First time buyer guide getting started
It’s one of the most exciting things you’ll do. But there’s so much to think about when buying your first property – especially getting a mortgage.
Here are the main things you need to know about mortgages. By understanding your options, you can make the right choice and plan well for the future.
We have different types of mortgages with different types of interest rates. These change from time to time. We'll let you know what's available when you apply.
When you have your mortgage appointment, your mortgage adviser will find out what mortgage is right for you. You’ll discuss the various types of mortgages, interest rates and any associated fees.
There are two main types of mortgage:
Fixed rate mortgage
- The interest rate is fixed for a set time. This means you can plan your finances with more certainty, as your interest rate won't change. The fixed rate usually lasts for 1 to 5 years, but sometimes longer.
- Once the fixed rate ends, we switch you to another rate, usually one of our lender variable rates. Your new interest rate may be higher or lower than the rate you’ve been paying. Prepare for any change and keep this in mind when budgeting.
- When your fixed rate period ends, you may want to apply to move your mortgage to a new fixed rate product for a further period of time or you could keep it on the variable rate.
- This mortgage follows the Bank of England base rate, meaning the interest rate is variable. Therefore, you could save money if the base rate is low. Or you could pay more if the base rate is high.
Use our mortgage calculator to see our current mortgage deals. You can get an idea of how much you could borrow and compare what the monthly payments will be.
From time to time, we may include a special offer with our mortgages. The interest rate for these mortgages may be a bit higher than usual. So you'll need to think about what's more important to you: a mortgage with a special offer, or a mortgage that may have a lower interest rate.
There are various properties for you to choose from. We'll value the property before deciding if we can lend to you.
If you are building a new house, some schemes will offer you the money in stages. This means you’ll get some of the money as work on the house progresses. We’ll visit the property and check the progress, based on the agreed terms.
When the property is finished and you’re living in it, you can then apply for a mortgage with us. You will need to be eligible and choose a mortgage that’s available at the time.
Buy to let mortgages
A buy to let mortgage is a loan to buy a property that you will rent out to tenants. The most you can borrow is linked to the amount of rental income we think you could earn. Investing in buy to let property is a risk. You should be an experienced house buyer and know about investment properties.
These mortgages aren't available to first time buyers or anyone under the age of 25. At least one person applying for the mortgage must currently own a property in the UK.
Shared ownership is usually offered by registered social landlords or local authorities. With this type of mortgage, you buy a share of a property – say half – and pay less rent for the other share. The share you first buy may be as little as 25%. But you can buy more shares until you own the entire property.
Usually you own 100% of the property and so there is no rent to pay like under a shared ownership scheme. The shared equity part relates to the fact you’re taking out an equity loan which counts towards your deposit.
The advantage is that you often only need to raise a 5% deposit yourself, with the equity loan making up the rest of the deposit. But if property prices rise over the next few years, the size of your loan will increase too. This means that in the long-term you may end up having to pay more under a shared equity scheme, than if you were just to save up a bigger deposit and get a standard mortgage.
The government offer an equity loan scheme and some property developers also offer their own shared equity schemes, as it helps them sell the homes they have built.
New-build or converted properties
To get a mortgage on a property that's been built or converted in the last ten years, it should be part of a building standards scheme. This tells us that the building was completed to good standard, by a qualified professional. Ask your estate agent if this applies to the property you’re interested in.
How much do I need to save for my deposit?
- We'll only lend you a percentage of what you need to buy the property. We base this percentage on the value of the property or how much it is sold for (whichever is lower). So you'll need to use some of your own money to buy the property – a deposit.
- We will only lend you a percentage of what the property is worth, so you will need to put down some of your own money towards the cost of the property. We call this a deposit. At the moment, your deposit should be at least 10% of the property’s value. If you can put down more than 10%, you can often get a lower initial interest rate.
- Our Mortgage calculator will give you an idea of how much you can borrow and what your monthly mortgage payments could be.
- There are government backed schemes designed to help you save your deposit faster. To find out more, see our ‘getting some help’ section of this guide.
Need help saving for your deposit?
There are government backed schemes designed to help you save your deposit faster. To find out more see our 'getting some help' section of this guide.
Costs when applying for a mortgage
As well as your deposit, there are other costs involved in buying a property and taking out a mortgage. Here are some costs that apply to most buyers:
- Product fee
Some mortgages also have a fee. You pay this when you apply. Most fees can be added to the total amount you pay back. Keep in mind: by adding the fee to your total mortgage amount, you will pay interest on it over the term.
- Valuation fee
The valuation fee depends on the type of valuation you choose.
There are two levels of valuation you can choose and these rise in cost: A Mortgage valuation which is required to value the property, but gives you limited information; A survey and valuation (often referred to as a Homebuyers report) which tells you information such as defects and problems that are serious or that may significantly affect the value.
Should you require a more detailed assessment of the property you are able to obtain a Building Survey which is a more comprehensive inspection of the property. You will need to obtain this independently and we will not receive any information from your chosen surveyor. As a result you would still need to obtain a level 1 valuation from us so that we can give you a lending decision on your application. The valuation fee must be paid upfront and is non-refundable.
You'll be able to discuss valuations and fees with one of our mortgage advisers when you apply, but to get more information and an idea of the cost of valuation fees, please visit our valuation schemes page.
- Legal/Conveyancing fees
To get a mortgage, you'll need a conveyancer (solicitor) to take care of the contracts and documents. The costs can vary between different conveyancers, so its important to look at what is included in any quotes if you are comparing.
Search fees and Land Registry fees and typical expenses that you will incur as part of the conveyancing process and typically included in quotes you receive.
You can use our conveyancing service to compare quotes for your legal costs from our panel of up to 200 conveyancers.
Costs when buying your new home
- Removal costs
You may want to use a removal company to help you move into your new home. Costs can vary, so get a few quotes to compare prices.
- Stamp duty
If you are buying or selling a property, there will be Stamp Duty Land Tax payable. This is a government tax charged on land and property transactions in the UK. The tax is charged at different rates and has different limits for different types of property and values of transaction.
This tax is an expensive extra cost that you should take into account when thinking about buying a property.
For the most up-to-date Stamp Duty limits visit the government’s website, or for properties in Scotland, visit the Revenue Scotland website.
You can get an idea of some of these costs by using our Mortgage calculator - you’ll need to enter details about the property cost and your deposit under ‘how much will it cost’. The the results will then show in the ‘What else should I budget for?’ section of the mortgage summary.
Costs of running your new home
- Household bills
When you're working out the cost of buying and running a home, it's important to bear in mind how much your household bills are likely to cost each month.
The main monthly expense will be for gas, electric, water and council tax, but it's also important to think about other monthly costs. Your mobile and landline telephone bills and broadband services can add up, and with so many television options available, it's easy to get carried away.
It's worth using price comparison sites to shop around for a better deal on your utility bills. In some cases you could save quite a bit each month, and some sites will arrange to switch providers for you.
- Protecting your new home
When you've got the keys to your new home, it's important to think about protecting it as soon as possible. You'll already have taken out buildings insurance as part of your mortgage application, but you should think carefully about how you might pay for your mortgage should the worst happen.
Our Mortgage and Protection Advisers can help you to find the right level of cover to protect your mortgage payments in the event of your death, or if you're too ill to work. We have a wide range of policies to suit all budgets and needs, so it's worth giving us a call or making an appointment at your local branch to discuss your options.
The Mortgage Amount and Monthly Payments
- Use our mortgage calculator to see how much you could borrow and what your monthly payments might be.
- Or to get a better idea of how much you could borrow, you can apply for an Agreement in Principle.
To help you prepare for the different costs involved when buying a home, it’s important you budget properly. If you need any help, our budgeting tool is a good place to start.
Helping you to take the first step on the ladder
Help to buy schemes are set up by the government to help you buy your first home. There are four schemes available:
Help to buy: equity loan scheme
How it works?
- This scheme is for first time buyers who would like to buy a new build property through a builder offering a shared equity scheme.
- The government lends you up to 20% (or up to 40% if you’re in London) of the cost of your newly built home. You’ll need to provide at least 5% cash deposit yourself.
- That means you will only need a 75% mortgage (or a 55% mortgage if you’re in London).
- This money loaned by the government is interest free for the next 5 years.
- Help to buy ISA savings can be used towards your portion of the deposit.
For more information, you can speak to one of our mortgage advisers. Or visit the government help to buy website.Back to top
Help to buy: ISA
The Help to Buy: ISA is closed for new applications.
If you already have a Help to Buy: ISA you can still save and claim the Government 25% bonus (minimum £400 and maximum £3,000).
You can also still transfer your Help to Buy: ISA to us from another bank or building society.
For more details please visit our Help to Buy ISA page.Back to top
Forces help to buy
How it works?
- If you’re part of the forces, the government's Ministry of Defence (MoD) Forces Help to Buy scheme allows you to borrow up to £25,000 interest free (repaid over 10 years).
- You can use the money as a deposit when buying a property that’s your main home.
- Advice is available to forces personnel through their Chain of Command and personnel agency.
- You may still be able to use the scheme if you have medical or personal reasons.
For more information, you can speak to one of our mortgage advisers. Or visit the Government website.Back to top
Right to buy
How it works?
- This scheme allows tenants renting from the council or a housing association to buy their home at a lower price.
- Depending on the amount of discount, buyers may not need their own deposit.
To find out more, contact your local authority. They'll let you know if you can buy the property, the amount of discount you could get, and any other details.
You can apply for a right to buy mortgage in branch or by phone. For more information, you can speak to one of our mortgage advisers. Or visit the government websiteBack to top
What is a mortgage?
- A mortgage is a loan taken out to buy property or land. They can run for up to 40 years - known as the 'term' although are usually over a shorter period.
- The loan is ‘secured’ against the value of your home until it is paid off.
- You will be charged interest on the money you borrow. The higher the mortgage rate, the more you pay in interest. The quicker you pay off your mortgage, the less interest you pay.
Why choose a Halifax mortgage?
- We offer a great range of award – winning mortgages - We’ve been recognised as Best Overall Mortgage Lender by Your Mortgage Awards every year since 2002 and 2020’s Best Mortgage Lender for First Time Buyers by What Mortgage.
- All our mortgages are flexible - No matter which mortgage you choose, you’ll enjoy a range of special features designed to help you manage it more easily.
- Professional help, whenever you need it - From helping you to find the right mortgage for your needs, to recommending cover to protect you, your home and your family. Our expert Mortgage and Protection Advisers will help you every step of the way.
- It’s easy to apply - Apply for your mortgage online, over the phone, or in person at your nearest branch.
What should I think about when applying for a mortgage?
- Before you start looking at properties, it’s important to work out a realistic budget. You’ll need to be sure you can borrow enough to cover the purchase of the property and that you’ll have enough spare to cover all of the associated costs and fees.
- We will only lend you a percentage of what the property is worth, so you will need to put down some of your own money towards the cost of the property. We call this a deposit. Your deposit should be at least 5% of the property’s value. If you can put down more than 5%, you can often get a lower initial interest rate.
- You'll also need to think about the type of mortgage you want, how long you want it for, and what type of interest rate is best for you.
- A mortgage is usually a long - term commitment, so it's important to choose one that's right for you. As your home and its contents are probably your most valuable assets, it's also important to find the right level of cover to protect them.
Each lender has its own criteria but here are some things you can do now to make sure your credit profile is in the best shape possible. So, you’ll stand the best chance of getting the mortgage you apply for.
8 steps to help you get credit fit
- Register to vote
Contact your local authority to register on the electoral roll (or to check if you’re registered already). This is so that lenders can confirm your address and trace your credit history. If you’re not registered, they might not have enough information to progress your mortgage application.
- Be choosy about applying for credit
If you make too many applications for credit, it can affect your mortgage application. The lender may think you’re not creditworthy or that your finances are in a bad state, and then question if you’re able to make mortgage repayments.
- Review your credit history and score
Before starting your mortgage application, look into your credit history using a credit checking agency. This allows you to spot anything that’s not correct and request it’s updated, so that mortgage lenders receive correct information on your ability to repay.
And, look at your credit score. If it’s low, see if you can improve on any of your credit habits by following the below tips. Scoring bands can vary among different credit checking agencies.
- Work out your debt-to-income ratio
This is the amount of borrowing you have in relation to your money coming in. Mortgage lenders typically prefer a lower ratio, because it means you’re more likely to be able to afford your monthly mortgage repayments.
- Cut out any unnecessary borrowing
You can reduce your debt-to-income ratio by avoiding borrowing too much. Try not to take out new credit in the six months before applying for a mortgage as it could increase your debt-to-income ratio.
- But keep active credit accounts open
These show lenders that you’re always able to make repayments on time. It might be an idea to close inactive accounts as they show lenders that you’ve got access to too much credit that you don’t need or you’re not using.
- Pay your bills on time
It’s always important to pay any bills on time. As any missed or late payments will be recorded on your credit history, and be seen by the mortgage lender. This could make them doubt whether you’re able to repay a mortgage on time, or at all.
- Know your joint applicants’ credit history
Mortgage lenders will assess the creditworthiness of all of those named on your application. So, if you’re making a joint one, get the other person to check their credit history and score are in order. And pass these tips on to them to help them get credit fit too.
- Mortgage terms can run for up to 40 years.
- With a repayment mortgage, the longer the term, the lower the monthly payment. However, because it takes longer to pay off the loan, you will pay more interest. That means it will cost more over the life of the mortgage.
- With an interest-only mortgage, the term you choose makes no difference to the amount you pay each month. That’s because you will only be paying off the interest charges, not the loan itself. With an interest-only mortgage, you need to have a plan in place to pay back the loan. For example, this could be savings or a pension. The mortgage term should match this plan: the amount of time when you will have enough money to repay the loan.
- The mortgage term you choose should expire at a time when there will be enough money in your plan to repay the loan.
Ways you can repay
There are three ways you can repay your loan: repayment, interest-only, or you can combine the two:
- Repayment mortgage
- Each month, you'll pay an extra amount on top of the interest. This extra amount pays off the loan over the life of the mortgage.
- During the early years of your loan, your monthly payment is mostly used to pay off the interest. However, as the loan is repaid, the interest becomes less. Which means more of your monthly payment is used to pay off the mortgage.
- Interest-only mortgage
- Each month, you only pay off the interest, with the mortgage loan being repaid at an agreed time in the future. You must have a plan in place to repay the amount you borrow. This is regularly reviewed to make sure you're on track to pay off the mortgage balance.
- It's your responsibility to pay off the loan when the mortgage ends. If you don’t, you may have to sell your property.
- You can only get an interest-only mortgage if the loan you want is less than 75% of the property's value.
- Part repayment and part interest-only mortgage
- You can also combine both types of repayment. For this, your mortgage is split into two parts: capital and interest repayment and interest-only repayment.
- This means at the end of the mortgage term, you'll still have some of the mortgage to pay off.
- You'll need to do this using a lump sum (one payment).
- As with an interest-only mortgage, you need to have plan in place to repay this amount at the end of the term.