Mortgages explained

What is a mortgage?

A mortgage is a loan taken out to help you buy a home. Most mortgages last between 20 to 30 years, but the term can be longer or shorter. You’ll make monthly repayments throughout this term, including interest on the loan.

The loan is tied to your home, until you pay it off. This means if you don’t make your repayments, the lender could take back – or ‘repossess’ your home and sell it.

Learn more about how mortgages work

What is a first time buyer mortgage?

You might come across the term first time buyer mortgage, or FTB mortgage. This is how we talk about mortgages for people who are buying a home for the first time.

There are also some government mortgage schemes that are specifically for first time buyers. For example, the mortgage guarantee scheme may allow you to apply for a mortgage with a 5% deposit.

Visit our first time buyer mortgage hub

What is a mortgage term?

If you’re applying for a mortgage, one of the first things to consider is the mortgage term. Essentially, a mortgage term is the length of time you have to repay the loan. The average mortgage ranges from 20 to 30 years, but the exact length of time can vary.

Usually, the longer your term, the lower your monthly repayments may be. But you’ll be charged interest on your monthly repayments. So, the longer your term, the more interest you could end up paying over time.

When you apply for a mortgage, it’s important to choose a term that works for you and your needs.

How much deposit do I need as a first time buyer?

A deposit is a sum of money you pay up front when buying a home with a mortgage. The bigger your deposit, the less you may need to borrow.

You’ll usually need a deposit that is between 10 and 20% of the full property value. But you may be able to access schemes where you can use a smaller deposit.

For example, if you’re buying a home for the first time, you may be able to take out a first time buyer mortgage of up to 95% of the property’s value, in which case you may only need a 5% deposit.

But keep in mind that a lower deposit could come with higher risk, as if the property value falls, you will be in negative equity.

Mortgage calculator

Use our mortgage calculator to help work out how much your mortgage repayments could be once you’ve paid a deposit.

How much can I borrow as a first time buyer?

Mortgage lenders may let you borrow up to 4.5 times your annual income. This can strike a balance between giving you the flexibility to choose the home that fits your needs and being able to keep up with repayments.

It's important to budget for all your outgoings and living costs to work out how much you’re comfortable paying each month. It’s important to bear in mind other costs involved with buying a house, like stamp duty, legal fees and removals.

Mortgage calculator

Types of mortgage

Everyone loves choice when it comes to their money. Luckily, there are a few different mortgage types to choose from:

Repayment

A repayment mortgage involves paying back the amount you borrowed, with interest, over a set term.

Interest only

An interest only mortgage covers the interest charges on your loan, rather than the original sum borrowed.

This means you’ll still owe the lender the full amount you borrowed at the end of the term.

Shared ownership

A shared ownership mortgage lets you buy a share of the property, instead of the whole property. You’ll pay a mortgage on your share, then pay rent on the share you don’t own.  

Family Boost mortgage

Not got a deposit? Our Family Boost mortgage means your family could help by putting 10% of the agreed property purchase price into a 3-year fixed term savings account as security instead.

The property will be all yours, and your family will get their savings back, plus interest, so long as your repayments are up to date.

Discover more about family boost mortgages and how to apply.  

Interest rate types

Mortgage interest rates are the percentage you can expect to pay on top of the money you borrow. These are usually set by your lender, but they can also be affected by the base rate, which is set by the Bank of England.

Tracker

With a tracker mortgage, the interest you pay each month may change in line with the Bank of England base rate.

Offset

An offset mortgage links your savings with the amount you borrow, which could reduce the amount of interest you pay.

Fixed rate

With a fixed rate mortgage, the interest you pay stays the same over a fixed period.

First time buyers guide to Stamp Duty

What is Stamp Duty?

  • Stamp Duty Land Tax (SDLT) is a tax you pay in England and Northern Ireland when you buy a property worth over a certain amount.
  • You have 14 days from the date of transaction to pay your SLDT, and this is usually handled by your solicitor or conveyancer.
  • In Wales, you’ll pay Land Transaction Tax (LTT).
  • In Scotland, you’ll pay Land and Buildings Transaction Tax (LBTT).

 

Stamp Duty Land Tax

Steps to buying your first home

Buying your first home can be exciting, but there’s also lots to think about. Here’s a guide to what you can expect:  

Working out how much you can borrow as a first time buyer

It's a good idea to work out what you can afford, and get an idea of how much a mortgage lender is willing to let you borrow. That way, when you come to make a full mortgage application your lender will know what your budget is and can help you choose the right deal.

A person using their mobile device.

1. Get a mortgage Agreement in Principle

A Mortgage Agreement in Principle (AIP) is the first stage of getting a mortgage. This is where your lender gives you an idea of how much you could borrow, and over how long.

Most estate agents will want you to have an Agreement in Principle to help you find a home.

An Agreement in Principle doesn’t affect your credit score.

You could apply for an Agreement in Principle in 15 minutes

2. Looking at what you can afford

  • Mortgage deposit.
  • Mortgage payments.
  • Legal/solicitor fees
    Property surveys and other bills.

Discover more associated moving costs and start planning your budget

Finding your first home

When you have your Agreement in Principle, you can start looking for your dream home.

3. Look for your first home

When you have your Agreement in Principle, you can start looking for your dream home. You can check out property listing sites, including:

It may also help to talk to a local estate agent. They might be able to tell you about properties that aren’t listed yet, or areas to look in.

4. Think about the type of property you are searching for

Before you search, think about the type of home you want. This can help make your search quicker and easier. Consider the different types of properties you could get within your budget, including whether they are freehold or leasehold.

Here are a few first time home buyer tips:

  • How many bedrooms and bathrooms do you need?
  • Will you need a driveway for parking, or a garage?
  • Would you like a garden or other type of private outdoor space?
  • Do you want a new build or an existing home?

5. Make an offer on a home

Found a home that ticks all the boxes? Great! It could be time to put an offer in.

Decide how much you want to offer. It’s often a good idea to consider the following factors:

  • Compare the property to other houses for sale in the local area.
  • Decide on the maximum price you could pay using your Agreement in Principle.
  • Consider what improvements the home may need and factor these into your budget.
  • Think about how much you’ll be paying in bills and mortgage repayments.

Once you’re happy, give the estate agent a call. You’re now another step closer to buying your first home!

The seller may accept your offer or look to negotiate. Either way, the estate agent will let you know. If they accept, you can still change your mind. But if you’re happy to go ahead with the offer, you can find a conveyancer and apply for your mortgage.

If you’re buying your first home in Wales, Northern Ireland, or Scotland, this process may vary as there are different property laws outside of England.  

6. Hire a solicitor or conveyancer

You’ll need to hire a property solicitor or conveyancer to carry out all the necessary work that’s needed to buy your first home.

A conveyancer is a specialist lawyer who covers the legal side of buying or selling a property. They will act on your behalf to handle the deposits, arrange contracts, and transfer the deed of the property from the seller to you.

Search more than 200 conveyancers with the Halifax Conveyancing Service.

7. Apply for a mortgage

If you’ve not already got a mortgage Agreement in Principle, or you applied for one over 90 days ago, you’ll need to apply for another one. You’ll also need to get an AIP from the same lender you’re applying for a mortgage with.

To apply for a mortgage, get all your documents together, ready for your lender to look at.

You’ll need:

  • a form of ID
  • your past three to six months of bank statements
  • your P60 tax form
  • your utility bills
  • proof of any benefits, if you receive them
  • the contact details for your solicitor, estate agent and seller.

If you’re self-employed you’ll need a few more things.

At this point, you can get help from a Mortgage and Protection Adviser. They can help you find the right deal for your budget and handle your application after you’ve made an offer.

  • Your mortgage adviser can guide you through the process and arrange your valuation.
  • Your lender will then give you a formal mortgage offer, based on all the information you’ve given them.
  • The process usually takes between three to six weeks.

8. Arrange a property valuation

When you take out a mortgage, your lender will need a surveyor to inspect and value the home you're buying.

Mortgage valuation

  • A basic valuation that often doesn’t include structural issues.
  • Will give you limited information about the property and may not highlight any defects or problems it has.
  • If you want a more detailed inspection, we can offer a survey and valuation.

Survey and valuation

  • Often called a Homebuyers Report, this gives you information about any issues that could affect the property’s value.
  • You'll get a full report with all the in-depth findings.
  • The results of this may affect how you look to negotiate the buying price with the seller.

Building survey

  • The most detailed survey, this can be tailored to suit your needs.
  • Building surveyors will be members of the Royal Institute of Chartered Surveyors.
  • Your surveyor will ask what kind of report you want, before the survey takes place.

For more information on valuation schemes and their costs, talk to your mortgage advisor.

9. Exchange contracts and completion

Exchanging contracts is one of the final stages of buying your first home. It's a simple process where you basically sign a contract saying you agree to buy the house.

The seller also signs a contract saying they agree to sell the house. These contracts are then exchanged between the legal representatives on both sides, and you are legally obliged to buy the property.

Before you exchange

Step 1: Your conveyancer will carry out the legal work.

This will include:

  • Contacting the seller's conveyancer and checking the documents they've sent.
  • Carrying out a local and drainage search of the property and reporting back to you.
  • Checking your mortgage offer letter from your lender and asking you to sign a copy.

Step 2: Get building insurance in place.

You should also check you have buildings insurance in place before you exchange contracts. That way, you’re covered if something happens to your new home. For example, a fire, flood or storm. Your conveyancer will ask for proof of this before exchanging.


Step 3: Pay the deposit.

You’ll then need to pay your deposit to your conveyancer. They will send this to the seller’s conveyancer.

Before you pay your deposit, check that you’re happy with the contract. You’ll need to have:

  • the mortgage offer in writing
  • all searches completed by the conveyancer
  • agreed on a completion date.

Step 4: Get ready to exchange.

Once the deposit is paid, you’ll be ready to exchange contracts.

After exchanging

Your conveyancer will do some final work before the keys are handed over, including:

  • transferring remaining money
  • arranging mortgage deeds.

From the day you exchange to the day you finally get your hands on the keys will usually be between 7 and 28 days.

Hurray! It's time to move into your first home!

The big moving day is finally here!

Two people rolling a carpet.

Hurray! It's time to move into your first home!

The big moving day is finally here!

10. Moving day

The big moving day is finally here! While moving home can feel like there’s so much to do, following a basic moving day checklist can help make things much easier.

First things first, be prepared. Gather plenty of boxes, bags, tape and bubble wrap. They’ll make it a lot easier when packing everything up.

Here are a few other tips to consider:

  • Decide if you want to hire a removal firm or rent a van to move things yourself.
  • Make sure the firm is fully insured. Or, if you’re using a van, make sure the driver is insured.
  • Take time to reroute your mail and let people know you’re changing your address.
  • Get final day meter readings for your gas, electricity and water in your old home.
  • Label all your boxes and pack up things you won’t need right away.
  • Leave any items you’ll need when you move in until last.

You could lose your home if you don’t keep up your mortgage repayments

Calculators & tools

Learn more about the mortgage rates you could get and how much you could borrow with the help of our tools.

Mortgage calculator

Calculators & tools

Learn more about the mortgage rates you could get and how much you could borrow with the help of our tools.

Mortgage calculator

 

Other ways to buy your house

Getting on the property ladder can be tricky, especially if it’s your first time buying a house. But there are several government schemes that can help you buy your first home. These include:

More about Government schemes

First time buyer FAQs

  • When you start paying back your mortgage, your repayments will often come out automatically by Direct Debit. But you might be able to change how and when you pay online.

    Your first payment could be a little higher than your normal monthly repayments. This is because your first mortgage payment includes an initial interest payment, on top of your monthly repayment. This covers the interest for the days between moving in and your first payment.

    So, what might this look like? Say you complete your move on the 15th. Interest will be charged from then until the end of the month, and this will then be added to your first mortgage repayment.

    You’ll normally make your first payment on the day of the month of your choosing. If your first payment is taken on a different date than the one you’ve chosen, it will be taken on the agreed date next month.

  • You can only get a buy to let mortgage if you’re buying a property and applying for a mortgage with someone who is not a first time buyer.  

  • Solicitor or conveyancer fees are usually around £2,239 for buying a house. This includes things like the legal fee, conveyancing disbursements and any extra fees.

    Learn more about solicitor fees.

  • In England, first time buyers don’t pay stamp duty on the first £425,000 of a home’s value, and 5% on any value between £425,000 and £625,000. If you’re buying your first house alone, and you’ve never owned a property or land before, you’ll be classed as a first time buyer. If you’re buying property with your partner, both of you will need to be first time buyers to qualify, otherwise you may have to pay Stamp Duty at the normal rate. The rules are different in Scotland and Wales.

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