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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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