Everyone loves a bargain or a discount, especially when it comes to property and saving a large chunk of money! Many vendors have a whole goody-bag of discounts to tempt first time buyers, who they generally view as hassle-free purchasers, but what are they, how do you get them, and are the really as good as they look?
As with any financial offer or “deal” it is always a good idea to take some experienced advice to find out if the offer is as good as it seems. Ascot Mortgages can help you understand how any property discounts work, how it might affect the mortgage, and whether what seems like a good deal does not actually end up costing you money or incurring penalties or costing you more further down the line.
The types of discounts usually offered:
Cash based offers
Some of first time buyer mortgage offers can be cash-based: one mortgage provider offers a £500 discount on some products if you have not had a mortgage in the last three years. Some lenders will give a cash back amount when the mortgage has been completed, which can be very welcome by cash-strapped first time buyers, who are most likely to feel the pinch at the end of the buying process!
Negotiating a lower purchase price
Possibly the most common first time buyer discount, as vendors are also keen to get first time buyers’ business. This is typically because of the fact that they usually indicate a quick, hassle free, sale, and this puts the first time buyer in a very strong negotiating position with regards to the purchase price of the property. Read more advice for first time buyers here.
Discounted initial mortgage repayments
Some lenders offer a discounted rate mortgage for a set period of time, typically lasting between two and five years. The discount is usually taken off the Bank of England base rate, or the lender’s standard variable rate.
A gifted deposit is where the deposit, or the equivalent is paid towards the mortgage by the property developer. There have been some recent changes to the way mortgage lenders treat gifted deposits which means private vendors are no longer able to provide gifted deposits to their buyers.
It is important that if you are offered a ‘gifted’ deposit from the developer, you will need to inform the mortgage lender what you intend to do because some lenders may still require a deposit from the buyer in addition to the gifted deposit. For example the buyer pays the minimum deposit (for example, 5%) and the gifted amount is added on (so, with a 10% gift, the total deposit put down would be a healthy 15%).
Reduced or waived arrangement fees
Other lenders will waive any arrangement fee which in some cases can be in excess of £1000, which means you save on the actual setting up of the mortgage.
Solicitors fees paid
Some estate agents will create a deal whereby the vendor pays for the buyers legal fees as part of the deal.
Valuation fees paid
There are lenders who will either pay for the property to be valued, or will reimburse you after the valuation.
What’s the catch?
There are often certain stipulations with these offers though, and some lenders ‘lock in’ first time buyers who take advantage of these, often generous, discounts. This means that, if you are locked in, switching to a better deal later will incur an early repayment charge, which can often wipe out the cost of the saving in the first place. This doesn’t mean that offers that don’t lock you in, or without early repayment charges, don’t exist: they do, but you might need to seek them out. This is why using a broker like Ascot Mortgages is critical in getting you the best deal.
It is important to fully understand the finances of these deals, and which one works best for you. Ascot Mortgages can help with this, because they are market leading mortgage brokers with excellent connections to lenders, meaning that they often find out about new offers quickly. They can also make sure that you are being tempted into a mortgage that is actually going to save you money, rather than one where it looks tempting, but in reality might work out expensive over the mortgage term.