How to find the best first time buyer’s mortgage

The time has come for you to buy a house, but for a first time buyer, the housing market can be frightening
and confusing. Unethical lenders may try to ensnare you with high interest rates and a loan that will have
you paying for years. Many houses are priced out of the range affordable by first time buyers. The market
for mortgage loans fluctuates every year, the interest rates and deals always changing. All these things make finding a good deal on a house difficult.

A first time buyer should consider a number of factors before going to purchase a property, such as:

  •  how much they will be permitted to borrow
  •  how much they can afford to pay per month
  •  the initial cash outlay for fees and deposit
  • what kind of mortgage they ought to use.

A mortgage broker, who will act as an intermediary to find you the right mortgage, can help immensely to ease this process.

Mortgages for the first time buyer in the UK

There are many different types of mortgages that can be chosen for a first time buyer. These include :

  • the fixed rate mortgage – with an unvarying interest rate over the life of the loan
  • the adjustable rate mortgage  – where the interest rate is periodically adjusted based on a index
  • the interest-only loan – where for a period of time, the buyer pays only the interest on the loan, then must begin making payments
    on the principal capital loan.

These last two types can be tempting to the first time buyer with little income, but can result in more money paid out over the lifetime of the mortgage. An adjustable rate mortgage can be the
better deal if interest rates continue to fall, but worse if they rise. Interest only loans permit a buyer who will be in better financial shape in a few years to get a foothold in the housing market. The downside is
that the principal will be untouched for those years.

 

 

How much to mortgage?

It can be dangerous to borrow too much money to buy a house especially if you are a first time buyer. In
the current climate 100% mortgages are actually no longer available. This is not necessarily a bad thing.
The problem with having a 100% mortgage is there will be no equity in your property and if house prices
dip you could end up in negative equity.

Negative equity is when your mortgage is worth more than your house: this is a huge danger. Many first time buyers consider only the monthly payment when they sign
up for a mortgage. It also is important to look closely at the full amount you will be paying, and the length
of time it will take to repay.

Some kind of deposit is normally required.  You will now need to have at least 5% of the purchase price as a deposit. If you have 10% or more, you can secure a better deal on your
mortgage rate.

Compare mortgage rates at these sites. www.MoneySupermarket.com and www.uSwitch.com

First time buyer rate

Some mortgages may offer first time buyers preferential rates. But this isn’t always the case ,so make
sure you shop around and definitely go to a mortgage broker who will sometimes have better deals
available to them than the high street and internet comparison sites.