Mortgage perks: Are they worth considering?
An increasing number of mortgages with incentives have been released onto the market providing borrowers with additional features to consider on top of the rate.
According to the latest analysis, mortgages offering cashback, a free valuation or free legal fees, have increased year on year and can offer some financial respite on upfront costs for cash-strapped borrowers.
Moneyfacts.co.uk, which carried out the research into incentives, revealed more lenders were offering £1,000 cashback.
It threw the spotlight on Barclays Mortgage, Cumberland Building Society, Nottingham Building Society, Principality Building Society, Post Office Money and Virgin Money.
Meanwhile, analysts at Moneyfacts revealed the number of deals which offered a free valuation had risen by more than 400 in the last year and there were over 100 more products offering free legal fees.
But it’s important to weigh up the benefits before proceeding with a mortgage purely based on the perks.
Rachel Springall, finance expert at Moneyfacts.co.uk, said: “Borrowers looking to appoint their own solicitor may prefer to choose a product that offers cashback instead of a package that includes the incentive of free legal fees or a free valuation.”
She also pointed out some borrowers preferred to avoid a basic valuation on a property – something which usually involved a drive-by or analysis of recent sales information on a valuer’s system – because they felt the property could be overvalued. In this case many borrowers often preferred to instruct their own surveyor to gain a more comprehensive insight.
The group could benefit most from incentives are first-time buyers, who are likely to have used most or all of their disposable cash for a deposit or on other costs.
Springall recommended a product which incorporates a ‘generous package of incentives’ for those just stepping onto the property ladder. She said, of all the 1,518 cashback mortgage deals on the market, well over half were available to first-time buyers who had a deposit of 20% or less. Some deals had cashback of up to £1,500 available.
Springall added: “It is worth keeping in mind not all of the products that include the most generous incentive packages will necessarily have lowest interest rates, so although these deals could offer upfront savings, in the long-term, the higher monthly repayments could far exceed any initial savings.”
Anyone in doubt over which deal to choose is advised by Moneyfacts to get independent financial advice to ensure the deal suits their needs, both upfront and for the full length of the mortgage.
Article by Kate Saines for www.whatmortgage.co.uk