First Time Buyers: What You Need to Know

first time buyer

I’m a First-Time Home Buyer. What Are My Options?

If you’re a first-time buyer it can be overwhelming trying to wade through the plethora of information and working out the best option for you.

First off, it’s worth knowing that to be classed as a first-time buyer you must be looking to purchase your only or main residence and must have never owned a freehold or had a leasehold interest in a residential property, either in the UK or abroad.

How Much Deposit Do I Need?

Typically, you need to save between 5 and 20% of the cost of the home you would like to buy. This is a minimum guideline and of course the more deposit you can put down the better, as you will be able to secure a better deal on your mortgage while also owning more of your property from the outset.

What Will It Cost Me?

Leaving the monthly repayments on your mortgage aside, there are a number of other costs you will need to factor in:

  • Survey costs
  • Solicitor’s fees
  • Removals costs
  • Buildings and contents insurance
  • Mortgage arrangement and valuation fees
  • Stamp Duty* (Land and buildings Transaction Tax in Scotland, or Land Transaction Tax in Wales)

*If you are a first-time buyer you will pay no Stamp Duty on the first £300,000, as long as your property is not worth more than £500,000.

Are There Any Schemes for First-Time Buyers?

The following schemes aim to help buyers secure their first home:

Help to Buy: This government-backed equity-loan scheme is designed to help those with a small deposit and is available to first-time buyers and existing homeowners who want to buy a ‘new build’ house. The purchase price must be no more than £600,000. Under this scheme, you need to contribute at least a 5% deposit, and you can then borrow 20% of the purchase price (40% in London) interest-free for the first five years.

This scheme is available in England only and is currently set to end in March 2021. It will then be replaced by a new scheme that will only be available to first-time buyers and will be subject to regional price caps.

If you live elsewhere in the UK, you can use Help to Buy Scotland, Help to Buy Wales or Help to Buy Northern Ireland.

Shared ownership: this is a scheme through which you buy a share of a home (ranging from a quarter to three-quarters of the home’s full value) from the landlord, who is usually the council or a housing association, and rent the remaining share. You mortgage the share that you own, and you pay a reduced rent on the remainder. You can then opt to buy a bigger share in the property at a later date, up to 100% of its value.

With both of these schemes, eligibility restrictions may apply, so make sure you do your research.

first time buyer