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First Time Buyer Mortgage Options

By: Paul Hockney
Submitted: 2008-05-26 13:20:53
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Heading into your first time mortgage transaction, it pays to understand some of the basics of home financing. Even as a first time homebuyer with bad credit, you will be eligible for a first time mortgage program. First time mortgage rates are technically no higher than repeat purchaser terms, but many first time mortgages may result in slightly higher rates.

Your first step should be to seek no-commitment independent first time buyer mortgage advice. A broker or advisor will know all the top first time buyer mortgage deals in the UK. First time buyer have a large selection of special mortgages available to them. A deposit can also increase the number of mortgage options open to you, and therefore help you find a more competitive deal. The longer the mortgage, the more you'll pay overall so your ultimate aim should be to overpay when feasible thus reducing the length of the mortgage term.

So, what are the mortgage options available to you?

Fixed Rate Mortgage
Quite simply, a fixed rate mortgage has a fixed interest rate for a specific period of time. This is typically 1-5 years and after this period the interest returns to the lenders standard rate. Fixed rate mortgages allow you to successfully plan your finances, as you know the mortgage repayment won’t increase for the defined fixed rate period. There is only one real flip side and that is when interest rates fall you do not benefit from reduced payments.

Tracker Mortgages
This type of first time buyer mortgage follows the interest base rates. In most cases your mortgage interest rates is set at a certain percentage above the base rates. The main advantage is that when the base rate falls then so do your repayments. And the reverse will also happen when the base rates rise.

Discounted Mortgages
Discounted mortgages work in a similar way to tracker mortgages in that they are variable loans. Unlike a tracker, a discounted mortgage doesn’t follow the base rate. Instead, there is a reduction in the lender’s standard variable rate (SVR) for an agreed length of time. With this type of mortgage your repayments will fall when the interest rate falls and they tend to be some of the cheapest first time mortgages available.

Flexible Mortgages
As the name suggests this type of mortgage allows you to be more flexible with your repayments. For example you can pay more or less each month and in certain cases you can even take a repayment break. One of the great advantages of such a mortgage is the ability to pay off big chunks of the mortgage which you may want to do if you get a big bonus at work for example and self employed people also prefer this type of mortgage as their income may vary from month to month.

Capped Rate Mortgage
These are mortgages guaranteed not to raise the interest rat above a certain percentage. And is normally for 1-2 years, after which the interest rate returns to a fixed or variable rate.

With such a diverse range of first time mortgages it will pay you to do your own homework before you make that decision on which mortgage will suit you and your finances.

Paul Hockney is an online finance advisor who provides first time buyer mortgage tips and advice.

Article source: Expert Articles

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