Are there any 90% LTV mortgages for first time buyers
What mortgage options are available if you have a 10% deposit?
Due to a number of factors there are actually a good number of 90% loan to value mortgages that are available to first time buyers at the moment. The main reason for rate drops and the release of new mortgage products is because there is money filtering down into the mortgage market from the Funding for Lending Scheme, that the Government launched a while ago, but much of the initial funding was destined for small businesses. However now that money is arriving with mortgage lenders, which is providing them with cheap money that they are then obliged to use for loans.
How exactly is this affecting first time buyers?
The main effect this is having on first time buyers is that it is providing a mortgage product that has reasonably affordable mortgage repayments due to the fact there are now products with interest rates of under 4%. The first lower interest rate mortgages were released near the beginning of the year, but these products generally have pretty large fees of up to around £1700. Therefore, with the newer products now hitting the market you will not only get good interest rates, you will also be able to apply for them with the more normal fees of around £1000.
Why are these products coming out now?
The main reason that there are more products being released at the moment is because of the funding that is coming through from the Funding for Lending Scheme. The Funding for Lending Scheme has helped to benefit the mortgage market and is continuing to do so as mortgage lenders plan to increase their lending this year. This is good news for borrowers for two reasons. Firstly, there is more money in the system and so lenders are more likely to give you a mortgage loan as a first time buyer. Secondly, the increase in lending also means that mortgage lenders are entering a period of increased competition, which is driving interest rates down, although the rates coming out in the deals at the moment are about the lowest you will see due to regulatory costs.
What term are the rates fixed for?
Many of the 90% loan to value mortgages for first time buyers provide you with a fixed rate for two years, but it is worth checking out the five year deals as well as the rates are not much higher, less than half a percent in many cases. The benefits of a five year fixed term deal are that you will be protected from any rate rises that happen over the next five years and you will also have the stability of knowing that your mortgage payments are not going to change significantly over the next five years. In fact your mortgage payments will decrease slightly as you pay off a small amount of your mortgage loan.
How to find the best deal
Find the right 90% deal for you
A good place to start your mortgage research is to look at the basics. Have a look at how much money your have saved up as a deposit and use that value to calculate how much you can then spend on your first property by assuming that this will be a minimum of a 10% deposit. If you can then find a property at the right price and in the right place, that is then a good time to start looking. If you find that the properties you want are all more than your budget you could consider using the help to buy scheme and making your deposit a 5% deposit, but you will get much better deals and be better off financially if you can go straight onto the housing ladder with a 10% deposit.
If you are struggling to understand what all of the mortgage products are and what all of the terms mean, you should go to a mortgage broker to help you find the best deal. One thing you need to remember, whether you use a broker or not, is that you need to bear in mind more than just the interest rates when you are comparing mortgages. There are also things like arrangement fees, conveyancing and stamp duty fees to take into account.