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First Time Buyer Mortgage Guide

Tamires Criscio
Tamires Criscio
  | Edited by Tom Church
Updated 4th August 2021

Are you a first time buyer? Buying your first property in the UK is an exciting time, but it also can be confusing. Latest Deals is here to help clarify any doubts and questions about it.

What is a first time buyer? 

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First, it’s important to understand what a first time buyer is. 

To be one, you must have never owned a residential property in the UK or abroad. If you own or have owned commercial property, it must not have any attached living space. 

If you buy a property with someone who owns or has owned a house, you aren’t a first time buyer.

If you have inherited a residential property or part of it, you aren’t a first time buyer. 

IMPORTANT NOTE: To make sure you are a first time buyer, always check with a mortgage broker/adviser. They will be able to help you understand what your situation is and how to proceed accordingly. 

How to Get a First Time Buyer Mortgage

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How do you apply for a first time buyer mortgage? The process of getting a mortgage loan is similar for all types of buyers. Latest Deals has a complete guide on how to get a mortgage, with a step-by-step process to make things easier for you.  

You will be able to get a mortgage if you can afford a mortgage deposit, usually around 10% of the property’s value, and how healthy your financial situation is.

The more stable and reliable your finances are, the better your chances of getting a mortgage. 

You need to show the mortgage lender that you are able to pay your monthly mortgage repayments without any problems for the next 25 years. 

Read more to learn what a mortgage is and how you can increase your chances of getting a mortgage.  

First time buyer deposit 

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The first and most important step is having a deposit. Latest Deals also has a complete guide about mortgage deposits, where you can learn how much deposit you need for a mortgage.

In the UK, first time buyers are expected to give a 10% mortgage deposit, but in some cases, they can give a 5% mortgage deposit or will need to give a 15% mortgage deposit. This depends on each case and its circumstances. 

IMPORTANT NOTE: If you are lucky enough to have family members or friends that can help you with your mortgage deposit, you can use the money. 

Most mortgage lenders will require a letter proving that the money was given as a gift and doesn’t need to be returned. 

Also, mortgage lenders have different policies on how much money you can use as a gift because they want to make sure you are able to afford your mortgage without any external help. 

What is the best first time buyer mortgage? 

The best type of mortgage for a first time buyer is the one that fits with your needs. 

Everyone’s financial situation is different; therefore, only you can decide which type of mortgage works best for you. 

Keep in mind that as a first time buyer,  it is highly recommended to talk with a mortgage broker/adviser who will tell you, based on your personal information, what is the best mortgage for you. 

There are many types of mortgages, such as repayment mortgage, Interest-only mortgage, fixed-rate mortgage, variable mortgage, flexible mortgage, offset mortgage, 95% mortgage, 100% mortgage/guarantor mortgage and others.

How much can I borrow as a first time buyer? 

The amount of money you can borrow will depend on several factors.

When you apply for a mortgage, the mortgage lender will check your financial situation to see if you qualify for one. 

They usually check: how much deposit you have, what your employment status is, how much your income is, what your credit score is, how much you can afford to pay considering your monthly outgoings and commitments, if you already have another loan or debts, and others. 

The more positive your financial situation, the more likely you are to borrow more money. 

IMPORTANT NOTE: It’s very important to take into account the change of interest rates, as they might increase your monthly repayments, making your payments more expensive than expected. 

When should I apply for a mortgage as a first time buyer?

Before applying for a first time buyer mortgage, you should apply for an Agreement in Principle (AIP). 

This works like a mortgage “test-drive” and gives you an idea of how much money you could potentially borrow and how much you can pay for a property. Once you have an AIP, you can start looking for properties and then apply for a first time home mortgage.  

Learn more about how to get a mortgage here. 

Stamp duty for first time buyers

Stamp duty is a type of tax. You have to pay this when you buy a property above a certain value. The amount of stamp duty that you have to pay will vary depending on the value of your property and where the property is located in the UK.  

First-time buyer Government scheme

In the UK, the government creates schemes to help first time buyers. The most well-known one is the Help to Buy Scheme. 

In this scheme, you can give a 5% deposit and get a 20% government equity loan to help to buy a property. Then you can apply for a 75% mortgage to afford the rest. 

Unfortunately, this scheme is not always available, and it’s restricted to some cases.

We also have a full guide about the Help to Buy Scheme. 

IMPORTANT NOTE: There are other government schemes available, such as The mortgage guarantee scheme, Shared Ownership, First Homes, Right to Buy, Help to Build and others. They all have their own eligibility criteria.

The Lifetime ISA for first time buyers

The  Lifetime ISA account is a savings scheme to help first time buyers afford their mortgage deposit. For every £4,000 saved in one year, the government gives a maximum bonus of £1,000 per year. There are some rules and conditions you must follow when using this scheme, learn more about them here. 

IMPORTANT NOTE: If you aren’t a first time buyer, you won’t be able to use the money for a down payment, but you can use it for retirement.

How to choose a property as a first time buyer 

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When choosing a property as a first time buyer, you need to keep in mind different factors such as: 

  • Location: Where do you want to live? Do you need to be close to work? Are there good schools/nurseries? 
  • Amenities: What do you need to have around your property? Good transport links? Supermarkets? Coffee Shops? Restaurants? Hospitals? 
  • Condition: Home improvements are usually more expensive than expected. If you can afford a significant renovation, it’s okay to buy a property that demands more care. If not, go for one that you can move in without hassle. 
  • Size: How many rooms do you need? How many bathrooms? Do you need parking or a garage? Do you want a smaller/bigger garden? 
  • Property type: There are two types of properties: new builds and existing property, both have advantages and disadvantages, and it’s up to you to decide what is the best option for you.

You also need to visit the property at different times of the day to make sure you get the full picture of what to expect living there. The more problems or issues you notice at this stage, the better decision you will make. 

You probably will visit more than one property, so it's essential  to keep track of them. Create a spreadsheet and take pictures and videos of the properties. Try to ask as many questions as possible in each and every visit. 

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

There are many costs to take into account when buying a first home: 

  • Deposit/down payment — around 5 to 15% of the property’s value. 
  • Stamp duty — depending on the property’s value.
  • Arrangement fee — when you take out a mortgage.
  • Valuation fee — when the mortgage lender carries out a valuation of the property you want to buy to make sure it’s worth what you are borrowing. 
  • Land Registry fee — to make sure the ownership documentation is up-to-date.
  • Conveyancing fees — to make sure all the legal stuff is done perfectly.
  • Mortgage broker/adviser fee — if you are using one to help you with the mortgage process.

IMPORTANT NOTE: There are many other costs that you should keep in mind when buying a first home, such as home insurance, renovations, decoration, moving expenses and others. 

Negotiating and making an offer as first time buyers

When you have found a property that you want to buy, it’s time to start negotiating and making an offer. 

It’s important not to go too low from the market price as this can put you at risk of losing the property to someone that makes a better offer. 

FAQ

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