Mortgage advice for first time buyers

Ready to take that first step onto the property ladder? Then make sure you get it right. Here’s everything you need to know about mortgage advice for first time buyers.

Angela Kerr Director, Editor

Buying a home for the first time can be exciting and exacting in equal measure. To ensure that you are fully prepared for the (frequently rocky) road ahead, get up to speed with the latest mortgage advice for first time buyers. We look at what deposit you’ll need, the first time buyer mortgage options available and how to boost your chances of having your application being accepted to help you follow in the footsteps of the 379,287 first time buyers who, according to the Yorkshire Building Society, got on the property ladder in 2022.

Who qualifies for a first time buyer mortgage?

You’ll be considered a first time buyer if you – and anyone you are buying with – are buying your first residential property. If you’ve owned a house or flat before, whether that’s in the UK or abroad, you won’t usually be considered a first time buyer. This includes if you’ve inherited a home, even if you’ve never lived there, or if someone who already owns their own home (such as a parent) is purchasing the house for you. 

If classed as a first time buyer you may get access to mortgages only available to first time buyers, plus you may get access to certain schemes to help you buy a house and first time buyer stamp duty relief too.

If you’re not sure, simply speak to a fee-free mortgage adviser today. Our partners at L&C take the hard work out of finding a mortgage and can explain your options from over 90 different lenders.

How do first time buyer mortgages work?

Just like with any mortgage, in order to take out a first time buyer mortgage, you’ll need to put down a lump cash sum (your deposit), unless you’re taking out a 100% mortgage. The amount you’ll be able to borrow will depend on your income and outgoings, and the amount will vary by lender too. Here’s how it works….

What deposit do I need for a first-time buyer mortgage?

According to Halifax, the average deposit first time buyers paid in 2022 was almost £62,500 – but that doesn’t mean you’ll need to put that much down. Lenders will typically require at least 5% of the value of the property for a deposit. But it’s always a good idea to save as much as you can in advance. A bigger deposit means you’ll have a lower ‘loan to value’, this is the ratio of how much you borrow compared to how much the house is worth. The lower the LTV, the wider the range of mortgages you’ll get access to, and usually at better rates too. Plus you’ll have less to pay back in the long term.

Is it possible to get a mortgage with no deposit?

However, it’s possible to buy your first home with no deposit by taking out a 100% mortgage, such as Skipton Building Society’s 100% Track Record mortgage or by taking out a guarantor mortgage with help from your parents or a relative. We explain all your options and what to consider in our guide on how to get a mortgage with no deposit.

Looking for a first time buyer mortgage? Check out today’s best first time buyer mortgage rates.

How to boost your first time buyer deposit

There’s no doubt that saving up to get a first time buyer mortgage is difficult, which is why so many first time buyers look for financial help, often in the form of gifted deposits from the ‘Bank of Mum and Dad’, to help boost their savings and get a step on the property ladder.

But don’t forget to look at Lifetime ISAs; these are for your first home or your retirement. Anyone aged 18-39 can open a Lifetime ISA and you can save up to £4,000 each tax year into it and the government will give you a 25% bonus on your contributions, up to a maximum of £1,000 per year. Find out more in our Best Lifetime ISA guide.

How much can I borrow on a first time buyer mortgage?

How much you can afford to borrow is usually calculated by taking three all important factors into account:

• salary
• outgoings
• credit history

Lenders typically will lend up to 4 to 4.5 times your salary depending on your outgoings and credit history. Outgoing variables such as the number of children or other dependents that you have, outstanding loans, bills, insurance and other such obligations are calculated alongside your salary in order to work out how much you will be able to afford to repay per month. Use our How much can I borrow calculator to get an idea.

Other income such as pensions, investments or earnings that fall outside your main salary will also be considered. Credit checks are undertaken to see if you have suffered from bad debts, payment arrears or even bankruptcy in the past. Evidence of such debts will obviously decrease your chances of a loan.

Mortgage term can be a consideration to determine the affordability of monthly repayments. You may decide to opt for a longer 30 year mortgage term so you can stretch repayments over a longer period and lower the monthly cost of your mortgage. By doing so, your mortgage will cost more in total as you will pay more in interest over the period of your mortgage.

First time buyer mortgage example

For an example of how it works, say you want to buy your first home with your partner; you’ve saved £25,000 for your deposit and had an offer accepted on a house for £250,000. This means you have a 10% deposit and you’ll need a mortgage for the remaining 90% of the value of the property. This means you’re looking for a 90% LTV mortgage – the loan will be £225,000.

In theory, given that lenders typically lend up to 4.5 times someone’s income, you’d need a combined income of at least £50,000 to borrow this amount. But depending on your outgoings and personal circumstances, the lender may require you to earn more. So it’s a good idea to get mortgage advice for first time buyers early in the process so you know where you stand.

See our mortgage calculators to get an idea of how much you can borrow and how much your mortgage will cost.

Where can I get my first mortgage?

If you want a first time buyer mortgage you can do directly to a bank or building society who can show you the products – or mortgage deals – they offer. Or you can use a mortgage broker who will go to a number of different lenders so you have a better range of deals to choose from.

What does a mortgage broker do?

If you’re looking for mortgage advice for first time buyers, using a mortgage broker can be particularly useful. Not only will they shop around to find the best first time buyer mortgage rates, they’ll also be able to match you to lenders that will be more likely to accept your application. Plus, they’ll be on hand to answer your questions along the way. But bear in mind that some brokers charge for their mortgage advice for first time buyers and this can amount to hundreds or even thousands of pounds. However, our partners, award-winning brokers L&C don’t charge a penny for their mortgage advice for first time buyers.

First time buyer mortgage deals

Many mortgage companies have special first time buyer mortgages, which are generally aimed at helping people get on the property ladder. These types of mortgages usually accommodate having lower deposits and have lower application fees. A recent example of this is Skipton’s 100% mortgage product — for more detail, see our advice guide 100% mortgages – should I get one?

However, when you get expert mortgage advice for first time buyers from a broker, they’ll look at first time buyer mortgages as well as other mortgages on the market to make sure you get the best mortgage for your needs.

Looking for the first time buyer mortgage deals? View today’s best first time buyer mortgage rates.

Mortgage broker expert view

“First time buyers generally face two big challenges in getting on the property ladder. Firstly, saving for a deposit can be difficult especially when faced with high rent payments. Secondly, being able to meet mortgage criteria to borrow enough to bridge the gap between high house prices and the deposit can seem stretching.

There are support schemes to help such as the Lifetime ISA boost to savings and stamp duty relief.  The mortgage market is very competitive so there are products that can help those with a small or even no deposit. However the myriad of mortgage products on offer can be confusing, so first time buyers will benefit from mortgage advice to help navigate their way through the maze.” David Hollingworth, L&C Mortgages

Will I be accepted for a mortgage as a first time buyer?

Before you apply for a first time buyer mortgage, it’s important to have as good an idea as possible about whether or not you’ll be accepted for it – if your application is rejected, not only will you not have a mortgage but it can harm your credit score too.

So there are three steps to take first:

1. Check your credit file

When you apply for a first time buyer mortgage the lender will check your credit file, so it’s advisable to do it first. Check everything is correct and boost your credit score as much as possible. The higher your score, the more likely you may be to be accepted for a mortgage; you may be able to borrow more and at better rates too. Find out more in our guide 11 Tips to improve your credit score for a mortgage.

2. Get expert mortgage advice for first time buyers

Each lender has its own lending criteria. So by speaking to a fee-free broker and getting expert mortgage advice for first time buyers, they’ll be able to match you with a lender that’s most likely to accept your first time buyer mortgage application. Speak to fee free mortgage brokers at L&C today.

3. Mortgage in principle

And it’s a good idea to get a ‘mortgage in principle’. This is a is an indication that a lender could lend you a certain amount, based on details you’ve provided about your income, spending and debts. You should be able to get a mortgage in principle for free. With our partners at L&C, you can get a personalised Decision in Principle in just a matter of minutes. Having a mortgage in principle makes you a more appealing buyer. It will give a seller and their estate agent confidence that you’re serious about the purchase. 

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

While you can apply for a mortgage in principle before you start house hunting, just like with any mortgage, you can only apply for a first time buyer mortgage once you’ve had an offer accepted on a property. Read more in our guide When to apply for a mortgage.

What types of first time buyer mortgage are there

Fixed rate

One of the first decisions is whether to go for a mortgage with a fixed or variable rate of interest. Fixed rate mortgages are often favoured by first time buyers as they are not subject to the rise and fall of interest rates and therefore offer a greater peace of mind. However, it rates drop you won’t benefit from a fall in mortgage payments.

Tracker or Discounted mortgages

There are variable interest rate mortgages:

• Tracker mortgages: The interest rate you’ll pay is directly linked to the Bank of England base rate and moves in line with changes made (either up or down) to that rate.
• Discounted mortgages: This is when a lender offers a discount on its standard variable rate for an introductory period – usually between two and five years.

Guarantor mortgages for first time buyers

Several lenders offer mortgages designed to help first time buyers to get onto the property ladder with help from a relative. These are sometimes referred to as guarantor mortgages. However, the guarantor will need to put up either savings or their property to act as security against the loan. In some cases, such as the Barclays Family Springboard mortgage, the guarantor must open a savings account with the lender and keep a certain amount of funds in it for a set period of time. See how parents can help their child buy their first home.

Family Offset mortgages

With family offset mortgages, the amount of interest the borrower pays is reduced by linking their mortgage deal to a family member’s savings account. But while this means the borrower will pay less interest on their mortgage, there are some downsides such as the parent won’t earn interest on their savings. Also, if the parent withdraws some of the money in the linked savings account, the borrower’s mortgage payments will increase – and there’ll usually be a lower limit on the amount of savings in the linked account.

Getting a joint mortgage

If you’re struggling to get a first time buyer mortgage on your own, another way a parent could help you is to take out a joint mortgage with you, which would make them equally liable for the repayment of the loan. And with your combined incomes, you may be able to afford to take on a larger loan.

However a major drawback is that if the parent already owns property, this new house would count as a second home, so the additional stamp duty rate would apply and when the property is sold there may be capital gains tax (CGT) liabilities.

An alternative to this would be a joint borrower, sole proprietor mortgage. This is when you apply with someone who’s willing to accept joint responsibility for making mortgage payments without having a legal claim to the property.

With JBSP mortgages, the parent and child will both be named on the mortgage. But only the child will be named on the property’s deeds. This means the stamp duty surcharge can be avoided.

To find out about all your mortgage options as a first time buyer, get fee-free mortgage advice from our partners at L&C.

What are the latest schemes available for first-time buyer mortgages?

So what are the latest schemes for first time buyers?

• Mortgage Guarantee scheme This isn’t a scheme you specifically apply for, it was designed to encourage lenders to offer 95% mortgages. However, many lenders offering 95% mortgages don’t use this scheme.
• Shared Ownership: It’s not exclusively for first time buyers, but Shared Ownership allows you to buy part of the property and rent the other part. Over time you can buy more of the property.
• The First Homes scheme, launched June 2021, offers newly built homes to first time buyers with a discount of at least 30% compared to the market value of equivalent properties. This discount stays on the First Home forever. However the scheme has extremely limited availability.
• With Help to Buy ending, Deposit Unlock, a scheme developed by the House Building Federation, which allows buyers to purchase a new build home with a 5% deposit is another option. We look at all the options available in our guide What will replace Help to Buy?

Video: How to get your first mortgage

What first time buyer mortgage fees are there?

Some mortgages come with a product fee or arrangement fee. Some lenders insist you pay the fees up front; others add it to the mortgage.  When you take out a mortgage you can expect to pay on average £1,078 in mortgage costs. It is also a good idea to be aware of any early repayment charges. (ERC) is a fee you may incur if you remortgage before the end of your deal or if you overpay your mortgage by more than the lender allows. See our advice guide on mortgage fees & costs so you know what to expect.

Use our online mortgage finder, or speak to our award winning mortgage brokers for free expert mortgage advice for first time buyers

Additional costs of buying your first home

The property cost and any fees on first time buyer mortgages are not the only costs of buying a house. There are quite a few extras to be aware of when you are budgeting how much you can afford.

Surveys & valuations

Lenders will require you to have a mortgage valuation so they can assess whether a property is worth the amount they are lending. Some mortgage deals will throw this in for free but otherwise you’ll have to pay for it. In addition, there are three main types of survey which can be undertaken in order to flag up any potential issues with a property. For more information about surveys and what’s what, read our guide What survey should I have?

Conveyancing fees

The conveyancing process covers the transfer of property ownership from one party to another. It begins once you have had an offer on a property accepted. Online conveyancers are often cheaper. See our guide to conveyancing fees for a rough idea or Compare instant quotes from conveyancing firms today.

Stamp Duty

First time buyers are exempt from paying any stamp duty so long as the property costs less than £425,000. Read more in our guide on First time buyer stamp duty.

Homebuyer Protection Insurance

Things can go wrong in the house buying process and statistics show one in three house sales do fall through. Homebuyers Protection Insurance is a useful product to have as it allows you to claim back for money you’ve already spent on things like solicitors fees, mortgage fees and surveys if your purchase falls through.

Use our online mortgage finder, or speak to our award winning mortgage brokers for free expert mortgage advice for first time buyers, to start finding the mortgage that is right for you today.

Frequently Asked Questions