First-Time Buyer Mortgages in the UK: Complete Guide (2025)
Everything first-time buyers need to know about getting a mortgage in the UK. Government schemes, deposit requirements, and step-by-step process.
Buying your first home is one of life's biggest financial decisions. With UK house prices averaging over £290,000 and first-time buyers typically needing deposits of £30,000-£60,000, understanding mortgages is crucial to making your homeownership dream a reality.
What is a First-Time Buyer Mortgage?
A first-time buyer mortgage is specifically designed for people purchasing their first property. These mortgages often come with benefits like lower deposit requirements, government schemes, and competitive rates. You're classified as a first-time buyer if you've never owned property before, even if you've previously rented or lived with parents.
How Mortgages Work
A mortgage is a loan secured against your property. You borrow money to buy a home, then repay it with interest over a set term (typically 25-35 years). Your monthly payment covers both the loan amount (capital) and interest. If you can't keep up payments, the lender can repossess your home to recover their money.
Key Terms Explained
LTV (Loan-to-Value): The percentage of the property value you're borrowing. A 90% LTV means you're borrowing 90% and putting down a 10% deposit.
APR: Annual Percentage Rate - the total cost of borrowing including interest and fees.
Term: How long you'll take to repay the mortgage (usually 25-35 years).
Government Schemes for First-Time Buyers
Mortgage Guarantee Scheme
Launched in 2021 and extended through 2025, this scheme helps first-time buyers purchase with just a 5% deposit on properties up to £600,000. The government guarantees part of the mortgage, encouraging lenders to offer 95% LTV mortgages. Available from major lenders including Lloyds, Barclays, NatWest, and Santander.
Shared Ownership
Buy a share of a property (typically 25-75%) and pay rent on the remaining share. You'll need a smaller deposit (usually 5-10% of your share, not the full property value) and a smaller mortgage. You can buy additional shares over time (staircasing) until you own 100%. Ideal if you can't afford a full deposit but can manage monthly payments.
First Homes Scheme
Offers new-build homes at a 30-50% discount to first-time buyers and key workers. Properties remain discounted for future buyers, creating permanently affordable housing. Eligibility criteria include household income limits (£80,000 outside London, £90,000 in London) and local connection requirements.
Lifetime ISA
Save up to £4,000 per year and receive a 25% government bonus (up to £1,000 annually). Available to 18-39 year olds, you can save until age 50. Use the funds for your first home (up to £450,000) or retirement. The bonus makes this one of the best ways to save for a deposit, effectively giving you free money.
| Scheme | Deposit Required | Property Limit | Best For |
|---|---|---|---|
| Mortgage Guarantee | 5% | £600,000 | Standard purchases, low deposit |
| Shared Ownership | 5-10% of share | Varies | Lower income, smaller deposit |
| First Homes | Standard mortgage | Discounted price | New builds, key workers |
| Lifetime ISA | N/A (savings) | £450,000 | Long-term savers |
How Much Deposit Do You Need?
Minimum Deposit Requirements
Most lenders require at least 5-10% deposit for first-time buyers. On a £250,000 property, that's £12,500-£25,000. However, larger deposits get you better interest rates. A 10% deposit typically offers rates 0.5-1% lower than 5%, while 15-20% deposits unlock even better deals.
The Impact of Deposit Size
On a £250,000 property with a 25-year mortgage at current rates, a 5% deposit (£12,500) at 5.5% APR costs £1,442 monthly. A 15% deposit (£37,500) at 4.5% APR costs £1,182 monthly - saving £260 per month or £78,000 over the mortgage term. Every extra percentage point of deposit significantly reduces your costs.
Deposit Saving Strategy
Aim for at least 10% deposit if possible. Use a Lifetime ISA for the 25% government bonus, set up automatic transfers to a dedicated savings account, and consider living with parents or house-sharing to save faster. Even an extra year of saving can save tens of thousands in interest.
Types of Mortgages Explained
Fixed-Rate Mortgages
Your interest rate stays the same for a set period (typically 2, 3, 5, or 10 years). Monthly payments remain constant, making budgeting easy. After the fixed period ends, you'll move to the lender's standard variable rate (usually much higher) unless you remortgage. Fixed rates are popular with first-time buyers for payment certainty.
Variable-Rate Mortgages
Your rate can change based on the Bank of England base rate or the lender's standard variable rate. Payments can go up or down. Tracker mortgages follow the base rate plus a set percentage (e.g., base rate + 1%). Discount mortgages offer a discount off the lender's standard variable rate. Variable rates are riskier but can be cheaper when rates are falling.
Repayment vs Interest-Only
Repayment mortgages: Each payment covers interest and reduces the loan amount. You'll own your home outright at the end of the term. This is the standard and safest option for first-time buyers.
Interest-only mortgages: You only pay interest, so the loan amount never decreases. You need a plan to repay the full amount at the end. Rarely available to first-time buyers and much riskier.
| Mortgage Type | Rate Certainty | Risk Level | Best For |
|---|---|---|---|
| 2-Year Fixed | 2 years | Low | Expecting income increase |
| 5-Year Fixed | 5 years | Low | Long-term stability |
| Tracker | None | Medium-High | Falling interest rates |
| Discount Variable | None | Medium-High | Risk-tolerant buyers |
How Much Can You Borrow?
Income Multiples
Lenders typically offer 4-4.5 times your annual income. On a £35,000 salary, you could borrow £140,000-£157,500. With a partner earning £30,000, your combined income of £65,000 could get you £260,000-£292,500. Some lenders offer up to 5.5 times income for high earners or specific professions.
Affordability Assessments
Lenders don't just look at income multiples. They assess your monthly income vs expenses, including credit card payments, loans, childcare, and living costs. They also stress-test whether you could afford payments if interest rates rose by 3%. Having minimal existing debt and low monthly commitments improves your borrowing capacity.
Improving Your Borrowing Power
Pay off existing debts (credit cards, personal loans, car finance) before applying. Even small debts can reduce your mortgage offer by thousands. Close unused credit cards and overdrafts. Reduce your credit utilization to below 30%. Avoid changing jobs shortly before applying, as lenders prefer employment stability.
Important
Just because you can borrow a certain amount doesn't mean you should. Consider whether you can afford payments if interest rates rise, your income decreases, or unexpected expenses arise. A good rule is that your mortgage payment shouldn't exceed 30% of your take-home income.
The Mortgage Application Process
Step 1: Check Your Credit Score
Check your credit report with Experian, Equifax, and TransUnion at least 3-6 months before applying. Fix any errors, register on the electoral roll, and address any issues. A good credit score (700+) significantly improves your chances and the rates you'll be offered.
Step 2: Get a Mortgage Agreement in Principle
An Agreement in Principle (AIP) or Decision in Principle (DIP) shows sellers you're a serious buyer. It's a conditional offer from a lender stating how much they'll likely lend you. Takes 1-3 days and involves a soft credit check. Having an AIP strengthens your position when making offers.
Step 3: Find Your Property
With your AIP, you know your budget. Factor in additional costs: stamp duty (first-time buyers pay none on properties up to £425,000), solicitor fees (£850-£1,500), survey costs (£300-£1,500), and moving costs. Budget for furniture and immediate repairs too.
Step 4: Make a Full Mortgage Application
Once your offer is accepted, make a full mortgage application. You'll need proof of income (payslips, tax returns if self-employed), bank statements (usually 3-6 months), proof of deposit source, and ID. The lender will value the property and conduct detailed affordability checks. This takes 2-6 weeks.
Step 5: Mortgage Offer and Completion
If approved, you'll receive a formal mortgage offer. Your solicitor handles the legal work, including searches and contracts. On completion day, the mortgage funds are transferred, and you get the keys. The entire process from offer acceptance to completion typically takes 8-12 weeks.
Additional Costs to Budget For
Stamp Duty Land Tax
First-time buyers pay no stamp duty on properties up to £425,000 (£625,000 in some cases). On properties above this, you pay 5% on the portion between £425,000-£625,000. This relief saves first-time buyers up to £11,250 compared to other buyers.
Solicitor and Legal Fees
Budget £850-£1,500 for conveyancing (legal work). This covers searches, contract review, and fund transfers. Shop around for quotes but don't just choose the cheapest - poor conveyancing can cause expensive problems later.
Survey Costs
The lender's valuation (included in mortgage application) only confirms the property is worth what you're paying. Consider getting your own survey: Basic valuation (£250-£400), Homebuyer's Report (£400-£900), or Full Structural Survey (£600-£1,500). A survey can identify expensive problems before you commit.
Ongoing Costs
Beyond the mortgage, budget for: Buildings insurance (required by lender, £200-£500 annually), contents insurance (£100-£300 annually), maintenance and repairs (budget 1% of property value annually), service charges and ground rent (for leasehold properties), and council tax.
| Cost | Amount | When Paid | Can You Negotiate? |
|---|---|---|---|
| Stamp Duty | £0 (up to £425k) | Completion | No |
| Solicitor Fees | £850-£1,500 | Completion | Yes |
| Survey | £250-£1,500 | Before exchange | Yes |
| Mortgage Fees | £0-£2,000 | Application/completion | Sometimes |
| Moving Costs | £300-£1,500 | Moving day | Yes |
Common First-Time Buyer Mistakes
Borrowing the Maximum Amount
Just because you're approved for £300,000 doesn't mean you should borrow it all. Consider whether you can afford payments if interest rates rise, you have children, or your income decreases. Leave yourself financial breathing room for life's unexpected events.
Not Shopping Around
Different lenders offer different rates and terms. A mortgage broker can access deals not available directly and help you find the best option. A 0.5% difference in interest rate can save £15,000-£30,000 over a typical mortgage term. Don't just go with your current bank.
Ignoring the Total Cost
A mortgage with a low rate but high fees might cost more overall than one with a slightly higher rate and no fees. Calculate the total cost over the fixed period, including all fees. Also consider what happens when the fixed period ends - some lenders have much higher standard variable rates than others.
Not Budgeting for Additional Costs
Many first-time buyers focus solely on the deposit and forget about stamp duty, legal fees, surveys, and moving costs. Budget an extra £3,000-£5,000 beyond your deposit for these expenses. Also keep an emergency fund for unexpected repairs or maintenance.
Rushing the Process
Don't feel pressured to buy quickly. Take time to view multiple properties, get proper surveys, and ensure you're making the right decision. A house is likely your biggest purchase - it's worth taking time to get it right. If something feels wrong, it's okay to walk away.
Success Tips
Start saving early and consistently. Improve your credit score 6-12 months before applying. Get a mortgage broker to find the best deals. Budget conservatively and leave room for unexpected costs. Don't rush - the right property at the right price is worth waiting for.
What Happens After You Buy?
Your First Few Months
Set up your direct debit for mortgage payments - never miss a payment as it severely damages your credit score. Arrange buildings and contents insurance. Register with the local council for council tax. Keep all property documents safe. Start an emergency fund for repairs and maintenance.
When to Remortgage
Start looking for remortgage deals 3-6 months before your fixed period ends. When it ends, you'll move to the lender's standard variable rate, which is typically 2-3% higher. Remortgaging to a new deal can save hundreds monthly. Most people remortgage every 2-5 years to get the best rates.
Overpaying Your Mortgage
Most mortgages allow overpayments of 10% annually without penalties. Even small overpayments significantly reduce interest and shorten your mortgage term. Overpaying £100 monthly on a £200,000 mortgage at 4% saves £30,000+ in interest and clears the mortgage 5 years earlier.
Final Thoughts
Buying your first home is a major milestone that requires careful planning and preparation. Start by improving your credit score, saving a deposit (using a Lifetime ISA for the bonus), and understanding how much you can realistically afford. Take advantage of first-time buyer schemes, shop around for the best mortgage deal, and budget for all additional costs beyond the deposit.
Remember, homeownership is a long-term commitment. Choose a property and mortgage you can comfortably afford, even if circumstances change. With proper preparation and realistic expectations, you'll be well-positioned to make your homeownership dream a reality.
For more financial guidance, explore our articles on improving your credit score, creating a budget, and personal loans.
Frequently Asked Questions
How much deposit do I need as a first-time buyer?
Typically 5-20% of the property value. Government schemes like Help to Buy can help with smaller deposits.