If you are a first-time buyer, understanding these costs can help you plan better, avoid surprises, and make more informed decisions before buying your first home.
In this guide, we will walk through the key costs first-time buyers should expect when securing a UK mortgage. We will also cover residential mortgages, buy-to-let mortgages, fixed-rate mortgages, variable-rate mortgages, and clear examples to make the process easier to understand.
Please note, this is a general guide and not personal financial advice.
Understanding Your Mortgage Options
Before looking at the costs of buying your first home, it is helpful to understand the main types of mortgages available.
Common mortgage options include:
- Residential Mortgage: For people buying a home to live in themselves.
- Buy-to-Let Mortgage: For people buying a property to rent out.
- Fixed-Rate Mortgage: The interest rate stays the same for a set period, such as 2 years or 5 years.
- Variable-Rate Mortgage: The interest rate can change, which may affect monthly mortgage payments.
Your mortgage type can influence your overall costs, monthly repayments, deposit requirements, and lender fees.
That is why it is important to choose a mortgage option that fits your personal circumstances, budget, and long-term plans.
Major Costs First-Time Buyers Should Budget For
Buying your first property involves more than saving for a deposit.
First-time buyers should also budget for:
- Mortgage deposit
- Mortgage arrangement fees
- Valuation fees
- Legal fees and conveyancing
- Stamp Duty Land Tax
- Survey costs
- Mortgage broker fees
- Moving costs
- Initial repairs and furnishing
Below is a simple breakdown of the key costs first-time buyers should expect.
1. Deposit
Almost all mortgages require a deposit before you can buy a property.
For first-time buyers, the minimum deposit often starts at 5% of the property’s price, but many lenders may prefer 10% or more.
A larger deposit may give you access to more mortgage options and could reduce the amount you need to borrow.
Example:
If you are buying a home priced at £200,000:
- 5% deposit = £10,000
- Mortgage amount = £190,000
This means your mortgage would cover the remaining £190,000, subject to lender criteria, affordability checks, and approval.
2. Mortgage Arrangement Fees
Lenders usually charge a fee to set up your mortgage.
This is often called:
- Arrangement fee
- Product fee
- Mortgage product fee
This fee can range between £0 and £2,000, depending on the mortgage deal.
Sometimes, this fee can be added to the mortgage. However, if you add it to the loan, you may pay interest on it over the mortgage term.
First-time buyers should always check whether the arrangement fee is paid upfront or added to the mortgage balance.
3. Valuation Fee
Before approving your mortgage, the lender may need to value the property.
This helps the lender check whether the property is worth the amount being borrowed against it.
A mortgage valuation is not the same as a full home survey. It is usually a basic assessment for the lender’s benefit.
A valuation fee may cost between £150 and £1,500, depending on the property and lender.
Some mortgage deals may include a free valuation, but this depends on the lender and product.
4. Legal Fees and Conveyancing
A solicitor or licensed conveyancer will handle the legal work involved in buying a property.
This legal process is called conveyancing.
Conveyancing usually includes:
- Checking contracts
- Carrying out local authority searches
- Reviewing legal documents
- Handling the transfer of funds
- Registering the property in your name
- Liaising with the lender and seller’s solicitor
Legal fees generally cost between £800 and £1,500, but this can vary depending on the location, property type, purchase price, and complexity of the transaction.
Example:
Jane is buying her first flat in Manchester.
Her legal fees came to about £900, which included local searches and handling the paperwork.
5. Stamp Duty Land Tax
Stamp Duty Land Tax, also known as SDLT, is a tax that may apply when buying a property in England or Northern Ireland.
First-time buyers may benefit from SDLT relief if they meet the eligibility rules.
Current first-time buyer SDLT relief in England and Northern Ireland is:
- No SDLT on the first £300,000
- 5% SDLT on the portion from £300,001 to £500,000
- No first-time buyer relief if the property price is over £500,000
Scotland and Wales have their own property tax systems:
- Scotland: Land and Buildings Transaction Tax, known as LBTT
- Wales: Land Transaction Tax, known as LTT
These have different bands, rates, and rules, so buyers should check the rules based on where the property is located.
6. Survey Costs
A lender’s valuation is for the mortgage lender.
A homebuyer’s survey is for you.
A property survey checks the condition of the home and can help identify issues before you buy.
Survey options may include:
- Basic condition report
- Homebuyer’s survey
- Full building survey
Survey costs can range from around £250 for a basic report to over £600 for a more detailed building survey.
Surveys are usually optional, but they are often recommended because they may highlight problems such as damp, structural issues, roof defects, or repair concerns before completion.
7. Mortgage Broker Fees
If you use a mortgage broker to help find the right mortgage deal, some brokers may charge a fee.
Broker fees can vary depending on the service, the complexity of the case, and the mortgage type.
Some mortgage brokers offer fee-free advice because they are paid by lenders, but it is important to check this upfront.
Before using a mortgage broker, first-time buyers should ask:
- Is there a broker fee?
- When is the fee payable?
- Is the fee refundable?
- Does the broker search a wide panel of lenders?
- Is the advice regulated?
A mortgage broker may help first-time buyers understand affordability, lender criteria, mortgage rates, and available mortgage options.
8. Moving Costs and Other Extras
First-time buyers should also budget for the practical costs of moving into a new home.
These can vary widely, but they may add several hundred or even thousands of pounds to your total budget.
Additional costs may include:
- Removal company fees
- Van hire
- Storage
- Furniture
- White goods
- Initial repairs
- Cleaning
- Home insurance
- Utility setup costs
- Broadband installation
- Decorating
These costs are easy to forget, but they can make a big difference to your overall moving budget.
How Fixed and Variable Rates Affect Your Budget
Your mortgage interest rate can affect your monthly payments and long-term affordability.
A fixed-rate mortgage means your monthly mortgage payments stay the same for an agreed period.
This can help first-time buyers budget with more certainty.
A variable-rate mortgage means the interest rate can change.
This means your monthly payments could go down, but they could also rise.
As a first-time buyer, it is important to consider your financial comfort level and how you would manage if monthly payments increased.
Buy-to-Let Mortgage Costs
If you are buying a property to rent out, the costs and legal requirements may be different from a standard residential mortgage.
Buy-to-let mortgage costs may include:
- Higher deposit requirements
- Higher lender fees
- Different affordability checks
- Landlord insurance
- Letting agent fees
- Property maintenance costs
- Possible tax considerations
Deposit requirements for buy-to-let mortgages are usually higher, often around 25% or more.
You usually do not receive first-time buyer SDLT relief when buying a property to let out.
Additional property tax rules may also apply, depending on your circumstances.
Real-Life Example: Tom and Sarah’s First Home Purchase
Tom and Sarah bought their first home in Yorkshire for £180,000.
Here is a simplified breakdown of what they paid:
| Cost Category | Amount |
|---|---|
| Deposit 10% | £18,000 |
| Mortgage Arrangement Fee | £999 |
| Valuation Fee | £350 |
| Legal Fees | £1,200 |
| Stamp Duty | £0 |
| Homebuyer’s Survey | £400 |
| Removal Costs | £600 |
| Total Upfront Costs | £21,549 |
While their mortgage covered £162,000, they still needed to save additional funds upfront for other buying costs.
This example shows why first-time buyers should plan beyond the deposit.
Final Thoughts
Buying your first home is a big step, and understanding all the associated costs is essential.
Besides the deposit and monthly mortgage payments, first-time buyers should also plan for:
- Mortgage arrangement fees
- Legal fees
- Valuation costs
- Property surveys
- Stamp Duty Land Tax
- Moving costs
- Repairs and furnishing
Each situation is different, so it is important to research your options and consider getting professional mortgage advice based on your circumstances.
Need Help Understanding Mortgage Costs?
At BSL Financials, we specialise in helping first-time buyers navigate the mortgage process with clarity and confidence.
We can guide you through your mortgage options, explain the costs involved, and help you understand what to expect before you buy your first property.
Speak with BSL Financials today to learn more about how we can support your journey towards home ownership.
Disclaimer: This blog post is for informational purposes only and does not constitute regulated financial advice. Please consult a qualified mortgage adviser for advice tailored to your circumstances. Your home may be repossessed if you do not keep up repayments on your mortgage.
