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Published 21 December 2023
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13 minutes

First-time Buyer Mortgages

Getting a mortgage as a first-time buyer is likely to be more straightforward if you’re well prepared. Find out about first-time buyer mortgages, and how to find the best deal when buying your first home.

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A first-time buyer mortgage allows you to borrow the funds needed to buy a home if you’re stepping on to the property ladder for the first time. Typically, first-time buyer mortgages require smaller deposits and have incentives to tempt you into taking out a mortgage with a certain lender. However, the overriding aim should be finding the best first-time buyer mortgage that best fits your needs. 

What is a first-time buyer mortgage?

First-time buyer mortgages are home loans for buyers who have not owned a property before. Recognising that you’re just starting out, mortgages for first-time buyers usually only need you to put down a 5% or 10% deposit.

You can also find first-time buyer mortgages that come with no mortgage fees to help keep upfront costs low, though the mortgage rate you pay is likely to be higher than if you pay a fee.

Some mortgage lenders also offer rewards and incentives on their first-time buyer mortgages, such as cashback or money towards legal fees. These offers can come into your thinking, but the main priority is to find the most suitable mortgage for you and your circumstances. 

» MORE: See current mortgage rates

How do first-time buyer mortgages work?

First-time buyer mortgages tend to work the same way as any other standard residential mortgage. The mortgage amount you need will usually be the price of the property you’re buying minus the size of your deposit. It may be larger if you add mortgage fees to your overall loan or borrow more to cover other costs. The mortgage is secured against your property, which means your home is at risk if you don’t meet the repayments.

Most first-time buyer mortgages are capital repayment mortgages, where the monthly repayments you make go towards paying off your interest and some of your original loan each month. If you keep up with your repayments, your entire mortgage debt should be paid off by the end of your mortgage term.

The alternative to a repayment mortgage is an interest-only mortgage, where you only pay off the interest every month and the original loan will still need to be repaid in full at the end of your mortgage term. However, interest-only mortgages aren’t usually offered to first-time buyers by mainstream lenders. 

In the past a first-time buyer mortgage term of 25 years was generally considered to be the norm, but you may be able to choose a shorter or longer period. Some lenders allow terms of up to 40 years. A longer term can lower your monthly repayments but will mean you’ll end up paying more interest overall.

» MORE: Calculator how much your mortgage repayments may be

What is a first-time buyer? 

To be considered a first-time buyer, you normally need to be buying your first and only property. That means you won’t have owned a residential or buy-to-let property before, either in the UK or abroad, or inherited one. It’s also unlikely you’ll be considered first-time buyers if you’re buying jointly with someone who has already been a homeowner. 

However, different lenders may have different rules about who they deem to be a first-time buyer. The eligibility criteria to qualify as a first-time buyer for various government support schemes, such as Shared Ownership or First Homes, may be different too.  

How much deposit do first-time buyers need for a mortgage?

Typically you’ll need at least a 5% deposit to get a first-time buyer mortgage. This would mean you need a 95% loan-to-value mortgage. When taking out a mortgage, loan-to-value is usually shortened to LTV, and refers to the size of the loan you need relative to the value of the property you want to buy.

If you have a 10% deposit, you may find the mortgage rates on 90% LTV mortgages are lower than if you need a 95% LTV mortgage. This is because you’re putting down a larger deposit. 

» MORE: How much do you need for a deposit?

Different types of mortgages for first-time buyers

There are various types of first-time buyer mortgages. Which is best for you will depend on your circumstances and preferences. 

Fixed-rate mortgages

With a fixed-rate mortgage your mortgage rate is guaranteed to stay the same for the period you’ve fixed (note that this is different to the mortgage term). Once your fixed-rate deal ends you’ll automatically move on to the lender’s standard variable rate (SVR), or you may decide to remortgage to a new mortgage deal. 

Tracker mortgages

The interest rate on a tracker mortgage will usually rise or fall as the Bank of England base rate rises or falls, and take your monthly repayments with it. The rate you pay is usually a set percentage higher than the base rate.  

Discount mortgages 

A discount mortgage tracks a lender’s standard variable rate but applies a discount for a certain length of time. An SVR tends to move in line with the base rate, although lenders reserve the right to change the right as and when they wish.

Offset mortgages

An offset mortgage allows you to offset your savings against the mortgage amount you’re borrowing to lower the amount of interest you pay. You can access the savings when you want, but won’t earn any interest from them while they’re linked to the mortgage.

Guarantor mortgages

With a guarantor mortgage, you’ll need a family member or close friend to act as your guarantor and promise to step in and pay your mortgage if you don’t. This type of mortgage may allow you to get a mortgage if you don’t have a deposit but it also means your guarantor may be putting their savings and even their home at risk. 

» MORE: Best mortgage lenders

How much can first-time buyers borrow? 

How much first-time buyers can borrow depends on the amount a lender determines you’re able to afford to pay back. To work this out, lenders consider factors such as your income, your outgoings, your credit score and your deposit. It is also important to consider whether you’d be able to afford the mortgage if interest rates were to rise. 

If you’re getting a first-time buyer mortgage with someone else, you may be able to borrow more through a joint mortgage than if you applied on your own. It may also be possible to get a mortgage on a low income in certain circumstances.

First-time buyer mortgage calculators 

Knowing your numbers is crucial as a first-time buyer. Use our mortgage calculators to get an idea of the amount you may be able to borrow, how much your monthly repayments might be, and the amount of stamp duty you’ll have to pay.

How to get a mortgage as a first-time buyer 

As with any mortgage, first-time buyers need to pass eligibility and affordability checks to be approved for a loan. A good starting point is to get an agreement in principle from a lender. It’s not a definite agreement that you will get a mortgage but it can give you a good idea of how much may be able to borrow. Getting an agreement in principle won’t usually affect your credit score.

You will only get a firm mortgage offer once you properly apply and a lender has carried out the necessary checks on your finances and credit history. 

» MORE: Learn about mortgage eligibility

Getting mortgage advice

Getting a mortgage is a huge decision that should never be taken lightly, especially when you’re a first-time buyer. Taking the time to get mortgage advice will usually give you the best chance of finding the best first-time buyer mortgage that is suited to you and your needs. You may also save money if an adviser has access to deals that you haven’t seen or can’t apply for directly yourself. 

If you think you need mortgage advice, we’ve partnered with online mortgage broker London & Country Mortgages Ltd (L&C) who can offer you fee-free advice. 

What first-time buyer schemes are available? 

There are several government schemes that aim to help first-time buyers on to the first rung of the property ladder.    

First Homes Scheme 

The First Homes scheme may allow eligible first-time buyers in England the opportunity to get a 30% to 50% discount on the market value of certain homes.

Help to Buy

Aimed at helping buyers with smaller deposits, the Help to Buy equity loan scheme is still open in Wales, but has ended in England, Scotland and Northern Ireland. 

Forces Help to Buy

If you’re in the Armed Forces and eligible, the Forces Help to Buy Scheme allows you to take an interest-free loan to help you buy a home. The loan must be repaid within 10 years.  

Shared Ownership 

The Shared Ownership scheme in England allows you to buy a share in a property and pay rent on the share you don’t purchase. Similar schemes are available in Scotland, Wales and Northern Ireland.   

Right to Buy

Under the Right to Buy scheme, eligible council tenants in England have the opportunity to buy the property they live in, discounted by up to 70% of its market value. The discount you qualify for depends on how long you’ve been a tenant and has certain limits. There are similar schemes in Wales, Scotland and Northern Ireland, and a Right to Acquire scheme if you’re a housing association tenant.

Lifetime ISAs 

Aimed specifically at first-time buyers saving for a deposit, a Lifetime ISA sees the government add a 25% bonus to the amount you save. It’s possible to receive a bonus of up to £1,000 per year if you save the annual maximum of £4,000. 

95% Mortgage Guarantee Scheme 

The mortgage guarantee scheme is designed to encourage mortgage lenders to make 95% LTV mortgages available to first-time buyers with a 5% deposit. You don’t need to apply for the scheme yourself, but it is currently set to finish at the end of June 2025. 

First-time buyer mortgage FAQs

How much deposit do first-time buyers need for a mortgage?

You’ll usually need a minimum 5% deposit relative to the value of the property you want to buy to get a first-time buyer mortgage. There are many ways to get help with a mortgage deposit, including saving into a Lifetime ISA.

Are mortgages available for first-time buyers?

Many lenders currently offer first-time buyer mortgages of up to 95% LTV if you have a 5% deposit. More mortgages are available if you can put down at least a 10% deposit and are borrowing at 90% LTV.

What is the current mortgage rate for first-time buyers?

Mortgage rates are changing all of the time, including for first-time buyers, but the rates you can get will depend on your deposit, financial situation, credit score and the type of mortgage you want. 

» MORE: See current mortgage rates

What do you need to get a mortgage as a first-time buyer?

To qualify for a first-time buyer mortgage you usually can’t have owned property in the past. Generally, you’ll also need a minimum deposit of 5% of the property value to get a mortgage. 

Do I get help as a first-time buyer?

There are various government schemes aimed at helping first-time buyers, including the First Homes scheme, Shared Ownership, Right to Buy, and, if you live in Wales, Help to Buy. If you save for a deposit using a Lifetime ISA, a 25% bonus worth up to £1,000 a year is available from the government.

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

To apply for a mortgage as a first-time buyer you’ll need to share several documents with your lender. Typically these will include your passport or driving licence as proof of your identity, and recent utility bills as proof of address. You will also need to provide proof of earnings through payslips if you’re employed or tax returns and business accounts if you’re self-employed. Bank statements and details of existing loan agreements are usually needed too. 

What are the other costs of buying your first home?

As a first-time buyer, you may need to pay:

  • Stamp duty – this tax is payable when buying property in England and Northern Ireland, though first-time buyers may not need to pay stamp duty when buying a property for less than £425,000.  Different tax charges apply in Wales and Scotland.
  • Arrangement fees –are usually charged by the lender to set up the mortgage
  • Survey fees – you may want to pay for a house survey to check the general condition of the property you’re buying
  • Valuation fees – these cover the cost of the house valuation a lender carries out to make sure the value of the property is sufficient to offer you a mortgage  
  • Conveyancing feesconveyancing fees are the legal fees associated with buying a property
  • Broker fees – if you get advice or go through a broker, you may have to pay for their services
  • Home insurance home insurance can provide financial protection if your property or belongings are damaged 
Do first-time buyers pay stamp duty?

First-time buyers in England and Northern Ireland only pay stamp duty on properties costing more than £425,000. If your property is worth more, stamp duty is payable at a rate of 5% on any portion of the value between £425,000 and £625,000. However, you won’t be eligible for first-time buyer stamp duty relief at all if you’re buying a property for more than £625,000.

» MORE: Stamp duty calculator

What is your loan-to-value (LTV) ratio?

Your loan-to-value ratio or LTV is the size of the mortgage you need expressed as a percentage of the value of the property you’re buying. If you have a £10,000 deposit and the home you’re purchasing is worth £100,000, you’ll need a £90,000 mortgage, and are borrowing at 90% LTV. Mortgage rates tend to get lower, the lower your LTV. 

Are there mortgages for self-employed first-time buyers?

Yes, you can get a first-time buyer mortgage if you’re self-employed, as long as you can prove you can afford one. The mortgages you need to look at are the same as those that are available to everyone else – lenders don’t offer specific self-employed mortgages

Are there other mortgage options for first-time buyers? 

Some of the other options first-time buyers may want to consider include:

  • Joint mortgages – buying with someone else may give you a bigger deposit and make a larger mortgage more affordable. 
  • Guarantor mortgages – a family member or close friend puts themselves forward as a guarantor for your mortgage, and promises the lender that they will pay your mortgage if you don’t.  
  • Shared ownership – this government scheme allows eligible first-time buyers to buy a share in a property and pay rent on the part that they don’t own.
How can I improve my chances of getting a first-time buyer mortgage?

Saving up a larger deposit may boost your chances of getting a first-time buyer mortgage and could help you access better deals. Having a good credit score may also mean you find it easier to get a mortgage as a first-time buyer. 

Image source: Getty Images

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