First-time buyer mortgages: everything you need to know before you apply

The biggest purchase of your life should not feel like a guessing game. Here is the whole process, explained properly.

This article is for anyone thinking about buying their first home, whether that is next month or in three years. It assumes no knowledge of mortgages at all, because nobody is born knowing this.

Buying your first home involves a series of decisions that each feel enormous: how much to save, how much to borrow, what type of mortgage to choose. Taken one at a time, none of them is complicated. By the end of this article you will have seen all of them in order.

How much deposit does a first-time buyer need?

Most lenders will lend up to 95% of a property’s value, which means a minimum deposit of 5%. On a £250,000 home, that is £12,500.

The percentage you borrow is called the loan to value, or LTV. A 95% mortgage means 95% LTV. The lower your LTV, the less risk the lender is taking, and the better the interest rates available to you. The biggest rate improvements typically come at 90% and 85% LTV.

This is why the deposit question is not simply how little can I put down. Sometimes waiting six months to move from a 95% to a 90% mortgage meaningfully reduces what you pay every month for years.

The Lifetime ISA: free money for first-time buyers

If you are aged 18 to 39, a Lifetime ISA lets you save up to £4,000 a year towards your first home, and the government adds a 25% bonus, up to £1,000 a year. The property you buy must cost £450,000 or less, and the account must have been open at least 12 months before you use it.

Used over several years, the bonus can add thousands of pounds to your deposit. The main caution is that withdrawing the money for anything other than your first home or retirement triggers a 25% government charge, which takes back more than the bonus.

How much can a first-time buyer borrow?

As a rough starting point, lenders will typically lend around four to four and a half times your annual income, or your combined income if you are buying with someone else. But the multiple is only the beginning.

Every lender runs an affordability assessment. They look at your income, your regular outgoings, your debts, and your credit history, and they stress test whether you could still afford the repayments if interest rates rose. Two people with identical salaries can be offered very different amounts.

You can improve your position before applying. Reduce or clear credit card balances and loans, avoid taking on new credit in the months before an application, check your credit report for errors, and make sure you are on the electoral roll at your current address.

What about stamp duty for first-time buyers?

First-time buyers in England and Northern Ireland currently pay no stamp duty on the first £300,000 of a property’s price, and 5% on the portion between £300,001 and £500,000. If the property costs more than £500,000, first-time buyer relief does not apply at all.

On a £250,000 first home, that means no stamp duty. On a £350,000 first home, the bill is £2,500. It is a cost worth building into your savings plan early, because it is due at completion alongside everything else.

Which type of mortgage should a first-time buyer choose?

The main choice is between a fixed rate, where your interest rate and monthly payment stay the same for a set period, usually two or five years, and a tracker or variable rate, which moves with interest rates generally.

Most first-time buyers choose a fixed rate for the certainty. Your payment cannot rise during the fixed period, which makes budgeting in your first years of ownership far simpler. The trade-off is less flexibility, and early repayment charges usually apply if you leave the deal early.

There is no universally right answer. The right deal depends on your deposit, your plans, and how much certainty you need. This is exactly the decision a mortgage adviser works through with you.

What does the application process actually look like?

The process runs in a fairly fixed order. First, an agreement in principle: a quick check by a lender confirming roughly how much they would lend you, useful for showing estate agents you are serious. Then you find a property and make an offer. Once accepted, you submit your full mortgage application with documents proving your income, spending, and deposit.

The lender values the property, and if everything checks out, issues your mortgage offer. Your solicitor handles the legal work, contracts are exchanged, and on completion day the money moves and the keys are yours. From offer accepted to completion commonly takes two to three months.

The costs beyond the deposit

The deposit is the headline number, but completion day involves more. Budget for legal fees, a property survey, lender arrangement fees on some deals, buildings insurance from exchange, and the practical costs of moving. As a rule of thumb, £2,500 to £4,000 on top of the deposit covers most first purchases, more if stamp duty applies.

There may also be a fee for mortgage advice. The precise amount depends on your circumstances and will be confirmed before you proceed.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Ready to find out what you could afford?

Every first-time buyer starts with the same two questions: how much can we borrow, and what will it cost each month? Both have precise answers once someone looks at your actual numbers.

Book a no-obligation chat with one of our mortgage specialists today. Bring your questions, however basic they feel. That is what the conversation is for.