Choosing your first mortgage is one of the biggest financial decisions you'll make. With lenders offering dozens of products and mortgage types, it's easy to feel overwhelmed. But here's the good news: as a first-time buyer, some mortgage types work better for your circumstances than others.
This guide cuts through the confusion to show you which mortgages suit first-time buyers, which ones to approach carefully and how to make the right choice for your situation.
Start with a Mortgage in Principle
Before you start house hunting or exploring mortgage types, get a Mortgage in Principle (also called an Agreement in Principle). This is a conditional statement from a lender saying they'll likely lend you a specific amount based on your income and circumstances.
Getting this sorted first means you'll know your realistic budget, can move quickly when you find the right property and show sellers you're a serious buyer. Most Mortgage in Principle applications take 24-48 hours and don't affect your credit score if done correctly.
Understanding deposits for first-time buyers
Your deposit size directly affects which mortgages you can access and the interest rates you'll pay. Here's how it works:
5% deposit (95% LTV mortgage)
The minimum for most first-time buyers. You'll pay higher interest rates but can get on the ladder sooner. A £200,000 property needs £10,000.
10% deposit (90% LTV mortgage)
Opens up more lender options and slightly better rates. The same property needs £20,000.
15% deposit (85% LTV mortgage)
Noticeably better interest rates and product choice. You'll need £30,000 for a £200,000 home.
The bigger your deposit, the better your mortgage deal. But don't wait years to save 20% if you can afford a home now with 5-10%. Property prices may rise faster than you can save, and you'll be paying rent instead of building equity.
The best first-time buyer mortgages
Fixed-rate mortgages
This is the go-to choice for most first-time buyers. Your interest rate stays the same for a set period (typically 2, 3 or 5 years), which means your monthly payments never change during that time. You'll know exactly what's going out each month, making budgeting straightforward.
Why it works for first-time buyers:
- Predictable monthly payments when money is tight
- Protection if interest rates rise
- Peace of mind in your first year of homeownership
The catch: If interest rates fall significantly, you won't benefit. You're also usually locked in until the fixed period ends, with penalties for leaving early.
What happens when it ends: Your rate switches to the lender's Standard Variable Rate (SVR), which is almost always higher. Most homeowners remortgage to a new fixed deal before this happens.
Best for: First-time buyers on tight budgets who need payment certainty, which is most people buying their first home.
95% LTV mortgages
These mortgages let you buy with just a 5% deposit. Several major lenders offer these products specifically for first-time buyers.
Why it works for first-time buyers:
- Get on the ladder years sooner
- Stop paying rent and start building equity
- Take advantage of current property prices
The trade-offs: Higher interest rates than larger deposit mortgages, smaller choice of lenders and you'll need to pass stricter affordability checks.
Best for: First-time buyers with strong income but limited savings, or those in areas where house prices are rising quickly.
Guarantor mortgages
Your parent or family member agrees to cover payments if you can't. This lets you borrow more or secure better rates than you'd get alone.
Why it works for first-time buyers:
- Access mortgages you couldn't get independently
- Sometimes better interest rates
- Can help if you're self-employed or have a complex income
Important considerations: Your guarantor is legally responsible if you default. This can affect their ability to borrow and puts their property at risk. Make sure everyone understands the commitment before proceeding.
Best for: First-time buyers with supportive family and strong income but limited credit history or small deposits.
Mortgage types to approach carefully
Interest-only mortgages
You only pay the interest each month, not the capital you borrowed. At the end of the term, you still owe the full original amount.
Why first-time buyers should be cautious:Monthly payments are lower, which sounds attractive. But you're not building any equity in your home, and you need a solid plan to repay the capital at the end. Most lenders won't offer interest-only mortgages to first-time buyers.
Might work if: You have a clear investment strategy to repay the capital, but this is rare for first-time buyers and comes with significant risk.
Variable rate mortgages
Your interest rate changes in line with the lender's Standard Variable Rate or the Bank of England base rate. Monthly payments can go up or down.
Why first-time buyers should be cautious:When you're buying your first home, budgeting is tight. A sudden rate increase could push your payments beyond what you can afford. Variable rates work better for buyers with financial cushions.
Might work if: You have substantial savings as a buffer or expect interest rates to fall soon and can handle the risk.
Using government schemes with your mortgage
Lifetime ISA
If you're saving for your first home, a Lifetime ISA gives you a 25% government bonus on contributions up to £4,000 per year. You can save up to £20,000 and receive £5,000 in bonuses.
Most mortgage lenders accept Lifetime ISA funds as part of your deposit. Your solicitor claims the bonus when you complete your purchase.
Property price cap: £450,000 anywhere in the UK.
First Homes Scheme
The First Homes Scheme offers new builds at 30-50% below market value. Your mortgage is based on the discounted price, not the full value.
If you're eligible, this dramatically reduces both your deposit requirement and mortgage amount. You'll need to meet income caps (£80,000 outside London, £90,000 in London) and other criteria.
Gifted deposits explained
Many first-time buyers receive help from family, often called the "Bank of Mum and Dad". Lenders accept gifted deposits, but you'll need proper documentation.
What lenders require:
- A gifted deposit letter confirming the money is a gift, not a loan
- Proof of where the money came from
- ID verification of the person gifting the money
- Confirmation they won't have any legal claim on the property
Most lenders want gifts from immediate family, though some accept money from other relatives or friends. Your solicitor handles the legal side of documenting gifted deposits during conveyancing.
Common first time buyer mortgage mistakes
Taking the maximum you're offered
Just because a lender will give you £200,000 doesn't mean you should borrow it all. Leave room in your budget for maintenance, emergencies and life changes.
Focusing only on interest rates
A slightly higher rate with lower fees might cost less overall. Compare the total cost over the fixed period, not just the headline rate.
Ignoring arrangement fees
Some mortgages have fees of £2,000+. Add this to your calculations when comparing deals.
Not getting advice
Mortgage brokers can access deals you can't find yourself and help with complex situations like self-employment or gifted deposits. Many offer free advice.
Forgetting about life after the fixed rate
Know when your fixed rate ends and start looking at remortgage options 3-4 months before. Don't accidentally end up on the SVR.
Getting your mortgage sorted
Most first-time buyers benefit from fixed-rate mortgages with the biggest deposit they can comfortably afford. Beyond that, your personal circumstances guide the decision.
Speak with a mortgage broker to compare your options. They'll explain which products you qualify for and help you find the best deal for your situation. Once you've got your mortgage approved in principle, you're ready to start seriously house hunting.
When you find your home and your offer is accepted, Homeward Legal's conveyancing solicitors handle all the legal work to get you to completion. We offer fixed-fee conveyancing with no hidden costs, so you'll know exactly what you're paying from the start.
Get your conveyancing quote in seconds or call us on to discuss your first home purchase.
Frequently asked questions about mortgages for first-time buyers
How much can I borrow as a first-time buyer?
Most lenders will lend 4-4.5 times your annual income. So if you earn £40,000, expect to borrow £160,000-£180,000. Some lenders go higher, but remember you need to afford the monthly repayments comfortably
Should I use a mortgage broker?
For most first-time buyers, yes. Brokers access deals you can't find on comparison sites, handle the paperwork and can help with complex situations. Many don't charge you directly as they receive commission from lenders.
Can I get a mortgage if I'm self-employed?
Yes, but you'll typically need 2-3 years of accounts. Self-employed first-time buyers often find it easier working with a broker who knows which lenders are more flexible.
What credit score do I need for a mortgage?
There's no single number, as each lender has different criteria. Generally, you need a "fair" credit score or better. If your credit history is limited, some lenders specialise in first-time buyers with thin credit files.
Can I use Help to Buy ISA and Lifetime ISA together?
You can hold both accounts but only claim the bonus from one when buying your home. The Lifetime ISA typically offers better returns due to higher contribution limits.
How long does mortgage approval take?
A Mortgage in Principle takes 24-48 hours. Full mortgage approval after your offer is accepted typically takes 2-4 weeks, though it can be faster or slower depending on your circumstances and the lender.