First Time Buyer Mortgages
Taking advice on mortgages from Principle First is likely to save you nearly £1,000 a year on your mortgage repayments!*
Click here to use our mortgage calculator or call us on 0800 678 5929
As a first time buyer, you may need mortgage advice even more than home owners and home movers who have been through the experience before. That’s a good reason to talk to us!
More than any other homebuyer, it is crucial that you have the expert services of a financial adviser – and more importantly, an advisor who is independent of mortgage lenders, and can look at the whole market, to find the right mortgage for you!
Independent research shows that, compared to the more limited advice of a bank or building society, an independent advisor will save you, on average, £962 per year on your mortgage*.
This is because the independent adviser has access to the whole market, while the tied bank adviser can offer you only their own product range.
Click here to use our mortgage calculator or call us on 0800 678 5929
Deposits for First Time Buyer mortgages
The range of mortgages likely to be offered to you will depend on several factors. The first of these is the amount you can afford as the deposit for your mortgage. In general, the maximum loan-to-value ratio available to first time buyers is 90%. This means that the lender will give you a mortgage to cover 90% of the value of your property, and you must provide the remaining 10% yourself. This is very much a minimum figure, however, and your chances of being offered a mortgage will be substantially better if you have saved a higher deposit. In the current climate, applicants who can raise a deposit equal to 25% of property value are much more likely to be smiled upon by mortgage lenders.
Depending on your deposit, you can use our simple mortgage calculator to work out your monthly mortgage repayments.
Click here to use our mortgage calculator or call us on 0800 678 5929
Elements of the Mortgage
There are two elements that make up your mortgage repayment: the capital repayment and the interest repayment.
The capital repayment is the part of your monthly payment which reduces the capital you owe, i.e. the sum that your borrowed. The interest repayment pays the monthly interest due on that capital. Understanding these two elements makes it possible to understand the various types of mortgage.
Types of Mortgage
Mortgages break down into two principal categories and then a number of sub-categories.
With a repayment mortgage you repay both your capital loan and your interest every month.
With an interest-only mortgage, you pay only the interest due on the capital, for an agreed term. This leaves the capital loan (i.e. the original amount of your mortgage) to be repaid, in a single large payment, at the end of your mortgage term. This large payment is covered by an investment you make when you buy your home. It is crucially important to invest wisely here. If this investment has under-performed, it may fail to yield enough to repay your loan. You could then be forced to sell your home, in order to repay your debt.
Fixed rate or variable mortgage?
A fixed rate mortgage gives you a set monthly repayment for the first period of your mortgage, normally for three or five years. This allows you to budget, as you know exactly how much your mortgage will be each month. You are sheltered from the movement of interest rates during this period; you do not suffer if they go up, but on the other hand you do not benefit if they fall. At the end of your fixed rate period, your mortgage switches to a variable rate, normally your lender’s standard variable rate (SVR). From here on your repayments can vary, as the Bank of England changes its base rate.
With a variable rate mortgage, your monthly repayment can fluctuate from the beginning. An increase in the Bank of England’s base rate of 0.5% can add 5-10% to your monthly mortgage payment.
Click here to use our mortgage calculator or call us on 0800 678 5929
* (Source: Association of Mortgage Intermediaries).
