Hot Topic First Time Buyer Mortgages Explained

Buying your first home in the UK can be an exciting journey, but the mortgage process can feel daunting. From saving money for a deposit to understanding the documents required for a mortgage, navigating the process of first-time buyer mortgages requires careful planning.

Let’s have a clear view of how the first-time buyer mortgages work and everything you need to know when buying your first property.

What Is a First-Time Buyer Mortgage?

A first-time buyer mortgage, as the name suggests, is a specific type of loan designed for people purchasing their first residential property. First-time buyers will have access to special deals on mortgages, such as lower deposit requirements and government-backed schemes.

Unlike the common belief, first-time mortgages also work like standard residential mortgages; the buyer will borrow money from a lender to buy a property and the loan is repaid with interest over a set term. The property will be used as collateral against the mortgage. So, if you default on the loan or fall behind with repayments, the lender can repossess the home.

Saving for a Deposit

The first step of buying a home is saving for a deposit.

Minimum deposit – Most lenders in the UK require at least 5% of the property’s actual value. So, if your property is valued at £250,000, the deposit would be £12,500, leaving £237,500 to borrow.

Typical deposit – For a property mortgage, the typical deposit is 10–20%, which does not improve your chances of mortgage approval while also ensuring lower interest rates.

There are certain government schemes that can further boost your savings, such as the Lifetime ISA, which allows you to save up to £4,000 per year, with the government adding a 25% bonus.

Affordability: How Much Can You Borrow?

The borrower’s financial strength is assessed carefully before approving the mortgage. Some of the common factors for affordability assessment include:

Income and employment status

Monthly outgoings (bills, loans, rent)

Credit history

Loan-to-income ratio

Generally, the lenders in the UK offer around 4–4.5 times your annual salary. However, this may vary by lender. For example, some lenders may approve a mortgage of £140,000–£157,500 for someone earning £35,000 per year, assuming they meet other criteria.

Mortgage in Principle

Mortgage in Principle is a document that states how much you are eligible for, based on your financial status, such as your income, credit score and deposit. It is always wise to obtain a Mortgage in Principle (MIP) before you start exploring your first home.

Benefits of an MIP include:

Clarifying your budget before making offers

Demonstrating seriousness to estate agents

Speeding up the formal mortgage application

While obtaining MIP is a wise decision, it isn’t a guarantee — final approval depends on full financial checks and property valuation.

Additional Costs to Consider

Beyond the deposit amount, there are many other additional expenses that need to be considered before making the final decision.

Stamp Duty Land Tax (SDLT) – First-time buyers in the UK are exempted from SDLT on properties up to £425,000, but the charges may be very high on higher-priced homes.

Survey and valuation fees – Depending on the type of survey, the buyers need to pay a fee of around £250–£600.

Solicitor/conveyancing fees – This is an important fee, which can be around £850–£1,500.

Moving and setup costs – Home insurance, utility deposits and moving costs may be additional. Including removals, utility deposits and home insurance.