Becoming a first-time buyer is a monumental stage of anyone’s life. It’s exciting and rewarding, but can be stressful. As with any big financial decision, there are a range of factors to consider when applying for a mortgage as a first-time buyer. At Trussle, we’re here to guide you through the mortgage process and help you understand the steps you need to take for as smooth a journey as possible. 

In this guide, you’ll find simple explanations and jargon-free mortgage breakdowns of the following:

Who is classed as a first-time buyer?

While it may be obvious for those who are not homeowners, it’s important to clarify this. There can be variations between how a mortgage lender (such as Nationwide) defines a first-time buyer, and how the UK government defines a first-time buyer.

You might qualify as a first-time buyer if:

  • You have never owned a property before - of any kind - in the UK or abroad. This also includes shared ownership schemes. 

  • You own a commercial property (such as a retail unit) with no living space.

  • You have never owned a property before in the UK or abroad, and are looking at buy-to-let properties.

  • You apply for a joint mortgage and neither of you has previously owned residential property. 

  • You have not owned a property for 3 years (some lenders may see you as a first-time buyer if so).

You might not qualify as a first-time buyer if:

  • You have ever owned a residential property in the UK or abroad.

  • The person you are buying with has ever owned a residential property in the UK or abroad (irrespective if you have not).

  • You have inherited a property.

  • Someone else is buying the property for you in their name.

These points establish how the UK government might view your mortgage application as a first-time buyer. They will use these criteria against whether or not you might qualify for Stamp Duty Tax cuts, for example.

On 23rd September 2022, the UK government announced that the property price threshold for paying Stamp Duty for first-time buyers increased from £300,000 to £425,000. This means that first-time buyers do not have to pay Stamp Duty if their home costs less than £425,000 – whether it’s a new build or an older property.

These stamp duty cuts will remain in place until 2025. This was announced in the Autumn Statement issued by Jeremy Hunt in November 2022.

How do mortgage lenders define first-time buyers?

Mortgage lenders can consider previous homeowners as first-time buyers again. For example, for Nationwide, a first-time buyer is someone who has not had a mortgage in the last three years in the UK or abroad. However, for Kensington, a first-time buyer is someone who has not had a mortgage or owned a property without any loans against it, in the last 12 months.

The primary reason mortgage lenders define first-time buyers differently relates to the eligibility of products they will be able to offer you. 

However, it’s important to note that even if a mortgage lender classifies you as a first-time buyer, you will not be eligible for stamp duty cuts if you have already owned a residential property at home or abroad. 

The concept of first-time buyer classification is more complicated than you would initially think. We know. As such, we do recommend speaking to a mortgage adviser for further clarity.

How much deposit do first-time buyers need?

A mortgage deposit is the amount of money that you put towards buying your home. 

The bigger your deposit amount, the less you'll have to borrow for your mortgage and the lower your mortgage repayments will be. This is known as your ‘Loan-to-Value’ ratio (LTV): the percentage of total property value that you pay for with your mortgage. 

If you do decide to put down a small deposit, such as 5% or 10%, you’ll take out what’s known as a high LTV mortgage (due to the high-interest rates you may pay as a result of putting down a low deposit).

According to Statista, the average deposit amount for first-time buyers across the UK in 2022 is 26%, against the average UK property price of £243,705. This does differ region-to-region, but a 26% deposit amount will ensure the average first-time buyer has access to better mortgage rates than those putting down 5% or 10%.

Remember, the larger the deposit the better the range of mortgage deals you should be able to apply for, and the lower the risk of negative equity as a result. There you owe more than what the property is currently worth.

As long as interest rates are considered high, it could be wise to build as large a deposit as you can. This will give you the best chance of qualifying for a mortgage with a lower interest rate.

5% deposits for first-time buyers

Due to soaring demand for properties during the pandemic, the government saw fit to introduce the 95% mortgage scheme for all home buyers on properties up to £600,000. While this scheme ensures more people can get onto the property ladder for the first time, interest rates for 95% mortgages can be high. 

However, due to the cost of living and rising inflation, 95% mortgages have seen a gradual uptick in applications. As such, they represent a very real path onto the property ladder for many first-time buyers. 

View more information about 95% mortgages here.

10% deposits for first-time buyers

A 10% deposit (or a 90% mortgage) is arguably the ‘standard amount’ to save for a deposit. It gives you access to better rates than 95% mortgages, and often estate agents may look for a 10% deposit to push any offer forward due to less risk. 

For more information about 90% mortgages, visit our complete guide.

100% mortgages for first-time buyers

A 100% mortgage is where you borrow the total property value. Mortgage lenders can make 100% mortgages available for first-time buyers, however, due to the extra risk, you will usually only be able to secure a 100% mortgage with a guarantor. Even then, there is no guarantee that your application will be accepted.

Learn more about 100% mortgages here.

What is a guarantor mortgage?

A guarantor mortgage, or a family-assisted mortgage, is where someone else (usually a family member) takes on the risk should you be unable to make any monthly repayments. The guarantor will not be named on the deeds of the property, or have any right to any share of the property, making this a good solution for first-time buyers on a low income. 

However. there are requirements of the guarantor to ensure eligibility, from their age to existing equity in their own property.

Learn more about guarantor mortgages here.

First-time buyer schemes

If you’re a first-time buyer, you could get help to buy a home using a government scheme.

Lifetime ISA for first-time buyers

A Lifetime ISA (LISA) can be an effective way to help you save for a deposit (or save for retirement). With a LISA, you can contribute up to £4,000 a year, and the government subsequently add 25%; up to £1,000 a year. What’s more, you can keep saving until you’re 50. 

Key points about Lifetime ISAs for first-time buyers:

  • You must be between the ages of 18-39 to open a LISA

  • The property you buy must be in the UK

  • The property you buy must be £450,000 or less

  • It must be purchased through a conveyancer or solicitor

  • You must buy it with a residential mortgage

  • You have to live there as your main residence

  • You can use your LISA to buy a home with another person regardless of whether or not they're also a first-time buyer

  • You can use the LISA to buy with another LISA holder

Learn more about LISAs in our Lifetime ISA guide.

Shared Ownership for first-time buyers

Shared Ownership allows you to buy a share of the property and pay rent on the rest. Your household income must be less than £60,000 or £90,000 if you live in London.

Our Shared Ownership breakdown covers how this works in more detail. 

Help-to-Buy Equity Loan for first-time buyers

The Help-to-Buy Equity Loan was designed to support the sales of newly built homes. The government would lend the buyer up to 20% of the property price, provided the buyer could raise at least a 5% deposit. This would give the buyer an LTV of 75%, ensuring access to favourable mortgage rates. 

The equity loan was interest-free for the first five years of owning the property.

Unfortunately, new applications for the Help-to-Buy Equity Loan ended on October 31st 2022.

Mortgage Guarantee Scheme for first-time buyers

The Mortgage Guarantee Scheme aims to help first-time buyers, and some existing homeowners, afford to buy a home with a deposit as small as 5%. Mortgages issued under the scheme are backed by the government, meaning the buyer would be financially supported should they become unable to make payments. 

The scheme was announced by the government in the spring budget 2021, with many mortgage lenders including Barclays, NatWest and HSBC supporting it. However, this scheme will end on 31st December 2022. 

Key points on the Mortgage Guarantee Scheme:

  • First-time buyers and existing homeowners are eligible 

  • The property must be residential (i.e. not a second home or a buy-to-let)

  • You have to live there

  • New builds and older properties worth up to £600,000 are eligible 

  • The mortgage application must be between 91% and 95% of the value of the property 

Only repayment mortgages are applicable (i.e. not interest-only mortgages).

Right to Buy & Right to Acquire for first-time buyers

Right to Buy aims to help council tenants buy the home they already live in. The scheme gives council tenants a discount towards buying the property.

Right to Acquire is for people currently renting homes from housing associations. The discount is smaller than what you may receive with Right to Buy, however.

Key points for Right to Buy:

  • Is an England-only policy. Right to Buy was abolished in Scotland and Wales in 2016 and 2019 respectively. However, there is a similar scheme in Northern Ireland called the House Sales Scheme.

  • A Right to Buy does not equal a right to get a mortgage.

  • The property you want to buy is your only home.

  • The property doesn't have any shared facilities with other households.

  • You've had a public sector landlord for three years. 

  • You're not currently in any legal battles with a creditor. 

Key points for Right to Aquire:

  • Housing Associations maintain the right to sell the tenant an alternative property to the one in which they live. 

  • The discount offered is significantly less generous than that offered under the Right to Buy. The discount is a flat rate and does not vary depending on the length of the tenancy. 

Learn more about the differences between Right to Buy and Right to Acquire in our dedicated guide.

First Homes scheme for first-time buyers

First Homes, launched in 2021, is a scheme designed to support local first-time buyers and key workers by offering new build homes at a discount of 30-50% compared to the market price. 

Key points about First Homes:

  • You must be 18 or older

  • You must be able to get a mortgage for at least half the price of the home

  • The scheme is only available in England

  • It’s designed for local first-time buyers and key workers only

  • First-time buyers must not have a household income exceeding £80,000, or £90,000 in London 

The local council may also set some eligibility conditions, such as prioritising homes for essential workers and those on lower incomes.

Different types of mortgages for first-time buyers

When comparing mortgage rates, you’ll inevitably search online for the best first-time buyer mortgages in the hope of finding the cheapest rates on the market. It’s a natural and logical action to take. 

The reality, however, is that the excellent mortgage rate you know your friend just landed with NatWest might not be the same mortgage rate you might qualify for. Conversely, you may find your mortgage rate trumps theirs. 

The factors that may influence this could include:

  • The size of your deposit compared to the value of the property (known as loan to value or LTV)

  • How long you intend to stay in the home

  • If you want your monthly payments to stay the same

  • Money from your parents or grandparents

  • Pay rises, bonuses, or inheritances

It comes down to personal circumstances, and for your mortgage broker to identify the best rate for your situation. Ultimately, the right mortgage should be based on these factors:

  • A monthly payment amount you can afford

  • An interest rate you are comfortable with

  • Mortgage fees attached

  • Remaining balance to pay

At Trussle, we have access to around 12,000 deals from 90 mortgage lenders. With that in mind, you can be confident we’re able to meet your unique requirements. What’s more, as first-time buyers, mortgage lenders often provide incentives, such as cashback and fee-free mortgages. Our mortgage advisers are ideally placed to potentially find these sorts of deals for you when applicable and/or relevant.

Fixed-rate mortgages for first-time buyers

With a fixed-rate mortgage, you’ll know exactly how much to pay every month and for how long. This is seen as a stable approach by many first-time buyers.

  • You can fix your mortgage from 2 to 15 years. 

  • With a fixed-rate mortgage you can often overpay by 10% a year (pay more than what you owe in order to reduce the total amount). If you overpay more than 10%, however, or pay back the full amount early, you may have to pay an early repayment charge (ERC). 

  • Once your fixed term ends, you will usually move onto your mortgage lender’s standard variable rate (SVR), unless you remortgage. The SVR will be a higher interest rate compared to your fixed rate.

Variable rate mortgages for first-time buyers

Variable rate mortgages include both tracker mortgages and discounted variable rate mortgages. Their rates can change, which means your repayments can fluctuate dramatically. Usually, a variable mortgage rate is higher than the Bank of England’s interest rate.

Discounted variable rates for first-time buyers

Discounted variable rate mortgages link to the mortgage lender's standard variable rate (SVR). They have a discounted rate for a certain amount of time, usually between 2 and 5 years.

These mortgages usually have the lowest interest rates and smallest monthly repayments, which can be appealing to first-time buyers. However, interest rates and monthly repayments can go up or down at any time so do bear this in mind.

Tracker mortgages for first-time buyers

Tracker mortgages follow the Bank of England's interest rate and are often a certain percentage above it. This means they do not follow the same interest rate changes as fixed mortgages. 

As a result of the fixed mortgage rate rises in October 2022, tracker mortgages have represented excellent value. Indeed, over 70% of all tracker mortgage submissions in 2022 at Trussle came in October.

How to apply for a first-time mortgage

Applying for your first mortgage can seem daunting. However, this simple 9-step plan will give you the basic actions to bear in mind.

First-time buyer mortgage calculator

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

Talk to a mortgage broker or lender to get a more accurate remortgage savings amount.

You could borrow up to

£000,000
Loan to value (LTV):00%
Including your deposit, you could afford a house price up to£000,000
Other fees you may have to pay:
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Next steps

If you're ready to get a mortgage, the next step is to answer a few more questions. Then a Trussle adviser will find the right mortgage deal for you.

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

Talk to a mortgage broker or lender to get a more accurate remortgage savings amount.

Budget considerations to make when buying your first home

Buying your first home is an exciting and rewarding process, but there are budget considerations, other than saving for a deposit and Stamp Duty, to be aware of. 

Here are some examples of potential costs you should consider working into your budget.

FAQs

Below is a series of frequently asked questions tailored to first-time buyers interested in learning more about mortgages and homeownership.

Sometimes. Certain mortgage lenders can offer preferential rates for first-time buyers. However, it’s important to remember that your mortgage adviser will guide you through which mortgage type suits your requirements.

An example of a mortgage lender offering a preferential first-time buyer mortgage is Nationwide’s Helping Hand.

Helping Hand aims to help first-time buyers potentially borrow a little bit more. There are strict eligibility criteria attached to this scheme, however: 

  • Be a first-time buyer. To Nationwide,  this means you will not have had a mortgage in the last 3 years. If applying jointly, both applicants need to be first-time buyers.

  • Have at least a 5% deposit.

  • Take out a 5 or 10-year fixed-rate mortgage.

  • Must not be self-employed.

  • Must not be using an affordable home ownership scheme such as shared ownership or Right to Buy.

The best mortgage rate for first-time buyers depends entirely on your personal circumstances. However, to give you an indication of what you might be able to borrow, and at what rate, do utilise our free mortgage calculator.

A mortgage loan lasting over 25 years is technically considered a long-term mortgage. However, a mortgage analysis by Bloomberg in 2022 has indicated that the average mortgage term for a first-time buyer in the UK is now 30 years. House price increases over recent years have naturally led to more and more buyers taking out longer mortgage terms. 

The advantage of a longer-term mortgage is the smaller monthly payments. However, the longer the mortgage term, the more, you will pay back in interest. As such, it will end up costing you more. 

There are many questions to ask yourself when weighing up the pros and cons of a longer-term mortgage, and these are best spoken through with your mortgage adviser.

Saving for a deposit is challenging, especially given the economic turmoil the UK is experiencing in 2022 and beyond. With inflation eating into the real-term value of money, we strongly suggest you speak to your financial advisor before opening up any new bank accounts. 

The Lifetime ISA (LISA) does, however, represent an excellent tax-free saving account to utilise as its government-backed.

While certain banks offer first-time buyer initiatives, such as Nationwide, the best bank for first-time buyers will be relevant to your own circumstances. Your mortgage adviser will be best placed to provide this information to you.

First-time buyers purchasing a property up to £625,000 will pay no Stamp Duty on the first £425,000 and only pay 5% on the remaining amount.

However, should the property cost more than £625,000, then ‘normal rates’ will apply. 

To determine how much Stamp Duty you might need to pay, please see our

These Stamp Duty rates will remain in place until 2025.

Freehold and leasehold are 2 different forms of home ownership. Whether your property is leasehold or freehold makes a big difference to what you can do to, and in, your home. 

It’ll also determine if there are extra costs to pay for your home. This applies in England and Wales. Laws in Scotland may be different for 'Feuhold' homes, however. 

Freehold

Owning a freehold property means you own your home and the land it stands on. There’s no time limit on how long you own a freehold.

The property is “free from hold” from anyone else except you, the owner.

Leasehold

Owning a leasehold property, on the other hand, means you own your home for as long as the freeholder (or landlord) agrees in your lease agreement. The freeholder will own the land your property stands on and has certain powers over it.

Learn more about the differences between leaseholds and freeholds in our dedicated guide.

Auction property purchases can be risky, yes, but so can any house purchase. 

Buying a house at auction does have its pros:

  • Sales can be quick.

  • They can be cheap compared to the market.

  • There’s no property chain, so the sale can be simple to manage.

However, there are also risks attached to auction properties:

  • There are time constraints placed on auction sales. These are usually 28 days, but buyers should double-check if they have more or less time to complete the sale.

  • Auction houses often need significant renovation work, hence the low bidding price they can begin at.

  • You will likely need a 10% deposit on the day of the bid, so you still need to save up.

  • There are often extra costs associated with buying a property at auction (this is on top of costs such as Stamp Duty). 

Bidding on an auction property is also legally binding once the hammer falls, so you must be sure this is an avenue you want to explore. 

You should also consider completing a property survey on any auction house you want to bid on. Yes, you will lose money here if you don’t win the bid, but at least you’ll know if there are any surprises waiting for its new owner.

There are many pros and cons to buying either a new build or an older property. However, it ultimately comes down to your budget and personal taste.

Traditionally, older properties are seen as having more character than new builds and can be set in more developed communities. New builds, however, are usually more energy efficient and many of the government's first-time buyer schemes are based on purchasing a new build, such as First Homes.

A property offer is only legally binding once you exchange contracts. As the contract exchange happens right at the end of the purchasing process, the buyer can legally pull out of any offer right up until that moment. 

Therefore, if you’ve made an offer and had it accepted, but you’ve become uncertain and now have cold feet, you are within your right to withdraw. However, it’s important to let the estate agent dealing with the property sale know as soon as possible.

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