Re­search those tempt­ing deals and see if they’re right for you

Yorkshire Post - Property - - PROPERTY - Franz Muelthaler

For those of you who haven’t no­ticed, Leeds Build­ing So­ci­ety be­came the first mort­gage provider in re­cent his­tory to of­fer a zero per cent deal in the UK mar­ket. Termed the Wel­come Mort­gage, it is mar­keted to ap­peal to those who would ben­e­fit from ini­tial lower monthly out­go­ings. Of course the ma­jor­ity of us would ben­e­fit from lower monthly out­go­ings and here is where the catch is. The zero per cent pe­riod is only for the first three or six months of the mort­gage term.

There is no doubt this of­fer will look ap­peal­ing. It is specif­i­cally aimed at peo­ple with smaller de­posits who will ap­pre­ci­ate three or six months of no in­ter­est re­pay­ments, as well as LTV rates from 80 to 90 per cent. How­ever, is this re­ally a good deal?

The plan is you re­ceive a lit­tle bit of fi­nan­cial respite in the first few months and a low ar­range­ment fee of £199, which in­cludes a free val­u­a­tion of up to £339. But af­ter the first three or six months in­ter­est-free pe­riod you re­vert to pay­ing the ap­pro­pri­ate rate of in­ter­est, which is fixed for ei­ther two, three or five years. The min­i­mum rate on of­fer is 3.39 per cent over a fixed term of two years with a max­i­mum 80 per cent LTV and the ini­tial three months in­ter­est free. Af­ter the fixed term ex­pires, the rate shifts to the stan­dard vari­able rate which is cur­rently 5.69 per cent.

As a head­line this looks like the deal of the cen­tury but look be­yond the ini­tial of­fer and weigh up the pros and cons; you would if you were buy­ing a new sofa.

The mort­gage mar­ket is now bustling with a plethora of deals. Just to men­tion a few al­ter­na­tives as ex­am­ples, Ac­cord Mort­gages are of­fer­ing an 80 per cent LTV mort­gage with rates start­ing at 2.44 per cent for a two-year fixed term. RBS are of­fer­ing 95 per cent LTV mort­gages on three-year fixed terms at 4.79 per cent switch­ing to four per cent un­der the Govern­ment’s New Buy scheme. But re­mem­ber to clar­ify ad­di­tional charges such as ar­range­ment and val­u­a­tion fees.

When look­ing at mort­gage deals it is im­por­tant to look at the monthly pay­ment as well as the over­all cost for com­par­i­son and com­pare that across the whole mar­ket. Look at your bud­get very care­fully, three or six months in­ter­est free might sound fan­tas­tic but bear in mind that is a small amount of time over the life of your mort­gage, or even the ini­tial ben­e­fit pe­riod you may choose.

My ad­vice would be to al­ways look at your op­tions, work out what you can af­ford now and in the fu­ture and re­ally get to grips with that fi­nan­cial com­mit­ment over the long term not just the short term.

Even if you have saved a 10 or 20 per cent de­posit have you con­sid­ered the ac­tual cost of buy­ing? There are other ex­penses to con­sider such as stamp duty. This can be any­thing from one to seven per cent of your to­tal pur­chase price – al­though it doesn’t ap­ply to properties un­der £125.001.

There other costs to con­sider such as con­veyanc­ing, val­u­a­tion, sur­vey and ar­range­ment fees. It’s es­sen­tial that you fully un­der­stand your op­tions, as well as your fi­nan­cial ca­pa­bil­ity and com­mit­ment.

It can be con­fus­ing and at times in­cred­i­bly frus­trat­ing re­search­ing and con­sid­er­ing all of th­ese points on your own. I can’t rec­om­mend enough that you talk to a qual­i­fied in­de­pen­dent mort­gage ad­vi­sor. An in­de­pen­dent ad­vi­sor is able to look at the vari­ables, as­sess your per­sonal sit­u­a­tion and find the best deal that suits you.

You don’t have to take a deal with them but it usu­ally pays to con­sult them rather than re­ly­ing on in­ter­net re­search or the rec­om­men­da­tion of your bank or build­ing so­ci­ety, which will have a vested in­ter­est in its own prod­ucts.

Franz Muehlthaler is a mort­gage ad­viser with Hol­royd Miller Properties, Wake­field, in as­so­ci­a­tion with Reach 4.

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