Rapid rises in property prices over the last decade have made it increasingly difficult to get on the bottom rung of the property ladder.The impact on the property market has been mitigated somewhat by the growth of Buy To Let. But first time buyers are a vital part of the property market, and banks know it is not in their interests for this group to be blocked out of the property market.
Because of this banks have developed mortgages with a range of features to make buying your first home more affordable. This is not an exhaustive list, but some feature of mortgages aimed at first time buyers include;
A lower than usual interest rate for an introductory period. This can be useful for offsetting the fees, charges and set up costs of buying your first home. But make sure your budget can support the increased monthly fee when the introductory discount ends. Alternatively, if there is no Early Repayment Penalty once the introductory discount ends, use
TheRateTart email alerts service to get a reminder when it is time to remortgage.
Cashback Offers can be used to pay fees and charges or to furnish your new home. However bear in mind that some mortgage lenders will require you to repay this money if the mortgage is redeemed early. This process is sometime known as 'claw-back'.
High Loan to Value Mortgages offer to lend more than the 90-95% of the property value which is the typical upper limit of mainstream mortgages. These mortgages are targetted at customers who do not have a deposit saved or who want extra funds to improve their new property.
There has been controversy around these mortgages as they can lead to borrowing greater than the value of the house. If house prices fall, this could leave customers with debts greater than the value of their house: "negative equity". In some cases the amount borrowed over 100% is secured against the house, whilst in other cases it is in the form of an unsecured loan
However continued house price rises have meant that some borrowers have seen this as an attractive alternative to an extended period of renting whilst they save for a deposit. The housing market can go down as well as up, so borrowers should be wary of assuming that their property value will increase to cover the cost of extra borrowing in a short period of time.
If you need more information to decide which mortgage is the best for you, then check out
TheRateTart Guide to Mortgages.
Please note that the information on this web-site is intended to provide an overview of the different types of mortgage available. Nothing on this website should be construed as advice and you should not make your mortgage decision based solely on this information.
TheRateTart recommends you consult an independent mortgage advisor to help identify the most suitable mortgage for your needs.
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