Guide to first-time buyer mortgages

Taking that first step onto the property ladder can be daunting. Here we've outlined what you need to know about first-time buyer mortgages.

The deposit

You'll usually need to have at least 5–25% of the value of the property saved as a deposit, which you'll pay upfront when you take out a mortgage. The bigger the deposit you're able to put down against the value of the property, the better the mortgage deals you're likely to have access to.

With a bigger deposit, you're also less likely to fall into negative equity if the value of the property drops after you've bought it. Negative equity is when your mortgage loan is worth more than your property, which can make it very difficult to sell or move up the property ladder.

However, if you’re unable to raise a large deposit, there may be options available to help you get on the property ladder:

  • Help to Buy, NewBuy and shared ownership schemes are designed to help those with a small deposit get onto the property ladder. You’ll need to meet the eligibility criteria and lenders will still conduct affordability checks to ensure that they think you’ll be able to afford repayments.
  • If you can find a suitable person, a guarantor can promise to pay your mortgage for you if you are unable to do so yourself. Guarantors are typically a parent or guardian. It’s a serious and legally binding agreement so you and your guarantor should make sure you understand the small print before you proceed.


When you apply for a mortgage the lender will check whether they think you can afford it. This might include checking your salary and other income, how much you have in savings, and your spending habits to see if they think you're likely to be able to keep up with repayments. Get prepared: find out more about affording a mortgage with our handy guide, or read more about the mortgage application process.

You should also conduct your own affordability checks. Do you think you’ll be able to keep up with repayments? How would you cope if your interest rate went up? If you don’t keep up with your monthly repayments, your home could be repossessed.

To estimate your monthly repayments for different deposit sizes and mortgage interest rates, try our mortgage repayment calculator.

Saving and budgeting

Saving and careful budgeting can help you to raise a bigger deposit, and it may also stand you in good stead when it comes to lenders' affordability checks. Read our guide to creating a budget. Remember that as part of these affordability check lenders may look in detail at your income and outgoings.

If you are saving for a deposit, make sure you're getting the best rate on your savings.

When you’re saving for a first home, remember to take into account other costs such as legal, valuation and surveyor’s fees, and stamp duty (if your property costs more than £125,000).

Comparing mortgages & getting advice

There are a number of mortgage types and choosing the right one for you will depend on your circumstances.

There are two main types of mortgage:

  • Interest-only mortgages: where you only pay interest during the term of the loan, rather than the actual loan itself. Monthly repayments will be lower because you’re only paying the interest each month, but you will need to repay the loan when the term ends and you must have a plan in place to do this.
  • Repayment mortgages: where your monthly repayments pay off interest and part of the original loan too. These mortgages are designed so that at the end of the term you have paid off you original loan plus interest.

Mortgage providers often offer special deals on how interest on the loan is calculated, often lasting for between two and ten years. These include:

  • Fixed rate: the interest rate stays the same for a fixed period of time.
  • Tracker: the interest rate is tied to the Bank of England base rate, meaning it could go up or down.
  • Discount: Instead of tracking the Bank of England base rate, the interest rate on your loan tracks your lender’s standard variable rate (SVR) for a fixed term. SVRs can change at any time.

Choosing to purchase a property may be one of the biggest financial decisions of your life, so you may want to speak to a mortgage adviser to help you find the right option for you.

Last updated: 02 July 2015