First-time buyers
Buying your first home: the numbers to work out first
Buying your first home comes down to a handful of numbers: how big a deposit you have, how much a lender will let you borrow, what the purchase itself costs, and what you will pay each month. Get those straight before you start viewing and the rest of the process gets a lot calmer. This guide works through them using a £280,000 home in England as the example.
1. Your deposit, and why 5% steps matter
Most first-time buyers put down between 5% and 15%. Lenders price mortgages in loan to value (LTV) bands, so the size of your deposit changes the rate you are offered, not just how much you borrow.
| Deposit | Loan | Example rate | Monthly (25 years) |
|---|---|---|---|
| 5% (£14,000) | £266,000 | 5.80% | £1,681.47 |
| 10% (£28,000) | £252,000 | 5.40% | £1,532.49 |
| 15% (£42,000) | £238,000 | 5.25% | £1,426.21 |
Going from a 5% to a 10% deposit cuts the payment by about £149 a month: partly because you borrow less, partly because the rate is lower. The jump from 95% to 90% LTV is usually the biggest step in rates, so if you are close to 10%, it is often worth waiting a few months to get there.
A 5% deposit is possible because of Freedom to Buy, the government's permanent mortgage guarantee scheme, which encourages lenders to offer 95% mortgages. You do not apply for it yourself; you simply look for 95% deals.
2. How much you can borrow
Most lenders lend around 4 to 4.5 times your income, or your combined income if you buy with someone else. Some go to 5 times or more for higher earners or certain professions. Regular debts, such as car finance, loans and childcare, reduce the figure.
For the £252,000 loan in the 10% example, you would typically need an income of around £56,000 at 4.5 times, for example two people earning £28,000 each. Lenders also check you could still afford the payments if rates rose, and look at your credit history and spending.
Get an "agreement in principle" from a lender or broker before you make offers. It is a quick check, usually with a soft credit search, of roughly how much they would lend.
3. Stamp duty: first-time buyer relief
First-time buyers pay less stamp duty, and on many homes none at all. On our £280,000 example:
| Where | First-time buyer pays | Rule |
|---|---|---|
| England and Northern Ireland | £0 | Nothing up to £300,000, then 5% up to £500,000. No relief above £500,000. |
| Scotland | £3,000 | No tax on the first £175,000, then the normal bands. |
| Wales | £3,300 | No separate relief, but nothing is due on the first £225,000. |
In England, someone who had owned a home before would pay £4,000 on the same purchase. To count as a first-time buyer, everyone buying must never have owned a home anywhere in the world, and you must be buying it to live in.
4. The costs on top of the deposit
Budget for more than the deposit. Typical extras on a first purchase:
- Conveyancing (legal work): about £1,500 to £2,000 including searches.
- Survey: about £400 to £1,000, depending on how detailed. Worth it on an older home.
- Mortgage fee: £0 to around £1,000. Many first-time buyer deals have no fee.
- Moving and setting up: removals, basic furniture, and often a few months of decorating.
On the 10% example in England, that puts the cash needed at roughly £31,000 to £33,000, not £28,000. Keeping a small emergency fund for after you move in is wise too: boilers have a habit of breaking in the first winter.
5. The monthly payment, now and later
Most first-time buyers take a 2 or 5 year fixed rate, so the payment is predictable at first. When the deal ends you move to the lender's standard rate, which is usually much higher, so plan to switch to a new deal at that point. You can usually lock one in up to six months before your current deal ends.
A longer term lowers the monthly payment but costs more interest overall: on the 10% example, stretching from 25 to 30 years cuts the payment from £1,532 to about £1,415. Many first-time buyers do this and then overpay when they can.
6. Saving the deposit: the Lifetime ISA
If you are 18 to 39, a Lifetime ISA adds a 25% government bonus to what you save, up to £1,000 a year on £4,000 of savings. Saving £4,000 a year for two years would add £2,000 to your deposit. It can be used for a first home costing up to £450,000, and the account must be open for at least 12 months before you use it. Taking the money out for anything else (other than retirement after 60) costs a 25% charge, which is more than the bonus, so only use it for money you are sure is for a home.
The government has proposed replacing the Lifetime ISA with a new First Time Buyer ISA, planned for April 2028. Existing Lifetime ISAs would carry on, so it is still worth opening one now if you qualify. Check the latest rules before you rely on them.
A quick checklist
- Work out your deposit and the LTV band it puts you in.
- Check how much you could borrow, and what that means for the price you can look at.
- Add stamp duty and the other costs to see the full cash needed.
- Look at monthly payments at today's rates and at a higher rate, and make sure both feel comfortable.
- Get an agreement in principle before making offers.
Work out your own numbers
The affordability calculator estimates what you could borrow and compares it with average prices in any area. The stamp duty calculator applies first-time buyer relief for England, Scotland and Wales, and the mortgage comparison shows deals you could get for your deposit, with the monthly payment for each.