First-time buyer mortgage guide

What is a first-time buyer mortgage?

A first-time buyer mortgage is a residential mortgage for someone who has never owned a home, in the UK or anywhere else. It works like any other repayment mortgage, but many lenders offer first-time buyers lower deposit options, and buyers in England and Northern Ireland pay less stamp duty on their first home.

You usually count as a first-time buyer if you have never owned a freehold or leasehold home, including one you inherited or owned abroad. Lenders use their own definitions for the mortgage itself, and some treat you as a first-time buyer if you haven’t owned a UK home for a number of years.

If you’re buying with someone who has owned a home before, the mortgage can still go ahead, but first-time buyer stamp duty relief won’t apply to the purchase. Our first-time buyer mortgages page explains how we help.

How much deposit do you need as a first-time buyer?

Deposits start from 0%, then 5%, 10% and upwards. A deposit of at least 10% usually opens up more lenders, lower rates and, with some lenders, higher income multiples. As your deposit grows and you move into lower loan-to-value bands, you potentially have access to better rates.

Lenders describe the size of your mortgage compared with the property’s value as the loan-to-value, or LTV. The bigger your deposit, the lower the LTV.

As you move down the loan-to-value bands, you potentially have access to better rates.

Rates and criteria depend on the individual lender and your circumstances.

Can you buy with no deposit?

A handful of lenders and building societies offer 100% mortgages. Criteria are tighter than for standard mortgages, for example 12 months or more of on-time rent payments, and borrowing may be capped at a lower multiple of your income. Some family-backed mortgages also let you buy without a cash deposit of your own, which we cover in the help for first-time buyers section.

How much can you borrow as a first-time buyer?

Most lenders lend first-time buyers between 4 and 5.5 times their income, and some lenders go up to 6 times. How much you can borrow depends on your credit profile, your circumstances, your line of work and an affordability check of your income, outgoings and credit history.

Income multiples are only the starting point. Lenders also work out whether the monthly payments are affordable once your regular outgoings are taken into account, such as car finance, credit cards, loans and childcare, and whether they would still be affordable if interest rates rose. That’s why two people on the same salary can be offered very different amounts.

Our mortgage calculators give a quick estimate of what you could borrow and what the monthly payments might be.

What do lenders look at when you apply?

Lenders look at five main things: your income and how stable it is, your monthly outgoings, your credit history, the size and source of your deposit, and the property itself. They use these to decide whether to lend, how much and at what rate, and every lender weighs them differently, which is why criteria vary so much.

• Income. Employed buyers usually show payslips and a P60. Some lenders accept a new job or a probation period. Self-employed buyers usually need two years of accounts or tax calculations, and some lenders accept one year.
• Outgoings. Regular commitments such as loans, car finance, credit cards and childcare reduce how much you can borrow.
• Credit history. Lenders check your credit file with the credit reference agencies, Experian, Equifax and TransUnion. Missed payments, defaults or CCJs make it harder, not impossible.
• The electoral roll. Being registered to vote at your address helps lenders confirm who you are and where you live.
• Your deposit. Lenders need to see where the money came from, such as savings, a Lifetime ISA or a gift from family, as part of anti-money laundering checks.
• The property. The lender values the property and checks things like the construction type, the length of any lease and whether it’s a flat above a shop or an ex-local authority home.

What are the steps to buying your first home?

Buying your first home usually follows nine steps: work out your budget, save your deposit, get a mortgage in principle, find a property and make an offer, apply for the mortgage, receive your mortgage offer, complete the legal work and surveys, exchange contracts, then complete and collect your keys.

1. Work out your budgetYour deposit, what lenders could lend you, and the costs on top such as solicitor fees, a survey and any stamp duty.
2. Save your depositOptions start from 0% deposit. Savings, a Lifetime ISA and gifts from family can all be used towards a deposit, depending on the lender.
3. Get a mortgage in principleA lender’s initial indication of how much it could lend, based on your income and a credit check. Many estate agents ask to see one before accepting an offer. It’s usually valid for 30 to 90 days.
4. Find a property and make an offerOffers are made through the estate agent. In England, an accepted offer isn’t legally binding until contracts are exchanged.
5. Apply for the mortgageThe full application goes to the lender with your documents, and the lender arranges a valuation of the property.
6. Receive your mortgage offerUsually two to three weeks after the application, although it can be quicker or longer depending on your case. Offers usually last three to six months.
7. Legal work and surveysYour solicitor or conveyancer carries out searches, checks the title and raises questions with the seller’s solicitor. Many buyers also arrange their own survey.
8. Exchange contractsThe purchase becomes legally binding and a completion date is fixed. Most lenders require buildings insurance to be in place from exchange.
9. Complete and collect your keysThe lender releases the money, your solicitor pays the seller and you collect your keys, usually one to four weeks after exchange.

How long does it take to get a mortgage as a first-time buyer?

A mortgage in principle can often be arranged within 24 hours, and a full mortgage offer usually takes two to three weeks once the application and documents are in. The whole purchase, from offer accepted to completion, usually takes around three months, depending on the chain, the legal work and the lender.

Typical timescales only. Chains, leasehold properties and new builds can take longer, and chain-free purchases can be quicker.

What costs do first-time buyers have to pay?

On top of the deposit, first-time buyers usually pay solicitor or conveyancing fees, a survey, any lender arrangement fee, and any stamp duty due, which depends on the price and where you buy. Together these costs commonly add up to a few thousand pounds, so most buyers include them in their budget from the start.

Typical ranges, not quotes. Costs depend on the property, the lender and the firms you use.

Do first-time buyers pay stamp duty?

First-time buyers in England and Northern Ireland get stamp duty relief, so they pay less, or nothing at all, on homes up to a set price. Above a higher price limit the relief doesn’t apply and standard rates are paid. Scotland and Wales have their own property taxes and rules.

The thresholds are set by the government and can change, so check the current rates on GOV.UK before you budget. We’ll factor stamp duty into your costs when we work out your budget together.

What help is available for first-time buyers?

Help for first-time buyers includes 0% and low deposit mortgages, family-backed mortgages, lenders that offer boosted affordability, and savings accounts with a government bonus, such as the Lifetime ISA. Each option has its own criteria, and what’s available depends on the individual lender and your circumstances.

0% deposit mortgages

A small number of lenders offer 100% mortgages, so no deposit is needed. These are often aimed at renters who can show a record of paying rent on time, and criteria are tighter than for standard mortgages.

Low deposit mortgages

Many lenders offer mortgages with a 5% deposit, depending on your income, credit profile and the property you’re buying.

Family-backed mortgages

Gifted deposits from family members are accepted by many lenders, usually with a signed letter confirming it’s a gift rather than a loan and that they won’t own part of the home. Other options include joint borrower sole proprietor mortgages, where a family member’s income helps you borrow more without them going on the deeds, and family-assisted mortgages backed by a relative’s savings or property.

Boosted affordability

Some lenders offer higher income multiples, up to 6 times income, for certain professions, higher earners or buyers with larger deposits. Others let a family member’s income count towards affordability, or offer longer mortgage terms, which can increase how much you can borrow.

Government savings schemes

Government-backed savings accounts, such as the Lifetime ISA, can add a bonus to what you save towards your first home. Each scheme has its own age limits, savings limits, property price caps and withdrawal rules, and these can change, so check the current rules on GOV.UK before you rely on one.

Availability and criteria depend on the individual lender and your circumstances, and can change.

What types of mortgages are there?

The main types of mortgage are fixed rate, tracker, discount and variable rate mortgages. A fixed rate keeps your interest rate the same for a set period, while trackers, discounts and variable rates can go up or down. Most deals have early repayment charges if you leave during the deal period.

Mortgage terms can go up to 40 years, depending on your age. Mortgages can be on a repayment basis, where the loan is fully repaid by the end of the term, or on an interest-only basis if you meet the lender’s interest-only criteria.

We contact all our clients around six months before their deal ends, so they can look at their options in good time. Our remortgage page explains how switching works.

Can you get a first-time buyer mortgage with bad credit or if you’re self-employed?

Yes. Missed payments, defaults or CCJs don’t automatically rule out a first-time buyer mortgage, but it all depends on your credit profile and each lender’s criteria. Self-employed first-time buyers still need to meet the lender’s standard self-employed criteria. In both cases, which lender suits you depends on your circumstances and the details of your income and credit history.

Keyholder has helped hundreds of people with bad credit get a mortgage, and many of them were first-time buyers. What matters is what happened, when it happened and whether it’s been settled, and it all depends on the individual lender’s criteria.

What documents do you need for a first-time buyer mortgage?

Typical documents include photo ID, proof of address, your last three months of payslips, your latest P60, three months of bank statements and proof of where your deposit came from. Self-employed buyers usually provide tax calculations and tax year overviews, or company accounts, instead of payslips. Exact requirements depend on the lender.

First-time buyer questions, answered