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Credit will be secured by a mortgage on your property. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE. Written quotations are available from individual lenders. Loans are subject to status and valuation and are not available to persons under the age of 18. All rates are subject to change without notice. Please check all rates and terms with your lender or financial adviser before undertaking any borrowing.

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Top mortgage guides

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What is a shared ownership mortgage?

This guide provides all the information you need about shared ownership mortgages.

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The first-time buyer’s guide to getting on the housing ladder

This guide is essential reading for any first time buyer.

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What are mortgage affordability checks?

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Improve your chances of getting a mortgage

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First Time Buyer Mortgage Guide

  • Becoming a first-time buyer is both a financial and a personal long-term commitment.
  • While there are many things to consider, the process of buying your first home needn't be too difficult if you're aware of what's involved.
  • There is a choice of low deposit first-time buyer mortgages available, including those that require a deposit as low as 5% and 10%.
  • There are a number of mortgage rate types available, all of which come with their own advantages and disadvantages.
  • There is assistance available, including first-time buyer mortgage Government schemes. See the links in this guide for more details.
  • You can choose to buy your first home directly with your chosen mortgage provider or you can enlist the help of a dedicated mortgage broker.

How are first-time buyer mortgages different?

A first-time buyer mortgage is where the lender is happy to accept the risk that the buyer has no track record in paying a mortgage and usually has a smaller deposit than compared to a second time buyer or someone remortgaging. For example, first-time buyer mortgages can go up to 95% loan-to-value (LTV). The risk for the lender is if house prices fall by more than 5% and the borrower defaults, they will not be able to recover the cost of the debt from the sale of the property.

Mortgage calculators can be a really helpful way of planning ahead. In just a few clicks, calculate how much you could borrow as well as your mortgage repayments.

Brief introduction to the different mortgage types

You can choose between a mortgage with a fixed rate of interest or a variable rate of interest. A fixed rate mortgage will retain the same interest rate for the duration of the initial rate, after which it will revert to the lender’s standard variable rate (SVR) or existing borrower’s rate.

A variable mortgage has an interest that can be changed by the lender. This is usually linked to the Bank of England base rate. If rates fall, then your monthly payment will reduce. Likewise, if they go up, then they will increase.

Which mortgage you choose will depend on your ability to pay more on your mortgage if needed, versus the security of a set payment every month. A mortgage adviser can help you to assess the pros and cons of each mortgage type.

Understanding my first mortgage

Mortgages can be quite complex, here are a few key terms and some helpful tips;

How does a first-time buyer get a mortgage?

  1. Check your credit score - the better your credit score the more lenders that will consider your mortgage application. If your score is poor you may still be able to find a mortgage – read our guide How to get a mortgage with bad credit.

  2. Save for your deposit– lenders will typically require at least a 5% deposit (of the property value) and generally with a larger deposit comes a better mortgage interest rate. Read our guide on how to save for your deposit.

  3. Ask Mum and Dad or a relative – if you don’t have your own deposit then you can get a 100% LTV mortgage as long as you have a guarantor, they effectively provide the deposit for you using either equity in their property or their own savings – however if you default, your guarantor’s money is at risk. There are a number of mortgages from different lenders that offer this approach, including family assist mortgages and joint borrower sole proprietor mortgages, each with their own requirements that you will need to be aware of.

  4. Understand your monthly mortgage costs – our mortgage tables show the monthly cost of each mortgage. You can use this to see if you are able to afford this amount based on your current income and other expenses.

  5. Check the fees – look at the total cost of your mortgage over the initial term including the cost of your fees – sometimes the lowest rate isn’t always the cheapest, especially if there is a large product fee.

  6. Start budgeting – lenders need to know your mortgage is affordable, they do this by assessing your expenses versus your income. Our guide 'What are mortgage affordability checks' explains more.

  7. Compare mortgage rates and features using our mortgage charts – you might prefer a mortgage that allows over-payments or payment holidays, for example.

  8. Find the right lender – different lenders have different criteria for their mortgage. A mortgage broker will know which lenders are most likely to approve your mortgage application, based on your individual circumstances.

Helpful things to know

What is an APRC?

APRC stands for the annual percentage rate of charge. It takes into account, not just the initial rate, but also product fees and other costs, to make it easier to compare between products. You can find out more in our guide about the differences between APRs and APRCs.

What is loan-to-value?

LTV, or loan-to-value, relates to the loan percentage that you will require compared with the value of the house. So, if you put up 5% of the value/price of the house as a deposit, you will need a mortgage that has a loan-to-value of 95%. The lower your LTV, the better the deal you will likely be able to get.

What deposit is needed for a first-time buyer mortgage?

You can get a mortgage with no deposit by using a guarantor, family assist or joint borrower sole proprietor mortgage. This is where you use someone else’s savings or equity in their property as a deposit. If you don’t pay your mortgage, then this money can be at risk. If you want to save for your own deposit, then the minimum for a first-time buyer mortgage is 5% of the property value. This is also known as 95% LTV, i.e. your mortgage loan is 95% of your property’s total value.

What fees will I have to pay when getting my first mortgage?

When applying for a mortgage you may have to pay a product fee or application fee. This fee secures your mortgage funds.  You can read more about mortgage fees in our guide.

Is my credit rating good enough for a mortgage?

Your credit score is an important part of how a lender decides if they will offer you a mortgage. You can check your credit rating using a credit reference agency.

The better your credit score, the greater the likelihood your mortgage application will be accepted. So, if you've got any credit card debt, try to pay it off and cancel the card before applying, and see if there is anything else you could do to improve your rating.

What are the typical costs involved in getting a mortgage?

  1. Application of product fees – these can range from free to thousands of pounds – check your total mortgage cost as a low rate with a high product fee can be more expensive than a slightly higher rate with a small or no fee.

  2. Valuation fees – sometimes these come free with your mortgage.

  3. Solicitor and/or conveyancing fees – to handle your searches and legal requirements.

  4. Stamp duty for first-time buyers is zero for houses below £300,000, those purchasing houses between £300,000 and £500,000 pay 5% of the value above £300,000 only.

  5. Building and contents insurance – buildings insurance is mandatory for mortgaged properties.

  6. Moving costs – including hire vehicles or a full removal service.

  7. Furniture and electrical goods – even the basics will add up, sometimes you can get cash back on a mortgage, which can help pay for these extra items.

What help is available to first-time buyers?

First-time buyers in England and Wales purchasing a new build property can benefit from a Government Help to Buy equity loan. The existing scheme will end in March 2021. The Government will replace this with a new scheme running from April 2021 to March 2023. The new scheme will come with maximum limits on property prices for different regions.

The Government lends first-time buyers between 20% and 40% of the cost of their new build home and this helps to reduce your monthly mortgage payment. You will need to repay the loan and this is based on your property’s value at the time and not when you first took the loan out.

In addition, a shared ownership property from a housing association can help to reduce the amount you need to borrow. This is where you have a mortgage on a percentage of the property, usually between 25% and 75% of the property’s value and pay a small rent to the housing association. Some housing associations will allow you to buy the property in full at a later date. It’s best to check these details with them before you make an offer on a shared ownership property.

Should I use a mortgage broker?

As a first-time buyer, you may find the new experience of getting a mortgage potentially complex and confusing. A mortgage broker can help you to find a mortgage that suits your personal circumstances and guide you through the process. Some brokers may charge you a fee while others receive payment from the mortgage lender. You can find out more about mortgage brokers in our guide Should I use a mortgage broker.

Pros and cons of first time buyer mortgages

  • Your own home. It's not just the actuality of buying your first property, it's also the feeling that comes with owning your first home.
  • No more rent. There are good reasons to rent your home but for many people paying rent is just wasting money that could go towards owning their own home.
  • More freedom. As it's your own home, you won't be bound by the restrictions that tenants often face from landlords.
  • The first step. Becoming a first-time buyer is your first step on to the property ladder.
  • Financial commitment. Buying your home is probably the biggest and longest financial commitment you'll ever make.
  • Good credit rating. To help improve the chances of your first-time buyer mortgage application being accepted, and to be able to access more affordable mortgages for first-time buyers, your financial health needs to be in good shape and you will need to meet the affordability requirements of the mortgage lender.
  • Extra fees and costs. Valuations, brokers' fees, local authority searches and solicitors' costs are just some of the extras you'll have to consider as a first-time buyer.

Mortgage calculators can be a really helpful way of planning ahead. In just a few clicks, calculate how much you could borrow as well as your mortgage repayments

Moneyfacts tip

Moneyfacts tip Leanne Macardle

If you're still not sure what kind of mortgage is right for you, you could consider using a mortgage broker. Not only can they provide valuable advice, but they may also have access to mortgage deals that are not available directly on the Moneyfacts charts. 

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