First-time buyers can cash in on cashback mortgages
Mortgages with cashback could pay dividends for first-time buyers, saving them money in the long-term, according to Yorkshire Building Society.
The mutual noted that, although the interest rates on mortgages with cashback tend to be higher, they can work out more cost-effective overall for certain borrowers.
It emphasised that borrowers should always work out which option will suit their individual circumstances best.
The facts that figure
Yorkshire Building Society gave the example of a first-time buyer with a 5% deposit who wants to borrow £171,000. They would have monthly repayments of £800.69 if they opted for the lender’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.
By plumping for the cashback mortgage, the first-time buyer would save £639.43 over the two years, including getting an initial £250 in their pocket once their mortgage completes, which could be useful for paying the costs associated with setting up a new home.
Charles Mungroo, product manager at the building society, explained: “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.
“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.”