The First-time Buyer’s Guide to London


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As the UK’s Capital, economic centre and one of the world’s great cities, London remains an incredibly popular place to move to, live in and make home. Yet if you’re interested in buying your first home here, there are a few special considerations worth bearing in mind.   

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Getting a mortgage in London

With property prices as they are, getting a mortgage for a home in London can be a daunting task, particularly for first-time buyers.  

The two main factors determining whether you’ll be accepted for a mortgage are likely to be deposit size and income. Before you begin looking at homes, it’s important to work out how much you can borrow (or will need to save) to understand the sort of properties and postcodes you can afford.  

Income assessment

As a general rule of thumb, mortgage lenders will loan up to 4.5 times the total annual income of you and anyone else you’re buying with, but they’ll also consider a variety of other factors including debts you have, average spending and your personal circumstances. 

Deposit size 

When it comes to your deposit, bigger is generally better. Not only will you need a decent-sized amount to get a mortgage at all, but you’ll also find that a larger deposit may mean you can access better interest rates on your mortgage. However, if you’re a first-time buyer looking at a new build home, you could take advantage of the Government’s Help to Buy scheme where you’ll only need a 5% deposit. We’ve explained in more detail below. 

Credit rating

One further factor to consider before applying is your credit rating. Make sure yours is in good shape by checking out your credit reports (Experian, Equifax and TransUnion are the main ones) and ask to have any mistakes you spot corrected immediately. If required, use the information in your report to take steps to improve your rating. Something like getting on the electoral roll is simple to do, but could be what makes the difference between acceptance and rejection.  

Choosing the right mortgage

When researching and applying for your mortgage, you have the option of going directly to the lender. However it may be worth considering a mortgage advisor or broker, especially one who specialises in new-build homes if you’re buying a new property: they’ll have in-depth knowledge of the market and could give you advice to make the process easier. Depending on how they work, there might not even be a fee.

The London Help to Buy Scheme 

As raising a deposit for a first home tends to be challenging, the Government Help to Buy scheme is designed to provide support. In fact, there is a special version of the scheme just for London which takes into account the particular challenges of the Capital’s property market. This means it is also more generous than elsewhere in the UK. 

Help to Buy: Equity Loan price caps – April 2021 to March 2023

Region
Maximum property price 2
North East £186,100
North West £224,400
Yorkshire and the Humber £228,100
East Midlands £261,900
West Midlands £255,600
East of England £407,400
London £600,000
South East £437,600
South West £349,000

Under Help to Buy, those purchasing a new-build home within the 32 boroughs of London can apply for an equity loan of up to 40% of the property’s value. This means you can put down a deposit of 5%, borrow up to 40% of the property price with a Government equity loan (interest-free for 5 years) and take out a mortgage on the remaining 55% – potentially improving your chances of being accepted by a lender, and of unlocking better mortgage interest rates. 

London Help to Buy equity loans are available to first-time buyers looking to buy a new-build property worth £600,000 or less. The loan is interest-free for the first five years.

Interested in exploring if the scheme’s right for you? You can find out more by clicking here. 

Stamp Duty in London

Stamp Duty is the tax charged by the Government when you buy a home or piece of land in England. It can apply whether you’re a first-time buyer or have previously owned a property, but recent Government announcements – in-part designed to help first-time buyers – make it more likely you’ll now pay less than before. 

First-time buyer stamp duty relief 

In 2017, the Government announced first-time buyers paying £300,000 or less for a residential property will pay no stamp duty. Those paying between £300,000 and £500,000 will pay stamp duty at 5% on the amount of the purchase price in excess of £300,000, a reduction of £5,000 compared to the amount of SDLT they would have previously paid. There’s no relief on properties above £500,000. 

Stamp Duty Holiday until 30 September 2021

In 2020, a temporary Stamp Duty Holiday was announced that benefitted home buyers until the end of March 2021. This has since been extended, set to come to a tapered end on 30 September 2021. Under the holiday, you can save thousands on your home depending on when you complete on the sale:

Until 30 June 2021

You’ll pay no Stamp Duty on homes up to £500,000, meaning you could save up to £15,000.

From 1 July – 30 September 2021

  • If you’re a first-time buyer and the home is under £300,000, then there will be no Stamp Duty to be paid. And if it’s worth between £300,001 and £500,000, you’ll only pay 5% Stamp Duty on that portion.
  • If you’re an existing homeowner, you’ll pay 0% Stamp Duty on the first £250,000 portion of the purchase price, saving you up to £2,500.

After 30 September 2021

The Stamp Duty you pay will revert to the 2017 Stamp Duty relief calculation.

It’s worth noting that Stamp Duty will need paying within 14 days of completion, so you’ll need to factor this into your upfront costs.  

Already found a property you’re interested in? Why not try our Stamp Duty calculator to see how much you’ll need to pay.  

Where to live in London

From the bright lights of Soho to the open spaces of the suburbs, there are a huge number of neighbourhoods, communities and locations to choose from when buying in London. To help you get started, we’ve explored some areas in this guide

Where’s right for you to buy will depend on many factors, from practical ones like budget and distance to work, to emotional ones like your lifestyle, future plans and areas you know and love. As well as the purchase price, it’s also worth considering expenses such as council tax and the cost of commuting. 

Before making any decisions, do plenty of research on potential areas – ideally visiting multiple times to really get a feel for the place. Looking into major re-development plans or transport projects can also be a worthwhile way of identifying locations which currently represent good value.  

The table below shows the average price of a London home by borough, as of March 2021:

Borough Average house price
Barking and Dagenham £320,507
Barnet £741,994
Bexley £396,573
Brent £627,713
Bromley £533,130
Camden £1,189,550
City of London £921,103
Croydon £389,483
Ealing £622,637
Enfield £502,355
Greenwich £496,695
Hackney £672,942
Hammersmith and Fulham £1,038,383
Haringey £691,947
Harrow £486,675
Havering £415,952
Hillingdon £483,519
Hounslow £592,760
Islington £843,626
Kensington and Chelsea £2,228,758
Kingston upon Thames £616,481
Lambeth £876,110
Lewisham £510,167
Merton £727,505
Newham £424,020
Redbridge £477,554
Richmond upon Thames  £894,226
Southwark £706,537
Sutton £469,084
Tower Hamlets £570,146
Waltham Forest £521,638
Wandsworth £859,319
Westminster £1,065,940

Source: Zoopla & Rightmove

Read this guide and keen to buy a new-build in London? We offer a huge variety of high-quality homes, all in great locations. Why not check out our current developments here

Sources: 

1. https://www.ownyourhome.gov.uk/scheme/help-to-buy-2021-2023/

2.  https://www.ownyourhome.gov.uk/scheme/help-to-buy-2021-2023/

3. https://www.which.co.uk/money/mortgages-and-property/first-time-buyers/buying-a-home/buying-a-house-or-flat-in-london-arf8g3r8sxpp