Types of Mortgages for First Time Buyers

Types of mortgages for first time buyers

You’re getting into first time home buying. Congratulations! This is one of the most exciting times in your life. It can also be pretty scary. The numbers you talk about when buying your first home are absolutely enormous, and your mortgage will probably be the biggest loan you ever take out.

If you’re about to start the first time mortgage process and would love to know the 5 mortgages for first time buyers that people rate highest, read on. By the end of it you’ll have a clear picture of the best mortgages for first time buyers, whether you qualify as a first time buyer, the schemes available to support your purchase, your deposit, and the Stamp Duty side of life. Want to know about mortgage schemes for first time buyers? Let’s go. 

Who Qualifies as a First Time Buyer?

Our first subject in our first time buyer help guide is a simple but essential one. Who qualifies for a first time buyer mortgage? It’s a simple matter to figure it out, on the face of it. This is the government’s own definition of a first time buyer:

‘A first time buyer is defined as an individual or individuals who have never owned an interest in a residential property in the United Kingdom or anywhere else in the world and who intends to occupy the property as their main residence.’

On the other hand determining who is and who isn’t a first time buyer isn’t always that straightforward. Imagine you’re buying as a couple and one of you has previously owned a property. How does that work out? What about individuals who have previously owned commercial property?


In a way the ‘buyer’ part of the term is misleading. The qualification is based on previous property ownership. If someone has owned a property they had inherited, for example, they would not qualify as a first time buyer. Here’s some more guidance:


You are usually a first time buyer if you have:


  •         Never owned a property before and are applying for a mortgage on your own
  •         If you’ve owned a commercial property but not a residential property (although if your commercial property had a residential element you won’t qualify)
  •         If you apply for a joint mortgage and none of you has owned residential property before


You are NOT a first time buyer if you have:


  •         Owned a property and sold it
  •         Inherited a property or were added to the deeds
  •         Previously owned a buy-to-let property
  •         Part-owned a property in the past
  •         Owned a residential property overseas
  •         Your spouse has owned a residential property. 


You can’t be a first timer if your co-owner has owned a residential property before. All the people involved need to be first timers. 

Schemes to Help First Time Buyers

How about government help for buying a house? Can you get help funding your first home? There are various schemes for first time buyers. The Mortgage Guarantee Scheme is designed to boost the number of mortgages for borrowers who have only saved a 5% deposit. The Help to Buy Equity Loan Scheme loans first time buyers a percentage of the purchase price of a new build home.

The Shared Ownership scheme is a part buy, part rent scheme that lets people buy a share of between 10-75% of a new home, paying rent on the remainder. The First Homes scheme gives first time buyers and key workers the chance to buy homes at a 30% discount, and the Right to Buy scheme helps council house tenants buy their council houses.

Types of Mortgage for First Time Buyers

There’s also a choice of types of mortgage for first time buyers to pin down. Are first time buyer mortgages more expensive? Not necessarily. There are some great deals around if you spend the time looking. So which one of these 5 deposit mortgages first time buyers would suit your circumstances best?


5 mortgages for first time buyers


One of the best mortgage deals for first time buyers is a fixed rate loan. With fixed rate mortgages you make fixed repayments for a set period. The result is super-simple. You borrow an amount, and you pay back the same amount every month until the fixed period ends. The most common fixed period used to be 5 years, now it’s increasing across the board for the first time.


Standard variable rate mortgages or SVRs are what buyers will usually move on to when their fixed rate, tracker or discount rate mortgages end. It’s wise to know what kind of mortgage your fixed rate deal will default to when the fixed element of it ends, and find out the worst case scenario monthly repayment so you know what to expect. 


Tracker mortgages track the bank of England base rate of interest, plus a percentage. Your repayments will go up and down along with the Bank’s base rate. This means you benefit from low base interest rates but it can also mean you suffer when the base rate goes up and your repayments follow. 


Discounted variable rate mortgages are fixed at a set percentage below the SVR for a defined period of time. After it ends, you’ll revert to a Standard Variable Rate mortgage, so be prepared for the change in the repayment amount. 


Offset mortgages are linked to a savings account, where the savings balance used to offset the amount you owe on the mortgage. If you’re able to save it’s a good idea. Here’s an example. Imagine you owe £100,000 on your mortgage and you have £20,000 savings. Under this kind of deal you only pay interest on £80,000. Your savings cleverly lower your monthly repayments or, alternatively, can be used to shorten the term of the mortgage, the number of years it lasts.


Bear in mind an interest only mortgage first time buyer deal of any kind only involves paying off the loan interest monthly. You pay the loan itself off when you sell or the mortgage ends. A repayment mortgage pays off the loan itself and the interest monthly. By the end of the loan it’ll all be repaid. If you sell the property you pay it the loan off from the proceeds of your sale


What’s the best first time buyer mortgage? It depends entirely on your own unique circumstances. And that’s why so many people use the services of a free independent mortgage advisor.

Deposit Needed for a First Time Buyer Mortgage

A mortgage deposit is simply the cash you put down to reduce the amount of money you need to borrow. What is the average first time buyer deposit? The bigger the deposit, the better first time buyer mortgage deal you’ll be able to get. While a 100% mortgage used to be a fairly common thing, these days it’s as rare as hen’s teeth. 5% tends to be the minimum deposit, but the more you can save the better.


Don’t forget the government’s 95% mortgage scheme, the Mortgage Guarantee Scheme. It helps first time buyers and existing homeowners secure a mortgage with just a 5% deposit on a home worth up to £600,000. Billed as an affordable route to home ownership, it gives  lenders the guarantee they need to provide mortgages that cover the other 95%, subject to the usual checks.

Stamp Duty for First Time Buyers

Stamp Duty Land Tax (SDLT) is a tax paid when you buy a property or land over a certain price in England and Northern Ireland. In Scotland it’s called Land and Buildings Transaction Tax, and in Wales it’s called Land Transaction Tax. The tax is due if you either buy a freehold property, buy a new or existing leasehold, buy via the Shared ownership Scheme, or are transferring land or property in exchange for payment, eg. buy a share in a house.

There’s a threshold under which there’s no SDLT to pay, currently £125,000 for residential properties. It comes into play when you and anyone else you’re buying with are first-time buyers, and the purchase price is £500,000 or less. The amount of tax you pay depends on the property value.

First time buyers in England and Northern Ireland can take advantage of stamp duty relief. First time buyers who pay £300,000 or less for their residential property will pay no SDLT. First time buyers paying between £300,000 and £500,000 will pay 5% Stamp Duty on property purchases over £300,000.

Your first time buyer mortgage options – Clear!

Now you know all about your first time buyer mortgage choices, the deposit you need to pay, supporting schemes to help first timers, and Stamp Duty. Are you ready to go find the home of your dreams? Good luck!