Best Mortgage Deals for First-Time Homebuyers in the UK

Mortgage Deals for First-time Homebuyers in the UK

From fixed-rate mortgages to offset and interest-only to guarantor mortgages, a first-time homebuyer can apply for varied mortgage plans for financing his/her first home in the UK. Let’s discover the different mortgage options.

1. Fixed-rate Mortgages

A fixed-rate mortgage is the best finance option for first-time homebuyers as it protects against unexpected interest rate increases. Fixed-rate mortgages involve a fixed interest for a predetermined period contributing to financial security and affordability. A homebuyer pays a fixed interest for an established period, typically two and five years. Homebuyers can plan their budget effectively as fixed-rate mortgages enable them to know the exact monthly instalments. It promotes a sense of security and financial stability among first-time homebuyers.

2. Tracker Mortgages

A tracker mortgage is another flexible option for first-time homebuyers to purchase homes in the UK. The interest rates fluctuate in this mortgage plan according to the Bank of England base rate. The base rate of the Bank of England is the benchmark for interest rate increases or decreases. This plan has the potential for the lowest interest rates if benchmark base rates fall. Homebuyers can also opt for early repayments without paying any early repayment charges.

3. Discounted Variable-rate Mortgages

A cost-effective option for first-time homebuyers, discounted variable-rate mortgages offer interest rates that are less than the standard variable rate (SVR) offered by a lender. This discount may be expressed as a percentage of the SVR or as a fixed sum. A homebuyer pays repayments with low interest rates for a couple of years. However, once the predetermined term ends a borrower may need to pay higher interest rates.

4. Offset Mortgages

In offset mortgages, a homebuyer has to link his/her savings or current account with the mortgage account. The more amounts you have in your savings or current account, the less interest rate you pay. This mortgage plan helps reduce interest payments and promotes faster repayments. Instead of earning interest on your savings or current account, you pay less mortgage interest.

5. Guarantor Mortgages

Guarantor mortgages for first-time home buyers means involving a third person as a guarantor for a mortgage. A lender will request a financial guarantee in case the principal borrower fails to make the mortgage payments. This type of mortgage allows a borrower to secure finance with fewer deposits.