Updated: March 15, 2022

Getting a First-Time Buyer Mortgage

Need advice for a first time buyer mortgage? Not sure how much deposit you'll need, or what else is expected? Find out all the answers in our expert guide!

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Pete Mugleston

Author: Pete Mugleston - Mortgage Expert

Updated: March 15, 2022

Getting a mortgage for the first time can be both an exciting and daunting experience. Without ever having done it before, it’s hard to know how to go about getting the process started, what paperwork is needed and where to turn for help.

Thankfully, there’s plenty of support available. By reading this guide, you’ll have a better understanding of the mortgage options available to you, as well as the government schemes you can access, and how to begin the journey to home ownership.

What is the best type of mortgage for a first-time buyer?

There are many different types of mortgages that you may or may not have heard of and no one size fits all. The ideal interest rate and terms differ depending on the circumstances and financial situation of the borrower.

To find out what kind of mortgage might be right for you, a good first step would be to reach out to an expert broker who can explain the options available to you.

Mortgage types

A traditional mortgage sees a borrower loan a certain amount required to complete their property purchase and pay it back in instalments each month until the mortgage term ends – usually around 25 years.

Capital repayment or interest only

The amount to be paid back each month depends on whether you opt for capital & interest repayments – which cover a combination of the interest rate and payback of the loan – or interest-only repayments – which only cover the interest accrued and requires a separate repayment vehicle to cover the capital amount, repaid in full at the end of the term.

Capital repayment is most common, especially for first time buyers, but interest-only is an option with certain specialist lenders.

Fixed or variable rate

The next decision to make is around whether to go with a fixed or variable interest rate. Fixed rate means the interest rate will stay the same throughout the term you’ve fixed the rate for (usually 2,3,4 or 5 years) while a variable rate means it will change depending on the mortgage terms and interest rates generally in the market.

Other mortgages available

There are other mortgages that see this model altered in some way and that might better suit your situation. These include:

Guarantor mortgage: If you’re deemed too risky to a lender, a guarantor – usually a family member – can offset that risk by committing to make the mortgage repayments in the event you aren’t able to. The guarantor wouldn’t own the property, and the hope is that they’d never have to step in, but they’re there as a failsafe for lenders – all of which will have different criteria they’d want the guarantor to meet.

Family assisted mortgages: In these types of mortgages, lenders allow for the borrowing of funds from family members if you don’t have enough capital yourself. The money they offer is held in a savings account with the lender for a certain amount of time and this acts as security should you be unable to make repayments. Different lenders offer different variations of the model.

Buy-to-let mortgage: If you’d like to buy a property but plan to rent it out, this is where you’d need to get a buy-to-let mortgage. Not all lenders will offer these to first-time buyers but a broker would be able to identify a few that do.

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Government schemes

Additionally, in the UK, the government offers a variety of schemes aimed at helping those trying to get onto the property ladder.

  • Help to Buy: Equity Loan: This scheme was designed specifically for first-time buyers looking to buy a new build property. As long as you’ve got at least a 5% deposit, the government will contribute up to 20% of the property’s value (40% if looking in London) as an equity loan. There’ll be no interest to pay on that for the first five years. The rest of the amount is then made up of a mortgage.
  • Shared Ownership: This scheme involves sharing ownership of a property with either a developer or housing association and is an option if you can’t afford the full value. You’d take a mortgage out for the proportion you’d be looking to own – anything between 10% and 75% of the property’s value –  and then pay rent on the remaining proportion to your co-owner. Over time, you could then buy a bigger and bigger share. To qualify, you’d need to have at least 5% of the proportion you’re looking to own as a deposit and earn under £80,000 (£90,000 if based in London).
  • Shared equity: Much like shared ownership, this option would mean owning part of a property but rather than paying rent on the amount you don’t own, you’d instead take out a low or 0% rate equity loan. This would then be paid back over the course of the mortgage term.
  • Right to Buy: If you’ve been living in a council house and think you might want to swap rent payments for mortgage payments, that’s an option through Right to Buy. This scheme allows you to purchase your home from your local authority or housing association. Depending on where the home is located, you would have to have lived in the property for a certain number of years.
  • Mortgage guarantee scheme: Running until December 2022, the government is offering a guarantee to lenders, encouraging them to offer more 95% loan-to-value mortgages. This means that you can apply for a mortgage only having saved a 5% deposit, leaving 95% left to be covered via a mortgage. The scheme stipulates that the property you’re looking to buy would have to be under £600,000 and can’t be a new build.

How a broker can help a first-time buyer

All of the options above can seem a bit overwhelming and, as a first time buyer with less knowledge of the mortgage market, you should take all help available to you. The brokers we work with specialise in first-time mortgages and can break down each option available to you, advise on which lender to apply to and make sure your mortgage application is as strong as it can be for a higher likelihood of getting the deal you want.

They will also be able to:

  1. Advise on the government schemes you qualify for and how to access them.
  2. Help in organising the paperwork needed as part of a mortgage application.
  3. Compare the whole market to find you a lender and deal best for you.

A free, no obligation consultation could have all of your questions around first-time purchasing answered. Call 0808 189 0463 or make an enquiry so we can arrange for a first-time buyer specialist to contact you directly.

How to get a mortgage for the first time

If you think you’re ready to climb the first rung of the property ladder and believe you’ve got enough saved to pay a deposit and fees, then the next step is to apply to a lender. How to do that?

Step 1: Speak to a broker who can identify the best lender

With so many banks and building societies out there, it can be hard to know where to start and what you should be looking for in terms of rates and requirements. A broker with specialist knowledge in first-time buying will be able to advise on where to apply and what type of mortgage to go for. They’ll also compare rates across the market to ensure you’re getting the best deal possible.

Step 2: Get your finances in shape and apply for a mortgage in principle.

A mortgage in principle is a document from a lender that states their willingness to lend you a specific amount. It’s best to get one of these before you start your house hunting so you know what properties you can afford.

In applying for this, a lender will want to know how much you earn, what you spend your money on each month, what your credit history looks like and if you have any debt. To give yourself the best chance of getting a great mortgage, try not to make any big purchase in the months leading up to submitting your application and see if you can consolidate or eliminate any debt.

Step 3: Find a property and a solicitor.

Once you’ve found the place you’d like to buy, ask your broker to connect you to a solicitor. They’ll then submit your “note of interest” to the seller, request a home report, and later make an offer on your behalf before doing some extra checks and working to complete the sale. At the same time, your broker can begin preparing your mortgage application in the expectation the lender then gives a formal mortgage offer.

Factors lenders consider

When reviewing your application, lenders will focus primarily on the following eligibility criteria:

  • Affordability: Lenders will take a deep dive into your finances – your earnings and spending record, credit score and existing debt – to assess how much they think you’ll be able to afford to pay back. A broker would be able to give you an indication of this before applying and lots of lenders – including Halifax, Lloyds Bank and Natwest – have a first-time buyer calculator that does the maths for you.
  • Deposit: Almost every mortgage will require you to have at least 5% of the property’s value as a deposit and the mortgage will make up the rest. If you’re able to put in a deposit higher than 5%, that will help secure you a better deal as it mitigates some of the perceived risk from the lender’s perspective.
  • Credit issues and debt: Ideally you’d have a great credit history and no debt but often that’s not the case. This will make securing a mortgage a little harder but not impossible. An expert broker will share which specialist lenders are willing to make exceptions and offer advice on how to improve your application to offset bad credit, for example by increasing a deposit.

Top tip: Download your credit report here to see what issues are being flagged and avoid submitting multiple mortgage applications online as any rejections will contribute to your credit rating.

What fees to expect

A mortgage application comes with a lot of moving parts and, unfortunately, some fees to pay. As well as having a deposit, it’s important you have the funds set aside to cover those costs. You can expect to pay:

  • Arrangement fees
  • Booking fees
  • Valuation fees
  • Solicitor fees
  • Stamp duty
  • Buildings insurance

The amounts for most of these will depend on the companies you opt to use, but Stamp Duty is determined by the government. Thankfully, first-time buyers in England and Northern Ireland get a stamp duty exemption if the property is under £300,000. If under £500,000, there’s also a discount. To help you determine the amount you’d have to pay, HMRC has a stamp duty calculator.

Getting a first-time mortgage on a new build

For many first-time buyers, new build properties are appealing, not only because they’re a brand new home that no one has lived in before, but because it means you can access the government’s Help to Buy Equity loan and Help to Buy: Shared Ownership loan. Some other appealing factors include:

  • The lack of a chain. You can move in as soon as the property is finished rather than waiting for current owners to buy their new house.
  • More energy efficient. New homes are constructed in line with latest energy standards, which means that while being more environmentally friendly, the monthly bills should be lower.
  • Access to more government schemes. The government’s Starter Homes scheme offers first-time buyers aged between 23 and 40 years a minimum 20% discount off a new build property.
  • Covered by building warranties. By law, developers have to provide new build properties with certain warranties, which means that if anything structural goes wrong in the first few years there’s someone on hand to help – ideal for first-time home ownership.
  • Potential money saving opportunities. Developers, looking to sell as many homes as possible, sometimes offer incentives to first time buyers. These might include covering your Stamp Duty or a part of your deposit.

Match with an expert in first-time mortgages

Specialist advice when you’re buying your very first home is important as it ensures you understand all aspects of the process and know what you have to do and when. Our broker matching service finds the ideal advisor for you and will see you receiving tailored advice from the time of initial interest right through to the day you get your keys.

Give us a call on 0808 189 0463 or make an enquiry today and you could soon be discussing the purchase of your first property.

FAQs

Who qualifies as a first time buyer?

This would be someone who has never purchased a home before, either in the UK or abroad.

I’ve saved up £20,000. Is that enough to get a mortgage?

Yes, it could be depending on your circumstances and strength of application. If £20,000 equated to a 5% deposit, you’d be able to purchase a home with a value around £400,000. But you would also need some money set aside for the fees so it would be advisable to opt for a property worth less than that.

I have a Help to Buy ISA. Where does that come in?

Help to Buy ISAs were offered by the government prior to 2019 and commit the government to providing an additional 25% on top of any savings held in that account at the time of purchasing a property. If you opened a Help to Buy ISA before 2019 and are ready to buy a home, let your solicitor know and they can request the government contribution on your behalf.

Alternatively, you might have a Lifetime ISA, which are still available today. Just like with a Help to Buy ISA, the money can be put toward a home and the government will contribute an extra 25% to your savings.

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We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in all different mortgage subjects. Ask us a question and we'll get the best expert to help.

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Pete Mugleston

Pete Mugleston

Mortgage Expert

About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

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FCA Disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms that are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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