First Time Buyers
It is paramount; when you are purchasing your first property that you carefully consider all the mortgage options available to you, to determine which type of mortgage suits your situation best.
At present, mortgage rates for a first time buyer are very competitive, as mortgage providers compete for your custom.
Before purchasing your first property, it is essential that you compare a number of mortgage providers to find the best mortgage suited to your financial situation. There are a range of mortgage products on the market, each with its specific advantages and disadvantages.
We will carry out this search for you as well as helping you with the small print. We will also be very clear about any penalties or restrictions, which may come with the mortgage.
The maximum amount that a first time buyer will be able to borrow depends on your situation.
Contact one of our advisers and we will be happy to discuss this further with you.
It is now also possible to take out mortgages in excess of the value of the property you are purchasing, though often a minimum deposit is required. A 5% deposit is normally considered the minimum.
Borrowers who are able to provide a larger deposit may be able to obtain better deals as they are viewed as a smaller overall risk.
Many first time buyers opt for a fixed repayment mortgage, as this method of repayment is far easier to budget for, though with interest rates so low at present you may be able to get a lower rate with a variable rate mortgage.
Finally, first time buyers with a low initial deposit should try to avoid High Lending Charges (HLC). Many lenders require borrowers to pay a HLC as a condition of their lending terms, again we will be happy to advise you on which lenders do not charge them.
HLC’s are designed to protect the lender in the event that borrower defaults on payments. In reality, it has no real benefit for the borrower and can cost thousands of extra pounds when spread across the full period of the mortgage.
There may be a fee for Mortgage Advice; the amount will depend upon your circumstances but we estimate it to be 0.5% of the mortgage sum.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
Mortgage Options
Repayment Mortgage
Monthly payments will gradually pay off the amount you owe (the capital) as well as paying the interest charged to you for the loan. Provided you make all these agreed payments, your loan will be paid fully by the end of the mortgage term.
Interest-Only Mortgage
Monthly payments cover the interest on the loan only, but do not pay off any of the capital. Separate arrangements need to be made to pay into a savings or investment scheme. This needs to build up a lump sum to pay off the mortgage at the end of the term. You have to make sure you have enough money to repay the mortgage at the end of the term; otherwise you could lose your home.
Interest Rate Arrangement
Whether you choose a repayment or an interest-only mortgage, you need to consider the different types of interest rate options available to you.
Remember, what looks like a cheaper mortgage today may not prove to be so in the longer term. Ask what happens after any special deal ends.
Standard Variable Rate Mortgage
Monthly payments go up or down when the lender's mortgage rate changes.
Tracker Mortgage (variable interest rate mortgage)
A tracker mortgage interest rate is a set amount above or below the Bank of England or some other base rate. It 'tracks' changes in that particular rate.
Discounted Interest Rate Mortgage (variable interest rate mortgage)
With a discounted interest rate mortgage your payments are variable, but are fixed at less than the lender's standard variable rate for a set time. At the end of this period, you are usually charged the lender's standard variable rate.
A Mortgage with Cashback
A cashback mortgage is where you receive a sum (usually between 3 and 5 percent of the amount borrowed, but sometimes a flat figure) shortly after you take up the loan. Normally some or all of the cashback is repayable to the lender if you repay the mortgage in the early years.
Variable Rate Mortgage - Good or Bad?
Good: You could benefit from any reduction in the current interest rates. This may mean your monthly payments go down. You usually have flexibility to overpay without any penalty. This assumes that there are no restrictions on making overpayments and early repayment charges do not apply.
Bad: When interest rates rise, your monthly payments could go up. With discounted mortgages, you need to think about what your monthly payments will be at the end of the discounted period, including any potential increase in interest rates.
What does loan-to-value (LTV) mean?
Loan to Value refers to the loan as against the value of a property expressed as a percentage. For example, a mortgage amount of £90,000 against a property value of £120,000, the LTV would be 75%.
Broker Fee Agreement
There may be a fee for Mortgage Advice; the amount will depend on upon your circumstances.
