For those ready to take their first step onto the property ladder, first time buyer mortgages will be necessary as most people moving into their first homes won’t be able to buy them outright. As making the decision to buy a house is often a daunting process, particularly during a time of high property prices, the best first time buyer mortgages are specifically designed to help people buy their ideal starter home.
Mortgages for First Time Buyers
Mortgages for first time buyers often offer deals with low application fees. A sizable deposit will, however, have to be raised in order to borrow money, though some mortgage lenders and mortgage brokers do offer 1st time buyer mortgages in exchange for just a 5% or 10% down payment.
95% First Time Buyer Mortgages
Many first time buyers will be tempted by mortgages requiring them to pay a deposit of a mere 5%. 95% first time buyer mortgages mean that the value amount of the property the borrower is able to borrow is 95%. This is known as the loan to value, which therefore means that up to 95% of the value of the property can be borrowed.
However, a mortgage of seemingly such good value does not come without its risks. If the borrower decides to take out a 95% first time buyer mortgage, he or she should be prepared to face higher rates of interest each month when repaying the loan. Also, as a 95% mortgage is generally for a term of 2 to 3 years, when this term ends remortgaging may prove difficult: competitive mortgage rates are often elusive because of the large amount of money being borrowed for the home.
100% First Time Buyer Mortgages
A first time buyer’s mortgage can also be attainable without any such deposit, though this is increasingly rare. 100% first time buyer mortgages enable those who don’t have money saved up to borrow the full amount of the property they are buying. However, in addition to the risks presented with 95% first time buyer mortgages, a 100% first time buyer mortgage opens up the possibility of falling into negative equity instantly if the borrower ends up borrowing more than the house is worth if the value of the property drops. This increases the risk of possible repossession.
First Time Buyer Initiative
Because of the current economic climate, a first time buyer initiative was introduced, aiming to make more homes affordable to first time buyers. For an affordable price and government assistance, the first time buyers’ initiative helps borrowers take out a mortgage for just 50% of the value of the property. The government then provides assistance to help them buy the house for the full purchase price and borrowers do not have to pay this money back until after the subsequent sale of the property.
First Time Buyer Mortgage Advice
Due to the extensive number of lenders offering 1st time buyer mortgage deals and schemes, professional first time buyer mortgage advice should be sought by all new entrants to the housing market: buying a house is one of the most important decisions people will ever make. It is possible, however, to compare first time buyer mortgages using specialist websites to find the best deals, work out how much can be afforded per month, while taking into account any additional first time buyer mortgage fees and expenses.