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First-time buyer mortgages

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Who qualifies as a first-time buyer?

You’ll be considered a first-time buyer if you haven’t owned a home before - either in the UK or abroad.

As a first-time buyer, you’ll need to be planning to use the property you’re buying as your main home, and not to rent it out or use it as a second home.

However, even if you’ve never owned a home before, you’re unlikely to qualify as a first-time buyer if:

  • You’re being bought your first home by someone who’s already a homeowner
  • You’ve previously owned a share of a home, for example, if you were a joint tenant
  • You’re buying a home with someone that either owns or previously owned a property
  • You’ve inherited a home, even if you never lived there and you sold it
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Types of mortgages for first-time buyers

When you’re thinking about buying your first home, you’ll need to think about what type of mortgage will suit your needs and circumstances best.

To take out a first-time buyer mortgage your lender will need to assess your salary and other income, and your outgoings, which includes household bills and any credit cards and debts you have.

The main types of first-time buyer mortgages are:

Fixed-rate mortgages

Your monthly repayments will stay the same for a set term - usually two or five years. If the Bank of England’s base rate goes down, you may end up paying more with a fixed rate than with a variable deal. At the end of the term, you’ll be moved to your lender’s standard variable rate which is likely to be higher than your fixed rate was.

Fixed-rate mortgages >

Standard variable rate mortgages (SVRs)

Each lender has an SVR it can set at whatever level it chooses, although it tends to follow the Bank of England’s base rate. If you’re on an SVR you’ll stay on this until your mortgage ends or until you switch to another deal.

Variable rate mortgages >

Tracker rate mortgages

Usually lasting two to five years, these mortgages track the Bank of England’s base rate and have interest rates that are typically set at a certain percentage above or below this rate. This means your payments will change as the base rate changes.

Tracker mortgages >

Discount mortgages

With these mortgages you pay the lender’s SVR with a fixed amount discounted from it. The discount only lasts for a set amount of time, usually two or three years, and these variable rates sometimes have a limit on how much they can rise or fall.

How much can first-time buyers usually borrow?

The amount you can borrow depends on your deposit and your salary. As well as paying your deposit, you should also factor in expenses like stamp duty, legal fees and moving costs.

Use our mortgage calculator to find out how much you could borrow and see what your monthly payments might be.

Mortgage calculator

What government schemes can help first-time buyers?

A number of schemes have been introduced to make buying a home easier and more affordable for first-time buyers, these include:

  • Help to Buy: Equity Loan - Used for newly built homes in England, this scheme can give you a loan of up to 20% to buy a home. You’ll still need a 5% deposit and a 75% mortgage for the rest. The equity loan will be interest-free for the first five years.
  • Help to Buy: Mortgage Guarantee - To help people who can afford mortgage repayments but not large deposits, this UK-wide scheme encourages lenders to provide 95% mortgages by providing them with a government-backed guarantee.
  • Right to Buy - For council and housing association tenants in England, Right to Buy can provide a discount of up to £112,800 on these homes to help first-time buyers take their first step on the property ladder.
  • Shared Ownership - First-time buyers in England can buy a share of a housing association home, initially buying between 10% and 75% and paying rent on the rest. You’ve got the option of increasing your share up to 100% when you can afford to.

Similar schemes to help first-time buyers are also available in Wales and Scotland, while Northern Ireland offers alternative low-cost homeownership options.

What other options are there for first-time buyers?

To make it easier to get on the property ladder, there are some other options that can help you get a mortgage as a first-time buyer:

  • Guarantor mortgages - Parents or other family members use their savings, or their home, as security for the mortgage. Typically they would guarantee 75% or 80%, although it can be up to 100%, which avoids you needing a deposit. If payments aren’t met, the shortfall will be paid by your guarantor or taken from their savings or property.
  • Parental help - Your parents or a family member can provide money for the deposit. This means you’ll have more money to put down on a home as a first-time buyer and can access better mortgage deals and lower repayment costs.
  • Shared or joint ownership - Friends, parents or family members can take out a joint mortgage with the first-time buyer. Combining incomes can increase the size of mortgage you can take out, which can help you access more mortgage deals and spread the cost.

Stamp duty for first-time buyers

If you’re buying a new property or your home costs over a certain amount you’ll need to pay Stamp Duty Land Tax (SDLT).

However, from 1 July 2021, if you’re a first-time buyer you’ll get a discount on SDLT which means you’ll pay less or no tax if both of the following apply:

  • You and anyone you’re buying with are first-time buyers
  • The home you’re buying is £500,000 or less

If you’re a first-time buyer you won’t have to pay SDLT on the first £300,000 of your home’s purchase price and you’ll need to pay 5% for any amount above £300,001 to £500,000.

For homes that cost more than £500,000, you’ll have to pay SDLT at the home mover rate.

To work out how much stamp duty you’ll pay as a first-time buyer you can use the government’s Stamp Duty Land Tax calculator.

The average deposit paid by first-time buyers in May 2019 was £47,646[2]

But you can get mortgages with a deposit of 5-10%. Check your eligibility now

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10 top tips for first-time buyers

Buying a home can be daunting, especially if you’re a first-time buyer. But there are lots of things you can do to help you step on to that first rung of the property ladder:

  1. Top up your deposit

    The more deposit you have, the less you’ll need to borrow. Having a bigger deposit can give you a better interest rate, which will also make your monthly repayments cheaper. So topping up your deposit any way that you can, whether by saving extra hard or asking parents to help, can really make a difference.

  2. Improve your credit score

    While having a decent deposit really helps, your credit rating also affects whether a lender will give you a mortgage. There are several things you can do to boost your credit score, these include registering yourself on the electoral roll, checking credit reports and correcting mistakes, and getting into better credit card habits.

  3. Look at government schemes

    Several schemes and Help to Buy options have been introduced to make it easier and more affordable for first-time buyers. These range from creating more 95% mortgages to Shared Ownership schemes, where you can start by buying a smaller share of your home. Check to see what schemes are available in your area.

  4. Consider buying with friends or family

    Joining up with others can increase your buying power and make it easier to buy a first home. Some mortgage lenders will allow up to four people to get a joint mortgage - pooling resources can also help give you access to more mortgage deals and mean you can spread the cost.

  5. Get help from mum or dad

    With house prices going up, saving for a deposit is becoming harder and harder. If your parents can help with the cost - for example, by giving money towards the deposit, agreeing to be a guarantor, or having their income or savings taken into account for your mortgage - it can finally mean you being able to become a homeowner.

  6. Find a conveyancer and get a home survey

    Once you’ve put in an offer on a home, it’s a good idea to get a survey done and choose a solicitor to do the conveyancing (transferring the ownership). While your lender will do their own valuation, getting a homebuyer’s survey before you buy will give you an idea of any structural issues or repairs that need to be done.

  7. Do your research

    When you’re thinking about buying a home and are confident you can afford to buy, you should look more closely at where you hope to live and the type of property you’re likely to be able to afford. Look at the current prices for properties in the area, you may need to widen your search to find homes that will fit your budget and needs.

  8. Be realistic about your repayments

    Remember that although interest rates are currently at an all-time low, this doesn’t mean they won’t rise in the future. So don’t plan on paying the rates you’re being given now for years to come. Instead, really think about what you could afford in the future if rates go up and you need to pay out much more each month.

  9. Get your paperwork ready

    To take out a mortgage there are several documents you’ll need to give to your lender. These are likely to include proof of income (such as the last three months’ pay slips), proof of deposit, and your latest P60 tax form. Check as early as possible what you’ll need to supply, so you can have it all ready in time.

  10. Budget for additional costs

    When you’re buying a house there are several costs involved besides the deposit and the mortgage repayments. You may also need to pay stamp duty, legal, search, and arrangement fees, plus survey fees and the general cost of moving. Unexpected expenses often crop up, so it’s a good idea to set some money aside for them.

Compare mortgages for first-time buyers

When you’re planning to buy a house and apply for a mortgage there are a few things you’ll need to do:

  1. Get an Agreement in Principle (AiP)

    It’s a good idea to get an AiP from a lender to give you an idea of how much you could borrow. And estate agents often ask for one before they’ll let you view properties. Getting an AiP shouldn’t affect your credit score but check with the lender first.

  2. Check your credit reading

    When you apply for a mortgage, you’ll be asked to provide lots of information. But before you do this, check your credit information is correct - you can do this online with one of the main credit rating agencies.

  3. Supply your documents

    Once you’ve found a home to buy and had an offer accepted, you’re at the stage of applying for a mortgage.

  4. Compare mortgages

    Shopping around could save you thousands of pounds over the term of a mortgage. We can help you compare mortgages to help you find the best deals and interest rates available across a range of lenders.

  5. Check your mortgage offer and make sure your deposit is available

    Once you receive the lender’s formal offer, make sure you check and fully understand the terms of the mortgage. You’ll also need to look into the arrangements for transferring and paying the deposit once the contracts are exchanged.

Frequently asked questions

Usually, a minimum deposit of 10% is needed for you to find more competitive mortgage rates. The bigger your deposit, the better deals you’ll find and the lower your monthly repayments will be.

The government’s Mortgage Guarantee Scheme has helped to increase the number of 95% loan to value (LTV) mortgages available, which means first-time buyers may only need a 5% deposit. Other mortgage schemes, such as the Help to Buy: Equity Loan can also help.

One option is to transfer your current mortgage to a new property. This is called ‘porting’ and most lenders will let you do this, although there may be costs involved if you’re wanting to increase or decrease your borrowing.

If you decide to port your mortgage, you’ll have to reapply for the loan from your lender and have the same checks done. However, porting does mean you could keep the same interest rate and terms which may not be available otherwise.

Another option is to apply for a completely new mortgage, but you may need to pay exit fees from your current lender if you’re still in the period where early repayment fees apply.

There are two main types of mortgage interest: fixed rate and variable rate.

With a fixed interest rate your monthly repayments and the interest you’re charged will stay the same for a set timeframe, usually between two and five years.

Variable interest rates can go up and down and so will your repayments. There are two main types of variable mortgages: tracker mortgages and discount mortgages.

Tracker mortgages usually follow the Bank of England’s base rate plus a set percentage, some of these run for two years before moving to the lender’s standard variable rate.

Discount mortgages charge the lender’s standard variable rate with a fixed amount discounted from this for a set period.

Most mortgage deals involve an arrangement fee, which can be up to £2,500. You can either pay this when you apply or have it added to the mortgage balance instead.

If you’re using a broker to arrange your mortgage, rather than going directly to a lender, you may also have to pay them a fee - but they should explain their costs before you use them.

As part of processing your application, your lender will carry out a valuation of your property. Sometimes they’ll cover this cost, but check with your lender or broker about whether you’ll be charged for this.

It’s best to start applying for a mortgage several weeks before you start looking for a property, as you’ll need to understand how much you can afford and what loan you can get.

If you know how much you can borrow by having a mortgage in principle, you’ll be in a stronger position when you’re making an offer, and estate agents and sellers will often expect you to have this.

To prepare and give yourself the best chance of a successful mortgage application, make sure your credit rating is as good as possible - taking some time to improve it is worth doing.

If this happens, you’re unlikely to be classed as a first-time buyer and so won’t be eligible for a first-time buyer mortgage. Instead, you’ll need to take out a joint mortgage.

Buying a home with a previous property owner also means you won’t qualify for the first-time buyer tax relief on stamp duty, unless you’re unmarried and you’re the only person named on the mortgage deed.

However, if you’re a first-time buyer using a Lifetime ISA (giving you a government bonus of 25%, up to £1,000 a year) you can still put your own bonus toward the price of a home you’re buying together.

The Help to Buy: Mortgage Guarantee scheme can also benefit both first-time buyers and existing homeowners by providing 95% LTV mortgages.

While you can take out a buy-to-let mortgage as a first-time buyer, the terms of a residential first-time buyer mortgage mean you can’t let it out without your lender’s written consent.

If your lender discovers you’ve been renting out your property without their agreement, they could ask you to repay the whole mortgage immediately or repossess the property.

Getting consent to let from your lender will usually involve additional charges or an increase in your mortgage interest rate.

If you’ve got a Help to Buy or shared ownership mortgage you won’t be allowed to let your property. You’ll probably need to repay this and change mortgages if you want to rent it out.

If you’re self-employed, you’ll need to prove your income to get a mortgage. Your lender will need to be confident that you can afford to borrow the amount you need to buy a home.

You usually have to show at least two years’ of tax statements or company accounts signed off by an accountant - if you can show consistent or increasing profit this can help.

It’s possible to get a 100% mortgage but they’re very rare. Instead, you’ll usually need to pay a percentage of the property’s value upfront as the deposit, and the lender will pay the rest.

Almost all 100% mortgages available are guarantor mortgages - this is when a parent or family member agrees to provide financial security to the lender if you can’t make your repayments.

Even if you have someone who can act as a guarantor, it doesn’t mean you’ll be offered a 100% mortgage, and the risk of this increases if you’ve got a bad credit score or are in debt.

If you can’t get a 100% mortgage you’ll need to save for a minimum deposit of 5% to be able to access first-time buyer mortgages and government Help to Buy schemes.

This is when a lender gives you an idea of what it’ll be prepared to lend you, based on the information you’ve provided.

It’s also called an Agreement in Principle (AiP), a Mortgage in Principle, or a Mortgage Promise.

This is useful to have if you’re house-hunting as it shows estate agents and sellers you’re serious about buying a property.

Typically lenders do what they call a soft credit search on you for this, so it should not affect your credit rating.

The agreement isn’t legally binding and the amount you’re offered could change once the lender has done more detailed checks on your income and spending.

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THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

PLEASE NOTE: THE FCA DOES NOT REGULATE MOST BUY TO LET MORTGAGES

[1]For online mortgage comparison and advice Gocompare.com introduces customers to Koodoo which is the trading name of Mortgage Power Limited who are authorised and regulated by the Financial Conduct Authority (FRN 845978). Gocompare.com’s relationship with Koodoo is limited to that of a business partnership, no common ownership or control exists between us. Please note, we cannot be held responsible for the content of external websites and by using the links stated to access these separate websites you will be subject to the terms of use applying to those sites.

[2]UK Finance: Mortgage Trends Update May 2019.
Average size of loan taken out by first-time buyers = £166,977.
Average loan-to-value for first-time buyers = 77.8% therefore average deposit = 22.2%
Based on these figures, average first time buyer purchase price = 166.977/77.8 x 100 = £214,623
So, the average deposit paid by first-time buyers in May 2019 is 22.2% of £214,623 = £47,646.