Before you step into your first-time mortgage transaction, it would be better to understand some of the basics of home financing. Despite the rise in the prices of property in the UK in the last few years, the market is still favorable for the buyers. Buyers get a lot of mortgage options that make it possible to buy a home even if their credits are not that good.
As a first time home buyer, you will be eligible for a first-time mortgage program even if your finances are not very strong. To begin with you may seek specialized mortgage advice for first-time buyers. Any experienced broker or advisor will have the complete idea about all the top mortgage deals for the first time buyers.
Mortgage providers offer to have a large selection of special mortgages to offer to the first time buyers. A deposit increases the number of mortgage options open to you and can help you find a more competitive deal. A First-time buyer is one who has not previously owned a property in his name. The sellers often favor this category of property buyer because they believe that with such buyers, the risk of creating a housing chain is negligible.
A housing chain occurs when the sale of a property depends upon the sale of another property. A first-time buyer is required to pay a down payment at the beginning of the purchase, which is usually up to 10% of the total price of the property. The rest of the cost of the home is financed by the lender in the form of first-time buyer mortgage.
There are many options available that range from fixed rate mortgage which have a fixed interest rate for a specific period of time to flexible mortgage where you are allowed a lot of flexibility with your repayments. In fixed mortgage the fixed interest rate is typically 1-5 years and after that, the interest rate returns to the lender’s standard rate.
This kind of mortgage helps you to successfully plan your finances, as you know the mortgage repayment will not increase for the defined period. Then there are discounted mortgages where there is a reduction in the lender’s standard variable rate for the pre-decided length of time. In this type of mortgage, the repayments for the borrower will fall when the interest rate falls. This kind of mortgage is considered the cheapest first-time mortgages available.
Another type of mortgage available to the first time buyer is the capped rate mortgage. In this type of mortgage, it is the guarantee that the interest rate will not be raised above a certain percentage. However, this guarantee is usually for 1-2 years only and after which the interest rate returns to a fixed or variable rate. With such a diverse range of first-time buyer mortgage, it will definitely be beneficial for you if you do a little research at your end to find the best deal available.
You should read the entire clause in the deal carefully as many of the first time mortgages offered by building societies and banks are shared ownership mortgages.