First Time Buyers
A guide to first-time buyer mortgages
Types of mortgages
The interest rate, and therefore your monthly payment, is fixed for an agreed time. Usually, between 2-5 years, but longer fixed-rate deals are available.
If you want to know exactly what you’re paying each month, which is great for budgeting, a fixed rate may suit you better.
Standard variable rate mortgage
These follow the lender's basic rate of interest and don’t come with any discounts. The amount you pay will change depending on the basic rate.
These are still variable-rate mortgages but these follow the Bank of England’s base rate. They are usually set at a certain percentage above the base rate.
Discount rate mortgages
Like a tracker mortgage, these follow the base rate, however, these are set at a certain percentage below the base rate.
A variable rate mortgage is linked to the lender's standard variable rate but with a fixed upper limit. So no matter how high the interest rate climbs, your monthly payments won’t go above a certain limit.
Some lenders offer offset mortgages that are linked to savings accounts from the same provider. They can give you a more competitive mortgage rate by using your savings to reduce the amount of interest you pay.
Launched by Skipton Building Society, the 100% Loan to Value (LTV) mortgage is designed for renters looking to buy. This deposit-free mortgage is for first-time buyers who can provide evidence of affordability and have a strong track record of rental payments to borrow up to 100% of a new home without the need for a deposit.
Mortgage jargon buster
Find all those mortgage terms confusing? You’re not the only one.
Agreement in Principle (AIP)
A document from your mortgage lender to show exactly what you are able to borrow.
APR (Annual Percentage rate)
The APR is how much your mortgage will cost over the year, during the term of your mortgage. They are there to help you compare different mortgages.
A setup fee for your mortgage. Most lenders will let you add this to the loan, but if you do you’ll pay interest on for the whole mortgage term.
The rate of interest set by the Bank of England. Tracker and Standard variable rate mortgages follow the base rate.
A mortgage expert who can help you find the right mortgage. Most get paid commission by the lender, but it’s worth asking how they’ll get paid before you start.
A policy that covers you for damages to the structure of your home – the bricks and mortar, not your possessions. You’ll need building insurance when you take your mortgage out.
The amount of money you borrow to buy your home.
This is the name for the legal process of buying and selling a home. Your solicitor will handle all your conveyancing needs.
The amount you put down towards the cost of your home.
This is the amount of the property that you own. For example, your deposit plus whatever capital you’ve paid off your mortgage is your equity.
A mortgage rate that stays the same for a fixed period. Fixed-rate mortgages are good if you want to know exactly what you’ll be paying each month.
All Keepmoat homes are freehold. It means you own the home and the land it’s built on.
LTV (Loan to Value)
Relates to how much of your home is paid for with a mortgage. LTV is usually worked out as a percentage. So for a £100,000 home, if you paid a £10,000 deposit and borrowed £90,000 the LTV would be 90%. Better mortgage deals are available for those with a lower LTV.
Mortgage Payment Protection Insurance (MPPI)
This is an insurance policy that covers your mortgage payments if you are unable to work due to accident, sickness or unemployment.
The length of time you take your mortgage over, typically 25 years.
Standard Variable Rate
The default interest rate your lender will charge once your fixed rate comes to an end. The interest rate could be higher or lower than your fixed rate.
The interest rate of your mortgage tracks at a set margin above or below the Bank of England base rate.
It may sound a bit odd when buying a new home but your mortgage lender will need to make sure the home you’re buying is worth the money you want to lend.
Variable Rate Mortgage
As the name suggests, the rate of interest you’ll pay will go up and down depending on your lender's standard variable rate