As a first-time buyer, it’s likely that you’ll be getting together some serious savings to go towards your deposit, there are numerous ways to save money on your first mortgage. As with any purchase, ultimately, the key is to shop around. Mortgage brokers are a good first port of call as they have access to a wide range of mortgage products and can determine relatively quickly which product is most suitable for you.
A fixed rate mortgage, for example, offers the security of knowing that monthly payments will not increase over a set period of time, but are often priced slightly higher than a variable rate mortgage in terms of APR. Many banks and building societies offer mortgages specifically aimed at first time buyers, with incentives including cashback or a contribution towards the legal fees associated with arranging a mortgage.
One of the most effective ways to save money on your first mortgage is to take advantage of any incentives being offered by the Government to help first time buyers get onto the property ladder.
In the UK, there are a range of Government backed schemes currently in place, including equity loan, shared ownership and Help to Buy ISA. With the current Help to Buy ISA scheme, for example, for every £200 saved per month (the maximum allowed within the scheme), first-time buyers receive £50 (i.e. 25%) from the Government towards a deposit on their first mortgage. The maximum the Government will contribute is capped at £3,000 per person.
The shared ownership housing scheme, in essence, allows you to purchase a share of a property and rent the remaining share at a lower rate, whilst the Help to Buy equity loan is beneficial to those with a comparatively low deposit. Eligibility criteria often apply for these incentive based schemes, so it is important to be aware of these.
Further costs to bear in mind are mortgage associated fees which unfortunately are unavoidable and can easily add up, such as valuation and arrangement fees. Whilst there is not much scope for saving on these fees, it is important to check what the lender will charge as an arrangement fee for setting up the mortgage as this can often exceed $1,000.
In many circumstances, this cost can be added to the mortgage, but this will increase the amount borrowed and therefore the interest, increasing the monthly repayment amount. One of the less direct ways to save money on your first-time buyer mortgage is to improve your credit score which will allow you to access mortgage products with lower interest rates.