Buying your first home is one of the most exciting — and sometimes daunting — steps you’ll ever take. With so much information out there, it’s easy to feel overwhelmed. But don’t worry — we’ve got you covered. In this complete guide, we’ll break down everything you need to know as a first-time buyer in the UK, from saving for a deposit to moving into your new home.
What is a First-Time Buyer?
A first-time buyer is someone who has never owned a property before, in the UK or abroad. If you’re buying a home for the first time — alone or with a partner — you may be eligible for government schemes and tax relief, such as first-time buyer Stamp Duty discounts in England and Northern Ireland.
When it comes to buying a property, one of the crucial steps is understanding the deposit requirement. Generally, you’ll need at least 5% of the property’s value as a deposit. For instance, if you’re planning to purchase a property valued at £200,000, you would need to save up £10,000 for the deposit.
However, it’s worth noting that the required deposit can vary based on several factors, including the type of mortgage you’re applying for and your financial circumstances. Some lenders may require a higher deposit, especially if you have a lower credit score or are classified as a first-time buyer.
Understanding Deposit Options
As mentioned, a minimum of 5% is typical for many mortgages, but putting down 10% or more could improve your chances of securing a mortgage with better interest rates.
Budgeting
Building a deposit can seem daunting, but with the right strategies and knowledge, it’s achievable. Always consider your options and seek advice from financial advisors or mortgage brokers to help navigate the complex landscape of home buying. Taking proactive steps today will put you closer to owning your dream home in the future.
Budgeting: Create a strict budget that allows you to save consistently. Identify areas where you can cut back on spending to increase your saving potential.
Automate Savings: Set up a standing order to transfer funds directly into your savings account each month. This way, you won’t be tempted to spend your deposit money.
Understanding Mortgage Options
As a first-time buyer, navigating the world of mortgages can be daunting, but it’s crucial to understand the various options available to you. Each type of mortgage has its own features, advantages, and considerations. Here’s a deeper look at the different types of mortgages you can choose from:
Fixed-Rate Mortgage
A fixed-rate mortgage offers stability and predictability, which is particularly beneficial for budgeting. With this option, your interest rate remains constant for a predetermined period, commonly ranging from two to five years, though longer terms are also available. This means that your monthly payments will not fluctuate, allowing you to plan your finances without worrying about unexpected increases in interest rates. After the fixed term ends, you may either refinance to a new fixed-rate or revert to a variable rate, which could be higher.
Tracker Mortgage
Tracker mortgages are linked to the Bank of England’s base rate, meaning your interest rate will rise or fall in line with changes in this rate. While this type of mortgage can result in lower payments when the base rate is low, it can also lead to increased costs when rates go up. For those who are comfortable with a certain level of risk and are keeping a close eye on interest rate trends, a tracker mortgage can be an appealing option. It’s important to consider your financial situation and how you would manage if your payments increase.
Variable-Rate Mortgage
With a variable-rate mortgage, the interest rate can change at any time, depending on the lender’s standard variable rate
(SVR). This means that your monthly payments could fluctuate either by the lender’s discretion or in response to
changes in the market. While you may benefit from lower rates during periods of lower interest rates, it can also lead to potential payment increases. This option often appeals to those who hope to take advantage of competitive introductory offers or who may not plan to stay in their home long-term.
Shared Ownership
Shared ownership is a unique option if you’re struggling to afford the full price of a home. With this plan, you buy a percentage of the property (commonly between 25% and 75%) and pay rent on the remainder. This arrangement can be less intimidating financially, as it lowers the initial cost of entering the housing market. Over time, many shared ownership schemes allow you to buy additional shares in the property. It’s an excellent choice for first-time buyers who may not have significant savings or are looking for a way to get on the property ladder without committing to a full purchase upfront.
Selecting the right mortgage is a vital part of the home-buying process. Each of these options presents unique benefits and challenges, and understanding them will help you make an informed decision that aligns with your financial situation and future goals. Always consider seeking advice from a mortgage broker or financial advisor to explore which option may work best for you.
Want a deeper breakdown? Read our blog: ‘Fixed vs. Tracker Mortgages: Which is Right for You?
Step-by-Step Homebuying Process
1. Save Your Deposit – Aim for at least 5% of the property price. The more, the better.
2. Check Your Credit Score – Lenders will assess your credit history to determine your mortgage eligibility.
3. Get a Mortgage in Principle – An Agreement in Principle shows sellers you’re serious and gives you a budget guide.
4. Start Viewing Properties – Use estate agents and property sites like Rightmove or Zoopla.
5. Make an Offer – Once you’ve found the right place, offer a formal offer.
6. Apply for a Mortgage—Now is the time to submit your full application with all supporting documents.
7. Survey and Valuation – Your lender will carry out a valuation. You may also arrange a private survey.
8. Exchange Contracts – Once everything’s agreed, you’ll sign contracts and pay your deposit.
9. Completion Day – The final payment is made, and you get the keys to your new home!
Ready to Take the First Step?
Buying your first home is a big move, but you can make it confidently with the proper support. At Sims Mortgages & Protection, we specialise in helping first-time buyers like you daily. Whether you’re just starting to save or ready to apply for a mortgage, we’re here to help. Get in touch for a no-obligation chat today.
The information contained within was correct at the time of publication but is subject to change.