Types of Mortgages for First Time Buyers

May 16, 2012 by  Filed under: Loans 

Since there are numerous companies in the UK offering various mortgages for first time buyers and the choice is never easy when it comes to such an important purchase. Special deals and interest rates are the things that first time buyers get hung up on which can be misleading and in the end can cause most headaches when it comes to mortgages. The best option is to first understand the basic differences between the mortgage types and how they can affect costs and interest rates and then to consider the more advanced options.

Some first time buyers choose repayment mortgages while others swear in interest only mortgages. The main difference is that repayment mortgages divide the payment for capital and interest, and when the term ends the borrower has paid off the loan completely. Interest only on the other hand services the interest on the loan, this means that when the term ends the borrower then has to pay the capital sum that was borrowed.

First time buyers who are willing to go for the standard repayment method have a wide range of products to choose from:

  • Discounts: some companies offer discounted mortgages which means that standard rates will have a percentage cut for a certain amount of time. These products usually have variable payments meaning that sometimes they will go up and sometimes down.
  • Capped: here the interest rate is also variable however there is a limit that the interest rate will not go over or under, this product is great if the market goes up and the interest rates fall.
  • Cashbacks: here the borrower will be paid a percentage of their mortgage, however do not expect low rates on these products.
  • Fixed: As long as the period lasts you will be paying the same interest without any variations.

Before choosing a mortgage for the first time, please consider the following:

  • Terms: does the deal require long periods or does it require penalties for changing the terms early? Are there any other terms that will make the deal look like a bad one?
  • Fees: are there any additional fees or some hidden fees, and how large are the arrangement fees?
  • Extra offers: are there any special first time offers? Are there other incentives that sweeten the deal?

We intentionally did not mention offset mortgages because they are usually preferred by those that have significant cash savings.

Take all these into consideration before you make your choice and you can’t go wrong.

David is a life insurance expert who explains how to use a Mortgage Insurance Calculator and helps consumers get cheaper Mortgage Insurance Quotes.

Article Source:
http://EzineArticles.com/?expert=David_Richardson_Smith

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