Type of first time buyer mortgage
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How does it work?
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Pros of this type of deal
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Cons of this type of deal
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Mortgages of 100% LTV and above
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These loans offers up to 130% of the property price.
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You couldn't find an unsecured loan at such a low rate as this.
The funds surplus to 100% should cover all home buying costs.
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In effect, you are in negative equity from day one and if house prices then go down, your situation will become a problem. Specially in todays unstable market.
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Cashback mortgages
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A mortgage In return for a rough. 5% deposit, you can get up to 6% of the loan in cashback, which is paid on completion. Both the rate and tie-in may be fixed for a set period.
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Cashback can come in handy for homebuying fees and the costs of setting up a new home.
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Many homebuying costs such as a survey, searches and land registry fees and searches are payable before completion so this money will not help.
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Graduate mortgages
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As well as being able to borrow up to over the full value of the property, your income multiples are boosted. How much by will depend on factors such as your outstanding debt and credit score.
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Not having to find a deposit – and having 2% extra – will be a welcome feature after the costs of going to university.
As the deal applies to graduates up to 35 years old, you will have plenty of time.
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Graduates rarely start off on a higher salary. They can also have a lot of debt, so you could struggle to make your repayments in the early years – especially having borrowed more than 100%.
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Professional mortgages
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This mortgage gives first-time buyers training to become a solicitor, actuary or accountant, favourable borrowing terms of up to 4.75 times income at 100% LTV. To keep repayments low the loan can also be taken over 45 years. First-timers already practising as an architect, doctor, dentist, surveyor or vet also qualify.
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Many first-time buyers have the potential to earn a high salary but haven't started yet. A professional mortgage takes this into account upfront, saving on the costs and inconvenience of stepping up a rung of the property ladder later down the line.
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Studying for these kinds of roles is expensive, so unless you are comfortably funded, a professional mortgage could see you stretched financially.
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Guarantor mortgages
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These days, most lenders have a guarantor facility across their standard mortgage range. This means that if there is any shortfall in income multiples, a family member can act as guarantor for the remainder.
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The parent does not have to feature on either the mortgage agreement or the property deeds.
Usually no second charge is required over the parent's home.
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The parent could be liable for the entire mortgage, not just the proportion they are guaranteeing.
Circumstances of either party can change.
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Family offset
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An offset mortgage allows you to offset your savings against the debt of your mortgage – reducing the interest payable and shortening the mortgage term. So if you had a mortgage of £150,000 and savings of £30,000 you would pay interest on a balance of £120,000.
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Your family members can have access at any time to their savings.
For their peace of mind, you do not have access to the savings.
It is not actually costing them to help you.
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The mortgage does not help you get on the ladder, just reduces interest repayments once you are there.
Your family members will not earn interest on their savings.
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