First-Time Buyer Guide: Deposits, Mortgages and Costs

Buying your first home involves more cash than just the deposit — and the mortgage you can get depends on a handful of numbers worth understanding before you start viewing properties.

Step one: the deposit and LTV

Your loan-to-value (LTV) is the mortgage as a percentage of the property price. A £15,000 deposit on a £200,000 home means a 95% LTV mortgage.

• 95% LTV deals exist and are viable, but rates are the most expensive.
• 90% LTV opens up noticeably better rates.
• Every 5% band matters — the best rates sit at 60–75% LTV. If you are close to a boundary, a slightly bigger deposit can cut the rate.

Use our mortgage overpayment calculator to see what different loan sizes and rates mean in monthly payments.

The Lifetime ISA — free money, with strings

If you are aged 18–39 you can open a Lifetime ISA and pay in up to £4,000 per tax year. The government adds a 25% bonus — up to £1,000 a year.

The catch(es):

• The property must cost £450,000 or less.
• The account must be open for at least 12 months before you use it to buy.
• Withdraw for anything other than a first home or retirement (after 60) and you pay a 25% withdrawal charge — which claws back the bonus and a slice of your own money.

For most first-time buyers under the price cap it is the single best savings vehicle available. Details on gov.uk.

How much can you borrow?

Lenders typically offer around 4–4.5 times your gross income (joint applications can combine incomes), but the real constraint is the affordability assessment — they stress-test whether you could still pay if rates rose, and they dig into your actual spending.

Before applying, it is worth tidying up: reduce credit commitments, avoid new credit applications, and check your credit files for errors — see our credit score guide.

Get an agreement in principle

An agreement in principle (AIP, also called a decision or mortgage in principle) is a lender's conditional indication of what it would lend you. It is free, usually instant online, and typically involves a soft or light credit check. Estate agents increasingly ask for one before letting you offer — get it before you start seriously viewing.

Stamp duty for first-time buyers

In England and Northern Ireland, first-time buyer relief currently means:

• 0% on the portion up to £300,000
• 5% on the portion from £300,001 to £500,000
• No relief at all if the property costs more than £500,000 — you pay standard rates on the whole price

Rules differ elsewhere: Scotland has LBTT with a more modest first-time buyer relief, and Wales has no first-time buyer relief under LTT. Thresholds change with budgets — check current rates on gov.uk before you budget.

The costs nobody mentions

Budget roughly £3,000–£7,000 on top of your deposit for:

• Conveyancing — solicitor/licensed conveyancer fees plus searches, typically £1,000–£2,000
• Survey — from a few hundred pounds for a basic condition report to £600+ for a full building survey on an older property
• Mortgage fees — arrangement fees of £0–£2,000 (a fee-free deal at a higher rate can sometimes cost more overall — do the maths)
• Removal costs, and the first month's reality: council tax, buildings insurance (required by the lender), service charges on flats

Leasehold flats add another layer — check the lease length (under ~80 years gets expensive and hard to mortgage), ground rent terms, and service charges before offering.

Schemes worth knowing about

• Shared ownership — buy a share (typically 25–75%) of a housing-association property and pay rent on the rest; you can "staircase" to bigger shares later.
• First Homes scheme (England) — new-build homes sold to local first-time buyers at a 30–50% discount, subject to price caps and eligibility.
• Family/springboard mortgages — a family member deposits savings with the lender as security, letting you borrow with little or no deposit.
• Guarantor mortgages — a parent's income or property supports your application.

Each has real trade-offs — read the small print before committing, and MoneyHelper has impartial explainers on all of them.

This guide is general information, not a mortgage recommendation or financial advice. A whole-of-market mortgage broker can advise on your specific circumstances — using one is usually free to you as they are paid by lenders.