April 12, 2012

First Time Buyer Mortgages

First Time Buyer MortgagesBuying a home is probably the largest investment you will ever make. With this in mind, you will want to calculate the total cost, including the mortgage, and payments you can afford.

Things first time buyers will want to consider

In today’s economy, your lender will expect you to put down a substantial amount as a deposit. You will have to use your savings for this, and for the other expenses you incur as well. As a rule, you must pay for the basic valuation survey done by the lender, which will amount to a few hundred pounds. You should also obtain some quotes for a more detailed survey to verify the property’s condition.

Note that if the purchase price of the property is more than £125,000, you will be required to pay Stamp Duty between 1% and 4% of the property’s value. However, since you are a first-time home buyer, you may be exempt from this obligation. You must also pay conveyancer’s or solicitor’s fees to cover the legal paperwork and property searches. They vary according to the home’s value or the area in which it is located.

Lender’s arrangement fees will vary as well, but they may include a booking fee and a completion or arrangement fee that can be added to the loan you are given.

Insurance requirements

If your mortgage falls into the high percentage category, you could be required to pay a one-off fee, known as a “higher lending charge,” that will protect your lender if you are unable to repay the loan. This will be based on the size of your deposit and the amount you borrow.

You might also have to take out an additional policy, such as a mortgage protection policy or term insurance. The premiums are usually relatively low, and this insurance pays the balance of the loan if you should die before you have repaid it.

You will usually also be required to take out buildings insurance to protect the property itself.

Choosing a mortgage

Compare MortgagesBased on your particular circumstances, you can select from several types of mortgages. For example, with a fixed rate mortgage, your lender will offer a loan with a set interest rate for a certain period of time. Then, it may revert to a variable rate.

If you prefer a capped-rate mortgage, the interest you pay will be limited for a set time period, and no rate increases will occur. A tracker mortgage loan tracks the Bank of England’s lending rate. It may revert to the lender’s standard variable rate (SVR), but the rate of a lifetime tracker is set for the entire term of the loan. Also, some lenders offer applicants a discount on their SVR for an established time period, and upon expiration, the lender’s current SVR will apply.

Obtaining a flexible-rate mortgage will allow you to vary your monthly payments based on your financial circumstances, and no penalty will be charged if you do. If you prefer an offset mortgage, the money you have in certain bank accounts will be weighed against your loan, thereby reducing the amount you owe on it.

For more information you should speak to a qualified mortgage adviser. To compare rates you may be able to use a mortgage comparison site.