First-time buyers: Santander offers 98% mortgage – is it worth it?

High street bank Santander has launched a mortgage allowing first-time buyers to borrow up to 98% of the property’s value.

The ‘My First Mortgage’ deal requires a minimum deposit of £10,000 and a repayment term of 5-40 years.

Buyers will still need to meet Santander’s broader affordability checks, including a maximum loan-to-income of 4.45x their salary.

Although the deal offers a larger loan option for first-time buyers, it comes with several restrictions.

The maximum loan value is £500,000 and it’s not available for flats, new build homes or properties in Northern Ireland.

Santander’s 98% mortgage is not available for the self-employed. And if you’re applying for a joint mortgage, both people must be first-time buyers.

The strict eligibility criteria could limit the mortgage’s accessibility. For instance, buyers in regions such as London, where average property prices are £553,258 (according to the latest House Price Index), won’t be able to apply.

It also excludes millions of self-employed workers looking to get on to the property ladder.

Is it worth it?

One of the biggest barriers to getting onto the property ladder is saving up enough of a deposit.

So larger home loans can offer a way to beat high upfront costs. Whether or not this type of deal is worth it depends on your circumstances.

Here’s a breakdown of points to consider to help you decide whether it could benefit you:

Other costs to consider

There are a lot of costs to prepare for when buying your first home.

For instance, you’ll need to have money set aside for legal fees, house surveys, moving costs and furniture once you move in.

For a full breakdown of the process and fees you’ll need to have ready, check out our podcast episode The Truth About Buying Home with Gabriel Nussbaum.

We also dig into how effective the Lifetime ISA is to help you save for a home in today’s property market.