First Time Buyer Mortgages

There has been a lot of talk recently about the difficulty that those seeking to buy a property for the first time are having doing so. This reflects continued growth in house prices which has outstripped growth in incomes.

Lenders have been doing their bit to help – there are now (1 October 2007) 160 mortgages available where the lender will lend 100% of the property value compared to 92 in April of this year. However, care should be taken in choosing a 100% mortgage. Some lenders allow you to add any initial fees to the mortgage amount. Whilst this may appeal at the time because you do not have to find a few hundred or a few thousand pounds, obviously you are increasing the amount of your mortgage to more than its current valuation. At a time when many people are predicting that in the foreseeable future house prices will not rise at the rates that they have in recent years having a mortgage amount greater than your property value may be a risk you should think seriously about.

Today there is a tracker mortgage available for a major high-street lender where the fees on a £150,000 mortgage are £4,954. Adding these fees to the loan would result in a mortgage equal to 103% of the property value. That means that you start off with a minimum of 3% that you have to make up. And consider what would happen if house values fell. Consider also what would happen if interest rates rose by 0.25% or 0.5% - would you still be able to meet your mortgage payments?

The best way to check this out is to use a mortgage comparison site that compares the whole of the market; one that is independent of all lenders; one that looks at the true cost of the mortgage over the term of the deal that you want.

Francis Ghiloni

Francis Ghiloni works as the Marketing Director at mform.co.uk. mform.co.uk allows you to compare mortgages and remortgages from every lender in the UK. mform is independent, free to use and enables you to apply for a mortgage from the whole UK market.