Purchasing your first home marks a major life milestone, and it can at times be an exhilarating and rewarding experience. However, the process is often long and complicated, which can be overwhelming if you are unprepared.
Here we'll offer valuable advice tailored to first-time buyers, and direct you to additional resources if you want to delve deeper into specific topics.
Why Buy Property?
Purchasing property is a significant decision that can have a profound impact on your finances and lifestyle. There are various reasons to get on the property ladder, such as:
Cost-effectiveness – Historically, owning a home has proven to be more cost-effective than renting in the long run, as property values typically appreciate over long periods.
Control and stability – Homeownership gives you control over your living space, enabling you to make alterations as you wish, and establish long-lasting relationships with neighbours and the local community.
However, it's crucial to acknowledge the challenges and potential drawbacks of homeownership before committing. The process can strain your finances, be stressful and time-consuming, and involve additional property maintenance responsibilities that you wouldn't have when renting.
In the UK, various types of property ownership exist, each with its own set of rights, responsibilities, and costs.
Freehold
Freehold ownership means that you own both the property and the land it stands on outright, with no time constraints. As a freeholder, you have complete control over the property and are responsible for its maintenance and associated costs.
Houses are generally freehold properties, although some flats, often converted from houses, may also be freeholds.
Leasehold
Leasehold ownership means that you own the property but not the land it stands on. Instead, you lease the land from the freeholder for a specified period, which can range from years to several centuries. Leasehold properties are commonly purpose-built flats.
Leasehold properties often involve a maintenance company that handles the maintenance and general upkeep of common areas, as well as the building structure, walls, and roofs. These properties are generally more affordable, since you only own the property and not the land.
However, leasehold properties come with fees, such as ground rent and a service charge, which can be substantial. Additionally, if the lease is approaching the 80-year mark, a costly lease extension may be necessary - a short lease of less than 80 years can make obtaining a mortgage challenging, and adversely affect the property's value.
Mortgages
Most first-time buyers won't have enough saved to buy their dream home outright, so will require a mortgage.
What is a mortgage?
A mortgage is a loan secured against a property, enabling you to borrow money to purchase a home. The lender supplies funds, which you combine with a saved deposit, to pay an agreed sale price, and then you repay the loan, with interest, over a specific term, typically 25 to 35 years.
If you fail to keep up with your mortgage payments, your home may be repossessed and sold to pay off any remaining mortgage balance.
What types of mortgages are there?
The interest charged on a mortgage is decided by the mortgage rate.
Fixed-rate mortgage – The interest rate on the loan remains constant for a specific period, typically from two to ten years, offering predictable monthly payments.
Variable-rate mortgages – The interest rate can fluctuate over time, based on a rate set by the lender or an external rate, such as the Bank of England base rate. This means the monthly payments can change over time.
When choosing between mortgages, you may also need to consider payment options:
Capital repayment – The monthly payments consist of both the interest charges for borrowing the money and a portion that goes towards repaying the loan. With this type of mortgage, the loan is fully paid off at the end of the mortgage term.
Interest-Only – The monthly payments solely cover the interest charged on the loan for that month, meaning the balance you owe the bank does not decrease over time. To be eligible for this type of mortgage, you will typically need to demonstrate to a lender that you have some way of paying off the loan in the future.
Key mortgage terms to familiarise yourself with
Before exploring your mortgage options, there are some key terms you should familiarise yourself with.
Loan-to-value (LTV) – The percentage of the property's value that you are borrowing. For example, if you have a 20% deposit, your LTV would be 80%. A lower LTV will typically lead to a lower mortgage interest rate.
Annual Percentage Rate of Charge (APRC) – The overall annual percentage charge of the mortgage, including interest and any charges.
Mortgage term – The duration over which the mortgage is repaid.
Initial rate – The interest rate you'll be charged at the beginning of the mortgage. For fixed-rate mortgages, this rate remains fixed during the product period. For variable-rate mortgages, this is the current interest rate, which may change in the future depending on the rate to which the mortgage is linked.
Product fees – Also referred to as ‘upfront fees' or a ‘mortgage arrangement fee', this is a fee a lender will charge for arranging the loan.
Early Repayment Charge (ERC) – A fee imposed by some lenders if you pay off your mortgage early or switch to another mortgage product before the end of a fixed-rate period.
The mortgage application process can be broken down into five steps.
Research your options by exploring a variety of lenders, such as banks and building societies. You can also make use of comparison sites, or speak to a mortgage broker, to compare what deals are available.
Obtain a Decision in Principle ('DIP') from a lender, which is a provisional estimate of how much they might be willing to lend you. Do this early on to get a clear indication of your overall budget.
After having an offer accepted, reassess your options, before submitting a full application.
The lender will complete a survey and carry out certain checks to fulfil their requirements.
Wait for the lender's final mortgage offer and complete the purchase.
Organise finances early
Organising your finances early in the home-buying process can make you more appealing to mortgage lenders.
Reduce unnecessary spending
Avoid large purchases or taking on additional debt
Maintain a consistent savings pattern.
During the mortgage application process, a lender will check your credit score.
Improving a low credit score can be challenging for first-time buyers. However, there are some steps you can take:
Register on the electoral roll at your current address.
Pay bills on time and in full.
Limit credit usage and maintain low balances.
Check your credit report for errors or inaccuracies and report them. Incorrect details, such as addresses or details or lending, can negatively affect your score.
Financial Planning for Home Buying
Purchasing your first home is a significant financial commitment, and it's important to understand all the costs involved to create a realistic budget.
In addition to the deposit required for a mortgage, there are additional upfront cash requirements.
Stamp duty – A tax on property transactions in the UK. First-time buyers may be eligible for a discount, for more information on this and up-to-date stamp duty rates, visit the government's stamp duty page.
Legal fees – The cost of hiring a solicitor or conveyancer to handle the legal aspects of the purchase. These typically range from £800 to £1,500 but can be more or less depending on the property and location.
Survey fees – The cost of having a property survey conducted. Surveys range from around £400 for a basic survey, up to £1,500 plus for a full structural survey. Some mortgage lenders also charge a survey fee to value the property.
Moving and removal cost – The cost of hiring a removal company or renting a van to transport your belongings to your new home. Average removal costs are around £600 but could be more or less depending on requirements.
Renovation and repair – The cost of any necessary repairs or improvements to the property after purchase. The price will vary depending on the condition of the property, and what you have planned.
There will also be ongoing costs, in addition to potential mortgage payments.
Running costs – Cost of utilities, such as electricity and gas. You can get a good indication of these costs from the property's Energy Performance Certificate (EPC). Learn more about EPCs.
Council tax – The amount of council tax you will pay is based on the value of the property and the area it is in. You can look up the property's council tax band and local authority council tax rates online.
Insurance – Your mortgage lender will require you to take out buildings insurance to protect your new home against damage from external factors such as floods, fire, and subsidence.
Ongoing maintenance – There will likely be bills to maintain the property's condition, such as when a roof needs repairing or a boiler breaks. This is likely to be lower for newer properties.
Leaseholder costs, if applicable – Ground rent and service charges.
Saving for a deposit
Saving for a deposit is one of the most challenging parts of the home-buying process. Typically you will need at least 5% of the property's price, and if you can increase the percentage, you'll be able to secure a lower mortgage interest rate.
The more you can save, the better. Explore options like temporarily moving back with family to boost your savings, or reduce your rent and non-essential expenses.
Help for first-time buyers
Several government-backed schemes are available to help get first-time buyers on the property ladder.
Lifetime ISA – A savings account to which the government will add a 25% bonus, up to a maximum of £1,000 per year. You can withdraw the money when you buy your first home.
Mortgage Guarantee – A scheme that encourages lenders to offer 95% LTV mortgage to first-time buyers, reducing the deposit requirement.
First Homes – An initiative that offers a discount of at least 30% of the market price of select new-build properties for first-time buyers.
Shared Ownership – A scheme where first-time buyers purchase a share of a property (typically between 25% and 75%) and pay rent on the remaining share, which is owned by a housing association. Reducing the mortgage and deposit requirements.
Right to Buy and Right to Acquire – Schemes that enable eligible council and housing association tenants to purchase their homes at a discounted price.
Each of these schemes comes with eligibility criteria, such as age and income requirements. It's worth investigating them, plus any other government initiatives, to see what you can take advantage of.
On average, it takes between three and eight months to go from the initial property search to moving day.
We'll go through the main stages in a beginner-friendly way, but for a full list of the steps involved, read our guide How Long Does It Take To Buy a House?
General tips
Build a support network – Seek advice from friends and family, particularly if they have been through the process themselves, to gain insights and share experiences.
Maintain open communication – Stay in regular contact with your solicitor, estate agent, and mortgage advisor to stay informed and address any issues promptly.
Stay positive and patient – Be prepared for emotional ups and downs, and don't let emotions dictate your decisions. Approach the process with a level-headed and optimistic mindset.
Who will I work with when buying a property?
Before we go through the home-buying stages, there are some key roles you should familiarise yourself with.
Estate agents – Assist you in finding suitable properties, negotiating offers, and facilitating communication between buyers and sellers.
Solicitors or conveyancers – Manage the legal aspects of the transaction, such as conducting property searches, drafting contracts, and transferring funds.
Surveyors – Evaluate a property's condition and identify any potential structural issues or other concerns that may influence your perception of the property.
Be aware of estate agents
Keep in mind that estate agents represent the seller, not the buyer. Use their services to gather property information and negotiate with the seller but be careful not to disclose details that could harm your interests. For instance, revealing your maximum budget could lead to you being pressured to spend more.
Finding a property and getting an offer accepted
The first stage involves determining your budget and researching the market.
Be open-minded
First-time buyers often focus on the most desirable areas, which can lead to steep competition and limited options. Areas that are seen as less desirable often have the most growth potential.
When viewing properties, don't be put off by cosmetic issues such as stained wallpaper or an unkempt garden. The cost to fix these types of issues is small when compared to the overall property price.
Create a list of minimum requirements to help you focus your property search. Consider factors such as location, property type and size.
Don't discount homes slightly outside your budget
Property prices are negotiable, and sellers often expect the final price to be lower than the asking price. Research by Zoopla showed an average discount of 3.9% in 2019 across all home sales.
If a property has been on the market for a while or if the seller needs to sell quickly, they may be more willing to accept a lower offer.
What should I do when attending property viewings?
When attending property viewings, remember to:
Take a friend or family member for a second opinion. They might also catch things you could miss during the visit.
Make notes of any questions, concerns, or observations you have during the viewing, and follow them up.
Take lots of photos for future reference.
Making an offer and negotiating a price
Once you've found a property you want to make an offer for, start the negotiation process by making an offer through the estate agent.
Beginner's tips for negotiation
Be confident and assertive – Don't be afraid to negotiate, remember this is a business transaction.
Justify your offer – Provide a rationale for your offer based on the research you have done, such as recent sold prices of comparable properties.
Don't get emotionally attached – It's essential to remain objective and not get carried away during the negotiating process, always be prepared to walk away if the deal isn't right for you.
Consider using a professional – If you're not comfortable negotiating, consider using a buying agent to handle the negotiation on your behalf.
Don't be pressured into a decision – Take your time to make an informed choice, and don't let anyone push you into a decision you're not comfortable with. Remember that it's okay to walk away from a deal if it's not the right fit for your needs and budget.
After you've had an offer accepted, your next steps are to find and apply for a mortgage, pick a conveyancing company to start the legal process, and decide if you want a survey.
Get a professional survey for peace of mind
Investing in a professional survey can identify potential issues with the property that may not be apparent during viewings. They can be particularly valuable for older properties, which may have issues such as structural issues that could be costly to repair.
Your chosen conveyancer will carry out several checks and report back their findings to you. While this is happening, your mortgage provider will survey the property.
Exchange to completion
Once you have your mortgage offer, your solicitor has gone through all their checks with you, and any survey results have been reviewed, it's the final step - exchanging contracts before completion.
After you sign and exchange contracts with the seller, there is no turning back. Normally, it's only a week or two from this point to the completion day, when the keys are handed over and you can move in.
Prepare for moving day
Moving day can be a stressful experience, but with careful planning, you can ensure a smooth transition to your new home.
Here's a moving day checklist:
Confirm the moving date with your solicitor.
Give notice to your landlord if renting.
Hire a removal company or arrange to rent a van if required.
Pack your belongings and prepare to move.
Set up utilities.
Inform relevant parties of your change of address – such as banks, insurers, pension funds, and the local council.
