20 January 2015

Getting onto the housing ladder

Mortgage options for first time buyers

The thought of getting onto the housing ladder can be a daunting prospect, especially if you don’t know your fixed rates from your cashback mortgages, but don’t worry, here’s a helping hand to get you started. There are now a number of initiatives to help first-timers buy their own place. Many banks and building societies, including Nationwide, tailor specific deals to first-time buyers which may include incentives such as cashback, discounts, low fees or help with legal costs.

For further information, take a look at Nationwide's first-time buyer mortgage range to see how we could help.

This article looks at some of the mortgage’s that are available to first time buyers, including the Government’s Help to Buy scheme.

Fixed rate mortgage

Some first-time buyers opt for a fixed rate mortgage because the rate of interest stays the same for a set period of time – typically between two and five years. This means the repayments remain the same for the duration of the deal, making it easier to budget. Fixed rate mortgages tend to be more expensive than variable rate mortgages - but you could benefit if interest rates go up during the period where your payments are fixed. But remember; the rate of interest will usually revert to a standard variable rate at the end of the deal.

Tracker mortgage

A tracker mortgage is a type of variable rate mortgage, where payments can go up or down. Generally, they're linked to the Bank of England’s base rate; so if the base rate goes up, so do your payments. Tracker mortgages are most advantageous when interest rates are low as your repayments will reduce: this may give you the option to overpay on your mortgage if your provider allows you - meaning you pay off your mortgage more quickly and therefore reducing the amount of interest you pay in the long term. However, if you’re on a tight budget, there may be other mortgages that are more suitable to your needs.

Cashback mortgage

Cashback mortgages give you an extra lump sum of cash at the beginning of your mortgage, which can be a useful injection of money to help pay for your moving costs or start furnishing your new home. The cashback is usually funded by interest you are paying back to your provider over the period of your mortgage agreement.

Guarantor mortgage

Some first-time buyer mortgages enable you to get someone to act as your guarantor. This is usually a parent or other close relative, who will have to show that your mortgage repayments will be met on time, and be prepared to make the payments themselves, if you are unable to. Once you’re confident that you no longer need their back-up, you can apply to have the guarantor released from the agreement.

Help to Buy

One of the most popular ways for first-time buyers to get on the property ladder is the Government’s Help to Buy scheme, which has two options to choose from:

  • An equity loan is where the Government lends you up to 20% of the value of a new-build home worth up to £600,000. 

  • A mortgage guarantee helps you to buy a home worth up to £600,000 with a deposit of 5%.

You can find out about the mortgage schemes Nationwide are a part of here. 

Another way Nationwide helps first-time buyers is through our Save to Buy scheme. Our Save to Buy savings account is a dedicated savings account to help you save towards a mortgage deposit. It also gives you an incentive to do so, with a competitive interest rate on a Nationwide mortgage when you’re ready to buy (if you keep the account for 6 months and meet the eligibility criteria*). Plus, you can earn a cashback reward when you complete a Save to Buy mortgage.

*Opening a Save to Buy savings account does not guarantee acceptance for a Save to Buy mortgage. All mortgages are subject to eligibility, underwriting and criteria.

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

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