First-time buyer mortgages: everything you need to know

Discover everything you need to know about first timer buyer mortgages in our helpful guide below.

If you’re hoping to buy your first house or flat, the most daunting part of the process for you may be finding your first mortgage.

There’s lots of new information to take on board, but here we break it down to make it easy to understand.

Once you’ve saved up your deposit (or found a mortgage guarantor), here’s how you go from house-hunting to an agreement in principle, passing your lender’s stress test and securing your first mortgage deal.

Who qualifies as a first-time buyer?         

Being a first-time buyer isn’t all bad.

Although there may be some challenges, first-time buyers benefit from certain schemes and allowances to make the home-buying process easier and more affordable.

It’s important to define legally what a ‘first-time buyer’ actually is. In the UK, a first-time buyer is considered someone who has never owned any residential property anywhere in the world.

This means you must not have owned your own home (with or without a mortgage) and must not have owned any buy-to-let property either. This includes any inherited property (so even if you have never bought residential property before, inheriting it means you’re no longer a first-time buyer).

The good news is that commercial property (such as shops or offices) does not count. So, if you have owned a shop, workshop, warehouse, or office before, you still qualify as a first-time buyer for the purposes of buying a home.

Remember, too, you’re only a first-time buyer if you’re buying the home to live in yourself.

If you’re buying rental property to let out, you don’t qualify for any first-time buyer perks.

One more thing: if you’re buying with someone else and your partner already owns residential property or has done so in the past, you may not qualify for some first-time buyer perks.

However, some will still be open to you, such as the government bonus on a lifetime ISA, which is available in the form of stocks and shares and cash.

How do first time buyer mortgages work?

Getting a mortgage when buying your first property is a slightly different process compared to selling one home to buy another.

For this first mortgage, you’ll need to put down a deposit – a cash lump sum to cover part of the cost of the property. This is because you can’t (usually) borrow all the money you need to buy a home. Some of that money must come from you, which is your deposit.

The bigger the lump sum you can raise (proportional to the property’s total price), the more likely you are to be offered a mortgage, and the better the terms of this mortgage may be.

Example of a first-time buyer’s mortgage

Patrick and Helen want to buy their first home together. They have saved up a total of £20,000 for a deposit, and they make a successful offer on a house for £200,000.

Their deposit is 10% of the total value of the home, so they need to cover the remaining 90% with a mortgage. They should also make sure they have extra savings set aside for associated costs such as conveyancing, surveys, stamp duty if payable, and removals. 

Assuming they can find a 90% mortgage, they will need the loan to be for £180,000. Will they be able to borrow this much? This depends on their incomes and financial commitments.

Some lenders may lend up to four and a half times someone’s annual income, so Patrick and Helen need at least a combined £40,000 to borrow this much. However, depending on their outgoings and essential expenditure, they may need to earn more than this to pass the lender’s affordability test.

To find out how much you might borrow based on your income, see the Unbiased Mortgage Calculator.

How to get a mortgage as a first time buyer

Although you can of course apply to lenders direct, the best way to find the right mortgage deal for you is to use a qualified mortgage broker.

There are many reasons why this is a good idea, which we explain below.

What does a mortgage broker do?

A mortgage broker is an independent go-between who scours the mortgage market to find the most suitable loan for you and maximise your chances of a successful application.

First and foremost, a mortgage broker can save you money by identifying the best deal with the lowest interest rates and/or lowest fees or exit penalties or whatever other criteria make it most suitable and affordable for you.

Secondly, a broker can make this choice based on all available deals on the market and may have access to some ‘broker only’ deals you won’t find directly from any provider or on any price comparison sites.

Thirdly, if you choose an independent, whole-of-market broker, they are not tied to any particular providers, so they can give you unbiased advice on the best deal for you with no conflicts of interest.

You might also choose a restricted or ‘tied’ broker who only selects deals from a smaller panel of preferred lenders rather than looking across the whole market. These types of brokers are often linked to estate agents.

Finally, your broker has experience and knows what different lenders look for in their ideal borrowers. They will guide you through the whole process to ensure your application is as strong and complete as possible to improve your chances of being accepted the first time.

As a first-time buyer, you can benefit enormously from having an expert who can answer any questions you have about the mortgage or the process in general.

Many mortgage broker clients have mentioned this as the service they valued most – having someone to reassure and inform them throughout this major life decision.

Learn more: Mortgage broker vs lender: what's the difference?

What should I know about mortgages as a first time buyer?

Mortgages come in a bewildering variety of shapes and sizes.

Here are some of the key features of mortgages that it’s good to familiarise yourself with.

Mortgage interest

A mortgage is a loan, so you’ll be charged interest each month. The higher the rate, the more you’ll repay monthly, and in total.

That may seem obvious, but it’s a crucial point when it comes to making certain decisions and comparing different deals.

The mortgage term

This is how long you’ll have the loan. Most mortgage terms are 20 to 25 years, but they can be up to 40 years.

Your loan must be repaid in full by the end of the term.

Repayment or interest only

With a repayment mortgage, you pay off some of the loan each month, along with the interest.

With an interest-only mortgage, you only pay the interest – so the amount you owe does not change.

This is a crucial point, as you must still pay off the full loan by the end of the mortgage term.

If you don’t have a lump sum available to do this, you will probably have to sell the property to pay off the loan.

Interest-only mortgages are usually taken out by landlords buying property to let, since they can sell the property at the end of the mortgage term to pay off the loan.

Taking out an interest-only mortgage as a homebuyer is not recommended unless you are confident of being able to pay it off in the future or plan to remortgage soon to a repayment mortgage.

You would need to demonstrate your repayment strategy to a potential lender, and it needs to be something more concrete than the vague promise of a future inheritance, for instance.

The mortgage deal

Your mortgage deal is one of the most important factors. This determines how much interest you pay on the loan, and whether or not this rate can fluctuate (and if so, by how much).

The most popular type of deal is a fixed rate mortgage. This means you’ll pay an unchanging rate of interests for a set period of time.

Other kinds of deal include tracker mortgages (where the rate changes in relation to the Bank of England base rate) and there are various others (find out about all the types of mortgage).

A mortgage deal, such as a fixed rate, lasts for a limited period such as two, three or five years (occasionally more).

After this, your mortgage will revert to the lender’s Standard Variable Rate (SVR) of interest, which is usually higher and can change without warning.

At this point, you should remortgage onto a new deal (either with your existing provider or a different one) to get another fixed or tracker rate.

The advantage of staying with your existing lender is you won’t usually need to go through the mortgage application process again, but you might get a better deal by casting your net wider across the mortgage market.

Mortgage fees

Often, you’ll have to pay certain fees when setting up a mortgage, ranging from a few hundred to a few thousand pounds.

There can also be fees for leaving your mortgage (i.e. remortgaging or paying it off) before a certain time has elapsed. Many deals have a tie-in period, often longer than the deal period itself.

This might require you to spend at least a year on the lender’s standard variable rate (SVR) unless you are willing to pay the charge.

Find out more about early repayment charges.

How much deposit do I need as a first time buyer?

Most lenders will insist you have at least a 10% deposit.

Historically smaller deposits have been accepted, but when there is more uncertainty in the economy, a 10% deposit (with a 90% mortgage) is generally the minimum requirement.

Generally, the bigger your deposit, the better deals you can get. With a larger deposit you will be offered lower interest rates and perhaps also longer-lasting deals.

Let’s look again at the example of Patrick and Helen given above.

They might struggle to find a 90% mortgage with affordable interest rates. However, if they have an extra £10,000, they would have a 15% deposit and would only need an 85% mortgage.

This would mean they would need to borrow less (£170,000), which would be more affordable and may come with a lower interest rate on their mortgage deal.

New mortgage deals are usually available at every 5% threshold – i.e., a 15% deposit will get you better deals than a 10% one, but a 14% deposit won’t.

However, under the Mortgage Guarantee Scheme, it is possible to secure a mortgage with as little as a 5% deposit. This scheme, available until June 2025, helps first-time buyers and others access higher loan-to-value (LTV) deals due to a government guarantee to lenders.

This means if you only have a 5% deposit, the scheme can help you secure a 95% mortgage, potentially opening up more opportunities to get on the property ladder.

Prime Minister Sir Keir Starmer has also announced that the Labour government plans to make the Mortgage Guarantee Scheme permanent under a new name, ‘Freedom to Buy.’

This proposed scheme aims to continue supporting buyers with smaller deposits, making homeownership more accessible in the long term.

For those who can only manage to raise a smaller deposit, the Mortgage Guarantee Scheme and its proposed successor, Freedom to Buy, could provide valuable routes to homeownership.

However, it's important to consider these mortgages may come with higher interest rates and fees than if you had a larger deposit.

Find out more about how loan-to-value ratio affects your mortgage.

Will I be accepted for a mortgage as a first time buyer?

Assuming you have saved at least a 10% deposit and want to borrow no more than 4.5 times your income, there are a few more tests you need to pass in order to secure your mortgage offer.

The first is a credit check – you’ll need a good track record of borrowing and repaying money on time.

The second is the affordability test. Your lender wants to make sure you can afford your mortgage repayments not just on paper, but in practice.

So they will look at all your spending patterns (on both essentials and luxuries) to see if you have enough money left over to pay your monthly repayments.

For this reason, in the weeks and months before your application, it’s a good idea to get your spending under rigorous control so you can demonstrate a comfortable surplus of income each month.

Remember that any rent you’re currently paying won’t count, because of course, if all goes to plan you won’t have to pay rent anymore!

When should I apply for a mortgage as a first time buyer?

You can apply for your mortgage at any time in the homebuying process, even before you start viewing properties, or after you've found a home you really like.

Some mortgage brokers may prefer to help you later on in the process, while others are happy to consult with you before the viewing stage, so specify this when you search for them on Unbiased. 

You can also work out roughly how much you can borrow using our mortgage calculator, but you'll still need a broker to give you a definitive answer and find the best deal.

Which help to buy schemes are there for first time buyers?

Various schemes are available to help first-time buyers onto the property ladder.

These include:

• The Mortgage Guarantee Scheme
• Lifetime ISAs
• Shared ownership
• The First Homes scheme.
• You can also get help from parents in various forms, such as guarantor mortgages.

Learn more: what is the Own New Rate Reducer scheme, and how does it work?

Will I pay stamp duty as a first time buyer?

One of the more recent perks of being a first-time buyer is you will be exempt from paying stamp duty on all but the most expensive properties (you’ll start to pay it only when the property price exceeds £425,000). This can save you several thousand pounds.

The stamp duty threshold for first-time buyers will fall to £300,000 for residential properties worth £500,000 or less from April 2025.

Find out more about stamp duty and how to succeed as a first-time buyer.

Get expert financial advice

Navigating the world of first-time buyer mortgages can seem overwhelming, but understanding the basics, from qualifying criteria and deposit requirements to the types of mortgages available, can help simplify the process.

By leveraging government schemes, considering the benefits of using a mortgage broker, and carefully preparing your finances, you can significantly improve your chances of securing the right mortgage deal.

This could help you step onto the property ladder with confidence.

Let Unbiased match you with a qualified mortgage broker who can help you navigate the mortgage market, find the best deals, and guide you through every step of securing your first home.