The first 0% mortgage deal was launched in the United Kingdom this year. With this reason, lots of building societies and banks begin to compete for home buyers having smaller down payments. The Welcome Mortgage coming from the Leeds Building Society targets some borrowers who would take advantage of the lesser monthly costs for their first period mortgage.
This provides borrowers the choice of paying without any interest for the first 3- 6 months, enjoying the money to spend for moving costs like stamp duty, and home maintenance.
Nevertheless, home buyers will have to reimburse the capital during this 0% period. Following the end of the interest-free period, the borrowers will revert to pay the full amount of capital and the interest that is fixed for 3-5 years.
Most mortgage brokers said that the deal from the Leeds Building Society can attract new borrowers who search for a wider space for the first few months of mortgage. According to the mortgage broker of SPF Private Clients named Mark Harris, the Leeds product advantage is ideal for people who use bulk savings for deposits and this allows concise interval to buy white goods or perhaps allows them to restore some of the savings.
The deal is only offered to home buyers with at least 10% deposit with a low fee and includes free valuation. The borrower could choose to pay without interest rate for at least 6 months to provide maximum flexibility. In case the borrowers don’t need extra cash, Leeds permits debtors to overpay for at least 10%.
Nonetheless, according to brokers the borrowers must pay high rates for the mortgage flexibility being offered with lesser rates from other lending institutions. For instance, Leeds would charge rate of at least 3.79% for a 3 year fix in which the borrower selects 3-month period without interest. This increases up to 4.20% of the 6-month alternative. The deals are often available to 80% loan-to-value.
As being compared, the Accord Mortgages, as part of the Yorkshire Building Society has at least 3-year fix at 2.59% and comes with a £975 fee.
According to David Hollingworth of London & Country, it is important to distinguish the whole value and make a comparison from other market.
There are other kinds of alternatives for home buyers to look for in order to lessen the monthly costs.
The Clydesdale Bank gives the borrowers the choice to repair the mortgage for 3 years based on the interest. Following this period, borrowers will immediately move to the standard variable rate of the bank which is 4.95% based on capital.
For those borrowers who apply for the product from the Clydesdale’s Low Start must be capable to repay the loan. The deal is available only to those borrowers with equity or deposits of at least 20% more. This has a 3-year fix at around 4.29% at 80% loan-to-value. It has also a fee of £500 for those who borrow lesser than £500,000.
Nevertheless, the highest loan-to-value is 80% and this won’t suit to all borrowers. Another alternative is to remove the shared equity mortgage through the private provider.
This year, the property company known as Castle Trust launched 2.99% 3-year fix intended for the first time home buyers with 10% deposit. During the term of the deal, the Castle Trust will give a loan of at least 20% of property value as borrowers take out a 70 % mortgage from the Kent Reliance.
Although no interest is to be paid on the 20% loan term for 25 years, the Castle Trust will get 40% on the value of the property gain in case the owner sells the property and also the original loan repayment.