The housing market, for the first time since 2008, looking up… With various schemes, the Government has made provisions to get first time buyers back on the housing ladder. There is an array of mortgage options for first time buyers, and so it is always wise to seek the advice of a whole of market broker, such as Ascot Mortgages, to get the best deal. But, what sorts of mortgages are there and which is the best option for mortgages for first time buyers?
Types of mortgages for first time buyers
Fixed rate mortgages
A fixed rate mortgage can be a good way to fund your first property. Fixed rate mortgages set the mortgage at a certain interest rate. This can be a good way to budget for your first property purchase, because you know that you are not going to be hit with unexpectedly high interest charges. This means that your payments will stay exactly the same allowing you to be able to budget; your interest rate will not change in line with the Bank of England base rate changing. This can mean that if interest rates drop, you might not benefit.
Flexible rate mortgages
Flexible mortgages allow people to constantly check that they are getting the best rate. Interest can be calculated on daily basis, in comparison to repayments that are calculated monthly or even annually. It also means, for first time buyers who are feeling flush, that overpayments can be made without any early repayment charges. This is a great way of reducing payments over the span of the mortgage. There might, depending on your provider, be the option to take a payment break or underpay occasionally. This flexibility can be great for first time buyers who might need to adjust their budgeting. It does rely on good budgeting skills however.
Discount mortgages are based on a variable interest rate, which can go up and down. They offer a discount off the lender’s standard variable rate, which can change. This can be a great opportunity for first time buyers when rates are low, but often, as interest rates have been low, collar rates are becoming common- this means that interest rates can only go so low.
These allow you to use your savings to reduce the amount of interest that you pay each month. If you had a mortgage of £100,000, and £10,000 in savings, then you would only pay interest on a mortgage on a balance of £90,000. This is a great way to pay a lower rate of interest, but it does depend on having a large amount of savings, which might be hard for first time buyers.
Help to buy mortgage for first time buyers
The Help to Buy Mortgage Scheme adds a government loan of 20 percent to the buyer’s deposit for new build, which needs to be a minimum of 5% or allows a 95% mortgage to be obtained on a re-sale property. This is a great way for first time buyers to get on the property ladder, and it means that the worry of trying to save for a hefty deposit, probably whilst renting, is a thing of the past.
Having a guarantor, who becomes liable if the borrower defaults on the mortgage, is a great way to get a mortgage. This can be great for younger first time buyers, whose income might not be enough to match the lender’s income requirements, but it does rely on a generous guarantor, and one who owns their own property as collateral.
Whatever option that you choose, as a first time buyer, there are lots of choices to be made. It is important to look at the various first time buyer mortgage options, and also to determine the best option for you. It is a good idea to take advice from a broker, such as Ascot Mortgages, who can help you to decide on the best mortgage for your needs.