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!
M & T H
M & T H
2024-06-23
We cannot recommend Jonathan enough, he is an absolute legend! We were stuck in a nightmare scenario, but he got us over the line with a smile (and lots of moral support!) Nothing was too much to ask, and now we're living in the property of our dreams. Every time the rate changed, he promptly revised the offer and we kept having a better deal each time. If you need a broker who makes the impossible possible, and the most pleasant person to deal with, Jonathan is your guy!
Claire Aitken
Claire Aitken
2024-06-19
Jonathan was absolutely excellent throughout our whole purchase experience and insurance needs. Always there for any questions and proactively reached out during what can be such a stressful time. A true professional with exceptional service skills . Thank you and can't recommend you enough. Will be back for future needs . Claire & Christopher
carline3891
carline3891
2024-06-19
I'm a first time buyer who had no idea how mortgages and buying houses worked. Plus finding me a mortgage would be a complex situation. Luckily a friend recommended Jonathan and he really did go out of his way to explain the entire process and answered all of my questions (no matter how basic they may have been). He found me a brilliant mortgage with a surprisingly low rate for my situation and this has allowed me to find and buy a home for the first time. I would definitely recommend Jonathan, especially if your eligibility may be a little complicated.
Poppy O'Flanagan
Poppy O'Flanagan
2024-05-30
Jonathan has provided us with mortgage advice on three occasions now and makes the whole process very simple. He always gives clear advice, is excellent at communicating and kept us updated throughout the process. We will definitely be using Ayla Mortgages again!
Mohamed Sayed
Mohamed Sayed
2024-03-13
High recommend! Very good broker and helpful! Just got me a flat with an amazing rate! Thank you Jonathan 🙏🏼
Jodie Marks
Jodie Marks
2024-03-06
Jonathan has been my mortgage broker for around 4yrs. His experience, knowledge and patience is second to none, Jonathan is extremely diligent and trustworthy. I have recommended him to many, and will continue to do so.
Mark Y
Mark Y
2023-12-11
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
2023-12-08
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
2023-12-05
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
2023-09-07
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!