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All You Need to Know About Applying for a First-Time Buyer Mortgage

First-time buyer mortgages are available from most lenders and providers – but understanding how the application process works and what a lender will consider when deciding whether to approve a UK first-time buyer is important.

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Based on your yearly income,
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Most lenders will let you borrow 4.5 times your annual salary so, as long as you have a standard 10% deposit, you should be able to borrow this much.

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Depending on your personal circumstances, some lenders may let you borrow 5 times your salary.

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Lenders usually cap the amount they lend at 5.5 times your salary, so it’s unlikely you’ll be able to borrow more than this.

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

Almas Uddin2023-05-09
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All You Need to Know About Applying for a First-Time Buyer Mortgage

First-time buyer mortgages are available from most lenders and providers – but understanding how the application process works and what a lender will consider when deciding whether to approve a UK first-time buyer is important.

Applying for mortgages designed for first-time buyers can be complex. If you have all your documentation and information available, it should be much easier to find the right first-time buyer mortgages and lenders for you.

In this guide, Revolution Finance Brokers outlines how to pick the best mortgages for first-time buyers and what to expect.

Eligibility for First-Time Buyer Mortgages

The first step is to verify that you qualify as a UK first-time buyer. If you do, you will have access to competitive first-time buyer mortgages and support schemes designed to make it easier to get onto the property ladder.

A UK first-time buyer is defined as somebody who has never owned a property before, including any residential home, anywhere in the world.

If you already have a buy-to-let or owned a property bought outright, you may not be able to use first-time buyer mortgages, even if you have long since sold the previous residence.

Inherited properties are included, so some applicants assume they can use products for first-time buyers but are ineligible, despite never having actively purchased a home.

However, commercial properties such as a shop or office are not included, so you can apply for a mortgage as a UK first-time buyer in this scenario. It is also worth pointing out that first-time buyer mortgages are only for residential homes rather than to help you purchase a rental property.

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Do I Count as a UK First-Time Buyer if a Joint Applicant Has Owned a Home?

Unfortunately not, most lenders won’t offer a first-time buyer mortgage to an applicant where one party has owned a residential property before.

That said, there are schemes and initiatives in addition to first-time buyer mortgages that you could use, such as a Lifetime ISA.

How Does a First-Time Buyer Mortgage Differ?

Buying a home as a UK first-time buyer is a little different than buying a new home and selling a previous property or remortgaging, because you won't have any equity. For first-time buyers, that means you need a deposit, which is a down payment against the purchase value.

First-time buyer mortgages may have lower deposit requirements, but it is highly unlikely you would be able to borrow close to 100% of the cost as a UK first-time buyer.

The higher the deposit you can put down, the better a deal you are likely to get, and the more first-time buyer mortgages you will be able to choose between since larger deposits pose less of a risk to the lender.

First-Time Buyer Mortgage Illustration

As a case study, let's assume two people want to purchase a home and have saved up a deposit of £20,000. They have found a great property for £200,000 and want the most affordable first-time buyer mortgage possible.

The deposit is 10% of the property value, so they need a first-time buyer mortgage for 90% - this is the Loan to Value or LTV.

Working with a capable broker, they have a reasonable chance of getting a 90% first-time buyer mortgage, but a lot depends on their income and employment situation.

Lenders look at your annual earnings and will lend up to around four to 4.5 times that value on a first-time buyer mortgage. If the couple earns £40,000 between them, they can borrow roughly £160,000 to £180,000 on a first-time buyer mortgage.

This example is a basic overview of how income assessments work for first-time buyers, but it's essential to understand that your first-time buyer mortgage will depend on more than the deposit you have and what the property is worth.

Choosing the Best Mortgages for First-Time Buyers

Once you have a good idea of your deposit and maximum first-time buyer mortgage value, you then need to consider where to apply. You have two primary options – either researching all prospective banks and lenders that offer mortgages for first-time buyers or working with an independent broker.

As a broker, Revolution works with clients to assess their circumstances and recommend the best mortgages for first-time buyers that align with their borrowing needs.

That can include:

  • Negotiating on your behalf with your selected first-time buyer mortgage lender.
  • Suggesting first-time buyer mortgage lenders who are likely to approve your application.
  • Comparing the best mortgage for first-time buyers based on costs, charges and interest rates.

Our goal is to make your first-time buyer mortgage as competitive and low-cost as possible, assessing a huge range of factors that are important for first-time buyers, such as admin fees, exit penalties and lender criteria.

Because we are whole-of-market and independent, we can scour thousands of potential products designed for first-time buyers and help you make informed choices about how to proceed.

Important Information You Should Know as a UK First-Time Buyer

There are countless mortgages for first-time buyers and lenders and terms to choose between, so it helps to know the terminology and questions a lender will ask you.

Mortgage Interest on a First-Time Buyer Mortgage

The interest is the amount, calculated as a percentage, the lender charges you for your loan. Higher interest rates can make some first-time buyer mortgages unaffordable, so it’s vital you do your sums and calculate the monthly cost accurately.

Mortgages Terms for a UK First-Time Buyer

The term is the length of time your first-time buyer mortgage will run for. A standard mortgage for first-time buyers will run for 20 or 25 years but could be much longer or shorter.

Types of First-Time Buyer Mortgages

Most residential properties are purchased with a repayment mortgage. As a UK first-time buyer, an interest-only mortgage is less likely to be suitable and means you pay solely the interest every month, with the full capital amount still to be repaid when your first-time buyer mortgage reaches the end of the term.

Calculating Deposit Requirements for a First-Time Buyer Mortgage

Most lenders with products for first-time buyers will expect a minimum deposit of 10%. That means you can potentially borrow up to 90% of the purchase price through a first-time buyer mortgage.

However, if you have a larger deposit, as a UK first-time buyer, you will be able to negotiate lower interest and more competitive contract terms.

In our illustration above, the couple has £20,000 as a deposit towards their first home. If they had an additional £10,000 and boosted their deposit to £30,000, they would be looking to apply for a first-time buyer mortgage at 85% LTV, which is a much easier proposition.

Borrowing less on a first-time buyer mortgage means your monthly repayments will be lower, and your charges and interest rates will also be more favourable.

Expert Advice on Buying a Home as a UK First-Time Buyer

Please review our FAQs below if you’d like more information about the best mortgages for first-time buyers. Alternatively, please contact the Revolution Finance Brokers team at your convenience for independent, professional advice on finding the right first-time buyer mortgage for you.

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

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Frequently Asked
Questions

Every lender that has products designed for first-time buyers will also have varied rules, policies and thresholds that dictate whether they can approve your loan as a UK first-time buyer.

For example, they might ask for a higher minimum deposit, need you to be in permanent, full-time employment, or apply smaller income multiples when they calculate the upper limit they will lend on a first-time buyer mortgage.

Your income, credit history, employment type, deposit value and other circumstances will all affect your approval for a first-time buyer mortgage. It is advisable to work with an independent, experienced broker who can work through all of these elements with you.

There isn’t any good or bad time to apply for a first-time buyer mortgage, although if you are close to having adverse credit reports wiped from your file or are just about to reach three years of self-employment, it could well be worth waiting.

That is because some lenders' criteria for first-time buyers will affect the deal you are offered – give us a call if you’re unsure of the optimal timing for your first-time buyer mortgage application.

Yes, we’ve covered the varied support schemes and initiatives in a separate guide. You could look at a Lifetime ISA to enhance your deposit, apply for shared ownership or use the 95% mortgage guarantee scheme, which is available for first-time buyers.

If you purchase a home as a UK first-time buyer for up to £300,000, you will not need to pay any stamp duty.

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FCA disclaimer

The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature.

We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.

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