Those in Debt Management Plans and 'Mortgage Prisoner's have help!

Debt Management Plans have had a place in the market during the tough times and have assisted many customers in reducing their monthly outgoings.  In brief terms,  the DMP company arranges a reduced monthly payment amount to the customers creditors.  However, some credit companies will see this as a breach of their original terms and may register defaults or an 'arrangement to pay' status position against the customers credit file.  This has been quite a barrier and has often prevented mortgage lenders assisting the customer with finance. 

As lenders compete for business, we are starting to see reviews of criteria options and some will now look to help those in a DMP up to 75% of the property value.  The DMP must be paid off as part of the deal.  If the DMP was paid off more than 36 months ago, then the lender will look at mortgage options up to 85% loan to value.  There are a myriad of terms and conditions, as you would expect, but this is a great step forward and now opens doors to customers that may not have been helped before.

With this in mind, we have also seen at least one lender looking to help those who could be classed as 'mortgage prisoners'.  This could be where a customer is coming to the end of the product term and due to revert to the lenders variable rate.  But since their last mortgage arrangement, new regulations have been implemented and the customer may no longer qualify for the same type of deal. Affordability calculations may have changed or another reason may affect their new mortgage options.  Therefore the customer may be stuck with the current lender and unable to move.  Some lenders have looked at these types of customers and launched 'transitional' mortgage options.  These lenders look at moving customers away from their current lender, on a pound for pound remortgage, with the minimal of paperwork and no requirement to undertake additional affordability assessments where no further funds are being raised (and assuming no income changes since the previous arrangement).  This assumes that the customer has conducted their current arrangement in an exemplary manner of course! This allowance to the lenders from the regulator is only available until 2016, when the EU Mortgage Credit Directive is implemented, so be quick!

Helping First Time Buyers..

First time buyers have been given a huge helping hand this week with the launch of a new 100% mortgage scheme. This works using the process of a legal charge being registered against immediate parental property, effectively using the equity as a guarantee. However, the key point here is that the applicant’s income must be sufficient to cover the whole of the mortgage on their own. Up to 80% of the value of the mortgage is charged to the applicants property and the remaining amount is charged against the parents property. The charge on the parental property, plus any existing mortgage, should not exceed 75% of the total borrowing on that property. What this means is that, for those with good income, supportive and accommodating parents yet little or no deposit, a property purchase is eminently possible enabling clients to get a foot on the property ladder. Good to see such product innovation!

The Government recently announced an increased availability to council tenants enabling more of them to purchase their own properties and this has resulted in a large number of enquiries for Right to Buy mortgages. Right to Buys often result from a local council selling the subject property to an existing tenant and at a discounted price. This discount can be up to £75k (£100k in London) and tenants must have been with the council for five years or more to obtain the maximum discount level. Some lenders will allow borrowing of up to 100% of the discounted sale price, and possibly slightly more if the extra funds are to be used purely for home improvements. If you re-sell your home within five years you will usually have to repay some, or all, of the discount you received. However, re-mortgaging is usually allowed during this time period. This is covered under the term 'Pre-emption Clause'

The other big hitter for first time buyers is through Shared Ownership Schemes, normally provided through designated housing associations. You buy a share of your home, between 25% and 75% of the property value, and pay rent on the remaining share to the housing association. You usually have the opportunity to purchase a bigger share of the property later on (known as ‘staircasing’). Local housing associations must confirm your eligibility in order to join these types of schemes.

These schemes are proving popular in the local area and a wide number of lenders are looking to lend in both scenarios and to a number of differing customer types, so always seek advice.  Especially as some of these lenders may not be household names.  But that shouldn't deter you as their volumes are hugely on the increase and they are great lenders to deal with.