Whether you want to climb the property ladder – or just get a foot on the first rung – the housing market can be baffling. And, with such a big purchase, you need to make sure that you know your stuff. But if you’re confused about your options, TotallyMoney can answer your questions and help find the right mortgage for you.
Admittedly, it is becoming harder for first time buyers to get on the property ladder. But it’s not all bad news! Many specialised mortgage products are designed for first time buyers. These include:
- Guarantor mortgages – offer preferable terms for those with a guarantor to secure the mortgage loan.
- Professional mortgages – offer preferable terms to people in specific professions, including accountants, actuaries, barristers, dentists, doctors, opticians, pharmacists, solicitors, teachers and vets.
- Graduate mortgages – offer preferable terms to people with degrees from specific UK universities, providing they match a specific demographic criteria.
All of these products can make a big difference to your chances of getting a mortgage, in a difficult market.
Many mortgage lenders offer features that can help save you money. For example, some lenders will give you cash-back upon acceptance, or cover home-buyers fees such as valuations or surveys. Others offer flexible payment schemes including overpayments, underpayments and payment holidays.
With a fixed rate mortgage, your monthly repayments will stay the same for a set period, at the start of the mortgage term. After this, the interest rate will usually revert back to a standard variable rate that can vary, usually in response to changes in the Bank of England base rate.
Fixed rate mortgages offer the benefit of guaranteeing an interest rate for a set period of time – which can provide security and stability if interest rates rise. However, fixed rates are generally higher than variable or tracker rates, so you’ll pay a premium for the peace of mind offered by this type of mortgage.
With a variable rate mortgage, your monthly repayments will go up, or down, in line with the Bank of England base rate.
During periods when interest rates are low, variable rate mortgages usually offer the lowest rates around. Additionally, if interest rates drop during your loan term, your monthly repayments will fall – and this can make a big difference to the total amount of interest you repay on your loan. The downside is that if rates increase, you will have to make higher payments.
This mortgage will ensure that your monthly repayments will not rise above a set level, over an allocated period of time (they are ‘capped’).
A capped rate mortgage lets you take advantage of interest rate drops, while simultaneously protecting you from excessive increases. But, as with a fixed rate mortgage, you will pay a premium for this service.
The interest on this mortgage directly tracks the Bank of England base rate, rather than following the lender’s standard variable rate of interest.
Tracker rate mortgages will be immediately affected by drops in the Bank of England base rate, which could reduce the amount of overall interest that you will need to repay.