For many first time buyers it is also time to get your first mortgage. So, what is involved?
Getting your first mortgage isn’t easy, but it is not impossible. You just need to take a few steps and accept professional help where it is possible. But first, what is a mortgage?
Well, as a home buyer it is unlikely that you will be able to afford to pay the entire cost of the house when you first buy it. So to make up the difference between the cash you can put towards the house and its actual cost, you borrow a huge sum of cash from a suitable bank.
In return, you agree that you will pay back that money, plus interest, over a fixed term. For example, 25 years. But, it is this interest that causes the confusion as it can be charged at different amounts, depending on a lot of factors.
For example, you might decide that you want a fixed rate mortgage. With this, for a certain amount of time the interest charges are fixed and no matter what happens to base rates, your repayments stay exactly the same. This is great when interest rates go up, but not so great when they drop. And even if they stay the same this is not always good news as quite often the fixed rate is what you might get as a variable rate.
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The variable rate is the basic rate that the bank will charge its customers. There are no frills on this one, it just moves up and down with base rate changes and the general mood of the bank. Usually, it is just used by customers who have completed their special offer period and can’t, for whatever reason, move to a better deal. But with low base rates it can be a good deal.
Then there are a whole variety of other incentives for the customer to take up an offer from a particular bank. For example, cashback offers and other draws. The problem is that the cost of all of these does ultimately come out of your total repayments, so whilst a cashback incentive might seem good now, you could be paying more in the long run.
Lastly, for now, is the question as to which of the bank’s offers are open to you. As a first time buyer there might be more options to try to tempt you in. But many of the mortgages on the market could be ruled out for a whole variety of reasons.
Such as, how much deposit are you able to put down? Traditionally it is the first time buyer that cannot afford as big a deposit as the mover and remortgage customer. But some of the best interest rates are only available to customers placing at least a 25% deposit. Other mortgage offers might not be available to you if your credit rating is not high enough and a whole host of other factors.
So, which mortgages are best for you? The best thing to do at this point is to ask for help from a completely independent mortgage advisor. Pick one who can search the entire market and talks to you about your circumstances and priorities.