As seasoned mortgage advisers, we are here to guide you through the process with this practical guide. From understanding your mortgage options to closing on your new home, you’ll find clear advice and helpful tips to make your first homebuying experience smooth and rewarding. Let’s get started on making your dream home a reality!

What is a mortgage?

Most people who own a home do so with the help of a mortgage, as very few buyers have the full amount of money available to purchase a property outright. Instead, they borrow a significant sum from a mortgage lender and agree to repay it over time through monthly payments. These repayments cover both the original loan amount (the capital) and the interest charged by the lender for borrowing the money.

Traditionally, the standard mortgage term was 25 years. However, this has changed in recent years due to rising property prices and affordability challenges. According to TSB in 2024, the average mortgage term for first-time buyers is now 32 years. Longer mortgage terms can make monthly payments more manageable but often mean paying more interest over the life of the loan.

When taking out a mortgage, buyers are usually required to pay a portion of the property’s price upfront — this is known as the deposit. The minimum deposit is typically around 5% of the purchase price, but putting down a larger deposit, such as 10% or 15%, can significantly reduce your monthly repayments and may give you access to better interest rates.

It’s important to remember that a mortgage is a secured loan — the property acts as collateral. If you fail to keep up with your repayments, the mortgage lender has the legal right to repossess your home and sell it to recover the debt. This is why it’s vital to only borrow what you can realistically afford and to have a clear understanding of the financial commitment involved.

Did you know: The typical age of a first-time buyer in the UK is approximately 33 years and 6 months, reflecting an increase of around 2 years since 2012 (source)

Deposit & Loan-to-Value (LTV)

A deposit of at least 5% of the property’s value is usually needed. For example, for a £250,000 home, a £12,500 deposit is required. The larger the deposit, the lower the monthly repayments and LTV, granting access to better mortgage deals.

Ways to Get a Deposit

  • Gifted deposit: Friends or family may contribute. A letter confirming it’s a gift, not a loan, is often required.
  • Equity from another property: Using the equity of an owned property as a deposit.
  • Shared ownership: Buy a percentage of a property and pay rent on the remaining.
  • 0% options: Some lenders offer 100% mortgage options requiring guarantees from family or friends.

Did you know: As of July 2024, 53% of UK adults own their own home, an increase from 50% in 2023. Of these, 28% own their home outright, while 25% have a mortgage.

(source: Avant Homes)

Freehold and Leasehold

When buying a property, it’s important to understand the difference between freehold and leasehold ownership. Purchasing a house usually means buying the freehold, which gives you full ownership of both the property and the land it stands on. This offers greater control and fewer ongoing costs, as there is no landlord or freeholder involved.

In contrast, flats and maisonettes are typically sold as leasehold. This means you own the property itself for a set period of time, as outlined in a lease agreement, but not the land it’s built on — that remains under the ownership of the freeholder. Leaseholders often have to pay ongoing charges, such as ground rent, service charges, and maintenance fees, to cover the upkeep of shared spaces and the building’s structure. It’s essential to review the lease terms carefully before buying a leasehold property, as they can significantly affect your rights and future costs.

Stamp Duty

In England and Northern Ireland, properties over a certain price attract Stamp Duty. First-time buyers are exempt from paying tax on homes up to £300,000. Equivalent taxes in Scotland and Wales are Land and Buildings Transaction Tax (LBTT) and Land Transaction Tax (LTT), respectively.

Costs for First-Time Buyers

Aside from mortgage setup fees and deposits, FTBs need to budget for other things such as surveys, stamp duty and insurance.

Home Surveys
A home survey is an essential step in the buying process, providing a professional assessment of the property’s condition. The type of survey you choose can vary depending on the age, size, and condition of the property. A basic condition report may be sufficient for a new-build, while older or unusual properties might require a more comprehensive homebuyer report or a full structural survey. These surveys help uncover any potential issues such as damp, subsidence, or structural damage, problems that could lead to costly repairs later on. Survey costs can range from a few hundred to over a thousand pounds, depending on the level of detail.

Conveyancer/Solicitor Fees
Conveyancing is the legal process of transferring ownership of a property from the seller to the buyer. You’ll need to hire a solicitor or licensed conveyancer to handle this for you. Their responsibilities include conducting local authority searches, checking for any legal restrictions on the property, drawing up contracts, and liaising with the seller’s solicitor. Fees can vary widely depending on the complexity of the transaction and the provider, but typically range between £800 and £1,500. Some solicitors also charge extra for services like bank transfer fees and dealing with leasehold properties.

Buildings Insurance
Most mortgage lenders require you to have buildings insurance in place from the day you exchange contracts. This covers the cost of rebuilding your home if it’s damaged or destroyed by events like fire, flood, or storm. The price of buildings insurance depends on factors such as the property’s rebuild value, location, and construction type. While it’s possible to bundle it with contents insurance, buildings cover alone usually starts from £100–£300 annually, depending on the level of protection needed.

Stamp Duty
Stamp Duty Land Tax (SDLT) is a government tax applied to property purchases above a certain threshold in England and Northern Ireland. The amount you pay depends on the purchase price and whether you’re a first-time buyer, moving home, or buying a second property. First-time buyers often benefit from reduced rates or exemptions. For example, as of the current rules, first-time buyers pay no Stamp Duty on homes up to £425,000. However, if you’re purchasing a more expensive property or a second home, costs can run into the thousands. It’s important to check the latest thresholds and rates, as they can change with government policy.

Moving Costs
Moving house comes with a variety of additional expenses that are easy to overlook. These can include hiring a removal company, renting a van, purchasing packing supplies, or even paying for storage if there’s a delay between moving out of your old place and into the new one. Professional removals can cost anywhere from a few hundred to over £1,000 depending on the distance, amount of furniture, and whether packing services are included. There may also be incidental costs like cleaning, utility connection fees, or temporary accommodation if things don’t line up perfectly.

Did you know: the average price of homes that first-time buyers are looking to purchase in 2024 has increased by £3,400 (1.4%) compared to 2023. This rise is most notable in the North West (+4.4%) and East of England (+4.3%)

(source: Zoopla)

Preparing for a Mortgage Application

Before applying for a mortgage, it’s a good idea to check your credit score with one of the main credit reference agencies such as TransUnion, Equifax, or Experian. Your credit score gives lenders an indication of how reliable you are at managing money and repaying debt. If your score is lower than expected, there are steps you can take to improve it — such as paying down existing debts, registering on the electoral roll, and ensuring all your bills are paid on time. Taking action to boost your credit score before applying can improve your chances of getting approved and may help you secure a better interest rate.

When you’re ready to apply for a mortgage, you’ll need to provide a number of important documents. These typically include proof of identity (such as a passport or driving licence), proof of income (like payslips, tax returns, or bank statements), and details of your monthly outgoings. You’ll also need to show evidence of your deposit, which could be in the form of a savings statement or a gifted deposit letter, if relevant. Having these documents prepared in advance can help speed up the application process and reduce the risk of delays.

Did you know: the average price of homes that first-time buyers are looking to purchase has increased by £3,400 (1.4%) compared to the previous year. This rise is most notable in the North West (+4.4%) and East of England (+4.3%) (source)

Mortgage Application Process

The first step in securing a mortgage is to gather all necessary financial documents and assess your overall financial situation. This includes reviewing your income, outgoings, credit score, and any existing debts to understand what you can realistically afford. Once you have a clear picture of your finances, the next step is to obtain a Mortgage in Principle. This is a statement from a lender indicating how much they may be willing to lend, based on your financial circumstances.

With a Mortgage in Principle in hand, you can begin searching for properties that fall within your budget. This will give you a focused approach to your house hunt and demonstrate to sellers that you’re a serious buyer. When you find the right property, you’ll then submit a full mortgage application to your chosen lender.

Following your application, the lender will arrange for a valuation of the property to ensure it is worth the amount being borrowed. You may also choose to commission a more thorough survey for your own peace of mind. Once the lender is satisfied with all checks, they will issue a formal mortgage offer. This confirms the amount they are willing to lend and is a key milestone on your journey to homeownership.

How Path Mortgages Can Help

Working with an independent mortgage adviser offers several valuable benefits, especially for first-time buyers or those navigating a complex financial situation. One key advantage is access to tailored, unbiased advice. Independent advisers are not tied to a single lender, meaning they can compare deals across the whole market and recommend the most suitable options based on your individual circumstances, rather than steering you toward a limited set of products.

They also provide valuable market insight. With expert knowledge of different types of mortgages, including fixed-rate, variable-rate, and tracker mortgages. An adviser can help you understand the pros and cons of each and guide you towards the best fit for your financial goals and risk tolerance. This insight is especially useful during periods of economic uncertainty or changing interest rates.

Additionally, an adviser offers full application support. They’ll help you prepare and submit your mortgage application, ensuring all necessary documents are in order and that the application is presented in the strongest possible light. This hands-on guidance can increase your chances of approval and make the entire process far less stressful.