Possibly. If you’ve never owned a home before, you are considered a first-time buyer, which means you can apply for a first-time buyer mortgage. You are not considered to be a first-time buyer if you’ve ever owned or inherited property - even if you’ve never lived there.
It’s worth bearing in mind that most mortgage deals available to first-time buyers are also available to those who already own a home.
You’ll get a discount on Stamp Duty if you’re a first-time buyer, but if you are buying as a couple and one of you has previously owned a property, the other will forfeit their first-time buyer status.
There’s good news for commercial property owners, though. If you've owned a shop or restaurant but have never owned a home, you can still be considered a first-time buyer.
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In the past, lenders used to be willing to lend you about five times your household income. These days lenders are more cautious about how much they will lend you and take your affordability into account.
Some of the criteria banks and lenders use to calculate how much you can borrow include:
Some providers also calculate your affordability using hypothetical scenarios such as sudden hikes in mortgage interest rates. This exercise is known as stress testing.
To increase your borrowing potential, it's a good idea to start spending sensibly and reduce your outgoings three to six months before you apply.
Many first-time buyers struggle to save enough to qualify for a mortgage. Fortunately, the UK government has various schemes to help people get onto the property ladder. These include:
Help to Buy is a first-time home-buyer government scheme in England and Wales that can help you get a mortgage with a 5% deposit.
The scheme offers an equity loan, which means you borrow money to use towards your deposit and repay it later. You must repay the loan when you sell your home, and if the price of your home has risen, some of the increase will also be repayable.
Learn more about the Help to Buy first-time home buyer government scheme
Compare Help to Buy mortgages to find the right deal for you
Another government scheme is shared ownership. This initiative lets you buy between 10% and 75% of a home as a share from a housing association or other organisation and pay rent on the rest. Shared ownership lets you buy a house with a smaller mortgage and a smaller deposit.
You have the option to buy more of the property later once you can afford it. This process is known as “staircasing”.
If you're between 18 and 40, you can open a Lifetime ISA (LISA). This is a first-time home-buyer government incentive to help you buy your first home and save for your future.
Under the rules, you can pay £4,000 a year into your LISA until you're 50. The government adds a 25% bonus to the money you save, up to £1,000 annually.
Be aware that you only get the extra government cash if the money is used to buy a first home or if you wait until you are 60 to take it out.
If you withdraw the money earlier or for other reasons, you’ll pay a withdrawal charge of 25%, which means you’ll forfeit the government bonus plus some on top.
When comparing first-time buyer mortgages, you can choose either a fixed-rate or variable-rate deal:
With a fixed-rate mortgage, the interest rate is guaranteed to remain the same for a set period, which means your monthly payments remain the same, making it easier to budget. The downsides are that the payments might be slightly higher than they would with the best variable mortgage and you won’t benefit if interest rates drop. On the other hand, your repayments won’t increase if interest rates rise.
With a variable mortgage, such as a discounted or tracker deal, the interest rate can change. The monthly repayments are usually a bit cheaper than with a fixed-rate mortgage, but the downside is that if the interest rate goes up – usually after a rise in the Bank of England base rate – your repayments will also increase. If you’re considering a variable mortgage, make sure you could afford it if rates were to rise.
The best type of mortgage for you as a first-time buyer will depend on your financial circumstances and whether you want the peace of mind of knowing how much your repayments will be each month. The main types you can choose from are:
The interest rate and your monthly repayments remain the same for the period of the initial mortgage deal, which could be two, three, five or even 10 years.
With tracker mortgages, the interest rate (and your monthly repayments) can go up or down during the initial deal in line with movements in another financial indicator - most commonly the Bank of England base rate.
The interest rate is usually a set percentage below your lender’s standard variable rate (SVR) during the initial deal, which means it can go up or down. The standard variable rate is your lender’s default mortgage rate that you move onto once your initial deal has ended.
These allow you to use your savings to reduce how much of your mortgage you pay interest on. When your mortgage repayments are calculated, the total savings are deducted from the capital owed before the interest is added. The downside is that the savings account typically doesn’t pay any interest on the money you have stashed away.
When buying a home, the bigger your deposit, the better your first time buyer interest rate will be.
These days, you need to have a deposit of at least 5% of the property value to get a mortgage. This will result in a Loan to Value ratio (LTV) of 95%, which is the maximum that almost all lenders will accept.
For example, on a £150,000 property, this would mean a deposit of £7,500. You'd then get a mortgage for the remaining £142,500.
LTV is a measure of the percentage of the property price that you will need to borrow to make the purchase. Typically, most banks recommend an LTV of 80%.
In our comparison tables, you can find 95% mortgages for first home buyers from a wide range of lenders.
Most lenders these days expect you to have at least 5% of the property’s value to get a mortgage. This 5% deposit means you can get a mortgage with a loan-to-value ratio (LTV) of 95%.
If you wanted to buy a property for £150,000, you would need a deposit of £7,500 and a 95% LTV mortgage for the remaining £142,500.
When buying a home, the bigger your deposit, the better your first-time buyer interest rate will be. It’s worth noting that lenders only offer 100% LTV mortgages if you have a guarantor: someone who agrees to pay the mortgage if you can’t.
You can find 95% LTV first-time buyer mortgage deals in our comparison tables.
If you can’t get a first-time buyer mortgage in your own right, other options that could help you include:
Buying a property with someone else will usually mean you’ll be able to raise a larger deposit, and your combined income will be higher than the amount you earn alone. This can make it easier to get accepted for a mortgage and increase the chances of getting offered a more competitive mortgage rate as your LTV may be lower.
Some lenders offer guarantor mortgages, where a friend or family member promises to step in and meet the mortgage repayments if you’re unable to. The guarantor will have to put up their own property or savings as collateral against your home loan.
Getting your first home can be tough, especially juggling paperwork with estate agents, solicitors and lenders. Speaking to a free mortgage broker like our partners at Mojo can help smooth the process. ”Nisha Vaidya, Mortgage Editor
It is doubtful that you will be offered an interest-only mortgage as a first-time buyer. Most mortgages are capital repayment mortgages, where you pay off the interest and the capital (the amount you borrowed) with each monthly payment. It is possible to get an interest-only mortgage but there are strict criteria and you’ll need to prove you have a viable plan for paying off the loan at the end of the term. They’re most commonly offered for buy-to-let mortgages and are vanishingly rare for people buying residential homes.
You can use our mortgage affordability calculator to work out how much you could borrow. From there, look at properties in the area where you want to buy and work out how much you need to save as a deposit. Mortgage repayment calculators can give you an idea of what your monthly payments will be. Compare these estimated payments with your current monthly outgoings to see if you can afford them.
Yes, your credit record matters for any mortgage application. Lenders want to see proof that you can keep up repayments. If your credit score is low, you may find fewer lenders willing to give you a loan. However, speaking to a mortgage broker can help you find the providers that are more likely to.
It is possible to get a first-time buyer mortgage with a 95% LTV. You may be able to use the Help to Buy or the new mortgage guarantee scheme. These initiatives are designed to help prospective homeowners get onto the property ladder with a 5% deposit. You can find 95% LTV first-time buyer mortgage deals in our comparison tables.
The best mortgage for you will be affordable and suit your circumstances. To find the cheapest deal, you should look at the total cost over the initial offer, which will take the interest rate and fees into account.
Most mortgages need at least a 5% deposit. For better interest rates, you will need to save more – the lower your LTV, the cheaper your mortgage is likely to be. Some mortgages are available to help you get onto the property ladder without a deposit, but these usually require having a friend or family member act as a guarantor.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
The results shown are for illustrative purposes, as you may not be eligible for every deal shown.
Lenders consider your credit record and financial circumstances when they decide if they can offer you a mortgage.
|Based on borrowing||£170,000 over 25 years||The overall cost of comparison||4.29% APRC Representative|
|Initial rate||2.94% fixed for 2 years (24 instalments of £829.10pm)||Subsequent rate (SVR)||4.53% variable for the remaining 23 years (276 instalments of £932.69pm)|
|Lender fee||£529||Total amount payable||£277,850.59|
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