When applying for a mortgage as a first-time buyer, a key decision you need to make is whether to choose a fixed rate or variable rate deal.
A fixed rate mortgage locks in the interest rate for a set amount time – the most common deals last for 2 or 5 years. But you can get fixed rate mortgages for 1, 3, 7 or 10 years, or even longer.
Your rate remains the same for the duration of the deal so you don't need to worry about your monthly payments increasing for this time. But if interest rates fall, you also won't benefit from a decrease in payments.
With a variable rate mortgage, the rate is subject to change during your deal period. If rates fall, you could benefit from lower payments during your deal. But if you opt for a variable rate mortgage, you have to make sure you can afford higher monthly repayments if rates rise.
Lenders can sometimes put floors or caps on a variable rate deal. A floor means your rate never falls below a certain level, while a cap (which tends to be more unusual) means it won't rise above a certain amount.
The main types of variable rate mortgages are:
You're normally moved on to your lender's SVR once your current fixed or variable deal comes to an end. The SVR is normally higher than other deals available on the market, so many people remortgage to another rate if possible. One of the upsides of being on an SVR is that it’s flexible. You normally won’t be charged early repayment fees if you want to pay off a chunk of your mortgage. Although this can also be the case with certain tracker deals.
A discount mortgage has a rate at a set amount below the SVR. For example, if the SVR is 5%, then you could get a discount rate mortgage for 2%. The rate rises and falls with the SVR.
A tracker mortgage rate is normally set at a certain amount above the Bank of England’s base rate. For example, if the Bank of England base rate was 4.5%, your interest rate may be 6.5%. Your rate then changes along with the Bank of England’s base rate.
Loan-to-value (LTV) is the amount of the property value (or price, whichever is lower) a lender is prepared to offer you.
For example, if the property you want to buy is worth £200,000 and you have a £40,000 deposit, this amounts to 20% of the property value. You'd then need to borrow the remaining 80% (£160,000) which means you'd need an 80% LTV mortgage.
Lower LTV mortgages tend to offer better rates than higher LTV deals. The lowest rates are usually available for 60% mortgages (which require a 40% deposit).
There are a number of schemes available to help you buy your first home, including:
Shared Ownership allows you to buy a share of your home – between 10% and 75%. You pay rent on the remaining share. You take out a mortgage on the share you want to buy and pay rent on the remaining amount. This means you need to make sure you can afford both the mortgage and the rent costs.
You can increase your share in the property later if you can afford to. The scheme is available on new-build properties, or on existing homes that are being sold through a housing association.
The First Homes scheme (only available in England) allows you to buy a home for 30% to 50% less than its market value. The homes must either be a new build or one that was originally bought as part of the scheme.
To be eligible for the scheme, you must be 18 or older, a first-time buyer, able to get a mortgage for at least half the price of the home and have an annual household income of £80,000 or less (£90,000 in London).
The aim of the Mortgage Guarantee scheme (introduced in April 2021) is to increase the number of 95% mortgages available in the market. Through it, the government offers lenders the financial guarantees they need to provide these higher LTV deals for properties up to £600,000.
The scheme was originally due to run until December 2022 but has been extended to the end of 2023.
The Right to Buy scheme offers council tenants the chance to purchase the house or flat they are living in, often below market value. This is only available in England (and Northern Ireland, in a slightly different format). Right to Acquire is a similar scheme for housing association tenants.
You may be able to apply to buy your council home if it's your only or main home, it's self-contained, you're a secure tenant and you've had a public sector landlord for at least 3 years.
The Help to Buy scheme is now only available in Wales. For those who meet the eligibility requirements, the government provides an equity loan to first-time buyers to assist them with purchasing a property. This is only available for new-build properties.
With Help-to-Buy – Wales, you must provide a deposit worth 5% of the property price. You then get a shared equity loan of up to 20% of the purchase price. You take out a repayment mortgage to cover the remaining amount.
A Lifetime ISA offers a 25% tax-free bonus to savings to help you build a deposit for your first home. You can save a maximum of £4,000 a year (meaning the maximum bonus available is £1,000 per year). You must have held one for a year before using the money to buy your first home, and it's only available on homes worth up to £450,000.
If you don't use the funds for your first home, you can also use them for retirement. But if you withdraw the money for any other reason then you may lose the bonus amount and face penalties on your savings as well.
You only need to submit a formal application for a mortgage once you've had an offer accepted on your first home.
But when you start to look for a property, you might want to consider getting an agreement in principle (AIP) from a broker or lender. Also known as a mortgage in principle or decision in principle, this document outlines what a bank or building society may be able to lend you based on the details you've provided.
It isn't a guarantee that they'll loan you this money, but it gives you an idea of what you're likely to be able to afford. Some estate agents only take your offers on homes seriously if you have one.
Guarantor mortgages for first-time buyers work by another person, usually a friend or family member, agreeing to cover the monthly repayments if you can't.
This may help you get a mortgage you otherwise can't. But it's important to remember that this puts your and their finances at risk if the repayments aren't met.
A joint mortgage works in a similar way to a mortgage for 1 person. It means 2 or more people (some lenders allow up to 4) can borrow money from a lender to buy a property together.
This allows you to put down a bigger deposit and borrow more.
Everyone on the mortgage is liable for the debt so it's important to make sure everyone is comfortable making their share of the repayments.
A freehold property means you own the building and the land it is on. This is the case for most houses.
If it's a leasehold you own the property but not the land it's on. If it's a flat, for example, you usually own the flat but not the building.
The best option for you depends on your circumstances. There are pros and cons of each and some home ownership schemes, such as Shared Ownership, are only available with leasehold properties.
A repayment mortgage means you pay off the interest and a bit of the loan each month, while an interest-only mortgage means you only pay off the interest.
At the end of a repayment mortgage, you should own your property outright. But at the end of an interest-only mortgage, you still need to repay the money you borrowed from the lender. If you don't have the money available to do so, you may need to sell the house or other assets.
Most residential mortgages (particularly for your first home) are taken out on a repayment basis, with interest-only options being far rarer due to their riskier nature.
But buy-to-let mortgages are more commonly taken out on an interest-only basis. This is because landlords are more comfortable selling the property to cover the loan a the end of the mortgage term, if they need to.
Most full mortgage terms are around 25 to 30 years but you can get longer or shorter terms. The maximum mortgage term offered is normally 40 years.
Stretching your mortgage over a longer term means lower monthly repayments. But it does mean you pay more in interest overall, compared to a shorter term mortgage.
Whether a longer term mortgage is right for you depends on your personal financial situation, and it might be helpful to speak to a broker for advice.
Yes, you may be able to get a mortgage for your first home if you're self employed. Just like an employee, whether a bank or building society lends to you depends on your individual financial circumstances.
There are slightly different requirements in terms of how you evidence your annual income when you're self-employed. The documents needed are normally:
Find out how much stamp duty you’ll pay on your property purchase.
See how much your future monthly repayments could be.
Buying your first home can be an exciting but stressful experience, so it's important to get as much expert help as you can. Speaking to one of our Mojo mortgage experts can help take the hassle out of the home buying process and get you the right deal for you and your circumstances.
If you live in a council house, you might be able to buy it through a right to buy scheme.
The first step to getting a house is making the decision about whether it's better to rent or buy.
Here's some tips to bear in mind when you view property.
The final hurdle before the house is officially yours – swap contracts and insure the building.
Joint mortgages are a good way to get on the property ladder. We explore their pros and cons.
Buying a house is an expensive process. Gifted deposits can help.
Page last reviewed: 30 May 2023
Reviewed by: Claire Flynn
YOU SHOULD THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME/PROPERTY. YOUR HOME/PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
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