The Complete First Time Buyer Guide for Central London Property 

First-time home buyers in central London have a lot to think about, from house prices and deposits to moving day worries.  

If you decide to take your first step onto the property ladder in Mayfair, Marylebone or Fitzrovia, you may feel apprehensive and confused by the process ahead. To help first-time buyers, we have put together this guide answering our most frequently asked questions. 

Read our house buying guide for first-time buyers for step-by-step guidance and more. 

What Is A First-Time Buyer? 

The HMRC definition of a first-time buyer is an individual who has never owned a residential property in the UK or abroad, buying a main home to live in. You won’t be regarded as a first-time buyer or crucially, be eligible for any schemes specifically for first-time buyers, if you have an interest in a property, or are buying together with someone who has owned property. Check with your mortgage provider whether their policy considers you as a first-time buyer. 

How Much Deposit Do I Need To Buy A Home? 

Before you start your property search, you need to save up a deposit. Your deposit will be a significant factor in determining how much money you can borrow when you’re ready to buy a home. You can access more competitive mortgage rates if you have a bigger deposit. 

If your money is tied up in a high-interest savings account, ensure you can access it in time to complete the purchase without incurring a hefty penalty. 

Use a mortgage calculator to determine how much you can borrow based on your deposit. Considering the current interest rates, the mortgage calculator will help you determine how much your monthly mortgage repayments will be so you can check if the property will be affordable. 

Do First-Time Buyers Have To Pay Stamp Duty? 

First-time buyers benefit from tax relief on stamp duty if the property costs £500,000 or less. First-time buyers pay 0% stamp duty on the first £300,000 and 5% on the portion between £300,001 and £500,000. 

If the purchase price exceeds £500,000, you won’t be entitled to any relief and will pay stamp duty at the standard rates. In Marylebone or Mayfair, where a one-bed flat can cost £750,000-£1 million, first-time buyers may not benefit. Read our article, Stamp Duty Explained, to learn about stamp duty. 

It is possible to add the stamp duty to your mortgage. But it will incur interest over the life of the mortgage, so borrowing extra money for the stamp duty will cost you more in the long run. It will also affect your loan-to-value ratio, preventing you from accessing the most competitive mortgage deals. 

What Are The Other Costs I Need To Budget For? 

Apart from your deposit and stamp duty, you must also budget for the following: 

• Home insurance (building and contents insurance) 
• Furniture and redecorating costs 
• Mortgage arrangement fees 
• Removal costs 
• Solicitors’ fees 
• Survey costs 

Are There Any First-time Home Buyer Hidden Charges? 

As a first-time buyer, there are hidden charges to budget for. For example, solicitor disbursements, additional surveys to investigate issues uncovered in the initial survey report, and extra costs if you’re buying a leasehold property.  

What Is A Mortgage? 

You will need a mortgage unless you can afford to buy your new home in cash. A mortgage is a loan taken out to purchase property or land. The loan is secured against the value of your home. If you can’t keep up your repayments, the mortgage lenders can repossess your property and sell it to get their money back. 

There are a few different types of mortgages, the most common being fixed-rate and tracker mortgages. Fixed-rate mortgages have a fixed interest rate for a set period, usually 2-5 years. A tracker mortgage’ tracks’ the base rate, which means it can fluctuate in line with changes to the Bank of England base rate. 

First-time buyer mortgages usually require a 5% deposit or more and can be a tracker or fixed rate. 

You may want to consider taking out mortgage life insurance when taking out a mortgage. This is not a legal requirement, and your mortgage lender won’t request this, but it provides mortgage protection, so your loved ones are financially protected in the event of the worst-case scenario. 

Want to know more?  Read about things to do when moving house in Central London, discover how to negotiate a house price effectively and explore our guide to how to choose an estate agent in Central London.

How Do I Apply For A Mortgage? 

Once you know your available deposit, you can apply for a mortgage. Considering the current interest rates, the mortgage lender will check that you can afford the repayments. They will look at your salary, other income, and outgoings, including credit card debt, other loans, household bills, and general living costs. 

You must provide evidence of your income and information about your outgoings. Commonly, lenders require you to provide the following: 

• At least three months of bank statements. 
• Details of any loans or credit cards you have. 
• Your past three months of payslips and your most recent P60. If you are self-employed, you must provide tax returns and two years of business accounts. 

Initially, the lender will give you a mortgage in principle, an unbinding agreement about how much they will lend you. Your offer should last between 30 and 90 days, but this is not a formal mortgage offer, and the amount offered relies on you providing the lender with all the paperwork and figures once you have had an offer accepted. 

When Should I Apply For A Mortgage? 

Getting a mortgage agreed in principle is a good idea before you start viewing properties. This will give you a better idea of the properties in your price range and demonstrate to estate agents that you are serious about buying a home. 

When Would I Need A Guarantor? 

A guarantor mortgage could suit first-time buyers with low incomes or little to no credit history. With guarantor mortgages, a parent or close family member takes on some of the mortgage risks, usually by offering their home as security and agreeing to cover the mortgage monthly payments if the homeowner defaults. 

What Is The Difference Between Freehold And Leasehold? 

If you’re buying a flat in Central London, it’s likely to be leasehold; if you’re buying a house, it’s most likely to be freehold. There are exceptions to this, so it’s essential to check the tenure of the property before you buy. 

A freehold owner owns the property and the land it’s built on and is responsible for all aspects of the property and land. In contrast, a leasehold agreement means you lease the property from the freeholder for a fixed period. 

Leasehold agreements are typically long-term, usually 90 to 120 years, but can be as high as 999 years. The freeholder is responsible for maintaining the communal areas and the structure of the building. They must obtain permission for any significant works on the property. You will be liable for service charges to cover general maintenance costs, building insurance and any services provided, such as porterage or cleaning. You may also be subject to specific terms, such as keeping the property pet free. 

What Government Schemes Are Available To Help First Time Buyers? 

The Help to Buy Equity Loan scheme has now closed. However, some government schemes are still available to help first-time buyers. 

95% Mortgage Scheme 

The mortgage guarantee scheme, launched in April 2021, encourages banks to offer 95% mortgages to first-time buyers. The government guarantees the portion of the mortgage over 80%, meaning that the lender will be partially compensated if the homeowner defaults. At the time of writing, the following lenders are offering mortgages under this scheme: 

• Lloyds 
• NatWest 
• Santander 
• Barclays 
• HSBC 
• Virgin Money 

First Homes Scheme 

Introduced in June 2021, the First Homes Scheme enables first-time buyers in England to buy a new-build home at a discount of 30% on market value. Your household income must be below £80,000 (or £90,000 in London). Research locally to determine which developers are participating in the scheme. 

Shared Ownership 

If you can’t afford a mortgage on 100% of a home, the shared ownership scheme could help. The scheme involves buying a stake of as little as 10% of a property, and then you pay rent on the remainder. You can buy a more significant share when you can afford to. 

Lifetime ISA 

Anyone aged 18 to 39 can open a Lifetime ISA account, which gives savers a 25% bonus for saving towards a first home purchase. The government will pay a £1,000 bonus if £4,000 is saved. 

Help to Buy ISAs also provide a 25% government bonus, with a maximum bonus of £3,000 when £12,000 is saved. The Help to Buy ISA scheme closed to new applications in 2019, but existing Help to Buy ISAs can still be used to maximise home deposit savings. 

Want to know more?  You can also read about the cost of selling a house, discover tips on what a mortgage decision in principle is and explore the costs of selling and buying a home

What Is The House Buying Process? 

With your budget in place, you are now in an excellent position to start your search for your first home. As a first-time homebuyer, you will be more attractive to vendors as you don’t have another property to sell, so you can move more quickly. 

1 Consider Your Requirements 

You should consider your requirements and whether you want to buy a house or a flat, considering its tenure. You should also acquire a mortgage decision in principle to ensure estate agents take you seriously.

2 Find A Property 

Register your interest with local estate agents. They will be able to notify you of new properties matching your requirements often before they appear online. Register with Kubie Gold if you want to buy in central London. 

Speaking to a mortgage adviser before you start your property search is a good idea. A mortgage adviser can help to ensure you search for properties that are within your affordability calculations. 

3 Put In An Offer 

Once you have found your dream home, you must make an offer. You may need to prove that you have the funds to pay the offer price; this is where the mortgage agreement in principle comes in handy. 

After making an offer, if accepted, you can formally submit your mortgage application, commission a survey, and appoint your conveyancer. 

4 Exchange Contracts And Complete 

Your conveyancer will manage the rest of the process. The conveyancer or conveyancing solicitor for your purchase will undertake all the legal and administrative work to transfer the ownership of the property to you. 

This includes conducting searches, drawing up and checking all the paperwork ready for you to sign, arranging stamp duty and registering your ownership with the land registry. 

Your conveyancer will also line up all parties for exchange and completion. Once you have exchanged contracts, you are locked into a legally binding deal to buy the property. At this point, you will need to put down your deposit. 

Then, your conveyancer can transfer the balance payable to the seller’s solicitor upon completion. Once the cash has arrived, you can pick up the keys from the estate agent or seller. 

5 Arrange Home Insurance 

You should arrange home insurance that starts on the date you exchange contracts. Your mortgage provider will require you to take out building insurance as part of their terms, and it is advisable to have contents insurance in place ready for when you move your belongings into the property. 

Benefits & Challenges Of Being A First-Time Buyer 

Buying your first property can be daunting, but there can be advantages to being a first-time buyer. 

Benefits 

• 100% First-time buyers’ relief on SDLT up to £300,000 
• Access to first-time buyer schemes 
• No hassle of selling a property 
• Sellers often prefer chain-free buyers 

Challenges 

• Understanding the buying process  
• Challenge of raising a deposit 
• Meeting mortgage criteria  
• Local limitations on first-time buyer scheme eligibility 

First-Time Buyer FAQs 

How much of a deposit is required for first-time buyers? 

10% to 20% deposits are usual, and 5% mortgages are available to first-time buyers under the mortgage guarantee scheme. You may need a larger deposit for adverse credit mortgages. 

Can first-time buyers rent their property? 

You can only rent out a property on a residential mortgage with your mortgage lender’s permission for a limited time. A 2-year limit usually applies under the First Homes scheme. To rent out long-term, you need a buy-to-let mortgage. 

How does a mortgage work for first-time buyers? 

First-time buyers usually take out repayment mortgages. This means you repay a portion of the mortgage and interest monthly across the mortgage term, often 25 or 30 years. 

How much can I borrow as a first-time buyer? 

Lenders carry out affordability checks to determine how much you can borrow. First-time buyers are generally offer mortgages up to 4 or 5 times your income. 

What happens on completion day as a first-time buyer? 

Here is an at-a-glance moving-in guide for a first-time buyer: 

• Both solicitors check the contract terms  
• Your solicitor arranges payment from your lender 
• The seller’s solicitor receives payment  
• The estate agent releases the keys 
• Move into your new home 

If you want to buy your first home in central London, or find out more about the cost of buying and selling a house, we’d be happy to discuss the process and show you suitable properties – whether you’re moving in closer from a London commuter town or a few streets away from your rental. Contact us today.