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The first-time home buyer’s guide

Buying your first house will probably be your biggest and most stressful purchase so far, but it can also be one of life’s most exciting and rewarding experiences. It’s a place to call home and an investment for the future.

If you’re looking to buy your first home, here are the main things you should bear in mind.

Check your credit score

You’ll need a healthy credit history to give lenders confidence in your ability to repay your mortgage. To see where you stand, start by checking your credit score with any or all of the three main credit reference agencies. Each looks at your credit history, debts and banking patterns to predict how much of a risk you pose to potential lenders.

‘There’s no universal credit score, but the higher the score, the more likely you are to be given the green light by banks and lenders for your mortgage.’

There’s no universal credit score, but the higher the score, the more likely you are to be given the green light by banks and lenders for your mortgage. To learn more, read our guide on how to check your credit score.

A ‘good’ score is 881 - 960 with Experian, above 420 - 465 with Equifax, and 604 - 607 for Callcredit then you’ve conquered the first challenge. Don’t worry if not, as there are plenty of things you can do to help boost your score. 

Manage your budget

‘Financial planning’ can sound a bit boring, but when it’s with the end goal of buying your dream home, it’s anything but.

The little things add up

Mortgage lenders consider your credit score and earning power, but also your spending habits. It’s worth totting up how much you spend each month on small but frequent purchases like travel and eating out. Finding cheaper options can add up to hundreds saved each month.

Putting the money you save towards paying off outstanding credit card balances and overdrafts will make you look better on paper to potential lenders.  And if you don’t have debts to clear, the spare cash is bound to come in handy for paying house-buying fees and taking care of essential DIY jobs after move-in day.

Help from the government

The government has stepped in to help with the challenge of home buying. If you set up a Help to Buy ISA, the government will boost your savings by 25%. So, if you save £2,000, it’ll be topped up with an extra £500, with a maximum government contribution of £3,000. There’s also a Help to Buy equity loan. It’s interest-free for five years and could be worth 15–40% of the property’s value, depending on your location.

Alternatively, shared ownership, is aimed at households that earn less than £80,000 (or £90,000 in London) and first-time buyers. If you can’t afford the mortgage on your own, they’ll step in and buy 25–75% of the house. You’ll then pay rent on the rest, with the option to buy more shares when you can afford to.

Different types of mortgage

Once you’ve got your credit score and savings under control, it’s time to consider mortgages. There are fixed-rate, tracker, cashback, and interest-only mortgages. The variety can be daunting at first, but once you know the pros and cons of each, they’re pretty straightforward.

‘The most common type is a standard repayment mortgage. Over a set period you repay the bank the money you’ve borrowed plus interest.’

The basic premise is always the same: you borrow money for your property, then pay it back with interest to the bank or lender. Mortgages vary by interest rates, repayment terms, built-in charges, and the length of time agreed to pay the money back.

There are two main types of mortgage. An interest-only mortgage  involves paying back just the interest instead of repaying the money you borrowed to buy your house. Paying less back each month might sound great, but you have to remember that when the term ends you’ll still owe the full amount you borrowed and will need to pay it back, so don’t forget to have a plan on how you’ll make the repayments later on.

The more common type is a standard repayment mortgage. Over a set period you repay the bank the money you’ve borrowed plus interest. At the end of the repayment period, you’ll own your house outright. If you move homes before paying off the mortgage, you can usually move with your mortgage, or alternatively repay and close the original loan and take out a new one (an early repayment charge might apply). Simple and effective, a standard repayment mortgage gives you peace of mind and not many variables to worry about.

Fixed-rate mortgages a particular type of standard repayment mortgage, are popular because they offer certainty. Your interest rate is fixed for 2, 3, 5 or even 10 years, meaning you know exactly what you’ll be paying back each month. That’s good news if rates go up, but if the rates drop, you’ll have to continue paying the higher rate.

You may also be offered a Flexible mortgage, meaning you can overpay or even take a payment holiday as part of the plan. However, this flexibility will result in the interest rate being higher than on other types of standard repayment mortgage.

Finding the right mortgage for you largely depends on your finances and how much risk you feel comfortable with. A fixed-rate mortgage offers certainty, which many first-time buyers consider important. But if you have more financial knowledge and experience, you might be able to gain an advantage by using a tracker mortgage or the standard variable rate. Picking the right mortgage for your situation is important, so speak to a mortgage broker for free advice before signing on the dotted line.

Extra home-buying costs

That rainy day fund you’ve been working on will come in very handy when it’s nearly time to take the big step. Here are some of the less obvious but no less important fees you’ll need to bear in mind when buying your first home.

‘Paying mortgage fees up front means you won’t have to pay interest on them, or you can spread the cost over a longer period and use the cash to pay for other fees.’

Stamp duty. This is a government tax on homes over £125,000, but first-time buyers are exempt on properties up to £300,000, with further relief up to £500,000.

Legal fees. These will vary by solicitor, but expect to pay around £850–£1,500.

Mortgage fees. As well as the loan, the lender may charge you a booking fee of up to £250 and an arrangement fee up to £2,000. Paying these costs up front means you may not have to pay interest on them, or you can spread the cost over a longer period and use the cash to pay for other fees.

Surveyor fees. A basic valuation will cost around £250, with a full survey costing closer to £600.

Valuation costs. These fees vary from £150 to £1,500 depending on the house value.

Money transfer fees. This is the cost of actually moving the money from the lender to the seller.

You might need to buy new furniture and furnishings to make your new house feel like a proper home. If money’s tight after all the paperwork fees, paying on a credit card could give you some wiggle room, as long as you have a plan in place for paying back what you borrow. Barclaycard has lots of credit cards that could help you manage your money.

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What's next?

Money’s bound to be a little tight after move-in day. Check out our advice on whether you should pay for home improvements on a credit card. Interest-free purchases and built-in protection if you need your money back can make paying on credit an attractive option for first-time buyers.


Learn more about credit

Should you put your home improvements on a credit card?