1. Home
  2. Mortgages
  3. First time buyer

First-time buyer mortgages

Mortgages for first-time buyers

We've partnered with Koodoo to compare mortgage deals across the whole market

  • Answer 8 simple questions to see your mortgage options

  • Compare mortgage deals without harming your credit score

What is a first-time buyer mortgage?

A first time buyer is someone who has never bought a property before, either in the UK or abroad. If you're thinking about buying your first home, you'll be looking for a first-time buyer mortgage.

You can only apply for one of these mortgages if it is your first home. So if you've owned a property before - or part owned - you won't qualify and you'll need a standard mortgage.

There are lots of first-time buyer mortgages to choose from and if you're looking for advice, you can speak to a mortgage adviser. But we also explain everything you need to know about first time home buyers in this guide.

What mortgage is best for first-time buyers?

The best mortgages for first time buyers vary depending on your circumstances.

There's lots to choose from and things like the size of your deposit, your usual income, and the kind of house you're buying can impact the decision.

First time buyers also need to pick between fixing your mortgage rate or choosing a mortgage that tracks interest rates. There are also several mortgages that are specific to first time home buyers and support available for those who are hoping to buy their first home.

To help you decide which first mortgage is best for you, we're here to help you understand the different mortgage options available for first time buyers.

Types of mortgages for first-time buyers

Buying a house is a big step but an exciting one. Owning your own property is right up there with getting married or having children as a special and celebrated life event

Before you start planning the design scheme though, one of the first things you need to think about is getting a first-time buyer mortgage.

As a first time home buyer a mortgage provider will look at your deposit, your income, and your regular outgoings to decide how much it will lend to you.

Here we look at the different types of mortgages for first time buyers:

  • Fixed rate
  • Standard variable rate mortgage
  • Tracker mortgages
  • Discount rate mortgages
  • Offset mortgages

A fixed rate mortgage locks in a set interest rate for around three to five years. You’ll usually be offered one of these when you first take out your mortgage. You’ll remain on this fixed rate even if the interest rate drops, which is a potential downside.

A standard variable rate mortgage or SVR will usually start when your fixed mortgage rate ends. Lenders can raise or lower the SVR at any time. It’s sometimes dictated by the Bank of England’s base rate. This is the rate that high street banks use to borrow money. If this goes up, lenders will often raise their SVR. As the name suggests, the amount of interest you’ll pay could vary from month to month.

If you’re on this type of mortgage, you should be prepared for your monthly payments to rise or fall each month, which can make it difficult to budget as a first-time buyer. One upside of the SVR is that it’s flexible. You won’t be charged if you want to pay off more of your mortgage or switch to another provider.

A tracker mortgage will depend on the Bank of England’s base rate. It’s usually an interest rate percentage with the Bank of England’s base rate added. For example, if the interest on your first-time mortgage was 1.5%, and the Bank of England base rate was 0.5%, your total interest rate would be 2%. The Bank of England’s base rate can change, so the overall amount of interest you pay could go up or down.

A discount rate mortgage is where lenders set their mortgage below their Standard Variable Rate. For example, if their SVR was 5%, then you could get a discount rate mortgage for 4%. But as we know, the SVR can rise or fall, so your discounted mortgage might do this too.

An offset mortgage could be a good option for you if you have a good chunk of savings. Here, you bring your savings in with your first-time mortgage, your lender then holds them for you. Your cash savings would then reduce or offset the amount of interest you pay. 

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

First time buyers will need to show evidence of their usual income and any regular outgoings. The amount a lender will loan them will be dependent on the deposit they have saved and their salary.

When looking at mortgages for first time buyers it's important to factor in any additional costs such as for stamp duty, legal fees, and moving costs.

What is a first-time buyer deposit?

The first step in buying a property is getting your deposit together. A deposit is an amount of money you’ve saved up to put towards buying your first home.

To get a first-time buyer mortgage, you'll usually need a deposit of at least 10%. However, some mortgage providers might accept 5% or 20% of the property value.

The more you can save, the more you will own of the house. This usually means you're overall payments will be lower too.

Here are a few examples of the amount needed for a house worth £200,000.

Deposit percentage Deposit amount
5%
£10,000
10%
£20,000
15%
£30,000
20%
£40,000

What is a loan to value ratio (LTV)?

If you’ve got your deposit together, you’re probably already looking at houses and thinking about how much you’ll need to borrow. When looking at the different mortgages on the market, you’ll see percentages such as 95%, 90%, 85% - this is the loan to value (LTV) ratio. LTV is always shown as a percentage and is the amount of the property value a lender is prepared to offer you.

For example, if the property you want to buy is worth £200,000, the lender could offer you a loan to value ratio of 80% - £160,000. You’d then put in a deposit of 20% - £40,000.

If you have a decent deposit to put towards the property’s value, you might get a more competitive interest rate for a first-time mortgage.

When lenders work out how much you can borrow, they’ll look at your credit history to see if you’re reliable when borrowing money.. They’ll also run some affordability checks to look at your:

  • Income
  • Outgoings
  • Debt
  • Childcare
  • General living costs
  • Credit history

The affordability checks help the lender understand whether you’ll be able to afford the mortgage repayments each month. Together with the information about your deposit, the lender is able to work out the maximum mortgage you can take out and the LTV of it. 

A breakdown of how loan to value is calculated

Ready to compare first-time buyer mortgages?

What schemes are available to help first-time buyers?

There are a number of schemes available for first-time buyers to help you get your foot on the property ladder, including:Help to buy is a government-run initiative offering schemes to suit different budgets and lifestyles:

  • Shared ownership
  • Equity loan
  • 95% mortgages
  • A guarantor mortgage
  • A joint mortgage
  • A right to buy scheme
  • A lifetime ISA

Shared ownership, part of the government's Help to buy scheme, allows you to buy a share of your home – between 25% and 75%. You pay rent on the remaining share. You only need to take out a first-time mortgage on the share you want to buy, making it more likely for the mortgage to be approved.

You can buy bigger shares on 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.

One thing to bear in mind is that shared ownership schemes are all leasehold until you own 100% of the property. There are also rules and regulations with shared ownership, for example, you don’t have the freedom to rent it out if you want to leave.

What's a leasehold?

Leasehold is when you own the property, but not the land it’s built on.

Find out more on the difference between leasehold and freehold properties.

An equity loan involves the government lending you up to 20% – or 40% if you’re in London – towards a new-build home. You can put a deposit down of 5%, and then get a mortgage on the remaining 75% of the property.

Equity loan example

Here’s an example of how the scheme would work:

Let’s use the £200,000 house as an example.

Your 5% loan would equal £10,000. The government would put in another £40,000.

You’d then be able to borrow £150,000 from your mortgage lender.

For the first 5 years you won’t be charged interest on the government loan. So, if you pay the loan off within 5 years you won’t have to pay any interest. If you don’t pay the loan off in the first 5 years, you will pay interest on the loan as well as on the mortgage you take out from the provider.

An image showing an equity loan example

95% mortgages are an attractive choice among first time buyers as you only need a 5% deposit. The need for a smaller deposit makes getting on the housing ladder a more affordable option for many.

Even with the lower deposit amount needed, you should make sure you’re able to make the repayments on the rest of the 95%. It’s also worthwhile looking at how long your overall mortgage term would be, as it could take longer to pay back compared to lower LTV mortgages.

If you’d like to find out more, our 95% mortgages guide may be able to help.

A guarantor mortgage is where a parent or close family member steps in if you’re not able to pay your mortgage. Your guarantor will be named on the mortgage, and either put their savings or their home up as security against it. The lender would then take the value from this if you missed a payment.

Some lenders offer a mortgage of up to 100% if you offer to use your parents’ house as collateral. Make sure you get legal advice before you do this, so you and your guarantor are kept in the loop.

A joint mortgage is simply a mortgage arrangement involving one or two other people. The upside of a joint mortgage is that you might not only be able to come up with a bigger deposit but you can often borrow more money. As you might have a higher deposit, you may have better choice of mortgages and access to more competitive interest rates. Like a regular mortgage, the lender will also check each person’s income, debt and general finances to see what you can borrow.

Each person can choose their share of the property, known as equity.

What's equity?

Equity is the value of the percentage you own in your property. In this instance, the equity can be 50%-50% or 60%-20%-20%, or however you want to split it. Each person named on the mortgage is responsible for paying for their part of the mortgage.

A right to buy scheme could be for you if you’re living in a council house. Through the scheme you may have the opportunity to buy it at a discounted price.

How do I know if I can buy my council house?

You should be able to apply to buy your council house if:

  • It’s your only or main home
  • The house is self-contained
  • You’re a secure tenant – which means you’re planning to occupy the house for the rest of your life
  • You have a public-sector landlord, for example a council, housing association or NHS trust. And you’ve had this landlord for three years - this doesn’t have to be three years in a row.

You can make joint applications too. Either with someone who shares your tenancy or with up to 3 family members who’ve lived with you for the past 12 months.

For more information on the right to buy scheme, visit the GOV.uk website.

A Lifetime ISA can be used for buying a house or for building up savings to use later in life. Savings-wise you can put in a maximum of £4,000 a year until you’re 50. One of the main selling points of a Lifetime ISA is that the government gives you an annual 25% bonus on the amount saved. So, if you saved the maximum £4,000, you’d receive £1,000 from the government.

How do I use a a Lifetime ISA to buy my first house?

You’ll need to have had a Lifetime ISA open for at a least a year before using it to buy your property. The government is quite specific on what the house must be like to spend your ISA on:

  • The house must cost £450,000 or less
  • You can only use the ISA to buy a house if you’ve had it for 12 months or more
  • You use a mortgage to buy the house, rather than a cash payment
  • If you’re buying with someone else, they can use their Lifetime ISA and bonus to help fund the property too.

If you decide to take money out of your ISA and not use it on a house, the government will take 20% of the total. For more details on the rules of ISA withdrawals and using it to buy a house see the GOV.uk website.

What else should I consider when getting a mortgage for my first home?

We've covered the nuts and bolts of choosing a first-time buyer mortgage but you should also consider the following things.

Location is not to be overlooked when picking a property. Is it near to a park, shops or a nice pub? Make a list of the priorities you're looking for before you make a short list of potential homes. It's also worth keeping an eye on local planning permission applications so you know what might change after you move in.

Schools are an important consideration if you have, or are planning on having, children. Catchment areas can be a tricky business and if you're set on a particular school you might want to check how close you are to it before you move.

Interest rates will have a big impact on your monthly repayments. Whatever type of mortgage you settle for, you'll need to be comfortable making your repayments - even if something changes in your financial circumstances. If interest rates rise, and your mortgage isn't fixed, remember this means your monthly payments will rise.

The economy and how well (or badly) it's performing will have an impact on the housing market. House prices have risen significantly in the last few years, following the Covid pandemic shut down in 2020, which also saw a prolonged period of low interest. But, now the cost-of-living crisis is pushing the price of mortgages up. So, it's worth keeping an eye on the wider market to see what's happening and how it could impact the price you pay.

Need more help?

What is a first-time buyer?

First-time buyers have never owned a residential property before in the UK or abroad. You won't be seen as a first-time buyer if you've part owned a property, you're buying one with someone who has owned one before, you've inherited a home, or someone else is buying it for you.

What is a guarantor mortgage?

Guarantor mortgages for first-time buyers work by another person, usually a friend or family member, signing your mortgage and agreeing to meet the repayments, if you can't. If the payments can't be met by you or them, their house may be resold.

What is shared ownership?

Shared ownership is a government scheme to help first time buyers. It lets someone buy a property by paying rent to the building owner and a mortgage for the part of the property they own.

It is a good way to get on the property ladder if you have a small deposit but there are drawbacks.

Shared ownership properties are usually leasehold, for example, so you need to pay a fee to the leaseholder. There can be restrictions too, such as not being able to have pets or rent the property out.

What is a joint mortgage?

A first time buyer joint mortgage works in a similar way to a mortgage for one person. It means two people can buy a property together. Often this means they can save a bigger deposit and borrow more.

Should I buy a freehold or leasehold for my first home?

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 will own the property but not the land it's on. If it's a flat, for example, you own the flat but not the building. Usually with freehold properties you'll need to pay service charges and ground rent.

The best option will depend on your circumstances. There are pros and cons of each and some Help to Buy schemes, such as Shared Ownership, usually only offer leasehold properties.

What’s the difference between repayment and interest-only mortgages?

A repayment mortgage will require repaying on a monthly basis. You will be told at the start of the mortgage how much you're monthly payments will be or if they might change, such as if they're linked to interest rates.

An interest-only mortgage works by you only paying the interest payments for a set term. At the end of this period you will be required to pay the sum of money you have borrowed from your provider.

Show more

What our mortgages expert says

With mortgage rates on the rise, it's a tough time for first-time buyers trying to get on the property ladder. Buying your first home is an exciting milestone and we try to make understanding your mortgage options as easy as possible by showing you the fees and rates of each.

I recommend comparing mortgage deals for first time buyers to choose the best option for you and your budget.

Louise Thomas mortgage expert signature

Louise Thomas

Personal finance expert

You should think carefully before securing debt against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.
Confused.com is not a mortgage intermediary and makes introductions to Koodoo to provide an information-only mortgage online comparison service. Confused.com's mortgage solution is provided by Koodoo. Koodoo is the trading name of Mortgage Power Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 845978), and is a registered company in England and Wales (company registration number 10978680), with a registered address at Scale Space, 58 Wood Lane, London, W12 7RZ.
Confused.com will receive a share of the commission that Koodoo earns from the provider.