Smaller deposits ''good for FTBs''
Tue 20th Nov, 10:57:49 GMT
First-time buyers could save on their mortgage deal if they put a four per cent deposit down on a property instead of making a five per cent payment, it has been suggested.
According to personal finance website Fool.co.uk, buyers who fork out five per cent of the value of a home they are interested in as a deposit could be liable for higher lending charges (HLCs) of around 1.6 per cent of the amount their loan is worth.
However, because of a lending loophole, borrowers who pay a deposit of less than five per cent are not eligible to pay HLCs and can cut how much their mortgage deal will cost them.
Jane Baker, mortgage expert at Fool.co.uk, said: "It is possible to put down a smaller deposit and still pay less.
"This goes against the grain as intuitively it makes sense to pay the largest deposit you can manage. But remember, it''s essential to look at mortgage deals in their entirety taking into account all the costs that apply," she explained.
Taking advantage of this loophole could provide welcome relief to stretched first-time buyers.
Recent figures from the Council of Mortgage Lenders revealing that the affordability of home ownership has continued to worsen for those looking to get onto the property ladder.
According to personal finance website Fool.co.uk, buyers who fork out five per cent of the value of a home they are interested in as a deposit could be liable for higher lending charges (HLCs) of around 1.6 per cent of the amount their loan is worth.
However, because of a lending loophole, borrowers who pay a deposit of less than five per cent are not eligible to pay HLCs and can cut how much their mortgage deal will cost them.
Jane Baker, mortgage expert at Fool.co.uk, said: "It is possible to put down a smaller deposit and still pay less.
"This goes against the grain as intuitively it makes sense to pay the largest deposit you can manage. But remember, it''s essential to look at mortgage deals in their entirety taking into account all the costs that apply," she explained.
Taking advantage of this loophole could provide welcome relief to stretched first-time buyers.
Recent figures from the Council of Mortgage Lenders revealing that the affordability of home ownership has continued to worsen for those looking to get onto the property ladder.
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