Getting your foot on the first rung of the UK property ladder can be tough, even at the best of times. So, if you are a single parent, it can seem like a mountain to climb when it comes to saving up and having a mortgage application accepted. As a single parent, it can be financially challenging, often because your childcare requirements mean that you are unable to seek full-time employment.
Even if you have the deposit set aside ready to buy your family’s first home, many mortgage lenders simply won’t accept your application if your income is too low or irregular to be classed an acceptable risk. However, there are mortgage brokers out there that can connect you with lenders – either mainstream or private – that have the risk appetite to lend to single parents. Some will even accept child benefit payments as part of your monthly income, which can be a huge weight off your mind.
However, the next big decision to make when you find a lender that accepts your risk profile as a first-time buyer is to choose between fixed rate and variable rate mortgages. Most variable rate mortgages have their interest rates pegged against the current interest rate of the Bank of England. This means that your rates can rise and fall as per inflation throughout the UK. In contrast, fixed-rate mortgages offer exactly what it says on the tin – a mortgage with a fixed interest rate for the duration of the initial mortgage term. What type of mortgage is best for single parents?
The benefits of variable rate mortgages
At the time of writing, the biggest benefit of looking for a variable rate mortgage is that interest rates have been at their lowest point for decades. Compare it with the early 1990s when interest rates were as high as 15%; interest rates are currently at 0.75% and are showing no signs of escalating too high any time soon. Low-interest rates mean low monthly repayments, but you are of course taking the risk that interest rates could rise significantly in the future, increasing your monthly repayments to potentially unaffordable levels.
The benefits of fixed rate mortgages
If you are most concerned about the stability of your monthly income, having a fixed mortgage repayment is helpful in terms of budgeting. You won’t get any nasty surprises should the Bank of England vote to increase interest rates, either. A fixed rate mortgage stays the same throughout the agreed term, regardless of any outside influences. It is worth noting that most fixed-rate mortgages do have extortionate exit fees which can act as a deterrent for anyone looking to change mortgage or pay off more.
Ultimately, there is no right or wrong answer when choosing between a fixed rate and variable rate mortgage. As a single parent, financial stability is what we all crave. A fixed mortgage could just give you that assurance and security you need to live your life day-to-day and make your dream to become a property owner a reality.