Buying a home as a First Time Buyer is probably the biggest purchase you’ll ever make, and for most people, that means taking out a mortgage. If terms like “loan to value,” “fixed rate,” and “agreement in principle” feel like a foreign language, you’re not alone. This guide breaks down exactly how mortgages work in the UK, step by step, so you can walk into the process with confidence.
What Is a Mortgage, Exactly?
A mortgage is a loan used to buy property or land, secured against the property itself. In plain English: you borrow money from a lender (usually a bank or building society), put down a portion of the purchase price yourself (your deposit), and repay the loan plus interest over an agreed number of years.
Because the loan is secured against your home, the lender has the legal right to repossess the property if you fall seriously behind on repayments. That’s the trade off that makes mortgages different from most other borrowing: it’s a serious, long term commitment, but it’s also how the vast majority of homeowners get on the property ladder.
The Four Things That Really Matter
Strip away the jargon, and every mortgage really comes down to four questions:
- How much are you borrowing? This depends on your deposit, the property price, and what a lender is willing to lend you.
- How will you pay it back? Most people use a repayment mortgage, where you gradually pay off both interest and the loan itself.
- What interest rate will you pay? Fixed, tracker, or variable, this affects your monthly payment and the total cost over time.
- Will a lender actually approve you? This comes down to your income, credit history, deposit, and the property you’re buying.
The First Time Buyer Mortgage Journey, Step by Step
| Stage | What Happens |
|---|---|
| 1. Budget check | Work out what you can realistically afford, factoring in income, savings, existing debts, and moving costs. |
| 2. Agreement in principle | A lender gives you an early, non-binding estimate of how much they might lend. |
| 3. House hunting | You find a property and make an offer. |
| 4. Full mortgage application | The lender scrutinises your income, credit history, documents, and the property itself. |
| 5. Valuation and legal work | The lender values the property; your solicitor or conveyancer handles the legal side. |
| 6. Mortgage offer | If everything checks out, you receive a formal, binding mortgage offer. |
| 7. Exchange and completion | Contracts are signed, funds are released, and the property is yours. |
| 8. Repayment begins | You start making monthly payments for the length of your mortgage term. |
Keep in mind: an agreement in principle is not a guarantee. Lenders can still turn down a full application after reviewing your documents, credit file, or the property’s valuation.
Understanding Your Deposit and Loan to Value (LTV)
Your deposit is the cash you put down upfront; everything else is borrowed. The relationship between the two is called your loan-to-value ratio (LTV).
For example: if you buy a £250,000 home with a £25,000 deposit, you’re borrowing £225,000, a 90% LTV mortgage.
Generally speaking, the lower your LTV (i.e., the bigger your deposit), the more mortgage deals you’re likely to have access to, and often at better rates. Lenders see lower LTV borrowers as lower risk.
Repayment Mortgages vs. Interest Only
Repayment mortgages are the standard choice for most homeowners. Each monthly payment covers a slice of interest and a slice of the actual loan amount, so by the end of your term, the mortgage is fully paid off.
Interest-only mortgages work differently, your monthly payments cover only the interest, meaning the original loan amount is still outstanding at the end of the term. You’ll need a solid, lender-approved plan for how you’ll repay that lump sum (for example, through savings, investments, or selling the property). These come with more risk and are less common for standard residential purchases.
Fixed, Tracker, or Variable: Which Rate Type Is Right for You?
| Rate Type | How It Works | Worth Knowing |
|---|---|---|
| Fixed rate | Your rate and payment stays the same for a set period (e.g., 2, 5, or 10 years). | Predictable budgeting, but you may face charges for leaving early. |
| Tracker rate | Follows a benchmark rate (often the Bank of England base rate) plus a set margin. | Your payments can go up or down as the base rate changes. |
| Standard variable rate (SVR) | The lender’s own default rate, which you often move to after a fixed or tracker deal ends. | Usually not the most competitive option worth reviewing before your current deal expires. |
| Discounted variable rate | A temporary discount off the lender’s SVR. | Still moves if the underlying SVR changes. |
Don’t just chase the lowest headline rate. Product fees, flexibility, and early repayment charges can significantly affect the true cost of a deal.
Beyond the Mortgage: Other Costs to Budget For
Your mortgage repayment isn’t the only cost of buying a home as a First Time Buyer. Depending on your situation, you may also need to budget for:
- Valuation and survey fees
- Conveyancing (legal) fees
- Mortgage product or arrangement fees
- Stamp Duty Land Tax (depending on price, location, and buyer status)
- Removal and moving costs
- Buildings insurance, typically required from the point you exchange contracts
What Do Lenders Actually Look At?
Every lender has its own criteria, but most will assess:
- Your income and how it’s earned (employed, self-employed, contract work, multiple income streams)
- Your regular outgoings and existing debts
- Your credit history
- The size of your deposit and where it’s come from
- The type, condition, and value of the property
If any part of your situation is a little more complex, self-employment, a smaller deposit, past credit issues, or an unusual property, it doesn’t mean a mortgage is out of reach. It usually just means it’s worth speaking to a broker who knows which lenders are more flexible in those areas.
When Should You Get Advice Rather Than Go It Alone?
A guide like this is a great starting point, but you may benefit from more tailored, regulated advice if you’re:
- Self-employed or have variable income
- Buying through a limited company
- Using a gifted deposit
- Dealing with recent credit issues
- Buying a non-standard or leasehold property
- Approaching retirement
- Considering interest-only borrowing
- Using overseas income
Frequently Asked Questions
Do I need a big deposit to get a mortgage? Not necessarily. Many first-time buyer products are available from 5–10% deposits, though a larger deposit typically opens up more competitive rates.
What’s the difference between a mortgage adviser and going direct to a bank? A broker or adviser can compare deals across multiple lenders, whereas going direct only shows you one lender’s products.
Can I be turned down after getting an agreement in principle? Yes. It’s an early indication, not a guarantee, lenders still carry out full checks before issuing a formal offer.
How long is a typical mortgage term? Commonly 25–35 years, though this varies based on your age, income, and how much you want to pay monthly versus overall.
Will interest rates affect my mortgage? Yes and particularly if you’re on a tracker or variable rate, or when you come to remortgage after a fixed deal ends.
Ready to Talk Mortgages?
Every situation is different, and lender criteria change regularly. If you’d like to talk through your options with the Munro Mortgages team, get in touch, we’re happy to help you understand what’s realistic for your circumstances before you commit to anything.
This article is for information only and does not constitute financial or mortgage advice. Your home may be repossessed if you do not keep up repayments on your mortgage.
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