First-time home buyer guide

What is a mortgage?

If a person is buying their first or primary residence and has never owned a freehold, leasehold, or rental interest in any residential property in the UK or overseas, they are generally considered a first-time buyer.

A mortgage is a loan that’s taken to purchase property or land. The term of most mortgages is 25 years. However, the term may be shorter or longer.

As a deposit, you will need to save 5% of the purchase price and then borrow the remaining money (the mortgage) from a lender like a bank or building society.

The loan is secured against your home’s value until it’s fully paid off.

If you are unable to pay your mortgage payments, the lender may take over your home and make it available for sale.

What is the minimum deposit required to purchase a house?

You must save money for a deposit before you look at properties.

You should aim to save at most 5% on the price of the home that you want to purchase.

If you are looking to purchase a home that costs PS150,000, for example, you will need to save at most PS7,500 (5%) to pay the deposit.

You can save more than 5% to get a better selection of mortgages and lower interest rates.

First-time buyers: Help

A variety of programs are available to assist first-time buyers, especially if you have a small down payment.

Loan to Value

People might mention LTV or Loan to Value when talking about mortgages.

This simply represents the amount that you borrowed to purchase your home (the loan), compared to the value of the property by the mortgage lender.

If you purchase a home at PS200,000 and put down PS20,000 for a deposit, with a mortgage of PS180,000, your LTV will be 90%. Because the amount borrowed (PS180,000), is 90% of the home’s value (PS200,000).

Your interest rate will likely be lower the LTV. Because the lender is less likely to take on risk with a smaller loan, this is why it is more affordable.

People with a minimum 40% deposit will typically get the best rates, which are equivalent to 60% LTV.

You must ensure that you are able to afford your monthly payments

The most important thing for a first-time buyer to remember is whether they can afford it.

Before you begin looking for property, it’s a smart idea to create a budget. Consider how much you can afford each month. Keep in mind that you will still need to pay for everyday expenses like gas, electricity, and food.

You should budget for other costs associated with buying a house

Other than your monthly mortgage payment, there are other costs associated with buying a house.

These include:

  • Survey costs
  • Conveyancing fees or solicitor fees (these often include additional costs such as search fees and Land Registry fees).
  • Valuation and mortgage arrangements
  • Removal and moving costs
  • Buildings insurance
  • Initial furnishing and decorating cost
  • Stamp Duty (Land Transaction Tax in Wales, Land Transaction Tax in Scotland)


Find a mortgage

Mortgages can be applied directly to a bank or building society.

You might also consider using a licensed mortgage advisor. A mortgage adviser can help you find the right mortgage for your needs.

This is especially useful if you:

  • You only have a very small deposit
  • Are you self-employed?
  • There are other factors, such as the type and location of your property. For example, you may need a mortgage to finance a share ownership plan.


Use mortgage comparison websites

Comparing mortgage interest rates is easy with comparison websites. These websites can be used to compare mortgages.

  • MoneySavingExpert
  • MoneySupermarket
  • Moneyfacts
  • Which?

Different types of mortgage

There are many types of mortgages on the market. Understanding these options will help to make the right decision.

First, consider the interest rate. For a certain number of years, most people begin with a fixed-rate deal. You would then normally move onto the standard variable rate offered by your lender. This applies unless you switch mortgages with an existing lender or remortgage to another lender.

The most common type of mortgage is the repayment mortgage. These are where you make monthly payments for both the amount borrowed and the interest.

Another type of mortgage is the ‘interest-only’ mortgage. These are not often available unless you are looking for a mortgage to buy to let.

Leasehold or freehold

It’s possible to purchase the freehold if you are looking to buy a house. This means that you are the owner of the property and the land on which it is located.

You will be purchasing a flat by buying a leasehold or a part of the freehold.

The mortgage application process

The process of applying for a mortgage may seem complicated and long. There are many forms to complete.

You will need to show proof of income, credit obligations, and spending. You will need to supply tax returns and business accounts from the past two or three years if you are self-employed.

Lenders will conduct what is called an affordability assessment. Lenders will conduct an affordability assessment, which is a comprehensive look at your finances. This allows them to determine if you are able to afford long-term repayments.


You may need to save money for a deposit if you are having trouble saving.

There are many options for those who struggle to save enough money to make a deposit.

This includes a variety of family assistance mortgages. This is where the person supporting you deposits a portion of the money you want to borrow into a savings account or guarantees the mortgage against a portion of their property.