What Is a First-Time Buyer? UK Definition, Benefits & Eligibility

Buying your first home should be exciting. But finding the money for a deposit and finding an affordable home in an area you’d like to live can be daunting. Rising house prices, increased interest rates, and a sluggish economy have made this all the more difficult in recent years.

However, with the right guidance and support, taking your first step on the property ladder could be easier than you might expect. At ChoiceMortgages UK we have been helping first-time buyers purchase homes for decades. Our team has a wealth of experience navigating the requirements of mortgage lenders. We’re here to help guide you through the process of buying your first home.

In this guide we’ll cover all the key information you need to know when setting out on this journey. Of course, your circumstances are unique to you, so when it comes to specific details, you’ll need to discuss these directly with our team.

One thing you need to know from the outset is that as independent mortgage advisors we have access to the full market. We’re not tied to any specific lenders, so we can find the best deals for you and your particular requirements. This sets us apart from many high street lenders, banks and building societies. If you’re already in conversation with a broker, it’s always worth checking whether they offer truly independent mortgage advice. It could save you a lot of money in the long run!

What Is a First-Time Buyer?

HMRC defines a first-time buyer as follows:

In order to count as a first-time buyer, a purchaser must not, either alone or with others, have previously acquired a major interest in a dwelling or an equivalent interest in land situated anywhere in the world, regardless of the value of that interest.

In simple terms, this means you’ve never owned a property, either in part or in full, outright or via a mortgage or other loan. Provided you meet this criteria you qualify as a first-time buyer. First-time buyers benefit from certain incentives and schemes aimed at making it easier to get onto the housing ladder.

For example, as of time of writing, first-time buyers pay much less Stamp Duty than other buyers. First-time buyers may also benefit from better mortgage rates, lower fees and cashback incentives, compared to those who have previously owned property.

If you’re buying a property with someone else, one thing to note is that if either of you have owned property before neither of you will be treated as first-time buyers. This will have an impact on Stamp Duty, mortgages available to you and other incentives so please make your broker aware of this as soon as you can.

First-Time Buyer Stamp Duty Benefits

Stamp Duty Land Tax is a government tax paid when buying property in England and Northern Ireland above certain thresholds. At the time of writing, first-time buyers pay the following:

• 0% SDLT on properties up to £300,000
• 5% SDLT on the portion from £300,001 to £500,000

If the property you are buying costs more than £500,000 you will not qualify for first-time buyer relief and will be charged the standard rates.

How Do First-Time Buyer Mortgages Work?

A mortgage is a long-term loan specifically designed for property ownership. The lender makes the money available for the purchase of the property. The loan is then paid back by the mortgage holder, along with any interest charged on the loan, over an agreed period of time.

For first-time buyers purchasing a property in their 20s or early 30s mortgage terms can usually be somewhere between 25 and 40 years. This is the maximum length of time over which the loan is repaid.

Most mortgages are capital repayment mortgages. This is where the value of the loan (equivalent to the cost of the property) is paid off a little at a time, month by month, along with the interest as a single payment. Alternatively, and in rare circumstances, an interest-only mortgage may be arranged. In this instance, the interest is repaid monthly, with the initial value of the loan being repaid by the end of the term. This is usually done through savings or investments.

Mortgage repayments are made monthly by Direct Debit. When arranging your mortgage your broker will be able to let you know what the cost of your repayments will be. If you’re able to afford more than the contractual repayment amount, then you may be able to ‘over-pay’. This is a helpful way of reducing the term of your mortgage (the length of time over which it is paid) as well as the amount of interest paid in total. It can be a shrewd way of saving yourself money in the long term.

More about First-Time Buyer Mortgages

Find out more about buying your first home by exploring our other helpful articles on this topic:

• How Much Deposit Do First-Time Buyers Need in the UK?
• How Much Can a First-Time Buyer Borrow in the UK?
• First-Time Buyer Mortgage Types & UK Government Schemes Explained
• The Full First-Time Buyer Mortgage Process: Step by Step
• First-Time Buyer Costs, Mistakes to Avoid & Why Use an Independent Broker