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First Time Buyer Mortgages – Transforming Homeless Into Property Owners
By: Agnes Powel
Having just settled in life, you are finding the rentals putting too much of a
burden on your finances. Nevertheless, you continue the payments thinking that
purchasing a home would be practically impossible. There are many expenses that
one has to necessarily make in order to just make a bare subsistence. Though the
list differs with each individual as each has a subjective concept of the
necessities, it is difficult to accumulate enough savings to pay for a house.
The following characterises most of the first time buyers. However, a surprise
awaits them in the form of first time buyer mortgages that accept first time
buyers with their inherent characteristics of financial weakness.
It is wrong to believe that first time buyer mortgages are like any other
mortgages, and have been so named by lenders to attract attention. A first time
buyer mortgage is designed primarily for the people who are buying homes for the
first time. The method combines the features of mortgage along with a lower rate
of interest. This is known as the discounted rate of interest. Relief from
paying at the standard rate for the initial few years makes these mortgages less
onerous. Once the discount period ends, the borrower will have to pay at the
normal rate that is prevailing in the market, go for the various schemes that
lower the interest rate, or opt for a remortgage (this has been explained
later).
First time buyer mortgages like the other mortgages are repayable in smaller
instalments. Though one can repay the entire amount drawn in one single
instance, it will be advisable to spread the payment. The amount thus saved can
be used for other purposes. This amount can be used for registration and other
documentation that require a hefty payment. The amount can also be used to pay
for the furnishings.
However, borrowers may get attractive deals if a certain percentage of the
amount is offered as a deposit. Lenders may offer 100% mortgages to those
borrowers who are unable to arrange a deposit. Nevertheless, the deals offered
to the person offering a deposit will be unmatched. Since the borrowers are
offering a part of the mortgage, lenders view this as a favourable aspect. The
borrower will be at as much risk as the lender; thus, they will think twice
before defaulting on the mortgage. The amount of deposit will differ with
lenders, the customs prevailing in a particular region, and of-course the rules
related to these mortgages.
Normally 70-80% of the price of the house is offered to the borrowers. The
amount to be offered may be calculated according to a lenders policy. The salary
or any other source of income is the basis of calculation of amount to be
offered. Normally 3.25 times the salary of a person or 2.25 times the salary of
couple is offered.
First time buyer mortgages become difficult to be paid after the discount period
ends. Instead of paying the increased monthly instalments that charge interest
according to the standard variable rate, it will be wise to look for a
remortgage. Either the same mortgage provider may be requested to transfer the
balance of the original mortgage into a new mortgage, or a new mortgage provider
may be contacted. Being competitive, mortgage lenders will vie to have the
business of such borrowers. However, many lenders try to prevent this shifting
by incorporating clauses to this effect in the mortgage agreement. These are
generally listed along with the other terms and conditions and one generally
does not give enough consideration to the effect that these can have in future.
Therefore, it is advised that one clearly read and get it specified, if
necessary, with the lender before putting his sign on such agreements.
First time buyer mortgages come as a ray of hope for many people, for whom
buying a home is nothing more than a reverie. Since the monthly instalments in
many cases are just equivalent to the rental being paid, borrowers do not
consider these as a burden. Besides, the borrower gets the ownership of the home
from the very beginning. These have made first time buyer mortgages more popular
among the tenants and other homeless people.
About the Author:
Agnes Powel is a financial analyst by profession. The academic qualification of
MBA (Finance) from University of Central England matches his credentials.Through
his articles, he tries to share this knowledge with the prospective borrowers.To
find Mortgage,first time buyer mortgage that best suits your needs visit http://www.easymortgageuk.co.uk
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