Introduction
Buying your first home is one of the most significant financial events of your life. The process can feel overwhelming: saving a deposit, understanding mortgage products, navigating conveyancing, and budgeting for additional costs (Stamp Duty, surveys, legal fees). This guide provides a complete financial roadmap for first‑time buyers in the UK. It covers every stage – from setting a savings target to exchanging contracts – and highlights government schemes (Lifetime ISA, Help to Buy (now closed to new applications but still relevant for existing equity loans), and First Homes Scheme) that can help you get onto the ladder.
Based on rules as of March 2026. Always verify current rates with official sources.
Stage 1: How Much Do You Need to Save?
The first question every first‑time buyer asks is: “How much deposit do I need?” The answer depends on the property price and the mortgage product available.
Typical deposit ranges:
- 5% deposit – Available through some lenders (95% loan‑to‑value, or LTV). Interest rates are higher (typically 5–6% APR). You will need a strong credit history.
- 10% deposit – The most common starting point for first‑time buyers. Offers much better interest rates than 5% (typically 4–5% APR).
- 15–20% deposit – Even better rates (3–4% APR). The jump from 10% to 15% often reduces your monthly payment significantly.
Example: A £250,000 property with a 10% deposit (£25,000) leaves a £225,000 mortgage. With a 5% interest rate over 30 years, monthly payments ≈ £1,208. With a 15% deposit (£37,500), the mortgage is £212,500 at 4.5% ≈ £1,077 per month. The extra £12,500 deposit saves you £131 per month.
Additional costs beyond the deposit:
- Stamp Duty Land Tax (SDLT) – First‑time buyers pay no Stamp Duty on properties up to £425,000 (for illustration, check current threshold). Above that, rates apply. For a £500,000 property, you pay 5% on the amount between £425,000 and £500,000 = £3,750.
- Survey and valuation fees – £300–£1,000 depending on the level of survey (basic mortgage valuation, homebuyer’s report, or full structural survey).
- Legal fees (conveyancing) – £500–£1,500 plus disbursements (search fees, Land Registry fees).
- Mortgage arrangement fee – £0–£2,000 (some lenders charge a fee for lower interest rates; others have no fee but higher rates).
- Removal costs – £300–£1,000 depending on distance and volume.
- Initial repairs and furniture – Budget 1–3% of the property price.
Total savings target: Deposit + £3,000–£8,000 for additional costs.
Stage 2: Government Schemes for First-Time Buyers
Lifetime ISA (LISA) – The most valuable scheme for most first‑time buyers. You can save up to £4,000 per tax year, and the government adds a 25% bonus (up to £1,000 per year). The LISA must be open for at least 12 months before you can use it for a house purchase. The property price must be £450,000 or less.
Example: You save £4,000 per year for three years. Total contributions = £12,000. Government bonus = £3,000. Total available for deposit = £15,000. You also earn interest or investment growth (if you use a Stocks and Shares LISA).
Help to Buy Equity Loan (closed to new applications) – This scheme closed to new applications in October 2022. However, if you already have a Help to Buy equity loan, you need to understand how to repay it when you sell or remortgage. The equity loan is interest‑free for the first five years, then interest accrues.
First Homes Scheme – A newer scheme (launched 2021) offering new‑build homes at a 30–50% discount, but the discount is applied to the property value forever (when you sell, the discount passes to the next first‑time buyer). Eligibility is income‑based (household income under £80,000, or £90,000 in London). The scheme is limited to certain local authorities and developments.
Shared Ownership – You buy a share of a property (25–75%) and pay rent on the remaining share. You can increase your share over time (staircasing). Shared ownership is useful if you cannot afford a full deposit or mortgage, but it comes with additional costs (rent, service charges, restrictions on selling).
Stage 3: Mortgage Affordability – How Much Can You Borrow?
Lenders assess affordability based on your income, outgoings, and credit history.
Income multiples: Most lenders will lend 4 to 4.5 times your annual income (joint income if buying with a partner). Some lenders offer 5 to 5.5 times for high earners or professionals (doctors, accountants).
Example: You earn £40,000. A typical lender offers £160,000–£180,000. With a £20,000 deposit, you can afford a property up to £180,000–£200,000.
Affordability stress test: Lenders check whether you could still afford payments if interest rates rose (typically to 6–7%). They also consider your regular outgoings: loan payments, credit card minimums, childcare, travel costs. Reducing these outgoings (e.g., paying off a car loan before applying) increases your borrowing capacity.
Improve your credit score – see article 6. Ensure you are on the electoral roll, have no missed payments, and keep credit utilisation low.
Stage 4: Choosing a Mortgage Product
First‑time buyers face a choice between:
Fixed‑rate mortgage – The interest rate is fixed for 2, 3, 5, or even 10 years. Your monthly payment stays the same regardless of base rate changes. Most first‑time buyers choose a 5‑year fix for payment certainty. After the fixed period ends, you revert to the lender’s standard variable rate (SVR) – typically much higher – so you will remortgage.
Tracker mortgage – The interest rate tracks the Bank of England base rate plus a margin (e.g., base rate + 1%). Payments vary as the base rate changes. Trackers often have no early repayment charges, giving flexibility.
Discount variable rate – A discount off the lender’s SVR for a period. Payments vary with the SVR.
Recommendation for first‑time buyers: A 5‑year fixed rate offers stability while you adjust to homeownership. You will not face payment shocks, and you have time to build equity before remortgaging.
Compare APRC (Annual Percentage Rate of Charge) – This includes the interest rate plus fees. A product with a £1,999 fee and a 4.2% rate might be more expensive than a no‑fee product at 4.5% for smaller mortgages. Use an online mortgage comparison calculator.
Stage 5: The Buying Process – Step by Step
- Agree in principle (AIP) – A lender gives a conditional offer indicating how much they would lend. An AIP is not a full mortgage offer, but it shows estate agents and sellers that you are serious.
- Find a property and make an offer – Your offer is accepted (subject to contract).
- Hire a solicitor/conveyancer – They handle legal searches, contracts, and Land Registry.
- Apply for a full mortgage – Submit payslips, bank statements, proof of deposit. The lender orders a valuation (basic check that the property is worth the price).
- Arrange a survey – A homebuyer’s report or full structural survey is highly recommended. A basic mortgage valuation is not a survey; it protects the lender, not you.
- Conveyancing searches – Local authority, environmental, water, and mining searches (depending on location).
- Exchange of contracts – You pay the deposit (usually 10% of the purchase price, but some of this may come from your mortgage). Exchange is legally binding – you cannot pull out without losing your deposit.
- Complete – On completion day, the mortgage funds are released, the balance is paid to the seller, and you receive the keys.
Timeline: From offer acceptance to completion typically takes 8–12 weeks. Delays are common.
Stage 6: Hidden Costs and Pitfalls to Avoid
Leasehold properties – Many flats (and some houses) are leasehold. You own the property for a fixed number of years (the lease term). Short leases (under 80 years) are difficult to mortgage and expensive to extend. Always check the lease length and ground rent terms.
Service charges and ground rent – For leasehold flats, you pay annual service charges (for building maintenance, insurance, communal areas) and ground rent to the freeholder. These can be £1,000–£5,000+ per year. Factor them into your budget.
High‑rise buildings with cladding – Since the Grenfell tragedy, lenders have tightened rules on flats in high‑rise buildings (above 18 metres). Some require an EWS1 form (cladding assessment). If the building does not have a valid EWS1, you may not get a mortgage.
Gazumping and gazundering – Gazumping is when a seller accepts a higher offer after accepting yours (before exchange). Gazundering is when a buyer lowers their offer just before exchange. Neither is illegal, but both are stressful. To reduce risk, move quickly to exchange.
Stage 7: After Completion – Your New Financial Life
Monthly costs: Mortgage payment, council tax, utilities, home insurance (buildings and contents), service charges (if leasehold), maintenance sinking fund (set aside 1% of property value per year for repairs).
Emergency fund: Increase your emergency fund to cover 6 months of these new costs. Homeownership comes with unpredictable expenses (boiler breakdown, roof leak).
Life insurance and income protection: If you have dependents, life insurance ensures the mortgage is paid off if you die. Income protection replaces your income if you cannot work due to illness or injury. Critical illness cover pays a lump sum if you are diagnosed with a serious illness.
Overpaying the mortgage – Many mortgages allow overpayments of up to 10% of the outstanding balance per year without penalty. Overpaying early saves substantial interest. See article 45.
Key Takeaways
- Save for deposit plus 3–8% of property price for additional costs (Stamp Duty, legal, survey, removal).
- Use a Lifetime ISA – the 25% government bonus is free money for first‑time buyers.
- Mortgage affordability is typically 4–4.5 times income – reduce existing debts before applying.
- Choose a 5‑year fixed rate for stability – you can remortgage later.
- Conveyancing and surveys are essential – do not skip the survey to save £500.
- Watch for leasehold traps – short leases and high service charges can make a property unsellable.
This article is for general information and educational purposes only. It does not constitute financial advice. Tax rules, allowances, and product terms may change. Always check with HMRC or an FCA-authorised adviser for your personal circumstances.