First time buyer's guide

Saving up a deposit

So you want to buy a place of your own? Step one is to save for a deposit.

Consider using a lifetime ISA, as you can save up to £4,000 a year and get a bonus top-up from the government of 25% annually (up to £1,000 a year). 

These savings can be put towards your deposit. The bigger your deposit, the better mortgage rates you'll likely be able to access.

Next, you need to get a mortgage in principle (MIP), ideally before you go house-hunting, so you can determine how much you may be able to borrow. 

Finding a mortgage

If you're wondering, 'Can I get a mortgage?' our mortgage checklist can help. This online tool helps you check the strength of your mortgage application and improve it.

Also, do all you can to improve your credit score, as this can save you thousands in the long run.

When you apply for a mortgage, the lender will run a credit check to decide how much you can afford to borrow.

Now, you should search for an independent mortgage broker who can research the whole market to find the best mortgage for your circumstances.

Having a mortgage broker greatly increases your chances of your application being accepted the first time and can save you a great deal of money over the long term.

You should read up on the different types of mortgages to consider which one is right for you.

Also, you may be able to get a mortgage in principle from a lender before it is formally approved. This can reassure estate agents that you can afford a particular property.

Guarantor mortgages

If you find it hard to get an ordinary mortgage, you may still be offered a guarantor mortgage if you have parents or other family members who are willing to help you out.

With this kind of mortgage, the guarantors (e.g. your parents) agree to cover your mortgage repayments if you cannot.

Shared ownership

If a lender won’t offer you a large enough mortgage to buy a whole property, another option is shared ownership.

This is where you purchase a portion of the home and pay rent on the rest. Find out more about shared ownership.

First Homes scheme

The government's First Homes scheme provides discounted homes to first-time buyers in England who would otherwise be unable to afford one.

Under this scheme, first-time buyers can buy a new-build home in their community at a discount of 30%-50% less than its market value. 

Buying with friends

It's even possible to buy a property in a group of up to four friends. Find out more about buying as tenants in common.

Choosing a property

Once you know how much you can borrow, you can search for homes in your price range.

Aim for the best you can afford, but give yourself a safety margin.

Your mortgage broker can show you how interest rate rises will increase your mortgage repayments to help you determine what you can afford.

Be persistent, as you may have to view a lot of properties before you have an offer accepted.

An alternative to house-hunting is building your own home, though only if you are confident managing a major project.

Conveyancing - hiring a solicitor

When your offer is accepted, the buying process, known as conveyancing, can begin.

For this, you'll need a solicitor. You may need to contact them often and send important documents, so being local is a big advantage.

Your solicitor’s job is to ensure your purchase is fully legal and there are no nasty surprises, such as finding the property is on a short lease or that the garden belongs to your next-door neighbours.

A good solicitor can make all the difference in the hectic final weeks of a home purchase.

Getting a survey

It is advisable to hire a chartered surveyor to report on your home before you exchange contracts.

For newer properties, a RICS Homebuyers report should be sufficient if you have no immediate plans for major building work.

However, if the property is over 30 years old, unusual or in poor condition, you should arrange a RICS building survey (often called a ‘full structural survey’).

Likewise, if you plan to carry out an extension or conversion, you should choose a more detailed survey.

A building survey can cost between £500 and £1,500, depending on the size of your home and what type you choose.

Find out more about property surveys.

Negotiating on price

Sometimes, a survey will turn up problems that are not deal-breakers but which will incur unforeseen costs for you.

In such cases, it may be worth renegotiating with the vendors to see if they will lower the price by a suitable amount.

Be reasonable and realistic, and remember that they are under no obligation to do so.

Calculate your stamp duty

You may not need to pay any stamp duty if you're a first-time buyer, as you don't pay any on the first £300,000 (5% stamp duty applies between £300,001-£500,000).

Stamp duty for a single property is charged in bands, as shown in this table: 

Use this stamp duty calculator to find out how much you will have to pay.

In Wales and Scotland, the rules are different.

In Wales, the tax is called the land transaction tax (LTT); in Scotland, it's called the land and buildings transaction tax (LBTT).

Use these calculators instead:

LLT calculator (Wales)

LBTT calculator (Scotland)

Exchange and completion

The final stage of buying your home is a two-step process.

Step one is the exchange of contracts, which your solicitor will handle.

Once contracts are exchanged, you are legally obliged to proceed with your house purchase. If you have to withdraw at this stage, you will have to pay significant costs.

At this stage, your seller will require you to pay an initial deposit, usually 10% of the property's value. However, this amount can sometimes be negotiated.

The final step is the completion day (typically a week after the exchange).

Your lender transfers your mortgage money to your solicitor, who transfers it to the vendors via their solicitor.

Once the money arrives, the estate agent will release the keys to your new home, and you can move in!

Insurance

Buildings insurance is a policy that pays out if your home is destroyed (e.g. by fire).

Your lender will insist that you have it, but you can buy it from a different provider if you wish. Ensure that your cover begins on the day you exchange contracts.

Life insurance is not compulsory, but it is essential. It means your mortgage will be paid off in full should one of the mortgage holders die so your family can stay in their home.

Moving home

The moving process may involve additional expenses, such as removal costs and a fee for the money transfer.

Most homes, unless brand-new, will require refurbishment and redecoration after you move in, so keep some cash in reserve to cover these extra costs.

Remember to update your address with all the relevant bodies, especially your bank, the DVLA (if you drive), and any pension schemes you hold.

Now you can settle in and enjoy your new home.