I’m a first-time buyer buying with a homeowner. What do I need to know?

Who is classed as a first-time buyer?

According to HMRC, to be classed as a first-time buyer, you “must not, either alone or with others, have previously acquired a major interest in a dwelling or an equivalent interest in land situated anywhere in the world.”. So, if you’ve never owned a property, you’re a first-time buyer. If you’ve owned a home in the past, but sold it, you do not count as a first time buyer. 

The same goes with if you’ve sold your home to live with your parents, or broke up with your partner who you had a joint mortgage with. If you’ve inherited a home instead of buying one, you also will not be classed as a first time buyer. 

Can you be a first-time buyer twice?

Technically, you cannot be a first time buyer twice. This includes if you or your partner have owned a home before, but had to sell it following a break up or change in circumstances. 

However, although this is the general rule, there are some lenders who will allow you to be a first time buyer a second time around, if you fit their criteria. For example, with a Nationwide Helping Hand mortgage, if you’ve not had a mortgage in the last 3 years, they will class you as a first time buyer. 

But keep in mind, while an individual lender may class you as eligible for their first time buyer mortgages, you would still be classed as a second time buyer for things like Stamp Duty.

Not sure what stamp duty is or how it works? Take a look at our first-time buyers’ guide to stamp duty. 

Do both buyers have to be first time buyers?

When buying a home together, you don’t both have to be first-time buyers. It’s possible to buy with someone who is already a homeowner or has been one in the past. But as we explain below, buying with someone who’s already taken their first steps into the world of homeownership could see you missing out on some valuable incentives. 

Do couples lose first-time buyer status if one partner bought in the past?

Some government incentives and buying schemes require you both to be first-time buyers in order to be eligible. Others will reward you, even if you’re a first time buyer buying with a second time buyer. So whether you lose your first time buyer status really depends on what schemes you use to buy your first home. It’s always best to speak to a mortgage broker to understand how this might impact you: their in-depth knowledge of criteria could save you a lot of time researching, and could save you money too. 

Let’s take a look at how these benefits work:

Do you pay Stamp Duty if one person is a first-time buyer?

When it comes to Stamp Duty, both borrowers need to be first time buyers to be eligible for first time buyer relief. So, if you’ve never owned a home before but you’re buying a property with someone who has, you’ll need to pay Stamp Duty if the property is worth more than £250,000. This goes up from 3% of the property price all the way up to 15%, depending how much it is worth.

If you want to take advantage of first-time buyer relief, you might be tempted to buy a property by yourself and your partner could keep the home that they own. However, due to mortgage affordability limitations, this won’t always be viable. 

You and your partner may need the equity from their property to buy the next one. You might also struggle to get a mortgage alone, due to lenders’ affordability checks. (Take a look at our guide on buying a house as a single person to learn more).

If you and your partner would like to live together (and we’re guessing that’s why you’re here), you’d also need to consider what you’ll do with the other property. If you rent one of the properties out, there are tax considerations to take into account. You’ll also need to decide who, out of you and your partner, profits from the tenant’s rent. 

With all this in mind, missing out on the stamp duty relief might be a small price to pay for simplicity. However, if you and your partner aren’t married, there are ways you can reduce how much stamp duty you pay, for example by one person being a Booster on the mortgage instead of a joint buyer with an Income Boost.

If you’re unsure what to do, talk to Tembo. We have a team of mortgage specialists who’ve helped hundreds of first time buyers and second time buyers boost their buying budget. To get started, all you have to do is create a free Tembo plan to get a personalised recommendation. You can then book an appointment with one of our award-winning team.

Can you use a Lifetime ISA if your partner is already a homeowner?

Thankfully, it is possible to use a Lifetime ISA to buy your first home, even if your partner is already a homeowner. This is because rather than being connected to properties, Lifetime ISAs are connected to people. Your home-owning partner won’t be able to use a Lifetime ISA for their next property purchase, but you will. 

Something to keep in mind, though, is that you can’t use a Lifetime ISA to buy a property worth more than £450,000 - even if you live in London. Money you save in a Lifetime ISA can only be used for an eligible home purchase or retirement. Withdraw it for anything else and you’ll be hit by a 25% fee. Meaning, if you save your deposit in a LISA and later decide to buy a property worth more than £450,000, you’ll be penalised for withdrawing the money and putting it towards a more expensive home. 

To find the right LISA for you, take a look at our list of the top 10 Lifetime ISA providers.

Is it easier to get a mortgage as a second time buyer?

You might assume that since your partner is a homeowner already, it’ll be easier for them to get a mortgage… and therefore easier for you to get a mortgage too.

Unfortunately, the fact your partner is a second time buyer makes very little difference to the application. Mortgage lenders will look at both yours and your partner’s finances as a whole, taking into account your joint income, deposit and expenses before deciding how much you can afford to borrow.  

Some second time buyers can find it difficult to get a mortgage, particularly if their finances have changed since they bought their first home. If your partner has become self-employed, started a new job recently or is pregnant/on maternity leave, these are all things that can influence their mortgage eligibility. Thankfully, using a mortgage broker can help you overcome most home buying obstacles. 

How can we boost our affordability and get a mortgage?

As a general rule, mortgage lenders will usually offer mortgages of around 4 to 5x an applicant’s income. If you’re applying as a couple, your incomes will be combined. So if you earn £35,000 and your partner earns £30,000, this means you’re probably looking at a mortgage of between £260,000 and £375,000. 

If you have a deposit of £30,000, this means you’d potentially be able to buy a home worth £405,000, if you found a lender willing to multiply your joint income by 5. 

Don’t forget: Since your partner already owns their home, they may have built equity that can be put towards your new place. You could use this equity to buy a more expensive home or decrease the amount you borrow and spend less on interest.

Worried you and your partner don’t earn enough to buy a home together? Fear not! If you’re a first time buyer buying with a homeowner, we may be able to help. We help first time and second time buyers boost what they can afford with the help of innovative ways of borrowing.

These include guarantor mortgages, which involve using a friend or family member’s income, savings or home as a security to increase how much a lender is willing to let you borrow. As well as schemes that boost your borrowing power without family support, such as private equity loans, higher lending schemes, deposit boost schemes and many more.

To find out which budget-boosting schemes you and your partner could be eligible for, create a free Tembo plan today. It takes 10 minutes to complete, there’s no credit check involved and at the end you’ll get a personalised recommendation including indicative interest rates and monthly repayments.