Britain is a nation that has become fixated with house
prices and given the coverage that the subject receives,
it is difficult to be blind to the financial benefit that
the steady or surging long term gains of property ownership
brings. It's unsurprising then that young professionals
are so keen to get started on the housing ladder.
However, thanks largely to the rising house prices that
make home ownership so appealing, many first time buyers
simply can't afford to get together a deposit of a sufficient
size to meet the loan to value requirements on most mortgages.
First time buyer mortgages can be divided into two types:
- 100% mortgages.
- Standard mortgages that are tailored to include certain
features or incentives that are particularly appealing
to first time buyers.
Historically first time buyers were offered better deals
than existing homeowners or people looking to remortgage.
This used to be done through the use of deals that were
exclusive to first time buyers, but these days it is rare
to find deals that are not open to all types of borrower.
All types of mortgage sometimes come with incentives
or features that hold particular appeal to first time
buyers. These can include: cashback on completion (ranging
from a few hundred to several thousand pounds), a refund
of the property valuation fees, help with legal costs
and so on. With new build properties, it is sometimes
possible to get additional incentives such as free kitchen
appliances or deals that allow you to move in to a fully
equipped property for a set sum of money as a deposit.
Within the bounds of standard mainstream mortgages, many
first time buyers go for fixed or capped rate mortgages.
This is often a sensible choice as it allows borrowers
to rigidly set their budget at a time when spare income
may not be freely available to cope with increases in
interest rates that may otherwise affect their mortgage
payments, if they had a discounted rate for instance.
First time buyers should be aware that to get the best
deals in terms of interest rates, the bigger the deposit
the more competitive the rate. If possible, it is usually
best to try and aim for at least ten percent. But this
fact leaves many potential borrowers facing a dilemma
of whether to delay the purchase and save a larger deposit
or to take on a mortgage loan with a marginally higher
interest rate. While saving can be good preparation for
the financial rigidity that is required in making your
mortgage payments each and every month, delaying the purchase
often means you have to pay a higher asking price as the
markets are likely to have risen by the time you get round
to buying.
A final point that first time buyers should remember
is that while the normal threshold for paying stamp duty
is £60,000, under the last budget stamp duty has been
abolished on properties that are sold for less than £150,000
in around 2,000 of the most deprived areas in the UK.
Some of these regeneration zones are actually quite popular
with first time buyers anyway, so this can be an added
incentive to target those locations.
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First time buyer mortgages :