Are cashback mortgages the best option for FTBs?

Are cashback mortgages the best option for FTBs?
A first-time buyer typically faces a lot of upfront costs, some of which can be unexpected and daunting for someone who has never bought a home before, so it can be handy to have some spare cash available to cover these extra necessities

The latest research from Yorkshire Building Society has suggested that mortgage products that offer cashback are most likely to save first-time buyers money in the long term.

According to the lender, cashback mortgages can work out to be more cost-effective overall, despite often carrying higher interest rates.

A first-time buyer with a 5% deposit who wants to borrow £171,000 would have monthly repayments of £800.69 if they opted for Yorkshire’s 3.84% two-year fixed rate mortgage. With this mortgage they would receive £250 cashback and pay no upfront product or standard valuation fees, so would pay a total of £18,966.46 over the 24-month fixed rate period.
 
Alternatively, a new homeowner borrowing the same amount and opting for Yorkshire’s lower 3.49% two-year fixed rate mortgage would pay just £766.91 a month, but the additional £995 product fee and £205 valuation fee would mean they would pay a total of £19,605.89 at the end of the fixed rate period.

The cashback mortgage would therefore save the first-time buyer £639.43 over the two years, including getting an initial £250 in their pocket once their mortgage completes.


However, the lower rate mortgage is cheaper for those who need a larger loan. First-time buyers borrowing £332,500 or more at 95% LTV, would pay less overall on the lower rate mortgage.
 
Charles Mungroo
, Product Manager at Yorkshire Building Society, said: “Some first-time buyers are happy to make sacrifices on their interest rate to get access to extra funds which they can spend on their new home, and our figures show that this can sometimes be the savvy choice in the long run.
 
We know that while buying your first home is extremely exciting it can also be hard on bank balances. We understand all of our borrowers are individuals and want to help them in the way which is most appropriate for them.
 
A first-time buyer typically faces a lot of upfront costs, some of which can be unexpected and daunting for someone who has never bought a home before, so it can be handy to have some spare cash available to cover these extra necessities.
 
That’s why we offer a range of high loan-to-value mortgage products designed to get people onto the property ladder, which include a choice of no-upfront fees, cashback on completion and free standard valuation options.”

Join our mailing list:


Comments

  1. DanHumphreysDanHumphreys27 February 2017 15:01:57

    It sounds like a good idea. Anything to help the younger generation get a foothold.

    Reply to this comment

Leave a comment



Latest Comments

Tom Allen
Tom Allen 20 Sep 2017

Absolutely agree with you!

view article
RyanGeo
RyanGeo 18 Sep 2017

A sharp correction would be a less dramatic expression to use. That is already underway in certain sectors in Reading where I practice as Chartered Surveyor

view article
sean benton
sean benton 01 Sep 2017

Identity theft is a thread for any profession. So,people should stay alarmed. I once take help from a letting agent and came to know that letting agents are taking every precaution to prevent fraudulent...

view article
Mark N.
Mark N. 30 Aug 2017

We have seen a surge in instructions over August and that should continue into September too.

view article
Chris
Chris 30 Aug 2017

Unfortunately, all the legislation bears its force on Landlords and ignores, naively, the effect of Rogue Tenants on the ability of landlords to keep houses in repair and offer properties for rent at reasonable...

view article
Christian Donovan
Christian Donovan 18 Aug 2017

The write-down on house values, combined with the fall in the GBP saddled the fund?s property portfolio with a 1.4% loss in the second quarter. The shocking amount of $240 million.

view article
Samantha Goodman
Samantha Goodman 11 Aug 2017

Interesting point of view.

view article
Samantha Goodman
Samantha Goodman 11 Aug 2017

It depends on the people, some older adults decide to make a long-distance move in order to live closer to their children or settle in a place with a lower cost of living.

view article
brandonlee10
brandonlee10 24 Jul 2017

The financial ramifications of the triggering of Article 50, the starting gun for Britain's departure from the EU, are far from clear. Buyers will be most cautious in London, given that buying a home in...

view article
IrisJ.
IrisJ. 19 Jul 2017

Great advice, but may I also add that when buying an already built home, make sure you do all of the proper inspections. Most importantly pest inspection because people tend to get surprised when they

view article
IrisJ.
IrisJ. 17 Jul 2017

The third point is, in my opinion, the most important one. People have become too inconsiderate and careless when it comes to rented properties. If a landlord wants to protect their property, regular visits...

view article
cornishalan
cornishalan 10 Jul 2017

Added to the cost of purchasing these village properties are the above average maintenance costs. Particularly where the property is a listed building or requires specialist building skills such as thatching...

view article

Related stories

More articles from Finance

Property Finance Roadshow 2017

4th - 12th October

4 days
6 specialists
4 locations
Free to attend

Click here to register now