A Simple Guide to Buying Your First Home
Buying your first home can feel complicated. There are deposits, mortgages, surveys, solicitors, fees and household costs to consider.
You do not need to understand everything at once.
This guide takes you through the main things to consider, from working out your budget to getting the keys.
Start With Your Budget
Before looking at properties, work out what you can comfortably afford.
A lender will consider factors such as your:
- Income
- Regular spending
- Existing borrowing
- Credit history
- Deposit
- Employment
- Household costs
The maximum a lender is willing to offer is not necessarily the amount you should borrow.
Think about the mortgage payment and the costs of running your future home, including council tax, energy, water, insurance, maintenance and repairs.
How Much Deposit Do You Need?
Your deposit is the part of the purchase price you provide yourself.
For example:
Property price: £200,000
10% deposit: £20,000
Mortgage required: £180,000
Some mortgages may be available with a 5% deposit, while a larger deposit can give you access to more mortgage options and reduce the amount you need to borrow.
Understanding LTV
Loan-to-value, or LTV, shows how much of the property’s value you are borrowing.
Using the example above:
£180,000 ÷ £200,000 × 100 = 90% LTV
A larger deposit means a lower LTV.
Budget for More Than the Deposit
Do not use all your savings for the deposit.
You may also need money for:
- Solicitor or conveyancing fees
- Surveys and valuations
- Mortgage fees
- Tax, where applicable
- Buildings insurance
- Removal costs
- Repairs, furniture and decorating
Keep some money available for unexpected costs after you move in.
Get Mortgage-Ready
Before applying, check your finances and organise the paperwork you may need.
This could include:
- Proof of income
- Bank statements
- Details of existing borrowing
- Evidence of your deposit
- Identification
It can also be useful to check your credit information for errors before applying.
Try to avoid unnecessary new borrowing or major financial changes during the mortgage application process.
Consider a Mortgage in Principle
A Mortgage in Principle gives an indication of how much a lender may be prepared to lend.
It can help you establish your property budget and may reassure sellers or estate agents that you are in a position to proceed.
However, it is not a mortgage offer. The lender will still need to assess your full application and the property.
Choosing Your Mortgage
First-time buyers face the same important mortgage choices as other homebuyers.
Fixed or Variable?
A fixed-rate mortgage keeps the interest rate unchanged for an agreed period, which can make budgeting easier.
A variable rate can change, so your monthly payment may rise or fall.
Mortgage Term
A longer mortgage term can reduce the monthly payment but may mean paying more interest overall.
A shorter term usually means higher monthly payments but can reduce the total interest paid.
Look at both:
What can I comfortably afford each month?
and
How much could I repay overall?
Repayment Mortgages
Most first-time buyers use a repayment mortgage.
Each monthly payment normally pays the interest and repays part of the amount borrowed. Over time, the mortgage balance reduces.
Finding the Right Home
Do not judge a property on its asking price alone.
Consider:
- Location and transport
- Council tax
- Energy efficiency
- Property condition
- Likely repairs
- Running costs
- Your future needs
A cheaper property requiring substantial work may ultimately cost more than a better-maintained property with a higher purchase price.
Valuations and Surveys
Your lender will normally arrange a valuation to check whether the property is suitable security for the mortgage.
A mortgage valuation is primarily for the lender.
It should not automatically be treated as a detailed assessment of the property’s condition.
Depending on the property’s age, construction and condition, you may want an appropriate survey of your own.
A survey costs money, but it can identify problems that might otherwise become expensive surprises.
Making an Offer and Applying
Once you find the right property, the exact buying process depends partly on where in the UK you are buying.
After an offer is accepted, there is still work to complete. This can include:
- Your full mortgage application
- Valuation and survey
- Legal work
- Searches and checks
- Formal mortgage offer
- Final legal arrangements
- Completion
Your solicitor or conveyancer will guide you through the relevant legal process.
Buying With Someone Else
Buying together can allow you to combine incomes, but both buyers can take on significant financial and legal responsibilities.
Before buying, discuss:
- Who provides the deposit
- How mortgage payments will be shared
- How the property will be owned
- What happens if circumstances change
- What happens if one person wants to sell
Consider obtaining legal advice about the ownership arrangement.
First-Time Buyer Schemes
Government and other schemes may be available to some first-time buyers.
Eligibility and availability can depend on factors including:
- Where you live
- Income
- Property price
- Property type
- Your circumstances
Schemes and rules change, so always check current official information before relying on one.
Shared Ownership and Similar Schemes
Some schemes allow eligible buyers to purchase a share of a property rather than buying it outright.
You may then pay rent on the remaining share and, depending on the scheme, have the option to buy more later.
Before proceeding, understand the:
- Share you are buying
- Mortgage
- Rent
- Service charges
- Rules for buying additional shares
- Rules for selling
The arrangements vary, so check the particular scheme carefully.
When Your Mortgage Deal Ends
Many mortgages have an initial deal lasting, for example, two or five years.
When it ends, your mortgage may move to another rate, potentially the lender’s standard variable rate.
Know when your deal finishes and review your options before that date.
Can You Overpay?
Some mortgages allow overpayments.
Paying extra can potentially reduce your balance faster, shorten the mortgage term and reduce interest.
However, limits and early repayment charges may apply, so check your mortgage conditions first.
Protecting Your New Home
Buildings insurance will normally be important when buying a home, and your lender may require appropriate cover.
Learn more about home insurance →
You may also want to consider other financial protection:
Life insurance can provide financial support for the people who depend on you if you die.
Learn more about life insurance →
Income protection can provide a regular income if illness or injury prevents you from working, subject to the policy terms.
Learn more about income protection →
Critical illness cover can provide a lump sum if you are diagnosed with a covered serious condition and meet the policy definition.
Learn more about critical illness cover →
These products protect against different risks. You may need some, all or none of them depending on your circumstances and the protection you already have.
First-Time Buyer Checklist
Before committing to a property, ask yourself:
Money
- Do I have enough for the deposit and buying costs?
- What monthly mortgage payment feels comfortable?
- Will I still have emergency savings?
Mortgage
- How much might I be able to borrow?
- What is my LTV?
- Fixed or variable?
- What term suits me?
- What fees and early repayment charges apply?
Property
- Is it in the right location?
- What will it cost to run?
- How energy efficient is it?
- Does it need repairs?
- Do I need a survey?
Future
- Could I cope if my costs increased?
- Does the property suit my likely future needs?
- Am I planning any major financial or lifestyle changes?
Compare First-Time Buyer Mortgages
The cheapest-looking mortgage is not necessarily the best mortgage for you.
Compare the overall deal, including:
- Interest rate
- Monthly payment
- Product fees
- Initial deal period
- Early repayment charges
- Flexibility
- Total cost over the period you are comparing
Energility’s mortgage comparison service is coming soon.
In the meantime, our guides can help you understand what you are comparing before you make a decision.
The Bottom Line
Buying your first home is a major financial commitment, but the process becomes much easier to understand when you tackle it in stages.
Work out your budget.
Build your deposit.
Understand your mortgage.
Research the property.
Budget for the full cost of ownership.
Most importantly, do not rush into buying simply because you feel you should.
A home needs to work for your finances, circumstances and future plans.
Next: Moving Home
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