IN A WORLD WHERE YOU CAN BE ANYTHING. BE A HOME OWNER
A GUIDE TO FIRST-TIME BUYER MORTGAGES
Being a first-time home buyer can feel daunting enough on its own, but, when you also have to learn about mortgages, it can seem even more difficult.
See the key facts below on mortgages for first-time buyers. We'll help you with everything you need for a stress free first time purchase!
What is a First-Time Buyer?
Typically, you’re considered a first-time buyer if:
You’ve never owned a residential property either in the UK or abroad, or
You only own – or have only owned – a commercial property with no living space attached to it (for example, a pub with upstairs accommodation).
You’re probably not a first-time buyer if:
You’re buying a property with someone who owns, or has previously owned, a home
You’ve inherited a home, even if you never lived there and it’s since been sold
You’re having a property bought for you by someone who already owns their own home, such as a parent or guardian.
Always check with a lender if you’re unsure whether you qualify as a first-time buyer.
Which type of first-time buyer mortgage is best for me?
The right type of mortgage for you as a first-time buyer will depend on your circumstances. We’ve put together a breakdown of the different types of mortgage, to help you find the right fit for you:
Fixed-rate mortgages – this is when the interest rate payable on your mortgage is fixed for an agreed length of time – with the most common set between 2-5. A fixed-rate mortgage offers stability, allowing you to you budget effectively for a set period. When a fixed-rate term ends, you’ll normally move to the bank’s standard variable rate (see below) and these tend to come with higher interest rates than other products.
Standard variable rate mortgages (SVRs) – this is a lender’s basic rate of interest. SVRs don’t come with discounts or reduced interest rates, and the lender can choose to change this rate. SVR tends to be the rate you roll on to once a fixed deal ends. We get in touch to make sure you don't fall on to the standard variable rate.
Tracker mortgages – these products have variable interest rates that follow an external rate, typically the Bank of England’s base rate. They don’t match the rates they follow, but are set a certain percentage above or below.
Discount rate mortgages – similar to tracker mortgages, these track (at a lower level) a lender’s SVR by a set amount. For example, if the SVR is 4% and the discount is 1%, you’ll be charged an interest rate of 3%. However, these rates are subject to change, and while the level of discount won’t change, the rate of interest might.
Capped mortgages – these are also linked to the lender’s SVR, but the rate won’t go above a set level. Alternatively, a collared mortgage is a type of loan where the interest rate won’t fall below a set limit. These products are much less common than other deals.
Offset mortgages – these are available to those who have a savings account and mortgage with the same provider. They allow you to use your savings as a way to offset the interest you’re being charged on your mortgage. With your two services connected, you won’t pay interest on your mortgage to the same value as the savings in your account. The more in savings you offset, the more you’ll save in interest, which means your mortgage payments will cost less. Offset mortgages typically allow you to make regular or lump sum overpayments, which can help you pay your mortgage off sooner. These can be more complicated than other mortgages, so you should be careful to understand the financial commitment, as well as the impact any change to your savings (particularly negative changes) can have on your mortgage.
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