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First Time Buyer Mortgage

Mortgage lenders are all for first-time buyers, because once obtained, they may hold on to them as borrowers for many years and perceptively sell them on to larger mortgages. But, first-time buyers are learning to be more and more astute. Today, more people are likely to shop around following the paying off of any redemption penalties (By and large, this is about three years after the taking out of the mortgage). Apathy still exists, however, and so first-time buyers remain appealing to mortgage lenders. This is why mortgages presented to first-time buyers are often found to include competitive incentives.

The choice to take out a mortgage

No matter how appealing owning rather than simply renting a property is, buyers should be careful not to become financially overstretched. Negative equity - when your mortgage outstrips the value of your home – hasn’t been so prevalent in the headlines of recent times, but some are predicting it will rematerialize. Making this a difficult time to foretell what is likely happen to prices.
Some mortgage lenders will offer as much as five times' salary and 100% of the property's value. However, the Financial Services Authority recommends that single home buyers should borrow up to a total of three times' salary and two and a half times' salary for mortgaging couples.
Although 100% deals are available, most mortgage lenders will require at least a 5% payment. If you are able to find 10%, you have more chance of being offered a better mortgage deal, as you are deemed to be a lower risk.

Types of first time buyer mortgage

It is common for first-time buyers to choose a repayment mortgage. Endowments are mostly dying out in the wake of a miss-selling scandal. Flexible mortgages are certainly worth taking into consideration. There may be fewer incentives offered to first-time buyers, but they are well suited to buyers who can pay off large amounts of capital. No one can accurately predict what will happen to interest rates and so a discounted rate can be a good deal. Equally, a fixed rate mortgage can have benefits - providing the interest rate does not fall further still. Deals will usually only last for a three year period. After this, you should shop around for other deals in the market.
Interest only mortgages can be beneficial for those who want to keep their repayments low. Some lenders will offer an interest-only deal for three years - but you will have made no inroads into the capital. The government recently launched a kite mark for financial products; Cat-marked mortgages. Cat stands for cost, access and terms and, while it is a new entity, some mortgages that fit the criteria are becoming available.

Be aware of Migs

First-time buyers who only have a low deposit should watch out for mortgage indemnity guarantees (Migs). Many mortgage lenders are known to force borrowers to buy these as a condition of the mortgage.

The Mig is an insurance policy that is put in place to protect the lender if the borrower defaults on mortgage payments. It has no benefits for you as the mortgage borrower and can cost you thousands of pounds. Even if it's spread out over the life of the mortgage, it is simply another addition to your outgoings.