First time buyer guide

Buying your first home can be an exciting time, but the mortgage process can feel tricky to navigate and it’s easy to feel overwhelmed. You might be asking lots of questions like “how much deposit do I need?”, “how do I apply for a mortgage?” or  “what type of mortgage should I get?”

Let’s take a look at the answers to some of these commonly asked questions and find out what to expect as first-time buyers in this handy first-time buyers guide.

What is a first time buyer mortgage?

First time buyers’ mortgages are specifically designed for those new to the housing market. First-time buyer mortgages often require little or no deposit. Lenders are often willing to offer 95% or 100% LTV mortgages because they recognise that first-time buyers tend not to have as much capital. You might also see mortgage companies using incentives, like cashback schemes, to persuade first-time buyers to borrow with them.

Type of first time buyer mortgage

There are two main types of first-time buyer mortgages on the market:

  • Repayment mortgage. This is the most common type of mortgage where you pay back some of your mortgage debt, plus monthly interest. At the end of the mortgage term, typically 25-30 years, you’ll have paid off the full loan plus interest.
  • Interest-only mortgage. This type of mortgage requires you to pay only the interest on the loan each month, leaving the actual loan debt payable at the end of the loan term. This loan type is less popular with first-time buyers as a large sum has to be paid back at the end and the maximum LTV is usually around 75%.

You’ll also find different types of interest rates including fixed (where you agree to a fixed interest rate over a certain time period), variable (your interest rate changes depending on the lender’s standard rate) and tracker (your interest rate tracks the Bank of England base rate).

A mortgage advisor can help you understand the different mortgages you’re eligible for and what might be the best option for your circumstances.

Deposits for first time buyers

When you take out a mortgage loan, you will normally have to put down a deposit of a least 5% of the value of the home you’re looking to buy. The mortgage loan makes up the rest of the property’s value, up to 95%, known as the loan-to-value ratio (LTV).

The more deposit you’re able to put down, the less you’ll need to borrow and the less interest you’ll need to pay. As a general rule, the larger your deposit and the lower the LTV, the more competitive and favourable mortgage rates you’re likely to be offered.

With the help of family, it is possible to secure a mortgage if you’re struggling with affordability or to save a deposit. Normally, a close relative will need to secure the loan with, for example, cash savings or equity on their own home — also known as a guarantor.

First time buyer’s benefits

Because they’re usually in a less financially affluent position, first-time buyers receive some great benefits to make buying their first home more affordable, including:

  • Stamp duty exemption: Stamp duty is a type of tax paid on property purchases and, as a first-time buyer, you typically pay less. For example, you’ll pay nothing on properties in England and Wales up to £300,000.
  • Lifetime ISAs: If you’re between 18 and 39 years old you can take out a Lifetime ISA that can be used towards a deposit for your first home. You can deposit up to £4,000 a year in your savings account and the Government will add 25% i.e. up to £1,000 a year.
  • Help to Buy: If you have a small deposit you can also benefit from the Government’s Help to Buy or Shared Ownership schemes that provide a part equity loan or share ownership of your property.

Additional costs

If you’re buying a property for the first time there are a few additional costs to be aware of:

  • Stamp Duty, if you purchase a property over the exemption cap
  • You might need to pay for valuation reports or surveys for lending purposes
  • Legal fees involved in contracts and buying a property
  • If you use a mortgage broker, you may have to pay a small fee for their services

Buying steps

Although the process of securing a mortgage can seem a bit complicated, there is a very straightforward, easy-to-follow process:

  1. Engage a mortgage broker who can help advise you on the best mortgage options for your needs. They can also secure a Decision in Principle (DIP) that can help reassure you and the seller that you’ll get a mortgage.
  2. Find a property you love and can afford.
  3. Put in an offer through your solicitor.
  4. Apply for your mortgage (your mortgage broker can take you through this).
  5. Check the contracts and deeds with your solicitor.
  6. Your and your seller’s solicitors exchange contracts and you hand over your deposit.
  7. Contracts are exchanged, your money is released to the seller and you’re now a homeowner!
Mark Y
Mark Y
I can’t recommend enough! Made the process easy, was always willing to explore every option and helped me arrive at the right product for me. Thanks again
Nick Kane
Nick Kane
Jonathan is always extremely helpful and jumped onto this request asap and secured a great deal for me which I was very happy with.
Debbie Rich
Debbie Rich
Jonathan is absolutely fantastic, he explains everything very clearly and always makes my remortgaging process easy, swift and affordable. He knows the market inside out. It’s a pleasure to work with him.
Eve Penford
Eve Penford
Jonathan was a great help when I needed to get a UK mortgage after living for years overseas. He listened to me to determine exactly what options would be best for me, found me a great rate, and his attention to detail meant that everything went very smoothly. Would recommend!
Isabel Shave
Isabel Shave
Jonathan answered all the questions I had regarding my mortgage promptly and in depth. I would definitely recommend him to anyone needing help with buying their new home.
Luke Rogers
Luke Rogers
Jonathan is the consummate professional. We have worked with him on 3 occasions and each time he took the time to explain our options and the relative pros and cons. He has helped us save money and manage risk and truly a person we have come to trust. He has supported my wife's family for many years and we will continue to work with him as long as he is working in the mortgage industry. If you are looking for sound advice and efficient management of changes needed I can't recommend Jonathan and Ayla too highly.
David Crook
David Crook
Really enjoy working with Jonathan to get to the best place for our mortgage. We agree on all of the parameters for dipping in and out of fixed rate options.
Neil Singh
Neil Singh
Jonathan was very professional and our remortgage came through bang on time with no fuss or problems. I am happy to recommend Ayla Morgages.
Jane Fowke
Jane Fowke
I can wholeheartedly recommend Jonathan at Ayla Mortgages. He has always given me wise advice and when we came to needing to secure a mortgage deal the week that over 800 lenders withdrew their rates, he was up at midnight and then first thing the next day, holding on a phone line for several hours, until the deal was confirmed! He made a stressful time as easy for us as it could have been. I will always use him!
Jesus Rodriguez
Jesus Rodriguez
We have recently had Jonathan help us with buying our first house, and cannot put into words how informative, patient and caring him and his team were throughout the process. I cannot but to HIGHLY Recommend them. Gracias!