Those looking to buy their first home can potentially choose from various types of mortgages. Although these products may all work slightly differently, all can offer benefits to first time buyers. Understanding how factors like finances, deposits, credit history and property value can affect deals and potential savings may help the first time home buyer get the best deal for their needs at the lowest possible cost.
What are the Factors That Affect First Time Mortgage Deals?
An individual that spots a fantastic deal for a first time buyer mortgage shouldn’t assume that they will be approved for it automatically. There are certain factors that may affect interest rates and offers, including:
- Salary/spending ratios
- Deposits
- Credit history
Lending money is a question of risk for any mortgage provider. The lower a risk the first time buyer is according to factors such as these, the better a deal they may be offered.
How do Finances, Salary and Spending Affect First Time Buyers?
This isn’t simply about how much the individual earns and whether this is enough to qualify them for a mortgage. During the application process a lender will also investigate their outgoings as well as their salary.
If the individual spends more than the lender is comfortable with, then they could well turn down their application for deals. Those that can demonstrate good budgeting, low debt that is well managed and sensible spending may find lenders more open to dealing with them at better rates.
Can a Higher Deposit Change a First Time Buyer Mortgage Interest Rate?
Generally, the more money that an individual can put down as a deposit, the better their chances of accessing lower rate deals. Traditionally, first time buyers have gone for a minimum deposit although some now are saving for longer.
This may mean that they delay the home buying process so that they can have a larger deposit to get better interest rates. Plus, borrowing less may result in lower repayments which can save in both the short and long term.
How Does Credit History Influence a First Time Buyer’s Mortgage Quotes?
An individual with a good financial history will look like a better bet to a lender than one that has a bad/impaired credit record. For the first time buyer this could see applications rejected out of hand or they could be turned down for low interest deals and charged higher rates.
Checking out a credit record before going through the application process is a good idea. The three UK credit referencing agencies all offer some kind of free trial so this won’t cost anything and could mean savings down the line if the individual can clean up their report if it needs it.
Can 2010 Stamp Duty Rate Changes Save First Time Buyers Money?
The 2010 budget changed the way that stamp duty works. This is a tax that homebuyers have to pay when they buy a property. From the 24th of March 2010 first time buyers no longer have to pay any stamp duty if they buy a property worth £250,000 or less. This could save them up to £2,500.
How Can First Time Home Buyers Save Money in Other Ways With Mortgage Deals?
Many first time buyer loans will come with a range of special offers and benefits that could save some money. Some deals, for example, will waive the cost of application and administration fees, some will pay for legal costs and some will give cashback. These may look good on paper but bear in mind that they may come with terms behind them that make them less of a money saver over time.
Taking time to understand the different kinds of first time buyer mortgages is important as this can play a part in the cost of mortgage repayments. Finally, making use of online mortgage comparison sites may also be worth doing as this can help compare rates and deals to find low cost options.
Carol Finch - Carol Finch is the Topic Editor for Retirement Planning, Budgeting, E-Commerce & Technical/Business Writing on Suite101.
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