First Time Buyers
Time to get on the Property Ladder

Introduction

Getting on the property ladder as a first-time buyer can feel overwhelming, but the process is more straightforward than you might think. There are several schemes available to help first-time buyers, and by saving a reasonable deposit, you can improve your chances of securing a mortgage.

In this article, we’ll guide you through everything you need to know about getting a mortgage as a first-time buyer, including the best deals, available schemes, and tips on how to secure guidance and support.

What is a First-Time Buyer?

A first-time buyer is someone purchasing their first home, but the definition has some nuances. Here’s what qualifies you as a first-time buyer in the UK:

• You’ve never owned a residential property in the UK or abroad.

• You only own or have owned commercial property, without residential living space.

You are not considered a first-time buyer if:

• You’ve inherited a home, even if you never lived in it.

• You’re buying a property with someone who has previously owned a home.

• A parent or guardian who owns a property is buying the home for you.

How Much Deposit Do First-Time Buyers Need?

Most UK lenders require a minimum deposit of 10% of the property’s value. However, there are options available if you have a smaller deposit of 5%. Several government-backed schemes allow you to buy with a smaller deposit, although not every lender offers this.

The larger your deposit, the better your chances of securing a lower interest rate, which will reduce your monthly payments. For example, with a 20% deposit, you'll typically receive more competitive interest rates compared to having a smaller deposit.

Here’s an example for a property priced at £250,000:

Deposit Percentage Deposit Amount
5% £12,500
10% £25,000
15% £37,500
20% £50,000

How Much Can You Borrow as a First-Time Buyer?

Most lenders will allow you to borrow 4 to 4.5 times your annual income. In some cases, especially for professionals like teachers or doctors, you may be able to borrow up to 5 or 6 times your income.

Factors that will affect how much you can borrow include:

• Income

• Credit score

• Existing debts

• Monthly expenses

• Employment status

• Savings

The First-Time Buyer Mortgage Process

Here’s a general outline of what to expect when applying for a first-time buyer mortgage:

1. Save for a deposit: Aim for at least 5-10% of the property’s value.

2. Affordability check: Lenders will assess your ability to repay based on your income and expenses.

3. Find a home: Look for properties or secure an Agreement in Principle (AIP) from a lender to see what you can afford.

4. Make an offer: Once you’ve found a home, make an offer to the seller.

5. Mortgage application: After the offer is accepted, apply for the mortgage. This will involve a detailed credit check.

6. Valuation and legal process: The lender will value the property, and your solicitor will handle the legal paperwork.

7. Complete the purchase: Contracts are exchanged, and you move in!

What Type of Mortgage Should You Get?

There are several types of mortgages available for first-time buyers:

• Fixed-rate mortgage: Interest remains fixed for a set period, typically between 2-5 years.

• Tracker mortgage: Follows the Bank of England base rate, meaning your payments can go up or down depending on interest rate changes.

• Discount mortgage: Offers a discount on the lender’s standard variable rate (SVR) for a limited period.

• Capped-rate mortgage: Has a cap on how high the interest can rise.

• Offset mortgage: Links your mortgage to your savings, reducing the interest you pay.

Schemes for First-Time Buyers

There are several government-backed schemes available for first-time buyers in the UK, including:

• Shared Ownership: Buy a share of a home and pay rent on the remaining portion.

• First Homes Scheme: Purchase a home with a 30-50% discount (England only).

• Right to Buy: Allows council tenants to purchase their home at a discount.

• Lifetime ISA: A savings account that adds a 25% government bonus to help you save for a deposit.

• Mortgage Guarantee Scheme: Allows buyers to secure a mortgage with just a 5% deposit.

• Deposit Unlock: Similar to the Mortgage Guarantee Scheme, backed by participating developers.

Speak to a Mortgage Expert

Navigating the first-time buyer mortgage market can be complex. Mortgage One is here to help guide you through the process, ensuring you find the best mortgage for your needs. Contact our team for expert, personalised advice.

FAQs

What is the minimum deposit I need as a first-time buyer? Most lenders require a minimum of 10%, but 5% deposit options are available with certain schemes.

How much can I borrow as a first-time buyer? Typically, you can borrow 4 to 4.5 times your income, though some lenders may allow more depending on your job and circumstances.

What mortgage type is best for first-time buyers? This depends on your circumstances. Fixed-rate mortgages provide security, while tracker mortgages can offer flexibility when interest rates are low.