you with money left over for savings or unexpected expenses.

How to get a mortgage as a first-time buyer

Start by getting an agreement in principle (AIP) from a mortgage provider to get an idea of how much money you can borrow for your first home.

When you’ve found your dream home, apply for a mortgage and the provider will confirm how much they can definitely lend you, after checking your credit history, and income and outgoings.

You can expect a final decision on your mortgage application in two to six weeks.

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Which schemes are available to help first-time buyers?

The government supports a range of schemes for first-time buyers.

  • Lifetime ISA – if you’re aged between 18 and 40, the government could add a 25% boost to your savings (up to a maximum boost of £1,000 per year) until you’re 50.
  • Right to buy – also known as ‘right to acquire’, this gives tenants who rent from a council or local housing association the chance to buy the home they live in.
  • First Homes scheme – available to first-time buyers over 18 years old, this scheme offers new-build homes for 30-50% less than their market value.
  • Shared ownership – allows you to co-own a property with a landlord (typically a council or housing association).
  • Mortgage guarantee scheme – offers the chance to get a mortgage with a 5% deposit. The scheme runs until 30 June 2025.

What else should I consider when getting a mortgage for my first home?

We’ve covered the main points for first-time buyer mortgages, but here are a few other things to bear in mind:

Monthly repayments

After you get the keys to your new home, you’ll need to start paying off your mortgage loan. Be aware that the first payment may be higher than subsequent payments as it includes interest for the days between the date you moved in and the end of that month, along with your standard monthly payment for the following month.

Budgeting

Apart from your monthly mortgage payments, there are other costs when buying a first home. These include survey costs, solicitor’s fees and buildings insurance. You can find out more about these in our FAQs below. And don’t forget to factor in your regular monthly household bills that will need paying alongside your mortgage, such as gas and electricity, broadband, and food shopping.

Economy

Events that affect economic growth, such as the cost-of-living crisis, can have a big impact on the house-buying market. Mortgage providers may tighten their lending criteria or increase the deposit amount they require. During the pandemic, interest and mortgage rates fell to historic lows, but the recent cost-of-living crisis has led to soaring inflation and mortgage rates rising again.

Compare first-time buyer mortgages

We compare mortgages from some of the market’s leading financial providers, to help you find the best first-time buyer mortgage rates.

If you prefer to speak to someone about your options, we’ve partnered with London & Country Mortgages Ltd (L&C)[1] to provide you with fee-free mortgage advice. Get in touch with one of their advisers here.

Go to L&C mortgages

About London & Country Mortgages Ltd (L&C)

[1] London & Country Mortgages Ltd (L&C) are a multi-award winning mortgage broker with over 20 years’ experience in helping people secure their perfect mortgage. Advice is provided by L&C, who are authorised and regulated by the Financial Conduct Authority (143002).

L&C are not part of Compare the Market Limited. Compare the Market receive a % of the commission that our partner London & Country earns. All applications are subject to lending and eligibility criteria.

L&C will not charge you a broker fee should you decide to proceed with a mortgage.

Author image Alex Hasty

What our expert says...

“It’s often worth waiting until you’ve built up your credit history to apply for a first-time buyer mortgage. If you don’t have a proven track record of repaying loans and paying bills on time, mortgage providers might be unwilling to lend to you as they can’t be confident you’ll pay them back. You should also make sure you’re registered on the electoral roll, as lenders like to see proof of your address.”

- Alex Hasty, Insurance comparison and finance expert

Frequently asked questions

What is a guarantor mortgage?

With a guarantor mortgage, a close family member or friend agrees to cover the mortgage repayments if you can’t.

A guarantor must be a homeowner and be prepared to put their own home at risk if your mortgage repayments aren’t paid.

This type of mortgage can be useful if you have little or no deposit, are struggling to find a suitable lender or want to increase the amount you can borrow for a house you wouldn’t normally be able to afford.

What is shared ownership?

The government’s Shared Ownership scheme lets you buy a share of a property owned by a housing association. You then pay them rent on the remaining share of your home.

You could be entitled to join a shared ownership scheme if your household earns less than £80,000 a year (£90,000 if living in London) and you’re a first-time buyer.

What is a joint mortgage?

A joint mortgage is a mortgage you take out with someone else. This could be a family member, friend, husband or wife, or partner.

Both people are responsible for a joint mortgage, which means you’ll both be liable for any missed repayments or making up the balance if one of you is unable to pay.

What is a loan to value ratio (LTV)?

A loan to value (LTV) ratio is the amount you can borrow on a mortgage compared to the overall cost of a property. It’s usually shown as a percentage.

Mortgage lenders usually have a maximum LTV ratio they’re willing to offer you. For example, if you’re looking to buy a property worth £200,000 and the lender is only willing to lend you 90% of the property’s value, you’ll get a mortgage of £180,000 and you’ll need a deposit of £20,000.

Should I buy a freehold or leasehold for my first home?

It’s up to you whether you buy a freehold or leasehold property.

Freehold means you own the property and the land it sits on. If you buy a house, it will usually be freehold.

With a leasehold, you own the property (but not the land it’s on) for the length of the lease agreement. Most flats and maisonettes are leasehold, and you’ll have to pay fees including ground rent and service charges.

Read more on the pros and cons in our guide to freehold versus leasehold properties.

What other costs are there to consider when buying a first home?

Costs and fees to consider include:

  • Stamp duty – first-time buyers in England and Northern Ireland don’t have to pay stamp duty on the first £425,000 of properties costing £625,000 or less.
  • Arrangement fee – this is the amount you pay to take out a mortgage.
  • Valuation fee – your mortgage provider will carry out a valuation of the property. Valuation fees vary among providers.
  • Survey fees – the cost of surveys varies, depending on the level of detail you want.
  • Broker fees – if you go through a mortgage broker, you may need to pay them a fee. We’re partnered with London & Country Mortgages Ltd (L&C)** to provide fee-free advice to our customers.
  • Legal costs – find out more about the legal expenses relating to a property’s sale in our guide to conveyancing.

What’s the difference between repayment and interest-only mortgages?

A repayment mortgage is where you pay back both the capital (the amount you initially borrowed) and the interest with each monthly payment. It means that by the time your mortgage ends, you’ll have paid off the total loan.

An interest-only mortgage pays only the interest on your loan each month, but none of the original capital borrowed. At the end of the mortgage term, you still owe the lender the original loan and you’ll need to show how you intent to pay that back.

Since the financial crash of 2008, interest-only mortgages are rarely offered to first-time buyers.

Should I consider a longer-term mortgage?

Many first-time buyers think about a longer-term mortgage because it lowers the amount you pay back each month, spreading the cost over a longer period of time.

While the standard length (or term) of a mortgage is 25 years, an increasing number of mortgage lenders are offering longer-term mortgages – some up to 35 years.

Be aware that while your monthly repayments will be lower with a longer-term mortgage, you’ll be paying back a lot more in interest overall.

The content written in this article is for information purposes only and should not be taken as financial advice. If you require support on the products discussed here, please speak to your bank/lender or seek the advice of an independent professional financial advisor. We also have more information on our Customer Support Hub.