Hybrid mortgages helps first-time buyers 'keep costs down'

First-time buyers worried about the initial outlay of money and future risks of taking out a mortgage should look into the possibility of taking out a hybrid mortgage.

A hybrid mortgage merges the benefits of adjustable-rate mortgages with fixed-rate mortgages. For example, a mortgage may have an adjustable-rate for the earlier years before automatically converting to a fixed-rate after a predetermined number of years.

Catherine Hearnden, company director at the independent financial advisor MyMortgageDirect, believes hybrid mortgages are a great option for first-time buyers.

"I think that it will keep their costs down now, but it will stop them spiralling in a few years if rates do go up. It is an excellent option," Ms Hearnden explains.

There is often a cap on the fixed-rate part of the mortgage, which means that there is less financial risk.

The recent spike in first-time buyers looking to get on the property ladder has spurred many lenders to begin offering hybrid mortgages as they are more affordable and less risky than other types of mortgages.

This surge comes as the Stamp Duty holiday nears its end.

From March 24th the Treasury will reinstate the one per cent charge on first-time buyers purchasing properties up to £250,000.

As a result, estate agent Haart has been receiving 5,000 registrations every week since Christmas from first-time buyers looking to take advantage of the savings available.

"The news that the Stamp Duty relief is to end has really focused their minds and we're seeing lots of people contacting us keen to move into their first home, particularly at the lower end of the scale, namely the sub-£150,000 market," says Russell Jervis, managing director of Haart.

However, buyers should not rush into taking out a mortgage. Ms Hearnden stresses that although hybrid mortgages are not complicated, they should seek guidance about the particulars of the deals available.

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2012-02-07 12:28:19 © Moneyextra.com