How to save as a first time buyer

Buying a home is one of the biggest financial decisions we make and at times it may feel a little daunting.

But it doesn't have to be. If you do your research and plan ahead, you can give yourself the confidence to make the right decisions about the roof over your head and how to pay for it. Remember to look out for first time buyer events that you might find useful.

So, whether you're currently renting your own place, sharing with friends or living at home with family, this plan will help you understand the steps needed to buy your own home.

1 - Get mortgage ready

A mortgage is a big financial commitment, so lenders will want to make sure you can keep up with the payments.

A good credit history is important, so check your rating with a free service such as Equifax, Transunion or Experian, and take steps to address any problems before it is time to apply for a mortgage.

Lenders will also consider your employment status and history, so get all your paperwork such as payslips, tax returns and P60 forms together in plenty of time. If you are thinking of moving jobs, a recent change may impact your chances of getting a mortgage, so plan ahead.

2 - Boost your budget

The most common question for first time buyers is "how much can I borrow?" All lenders are different, so it’s important to check with your lender.

In calculating how much you can borrow lenders will also consider your other financial commitments, such as childcare costs and car finance, as well as any other debt. This may mean that you are not be able to borrow as much as you initially thought. Consider where you can reduce your outgoings, but make sure any savings are manageable, and not just a short-term fix.

And check what income a lender will consider for mortgage purposes. If you are employed and paid regularly through PAYE, they will most likely base a mortgage offer on your current annual salary. However, if you are self-employed, you may need at least 2 years of accounts to prove your income.

Our mortgage calculator can give you an idea of how much you can borrow and what your monthly repayments will look like.

3 - Max out your deposit

“What deposit will I need?” You will need a deposit of at least 5% of the value of your new home, so start saving as early as you can.

The bigger your deposit, the lower your monthly repayments may be. The key phrase to look out for is Loan to Value - LTV for short. This is the percentage of the purchase price funded by your mortgage, for example: for a £200,000 house a deposit of £40,000 (20%) means that your LTV would be 80% (the proportion funded by the mortgage).

If you have a lower LTV, you may be more likely to be accepted for a mortgage and offered lower interest rates.

4 - Get your perfect mortgage match

All mortgages are different, so compare the deals available to you carefully.

A fixed rate locks in interest rates for a set period and offers security that your payments won’t rise in that time but may have early repayment fees if you want to leave early. And a mortgage with an attractive lower rate may have more expensive fees attached. There are a range of different mortgages to suit your circumstances. Find out more about TSB’s range of mortgages for first time buyers here or speak to our mortgage experts to find out more.

5 - Know the cost of moving

You will need to save up more than your deposit to buy a home. Other potential costs include Stamp Duty, solicitor’s fees, local authority searches and potential removal costs.

Stamp Duty is a tax on buying a property in England and Northern Ireland - in Scotland there is a Land and Buildings Transaction Tax, and in Wales you will pay Land Transaction Tax.

Stamp Duty Land Tax (SDLT) starts to apply when you buy property that costs:

• £125,000 for residential properties
• £300,000 for first-time buyers buying a residential property worth £500,000 or less
• £150,000 for non-residential land and properties

This means from April 5 2025, first time buyers will pay no stamp duty on properties up to £300,000, then 5% on the next £200,000.

Solicitor’s fees, typically cost £850 to £1,500, and local authority searches cost around £250. A property survey starts from around £250, and a full structural report will cost at least £600. Some lenders will offer a free basic valuation so it’s worth enquiring with your lender.

You will need to pay a Land Registry fee from £200 up to £500 to register your new property in your name (your solicitor will organise the registration on your behalf). These figures can vary.

Listing everything you will have to pay to move and making a budget will help you manage your finances throughout this process.

6 – Apply for your mortgage

You’ve saved your deposit, researched the perfect mortgage deal, got all your paperwork in order and made a budget for your moving costs so it’s time to apply for your mortgage.

Buying a home can be stressful, but if you’ve followed the steps above, you’ll be ready to pick up your keys, relax, and put your feet up in your new home before you know it.

 

Your home may be repossessed if you do not keep up repayments on your mortgage

*18+ and UK resident only. Subject to status and lending criteria. Terms, conditions and policy exclusions apply.

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