Understanding mortgages can be a daunting process, particularly for first-time buyers. With so many unfamiliar terms and financial commitments involved, it’s important to feel confident in what you’re signing up for. One of the most commonly encountered terms in the home buying world is the first mortgage. But what exactly does it mean, and how does it work? 

 

We’ll explain what a first mortgage is, how it differs from other types of mortgages, what it entails for borrowers, and what you should consider before taking one out. Whether you’re a first-time buyer or someone looking to understand the structure behind property lending, this guide aims to help you navigate the topic effectively.

 

What Is a First Mortgage?

A first mortgage refers to the primary loan that a borrower takes out to purchase a property. It’s the initial charge registered against the home, secured against the value of the property itself. If the borrower fails to keep up repayments and the property is repossessed, the first mortgage lender is the first to be paid back from the proceeds of any sale.

 

This priority status gives first mortgage lenders a higher level of security compared to other creditors, such as second charge lenders. The first mortgage is typically the largest loan against the property, and it plays a central role in financing most home purchases.

 

Understanding the Structure of a First Mortgage

A first mortgage is a secured loan, meaning it is tied to the property as collateral. If you are unable to meet the conditions of the loan, particularly regular repayments, the lender may take steps to repossess the property in order to recover the amount owed.

 

Here are some key components typically associated with a first mortgage:

 

• Loan Amount: This is the amount borrowed from the lender to buy the property. It’s usually a percentage of the property’s market value, depending on the deposit amount.
• Interest Rate: The cost of borrowing is expressed as a percentage. Interest rates can be fixed, variable, or a combination of both.
• Term: The duration over which the loan is to be repaid, often ranging from 10 to 35 years depending on the agreement and the borrower’s circumstances.
• Repayment Type: You can typically choose between repayment mortgages (where both capital and interest are paid off) and interest-only mortgages (where only the interest is paid, with the capital repaid at the end of the term).

 

Differences Between First and Second Mortgages

It’s important to distinguish between a first mortgage and a second mortgage. A second mortgage is an additional loan taken out against the property when a first mortgage already exists. While a first mortgage has priority, second mortgages are subordinate and carry more risk for lenders, often leading to higher interest rates.

 

For example, if a borrower defaults and the property is sold, the first mortgage lender will be paid first, and only any remaining funds will go towards settling the second mortgage.

 

Who Can Apply for a First Mortgage?

Generally, anyone seeking to purchase a home and meet a lender’s eligibility criteria can apply for a first mortgage. First mortgages are particularly common among first-time buyers, but they also apply to anyone taking out a loan to buy a new home—whether it’s your first property or your fourth.

 

Lenders typically assess applicants based on criteria such as:

 

• Employment status and income
• Credit history and credit score
• Existing debts and financial commitments
• Deposit amount
• Affordability checks based on expenditure and lifestyle

 

Each lender may have slightly different thresholds and policies, so using an intermediary can help you compare what’s available in the current market and guide you toward suitable options for your circumstances.

 

Types of First Mortgages

There are various types of first mortgages available, and the right one for you will depend on your financial situation, preferences, and long-term plans. Here are some of the most common options:

 

Fixed-Rate Mortgages

These mortgages offer a fixed interest rate for a set period—typically between 2 and 10 years. During this time, your monthly repayments remain the same regardless of changes in the Bank of England base rate. This can provide predictability in your budgeting but may come with higher initial rates compared to variable products.

 

Variable-Rate Mortgages

With variable-rate mortgages, the interest rate can fluctuate over time. These are often linked to the lender’s standard variable rate (SVR), which can change at their discretion. While you may benefit from falling rates, your repayments could increase if rates rise.

 

Tracker Mortgages

Tracker mortgages are tied to an external benchmark—usually the Bank of England base rate—plus a margin set by the lender. When the base rate changes, your interest rate and repayments adjust accordingly. These products can offer transparency, but they also carry the risk of higher payments if rates rise.

 

Offset Mortgages

Offset mortgages link your mortgage account to one or more savings accounts. Instead of earning interest on your savings, the money is used to offset the amount you owe, reducing the interest charged on your mortgage. This can help reduce overall costs but requires disciplined savings behaviour.

 

How Much Can You Borrow with a First Mortgage?

The amount you can borrow depends on several factors, with income playing a central role. Lenders often multiply your annual income (and that of a joint applicant, if applicable) by a set figure—usually around 4 to 4.5 times—to determine your borrowing capacity.

 

However, affordability assessments also consider your existing financial obligations, spending habits, and any dependents. Some lenders may offer a higher multiple based on specific occupations or substantial earnings, subject to stricter underwriting criteria.

 

Deposit Requirements

You’ll typically need a deposit of at least 5% of the property’s purchase price to secure a first mortgage. A higher deposit can open doors to a wider range of mortgage products and more competitive interest rates. For example, putting down 10%, 20%, or even more may offer access to deals with lower monthly repayments.

 

The size of your deposit directly affects your loan-to-value (LTV) ratio—the proportion of the property’s value that you’re borrowing. A lower LTV often results in better terms and more choice.

 

Costs Involved in a First Mortgage

Aside from the deposit and monthly repayments, there are other costs to be aware of when taking out a first mortgage:

 

• Product Fees: Some mortgages come with arrangement or product fees. These can be added to the loan or paid upfront.
• Valuation Fees: Lenders may require a valuation to confirm the property’s worth. Some deals include a free valuation, while others may charge.
• Legal Fees: Solicitors or licensed conveyancers handle the legal aspects of purchasing a home, and their services carry costs.
• Stamp Duty: Depending on the property value and whether you’re a first-time buyer, you may have to pay Stamp Duty Land Tax (SDLT).
• Broker Fees: If an intermediary is helping you find a suitable mortgage, there may be a fee involved, depending on the service provided.

 

How Lenders Assess Mortgage Applications

When you apply for a first mortgage, lenders will conduct a thorough assessment of your financial profile. This generally includes:

 

• Credit checks to review your borrowing history and identify any past issues.
• Verification of income through payslips, tax records, or bank statements.
• Review of outgoings such as rent, utilities, loans, and lifestyle spending.
• Stress testing to ensure you can still afford repayments if interest rates increase in the future.

 

These evaluations are designed to ensure that the mortgage is suitable for your financial circumstances and sustainable over the longer term.

 

Porting a First Mortgage

If you already have a first mortgage and plan to move home, many mortgage products allow for porting. This means you can transfer your existing mortgage deal to the new property, subject to lender approval. Porting can be beneficial if your current rate is competitive, although you may still be required to undergo affordability checks and meet specific conditions.

 

Early Repayment and Overpayments

Many first mortgage deals allow for early repayments or overpayments up to a certain limit—often 10% of the balance per year—without incurring charges. Making overpayments could help reduce the total interest paid and shorten the term of your loan. However, exceeding the permitted limit may result in early repayment charges (ERCs), so it’s important to check the terms of your mortgage agreement.

 

First Mortgage for First-Time Buyers

As a first-time buyer, getting your first mortgage can seem particularly complex. Many lenders offer specialised products aimed at first-time buyers, which may include incentives such as cashback, free valuations, or lower deposit requirements. However, it’s the overall cost and suitability of the deal that matters most, so it’s advisable to compare options carefully.

 

There are also government-backed schemes designed to help people get on the property ladder, such as:

 

• Shared Ownership
• First Homes scheme
• Lifetime ISAs
• 95% mortgage guarantee scheme

 

These initiatives can sometimes ease the process of obtaining a first mortgage, depending on eligibility and location.

 

Remortgaging and Switching Deals

After the initial fixed-rate or discounted term of your first mortgage ends, you may be moved onto your lender’s standard variable rate, which is typically higher. This is why many people choose to remortgage—switching to a new deal, either with the same lender or a new one, to potentially access better rates or different terms.

 

Remortgaging doesn’t always mean moving home; it can simply be a financial decision to seek a more competitive product in line with your evolving needs. However, fees, charges, and new affordability checks may still apply.

 

Common Mistakes to Avoid

When applying for a first mortgage, it’s important to avoid errors that could cost time or money. Common pitfalls include:

 

• Not checking your credit score prior to applying
• Underestimating the full cost of homeownership
• Choosing a mortgage based solely on the interest rate
• Failing to account for future financial changes
• Overstretching your budget in pursuit of a dream property

 

Being well-informed and seeking guidance through the process can help you navigate these challenges as effectively as possible.

 

Conclusion

A first mortgage plays a vital role in helping people purchase property, whether you’re stepping onto the ladder for the first time or buying again after renting or selling. Understanding what a first mortgage involves, how it’s structured, and the different types available gives you a solid foundation to make informed decisions.

 

From deposit requirements to the types of mortgages on offer, there are many elements to consider. Comparing lenders and products can help you access deals suited to your needs, while seeking help from a professional can make the process smoother and save you time where possible.

 

As with all major financial commitments, it’s wise to do plenty of research, plan your budget, and strive to understand the terms involved before proceeding. A well-chosen first mortgage can make all the difference in managing your finances and achieving your long-term property g