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

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
Jo Mullett
Jo Mullett 07 Jul 2017

Here in Swansea, known as the Japanese knotweed capital of the UK, it never fails to amazes me that people have no idea of the potential problems this invasive non-native plant can cause when buying or...

view article
NathanG
NathanG 05 Jul 2017

McDonalds, for example, have been purchasing their real estate on prime locations for years. If something happens to the company they'll have invaluable assets that will be able to save them. We might

view article
Jonah
Jonah 04 Jul 2017

Graham: surprised to see you cite the "extra tax liability" as capping out at ?560. It doesn't - the extra tax is exponential, as it is levied on the income (i.e the inflating level of rental income you...

view article
Dianne Griffen
Dianne Griffen 29 Jun 2017

Be very wary of anyone bringing you deals that they have ?found? and want to ?sell on to you? or ?joint venture? with you on ? you need a proper legal contract for this, involve a RICs surveyor to confirm...

view article
jason hadzikostas
jason hadzikostas 28 Jun 2017

The most important thing is a budget. Students have to manage their spendings in food, house maintenance, books and many other things. According to me, student Studios are the perfect option for them as...

view article
SecomTech
SecomTech 22 Jun 2017

AT Last...This was discussed years ago and there was a move towards landlords registering their bad tenants on a database..(can't remember where) It seems a logical step though our leaders will probably...

view article
Bertrand
Bertrand 02 Jun 2017

How about the Welsh Govt introducing a scheme to protect landlords against "rogue" tenants who are then taken to court for criminal damage to the properties they trash. Pretty unlikely I suspect and politically...

view article
AmberMorris
AmberMorris 25 May 2017

"Please don't pick a novelty tune-playing doorbell. They're not 'fun'. They're stupid." Laughed a lot to this. It's actually true, though.

view article

Related stories

More articles from Finance