First time buyer - please advise

thecoolalhambra

Hi There

I am a first time buyer interested in buying my flat, the flat costs £120,000 I have a deposit of £30,000 so will take out a mortgage for £90,000.

I am thinking about 2 possible options for a mortgage:

1) A flexible mortgage (as i can borrow an additional £25,000 from family and friends to keep in the account). But not sure which is the best/cheapest on the market at the moment.

2) A discounted mortage for the first few years and then switch to a felexible mortage. I have seen a good deal offered by HSBC which is around 4% for the 1st year, with no tie-ins.

My partner is not working at the moment but will be in a years time, we will then be able to make increased payments.

I am keen to pay my mortgage as soon as possible which is why the flexible mortgage sounds appealing to me as I can probably pay double my repayments each month (currently quoted around £500 per month), I am also very good at managing my money.

A problem I do have is that I have always paid for everything with a debit card, and don't have any credit cards. Whenever I try to get a credit card or open a store card I get turned down - will I have problems getting a mortgage from any places apart from my own bank?

I find all this very confusing and like others have learnt a lot about mortgages in the past few weeks!!!

All advice would be greatly appreciated.

Thanks.

DavidLaGuardia

If you want a flexible mortage to enable faster payment, you should also know that a lot of ordinary (non flexible) mortgages do offer the facility to repay up to 10% of the balance off as an additional payment once each year, Hence if you can get a lower interest rste they might work out better. You can simply save up any addtional paymments and pay them at the end of the year or any offer period that applies (for exampl if you got a two year discount)
To get the right product , you need to see a broker who has access to the whole market and good filtering software to search this according to your circumstances. There are thosuands of deals in total so no one can really advise you any other way if you genuinely want to consider all the options available.

MarkyMarkD

If your sole reason for wanting a flexible mortgage is so that you can overpay, that isn't a reason for wanting a flexible mortgage.

As DLG says, most non-flexible products (but not all) allow over-payments of up to 10% of the balance without penalty. The only benefit of a flexible is that the repayments may reduce the interest you pay more quickly - but most mortgages with monthly, or daily, interest and the 10% flexibility referred to will do this nearly as well.

And the rate payable on an explicitly flexible mortgage will always be quite a bit higher.

So, my advice (and you should get proper advice if you are unsure) would be to take the best discounted or tracker product you can (or fixed rate - depending how much the certainty means to you) which allows over-payments and calculates interest on at least a monthly basis - and then overpay to your heart's content.

Incidentally, loans which recalculate interest on an annual basis will normally ALSO recalculate when any substantial over-payment is made - normally £500 over your normal monthly payments.