The First-Time Buyer’s Guide: Deposits, Mortgages and Stamp Duty

Buying your first home in Britain can feel like a rigged game — prices that make your eyes water, a vocabulary that sounds deliberately confusing, and a Bank of Mum and Dad that not everyone has. But strip away the jargon and the process is just three big building blocks: a deposit, a mortgage, and a tax called Stamp Duty. Understand those three and the whole thing stops looking like a wall and starts looking like a staircase. Let’s climb it.

Block one: the deposit

Your deposit is the chunk of the purchase price you pay up front from your own money. The bank lends you the rest. It’s usually quoted as a percentage of the property price, and that percentage matters enormously — not just for whether you can buy at all, but for how much your borrowing costs.

• 5% — the minimum many lenders will accept. It gets you on the ladder, but on the priciest borrowing terms.
• 10–20% — the sweet spot. The bigger your deposit, the better the mortgage rates you’re offered.

On a £250,000 flat, a 5% deposit is £12,500, a 10% deposit is £25,000, and 20% is £50,000. Yes, those are big numbers. This is exactly where boring, consistent saving pays off — and where the right account makes a real difference.

Block two: the mortgage

A mortgage is simply a loan secured against the property. “Secured” is the important word — if you stop paying, the lender can ultimately repossess and sell the home to get their money back. In return for that security, mortgages come with far lower interest rates than, say, a credit card. You repay it over a term, commonly 25 to 35 years, in monthly instalments.

Fixed vs variable rates

Your interest rate comes in two main flavours. A fixed rate locks your monthly payment for a set period — typically two or five years — so you know exactly what you’re paying, even if interest rates rise. A variable rate can move up or down over time, which means cheaper payments if rates fall but a nasty surprise if they climb. Most first-time buyers go fixed for the peace of mind.

How much will a lender give you?

Two factors drive this. First, affordability: lenders pore over your income and outgoings to check you can actually cope with the repayments. As a rough rule of thumb, they’ll lend somewhere around 4 to 4.5 times your income— so £35,000 a year might stretch to roughly £140,000–£160,000 of borrowing, though your other debts and spending push that around. This is exactly why getting a budget under control matters before you apply; our budgeting guide for Gen Z is a good warm-up.

Loan-to-value: the number that sets your rate

The second factor is loan-to-value (LTV) — the size of your loan as a percentage of the property’s value. Put down a 10% deposit and you’re borrowing 90%, so you’re a 90% LTV borrower. Put down 20% and you’re at 80% LTV.

Here’s the bit worth tattooing on your brain: lower LTV means better rates. A bigger deposit makes you less risky to the lender, so they reward you with cheaper borrowing. The difference between a 90% and a 75% deal, compounded over a 30-year term, can be thousands of pounds. Saving an extra few percent of deposit often pays for itself many times over.

Block three: Stamp Duty

Stamp Duty Land Tax (SDLT) is a tax you pay when you buy a property in England and Northern Ireland. The good news for you: first-time buyers get a generous relief, so many pay little or nothing. The rates below are the first-time buyer bands for the 2025/26 tax year (from April 2025).

A couple of things to get right. The relief is tiered, like income tax — you only pay 5% on the slice above £300,000, not on the whole price. Buy at £350,000 and you’d pay 0% on the first £300,000 and 5% on the remaining £50,000, so £2,500 in total. But the relief vanishes entirely if your home costs more than £500,000 — over that line you fall back to standard rates, where the normal nil-rate band is just £125,000.

Work out your own bill in seconds with our Stamp Duty Calculator — it’s far less scary once you see it’s often £0.

The costs nobody warns you about

Here’s where first-timers get caught out: the deposit isn’t the only cash you need on the day. Budget for these extras too, because they’re real and they add up.

• Valuation and survey — the lender checks the property’s worth, and a survey flags problems before you’re lumbered with them.
• Conveyancing / solicitor fees — the legal work of transferring ownership.
• Mortgage fees — some deals carry an arrangement or product fee.
• Moving costs — removals, the inevitable IKEA trip, and getting the broadband sorted.

A sensible move is to keep these separate from your deposit savings so a £1,500 solicitor’s bill doesn’t quietly eat the money you needed for the deposit itself.

Your rough roadmap

1. Sort your budget and credit. Lenders look closely at both — get your spending under control and your credit history clean.
2. Save the deposit in the most efficient place — a Lifetime ISA if you qualify, for that 25% government bonus.
3. Get a mortgage agreement in principle so you know your budget and sellers take you seriously.
4. Factor in Stamp Duty and the extra costs before you fall in love with a place at the top of your range.
5. Make an offer, instruct a solicitor, and complete. Then collapse onto a floor that is finally, legally, yours.

One honest note: this is education, not financial advice, and a mortgage is a serious, long-term commitment — your home can be repossessed if you don’t keep up repayments, and when you invest a deposit fund your capital can be at risk. A qualified mortgage adviser is worth their fee when the time comes.

For now, though, the wall has turned into a staircase. Model the numbers with the Mortgage Calculator and Stamp Duty Calculator, get that deposit snowballing in a Lifetime ISA, and keep learning at your own pace with our free courses. The first step is the one you take today.