Mortgages represent the single biggest financial commitment that most people make in a lifetime
For the first time buyer the scale of this undertaking can, quite reasonably, seem pretty daunting. Specialist first time buyer mortgages are now a standard product category for established providers like Santander mortgages. As with all such complex financial deals, there is quite a range of choice between different first-time buyer mortgages, which can at first seem difficult to usefully differentiate. However, by looking at certain features and benefits it can make it a lot easier to zero in on the type of mortgages that will best suit your financial position.
A deposit of 10% is now a fairly standard minimum requirement for securing mortgages, and so this ratio is a key factor in determining the upper price range of your buying power. However, the higher the deposit, the lower the interest rates you’ll be offered. Taking a longer term view of just what the mortgage will cost, it can often make the best sense to either amass a larger deposit, or look at more modestly priced properties to allow you to benefit from the lower interest rates that a higher percentage deposit will provide. If you simply have to buy soon, and will be working with a minimum deposit, your choice of mortgage will already have been narrowed down for you.
Choosing mortgages that charge a booking fee can result in lower monthly payments for a specified period. Taking this upfront charge can therefore help you in budgeting for the cost of mortgages in the first few years.
Many providers have a special category of first-time buyer mortgages reserved exclusively for existing current account customers. If you do not need to secure the mortgage immediately, and have the time to research these deals and plan ahead, it can often be worth switching your current account custom to take advantage of these incentives.
While there is an ever increasing number of varieties of product in the mortgages market, the vast majority of these options can be categorised as either fixed rate or tracker mortgages. Fixed rate mortgages, as the term suggests, hold a pre-agreed rate of interest for a specified term, and can again make it a lot easier to budget for the cost of monthly premiums.
Tracker mortgages on the other hand will rise and fall in relation to the Bank of England base rate of interest. Thanks to the special conditions of the prevailing economic situation – namely the record low base rate, and the length of time over which it has been maintained – Tracker mortgages currently offer a lower rate of interest than fixed rate options can provide. However, this saving must be seen as a short term measure, as the base rate, when it finally changes, can only go one way – up. Given the term of the average mortgage – decades – the most relevant question for most mortgage holders is not whether to fix the rate, but when.