How the Post Office has changed over the years. Once you just popped in for a stamp, a postal order or a chat, whilst now it aims to be a major mortgage player. It is ironic though at a time when most lenders are moving away from the rather rash introduction of interest only mortgages the Post Office is promoting them as available on all their mortgage products. As most lenders back away from high loan to value mortgages the Post Office offers a 90% loan to value mortgage for first time buyers.
Those with a deposit of just 10% available will be eligible for a fixed rate mortgage of two, three or five years. The rates are obviously higher than those mortgages which have a lower loan to value requirement but the Post Office do allow for overpayments even within the promotional periods which is a bonus. Borrowers may repay from £500 up to 10% of the annual yearly balance without incurring a penalty.
Figures show that most first time buyers underestimate the costs of taking on a mortgage and go way over their personal budgets, resulting in additional debt as well as the new mortgage. Not enough consideration is given to the costs associated with obtaining a mortgage or establishing a new home. The fees which are attached to the Post Office mortgage are clear for the buyer to understand. The arrangement fees can be added to the loan which means that interest is paid on the fees, but the lender does advise its borrowers to try and pay them upfront to avoid this.
The standard arrangement fee for each of the first time buyer 90% loan to value mortgages are a standard £995. In addition there is a lending fee of 195. Most of the fixed deals include a free standard property valuation and the best thing for first time buyers is that no mortgage indemnity guarantee (MIG) is required. This represents a good saving for buyers who are almost always required to pay for a MIG, with deposits of less than 20%.
The Post Office mortgages can be taken as capital repayment or interest only. If the latter is chosen there must be a repayment vehicle in place to run alongside the mortgage. It is far more prudent for borrowers to elect for a capital repayment mortgage and thus have the security of the mortgage principal reducing over time.
Fixed rate offers will be subject to change but currently start at 5.45% on 2 years fixed and 5.99% on 5 years. More competitive interest rates are available but for those looking for a mortgage offering only 90% loan to value the Post Office is well worth considering.
Source: The Post Office.