UK
PROPERTY NEWS & ADVICE
Mortgages for First Time Buyers
Being
a first time buyer of property can often be very daunting.
You’ll more than likely be taking out the biggest expenditure
of your life by buying a house, and whilst a mortgage will
help you make that purchase, it is also very costly. The problem
is where to start – there is a mass of mortgage products
out there, and trawling through big lists trying to find the
product best suited to your needs is far from easy.
There
a number of ways that you can plan to soften the blow of any
mortgage before you take it out. First and foremost, you should
try and have some capital before you get started so that you
can lay down a deposit. On any sized mortgage, the bigger
this initial deposit is, the smaller the repayments will be
because of interest - but where will you find this extra money?
The most obvious way is to save for a number of years in preparation
for making the deposit. Another way is to ask your parents
to borrow a lump sum to help with the initial fees. Some banks
and financial services offer mortgages that do not need a
deposit. Natwest is one bank that can offer 100% mortgages
to first time buyers. However, beware that a higher lending
charge often occurs if you borrow over 90% of the value of
your home.
Other
smart ways to save money on your mortgage is not to make the
purchase by yourself. While a large proportion of first time
buyers are couples looking to get their own property together,
it may well be worth going into a mortgage with friends or
parents. If you are looking to go it alone, then it could
be attractive to get a lodger mortgage, or get a lodger that
can pay rent. With both shared mortgage and lodger mortgage
options a longer mortgage will give you lower monthly payments,
and it is not uncommon to take out a first time mortgage over
30 years. However, it must be pointed out that longer mortgages
are likely to cost more in the long term.
Set
up costs can also be high, with many banks charging different
fees for different products. It might be easy just to go for
the mortgage with the cheapest initial fee, but you should
be very wary of this. You’ll more than likely be paying
off your mortgage over a long period of time, so the APR is
normally a much more important feature to consider than any
start up costs.
See
the table below for some comparisons on 2 year fixed rate
mortgages, taken from fool.co.uk mortgages on 30/10/07.
Provider |
Product |
Initial
Rate |
Overall
Cost for Comparison |
Fee |
A&L |
Mortgages |
5.73% |
7.8% |
£999 |
Natwest |
Mortgages |
5.69% |
7.9% |
£1299 |
Britannia |
Mortgages |
5.69% |
7.4% |
£999 |
Nationwide |
Mortgages |
5.72% |
7.2% |
£999 |
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