What is a first-time buyer? Let’s explore who qualifies and who doesn’t, and how the process of buying a house is different for those who haven’t done it before.
What is a first-time home buyer?
A first-time buyer is someone who is buying a property, who has not previously owned a home, therefore doesn’t have one to sell.
On the surface, it might seem obvious who is a first time buyer and who isn’t. However, it’s not always that simple, and some people aren’t sure if they would be considered one. The clue isn’t always in the name with this one; first-time buyer status isn’t always as straightforward as it sounds.
When are you typically a first-time buyer?
It’s important to note that rules change lender to lender; some may consider you a first-time buyer when others do not. But, here’s when you’ll generally be classed as one:
- You’ve never owned a home before (UK or abroad)
- You only own, or have owned, a commercial property – such as a shop, restaurant, or salon with no living space attached
Who doesn’t qualify as a first-time buyer?
You’re usually not a first-time buyer if:
- You’ve bought a property before
- You’ve owned a property before
- Including if you’ve inherited one (even if you’ve never lived there and have sold it)
- You’ve had a property bought for you, for example by a parent
- If you’ve owned a home before, you won’t be able to leverage your first-time buyer status
- You’re looking to purchase a buy-to-let property (you won’t qualify for first-time buyer stamp duty if you’re going to rent it out)
What if you’re buying with someone else?
If you’re buying with a partner (as a lot of people do) many assume both of you need to have not owned a property before in order to be considered ‘first-time buyers’.
However, marriage does not stop you from being defined as a first-time buyer in all cases. Provided your spouse doesn’t already own a property and you are buying in your name only, you can qualify for the tax relief.
What if you don’t currently own a property?
Even if you don’t have a property to sell currently, but you have owned a home before, you won’t usually be considered a first-time buyer.
First-time buyer FAQs
Looking to get on the property ladder and become a first-time buyer? Here are some frequently asked questions:
Do I pay stamp duty?
First-time buyers don’t pay any stamp duty on the first £300,000. Between £300,000- £500,000, you’ll pay 5% tax.
For a clearer guide on how much you’ll pay, use a stamp duty calculator.
What size deposit will I need?
How much deposit you’ll need varies, usually between 5-20% of the purchase price, but it’s recommended to save as much as possible. This way you give yourself the best chance of securing a favourable mortgage deal, with lower interest rates.
Try to save at least 15%, although even more if you can. Of course, this can be difficult, particularly if you’re paying rent. Budgeting is absolutely key, and one of the best deposit saving tips.
What types of mortgages are available?
If you only have a 5% deposit, this would mean you’d get a 95% LTV mortgage, enabling you to borrow 95% of the money needed to buy the property. The government recently helped make these mortgages more readily available by introducing a new mortgage guarantee scheme in the Spring Budget.
However, these aren’t the only types of mortgages available, especially if you have a larger deposit. If you’re looking to buy a home, speak to a mortgage adviser to find out what your options are. We can connect you with a professional below.
From variable rate to fixed, there are many mortgage types out there, each with their pros and cons.
How easy is it to get a mortgage?
Applying for a mortgage is a daunting step for many, especially if you’ve never done it before. Improve your chances of getting a mortgage by:
- Checking your credit score – and improving it if needed
- Registering to vote
- Not trying to hide anything on your mortgage application
- Paying all bills on time
- Paying off any long-term debts
- Managing your existing credit
What can I afford?
When working out what you can afford, don’t just look at house prices. You also need to consider other factors, such as the cost of running and maintaining your home. This is another reason why mortgage lenders are required to look at your affordability based on your ingoings and outgoings as part of their mortgage approval process.
Use a mortgage calculator to give you a rough guide on how much you’ll pay each month.
What help is out there?
There are some government schemes that could make the road to becoming a homeowner easier, including:
- Shared ownership (where you buy a share of a property and pay rent on the other share)
- Help to Buy Equity Loan
- Right to Buy
What is ‘chain-free’?
First-time buyers are chain-free as they’re not reliant on the sale of their home to buy another one. This can put them at an advantage compared to other buyers, as property chains are notorious for delays.
Therefore, a seller might choose to sell to a first-time buyer over someone else in the hope the sale has a better chance of going through.
You should leverage this status to your advantage. Provided you’re organised and prepared, you might be able to have an offer accepted that’s lower than the asking price. Of course, there are no guarantees, and it depends how much interest there is in the property, but it’s something to keep in mind.
Need more advice?
We have a number of first-time buyer guides available to help you every step of the way. It can be tough getting on the ladder, but it’s not impossible.
Looking for a mortgage adviser?
We can connect you with our panel of experts so you can explore your options and work out what you can afford. Get in touch today for a no-obligation quote.
Last Updated: October 26th, 2022