Becoming a first time buyer
Rising house prices in recent years have caught the news headlines but there are still plenty of great deals out there for first time buyers. The first small step can seem the hardest but with the right guidance the house of your dreams could be yours sooner than you think. The best mortgage rates are for those able to pay larger deposits but if you can raise just 5% you can get your foot on the first rung of the property ladder.
Your first big decision as a first time buyer is whether to save up to pay a larger deposit and get access to the better mortgage rates or go for broke now with a 95% mortgage. In theory saving up first makes sense but as house prices keep outstripping savings rates and wage inflation you may find yourself running in circles.
The second big decision is whether you opt for a fixed or a variable rate mortgage deal. A fixed rate – typically lasting between two to five years, is usually slightly higher than the variable option but guarantees you no nasty surprises for the agreed term. You’ll also have to pay an early repayment charge if you switch to a different mortgage before your time is up. A variable rate mortgage can be linked to the Bank of England’s base rate (called a tracker mortgage) or alternatively you can get what is called a discount mortgage, and is linked to the lender’s standard rate.
The Government’s Help to Buy scheme has recently been discontinued. Previously it allowed you to make your first property purchase – provided it was worth no more than £600,000 – with a deposit of at least 5%. In return the Government guaranteed up to an additional 15% of the property price. If you were hoping to apply and are now left feeling confused about the changes and where this leaves you, please call us today to go over your options.
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