What is a First-Time Buyer?

You’re officially a first-time buyer if you’re purchasing your only or main residence, and you (and anyone you’re buying with) have never owned a freehold or leasehold property anywhere in the world. This status can make you eligible for specific government schemes and certain tax breaks.

Understanding Your Mortgage: The Basics

What is a Mortgage?

A mortgage is a loan specifically for buying property. You borrow money from a lender (like a bank or building society) and pay it back, with interest, over a set number of years. The property itself is used as security for the loan.

What is a Mortgage Term?

This is the length of time you agree to pay back the loan. In the UK, the most common mortgage term is 25 years, but you can choose shorter (e.g., 20 years) or longer terms (up to 40 years). A longer term means lower monthly payments, but you’ll pay more interest overall.

Types of Mortgage: Repayment vs. Interest-Only

For first-time buyers, there’s really only one suitable option:

1. Repayment Mortgage: Your monthly payment covers both the interest on the loan and part of the capital (the original amount borrowed). By the end of the term, you’ll have fully paid off the loan and own your home outright.
2. Interest-Only Mortgage: Your monthly payment only covers the interest. You’ll need a separate plan (like an investment) to repay the full capital at the end of the term. Lenders rarely offer these to first-time buyers due to the higher risk.

Understanding Interest Rates

Your interest rate determines how much extra you pay back on your loan. The two main types for first-time buyers are:

1. Fixed Rate: Your interest rate—and therefore your monthly payment—stays the same for an initial period (e.g., 2, 3, or 5 years). This offers security and makes budgeting easy.
2. Variable Rate: Your rate can go up or down, usually in line with the Bank of England Base Rate. This includes Tracker and Standard Variable Rate (SVR) mortgages. Your payments can change, making budgeting harder.

What Deposit Do I Need as a First-Time Buyer?

This is your biggest first step. The deposit is your upfront contribution, expressed as a percentage of the property's price.

1. Minimum: You typically need a minimum of 5% of the property price. However, having a larger deposit (e.g., 10% or 15%) gives you access to many more mortgage deals with significantly lower interest rates, saving you thousands over time.
2. Help from Schemes: Government schemes like the Mortgage Guarantee Scheme or a Lifetime ISA can help you boost your savings or secure a 95% mortgage.

How to Get a Mortgage as a First-Time Buyer: The Process

1. Check Your Credit Score: Do this first for free on sites like Experian or Equifax. A good score is crucial for approval.
2. Save Your Deposit & Budget: Know what you can afford for a deposit and monthly payments. Use online mortgage calculators.
3. Get a Mortgage in Principle (AIP): This is a conditional offer from a lender saying how much they might lend you. It shows estate agents you’re serious.
4. Find a Property & Make an Offer: Once your offer is accepted, you formally apply for your mortgage.
5. Mortgage Application & Valuation: Your lender will assess your finances in detail and value the property.
6. Get Legal Advice: A conveyancing solicitor handles all the legal work and searches.
7. Exchange Contracts & Completion: Exchange is legally binding. On completion day, the money is transferred, and you get the keys!

Do First-Time Buyers Pay Stamp Duty?

This is a major benefit for first-time buyers. Stamp Duty Land Tax (SDLT) is a tax on property purchases.

1. England & Northern Ireland: You pay 0% Stamp Duty on the first £425,000 of a property costing up to £625,000.
2. Scotland (Land and Buildings Transaction Tax - LBTT): You pay 0% LBTT on the first £175,000.
3. Wales (Land Transaction Tax - LTT): You pay 0% LTT on the first £225,000.

The Role of Your Credit Score

Your credit score is a numerical summary of your financial reliability. Lenders check it to see how you’ve managed credit (loans, credit cards, bills) in the past. A higher score means you’re seen as lower risk, which helps you get approved and secure better mortgage rates. Before you apply, ensure you’re on the electoral roll, pay bills on time, and avoid applying for other new credit.

How Can Rock Finance Help You? Your Next Step

The mortgage market can be a maze of jargon and fine print. You don’t have to navigate it alone. At Rock Finance, we specialise in guiding first-time buyers from dream to doorstep.

We can help you by:

1. Explaining all your options in plain English.
2. Comparing thousands of mortgage deals to find the right one for you.
3. Managing the entire application process, giving you one less thing to worry about.

Ready to take your first step? Book a free, no-obligation consultation with a Rock Finance adviser today. Let’s make your first home a reality.