FIRST-TIME buyers struggling to manage the hefty costs of getting on the property ladder now have a new option to ease the financial strain.
Skipton Building Society has introduced its Delayed Start Mortgage, allowing borrowers to postpone repayments for the first three months after moving into their new home.
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The lender says this innovative product provides a much-needed “breathing space” for buyers grappling with the extra expenses that come with purchasing and furnishing a first home.
According to Skipton’s research, these costs can quickly spiral, with first-time buyers spending an average of £3,500 on furniture, £2,600 on kitchen appliances, and £1,700 on removal services.
The study also revealed that it typically takes buyers around eight months to recover financially from moving-related expenses, which can dampen the excitement of becoming a homeowner.
To ease the transition, the Delayed Start Mortgage offers fixed rates ranging from 4.78% to 5.4% and is available to buyers with deposits starting at just 5%.
All the deals are fee-free, meaning borrowers won’t have to pay any upfront arrangement fees.
Borrowers can use the three-month repayment holiday to focus on settling into their new home without the immediate pressure of monthly mortgage payments.
What fixed rates are available?
BORROWERS can choose from the following six rates:
- Two Year Fixed, 90% LTV – 4.87%
- Two Year Fixed, 95% LTV – 5.20%
- Two Year Fixed, 90% LTV – 4.78%
- Two Year Fixed, 95% LTV – 5.00%
- Two Year Fixed New Build, 95% LTV – 5.40%
- Five Year Fixed New Build, 95% LTV – 5.20%
Jen Lloyd, head of mortgage products at Skipton, said: “Becoming a home-owner should be one of the most exciting milestones in someone’s life.
“However, our research shows that first-time buyers are struggling and feel the cost associated with the move takes the shine off getting on to the property ladder.
“We hope that this product will help first-time buyers settle into their new home and help ease the strain of the costs that come with buying a first home that go beyond the deposit.”
However, while the mortgage allows you to pause repayments for the first three months, interest will continue to accrue during this period.
This means the total amount you owe will go up slightly, as the unpaid interest is added to your total mortgage costs.
There’s no such thing as a free lunch
Mark Harris, chief executive of mortgage broker SPF Private Clients
How does the mortgage work in practice?
If you sign up for the Delayed Start Mortgage, you won’t need to make any payments for the first three months.
During this time, no payments are required, but interest will still be charged at the fixed rate you originally chose.
For example, if you selected a two-year fixed rate of 5.2% with a 5% deposit, your payments for the first three months would be £0.
After the three month break, your mortgage will continue at the same 5.2% rate until August 8, 2027.
Assuming the interest rate remains the same, your monthly payments for the remaining 24 months of the fixed period would be £1,516.27.
In comparison, if you opted for the same mortgage deal without the three-month payment holiday, your monthly payments would be £1,491 over the same 24-month period.
In total, deferring the first three payments would cost you an additional £606.48 in interest over the two-year period.
Mark Harris, chief executive of mortgage broker SPF Private Clients, says: “Skipton should be applauded for this innovation as it is yet anther example of the building society ethos of actually trying to help first-time buyers with real-world solutions.
“However, there is no such thing as a free lunch.
“Enjoying a mortgage sabbatical will cost around £600.
“Also, it is not the cheapest rate for a 95% loan-to-value fee-free product.”
For instance, Barclays is currently offering a five-year fixed rate deal at 95% loan-to-value (LTV) with an interest rate of 4.84%.
For a £230,000 mortgage, this would result in monthly payments of £1,358, fixed for 61 months.
This figure includes a £115 fee.
How much can I borrow?
A MORTGAGE affordability calculator helps determine how much you can borrow.
It uses your income and expenses to estimate the maximum loan you can afford.
Thes calculators consider your gross income, including salary, bonuses, and other income sources.
It also takes into account your monthly outgoings, such as bills, debt repayments, and living expenses.
By analysing your income and expenses, the calculator estimates your disposable income.
It then uses this information, along with current interest rates, to calculate the maximum mortgage you can realistically afford.
Some calculators also consider your credit score and debt-to-income ratio.
Banks, lenders, broker websites, and price comparison platforms all provide these convenient online tools.
How can I compare monthly mortgage costs?
Mortgage calculators can help you compare the total cost of two different mortgages.
They allow you to input key details like loan amount, term, and interest rate for each mortgage.
You can then compare the monthly payments and total interest paid over the loan term for both mortgages.
Calculators also let you factor in additional fees and incentives to get a more accurate comparison of the overall cost.
This helps you determine which mortgage offers better value, even if the interest rates are similar.
MoneySavingExpert.com’s Ultimate Mortgage Calculator can help you do this in minutes.
Just enter the details of the mortgage products by visiting moneysavingexpert.com/mortgages/compare-mortgage-rates.
How to get the best deal on your mortgage
IF you’re looking for a traditional type of mortgage, getting the best rates depends entirely on what’s available at any given time.
There are several ways to land the best deal.
Usually the larger the deposit you have the lower the rate you can get.
If you’re remortgaging and your loan-to-value ratio (LTV) has changed, you’ll get access to better rates than before.
Your LTV will go down if your outstanding mortgage is lower and/or your home’s value is higher.
A change to your credit score or a better salary could also help you access better rates.
And if you’re nearing the end of a fixed deal soon it’s worth looking for new deals now.
You can lock in current deals sometimes up to six months before your current deal ends.
Leaving a fixed deal early will usually come with an early exit fee, so you want to avoid this extra cost.
But depending on the cost and how much you could save by switching versus sticking, it could be worth paying to leave the deal – but compare the costs first.
To find the best deal use a mortgage comparison tool to see what’s available.
You can also go to a mortgage broker who can compare a much larger range of deals for you.
Some will charge an extra fee but there are plenty who give advice for free and get paid only on commission from the lender.
You’ll also need to factor in fees for the mortgage, though some have no fees at all.
You can add the fee – sometimes more than £1,000 – to the cost of the mortgage, but be aware that means you’ll pay interest on it and so will cost more in the long term.
You can use a mortgage calculator to see how much you could borrow.
Remember you’ll have to pass the lender’s strict eligibility criteria too, which will include affordability checks and looking at your credit file.
You may also need to provide documents such as utility bills, proof of benefits, your last three month’s payslips, passports and bank statements.