Your mortgage scenario is not out of the ordinary to us!

You might think that your scenario is out of the ordinary and maybe a lender won’t look to assist you.  And you might be right, if you are purely looking at the mortgage lenders on the high street.  But we all know that not everyone fits this ‘ideal client’ picture.

Complex scenarios are on the increase and some of the smaller, more agile lenders are looking to help you.

Some lenders have recently made some criteria changes that include:

-        4 applicants and 4 incomes!  The lender will now accept using 4 incomes on an application.  This is 4.49 x the two highest salaries and then adding one each of the remaining two.

-        Joint Borrower / Sole Proprietor.  So you need Mum and Dads help in getting your first mortgage?  Not a problem.  Lenders will allow you to apply jointly with blood relatives, from both sides if needed, yet you remain the sole owner of the property.

-        Lending into later life – applicants are now catered for up to age 95!  Equity release is not always the right solution and lenders are now offering normal mortgages to those who fit their criteria with regards to affordability and right loan to values.

-        In probation?  Not a problem.  Some lenders will consider.

-        Foster care income?  Ok, this is considered if you have 12 months history

-        Secondary income / Zero hours contracts / Newly Qualified Teacher in first contract period – all considered.

These are just some of the benefits of using an independent mortgage brokerage and especially if they are ‘whole of market’ and have the ability to deal with any lender and are not restricted to a small panel of lenders.

These lenders may not be household names, but you’ll probably find they are extremely helpful and will look at most scenarios, manually, with no credit scoring and have an appetite to lend! Most importantly, their interest rates are mostly very competitive too and make the right ‘impact’!

What's available for your first property purchase?

Looking at purchasing your first property?  First Time Buyers will usually require a minimum 5% deposit, but product availability increases with a 10%+ deposit.  Some lenders will allow a 5% builders deposit, but this must be confirmed as a gift and non-repayable. Some lenders will allow the deposit to come as a gift from the Bank of Mum and Dad, or an immediate family member.  This can include step family, aunts and uncles and is acceptable for first time and subsequent buyers.  The money must be a transparent gift that has originated in the EU and can be easily traced back to the originating source.  A letter from the family member will usually be required and needs to advise the gift amount, relationship the person gifting the monies is to the applicant, confirmation that it is a gift and not a loan and therefore is not repayable, confirmation that they do not currently own the property being sold and that they will not live in the property or have any interest in the property post completion. 

Some lenders may allow a loan of up to 100% of the property value if parents or another immediate family member will act as guarantor or provide additional security. Those guaranteeing, in the main, will need to show evidence of affordability for both their current residential mortgage and the one they are intending to guarantor and possibly allow a charge to be taken on their own home.

All positive indeed and that’s not even touching on the number of Help to Buy, Right to Buy and Shared Ownership schemes available.

Rates have reduced lately in a bid to assist this under-served market segment and criteria is definitely more accommodating.  Income multiples tend to be between 3.75 to 5 x joint income and terms and conditions always apply!  However, Lenders are showing a willingness to assist First Time Buyers and in the current market, that can only be a good thing.

Be aware of who is credit searching you, and when.

We have had a few customers contact us for a mortgage who have been totally unaware that they have had a number of credit searches carried out following recent searches for competitive renewal quotes on their home or car insurance via Comparison Websites.   I’m sure it will be stated somewhere in the small print, but the customers have researched a number of comparison sites and ended up with a similar number of credit searches on their profile.  This, in a small amount of time can have a marked effect on your credit score, and as such, affect your ability to obtain finance, so always read the small print and be aware!  

With this in mind, lenders will look closely at an individual’s recent payment profile, how many recent credit searches have been incurred by financial institutions and more.  The more credit searches you have on your profile, over a recent amount of time, the more likely your credit score will be lower as a result. Try and ensure there are no missed or late payments as these will also decrease your credit score.  In short, your credit search / score is the basis on which most lenders will initially decide whether to lend to you or not.  If you’ve not checked your credit file before, it is well worth a review. Experian, Equifax and Noddle tend to be the main providers used in our market with some offering free initial trials.

Finally, we are seeing a lot of first time buyers turn to the bank of Grandma and Grandad as the bank of Mum and Dad appears to be running a little dry!  There are various ways in which the older generation are helping the first timers.  Some are gifting deposits to help those get on the property ladder.  With most products, the larger the deposit, the lower the interest rate.  Others have agreed to the placement of a collateral charge on the parents or grandparent’s property. This gives a lender more security and maybe a better credit risk rational to the deal, than originally might have been the case.  In some cases, the parents have joined in to provide additional income support and bolster the overall application.  Whichever way required, always explore the options and have a conversation with a professional as there may just be an alternative way to do the deal.

Coming to the end of the mortgage product term. What next?

We're seeing some issues for those coming up to the end of their product promotional rate period, especially where the lender is not offering them anything attractive to stay.  Lenders want to lend, but in some cases are not able to, or may choose not to, even to existing customers.   The simple reason being that the customers may not pass the same lenders new criteria.  Reasons can include, original borrowing on a multiple of income, age, small equity levels in property.  Lending rules have changed dramatically over the last few years and more stringent measures are in place, as well as tougher reporting to the regulator.  Lenders have to be sure the customer can afford their mortgage for a number of years ahead and stress test against possible rate rises. Seek professional advice if you are concerned or are looking for an alternative lender as some might be considered to be hiding behind the rules!

Remortgaging away from your current lender should not be looked upon negatively.  Many lenders will cover the cost of surveying your property, as well as covering the legal fees in transferring your mortgage from one lender to another.  But most of all, you should think of number one as this could save you money on your monthly budgets and, subject to terms and conditions, this can only be a good thing.

Products continue to increase and one of the fastest growth markets seems to be in the Ex-Pat sector. A British Ex-Pat in good employment abroad is favoured by a growing number of lenders who are willing to provide a mortgage to help them obtain a Buy to Let property in UK. The rules are tight but there are lenders who will advance up to 75% of the property value. Incomes usually need to be from a recognised and preferably multi-national business abroad and in a region upwards of £40000 sterling equivalent. A couple of lenders will also allow Ex-Pats to own a residential property in UK and where their family, usually off-spring, will reside pending their return to UK.  

The Bank of Mum and Dad is huge!

First Time Buyers trying to get on the property ladder will turn to the Bank of Mum and Dad to borrow more than £6.5bn this year, according to a report from Legal & General.  This equates to nearly 25% of UK property transactions and similar to being the country's ninth biggest mortgage lender!

The report suggests that the 'millennials' are the biggest recipients with 70% of the funding going to people under the age of 30.   

Although, a report from Prudential has also suggested that Mum and Dad worry about how their money is being spent and would like control over the gifted funds.  One in four worry it could be given to their children's spouses in the case of divorce and one third are mindful their children could squander the gift altogether!

First Time Buyers currently have a good number of options available to them, including mortgages up to 95% of the property value and where possible, parental guarantor mortgages. 

We've also seen a marked increase recently in enquiries for Right to Buy properties and those looking to purchase on a Shared Ownership basis:

Right to Buys are usually via the local council selling their properties to the existing tenant at a discounted price.  This discount can be up to £78,600 (£104,900 in London)  and applicants must have been a public sector tenant for at least three years.  Some lenders will allow borrowing of up to 100% of the purchase price.  If you resell your home within five years you will usually have to repay some or all of the discount you received, however remortgaging is usually allowed in this time period.  There are other schemes available to housing associations and the Government has plans to extend Right to Buy to more housing association tenants.

Shared Ownership Schemes are normally provided through 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 (normally called ‘staircasing’).  Local housing associations must confirm your eligibility in order to join these types of schemes.

Both 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 different customer types, even those who may have had financial credit blips in the past.  So always seek advice.

Big month for Divorces and many rates have dropped..

Happy New Year!  I hope it is a successful and enjoyable one for you all.

Over the Christmas period, we have seen a number of rates drop as lenders seek to attract new business. One example is from the nice people at Virgin Money who have reduced rates on their first time buyer products to under 4.30% for a two year fixed rate.  This is aimed at those with just a 5% deposit and includes a £1,500 cash back to help pay the stamp duty costs on a property up to a value of £200k.  Positive thinking. Let's hope others follow suit.

I do think we will see some fierce lender competition in the opening quarter of the year.  Lenders are preparing for new regulations that will hit the market in late March, and with only a small amount of stock currently available to purchase, the remortgage market especially will be singled out as a quick source of business. 

Sadly, with January often proving the biggest month of the year for divorces, re-mortgaging can be a key part of the separation process.  It is a difficult time for all parties, especially when children are involved, but the need to pay the joint mortgage is imperative.  If the payments are not made, you may find it difficult, if not impossible, to obtain a mortgage in sole names.  For the newly single, many lenders will take in to account child maintenance, working tax credits and so on.   Affordability is key and any lender will base their decision to lend around this.

The bank of Mum and Dad, or even Grandma and Grandad, can also be bought in to consideration.  There are various ways in which the older generation are helping their children.  Some are gifting deposits, to help them get onto the property ladder.  With most products, the larger the deposit, the lower the interest rate. Others have agreed to the placement of a collateral charge on the parents or grandparents property.  This gives a lender more security and maybe a better credit risk rational to the deal, than originally might have been the case.

Whichever way, always explore the options and have a conversation with a professional as there may just be an alternative way to do the deal.

Life does not end at age 70!

You may be surprised to hear this, but life does not end at age 70!  This is despite a majority of mortgage lenders requiring full repayment of their loans at this age.  Normally, a high street lender will allow a mortgage term to last until the applicants usual retirement age.  This used to be 65, officially it's now 67, but the reality is it can be much later.  As such, most lenders increased their maximum age at the end of mortgage maturity to age 70.  However, we all know that people are working a lot longer now and repayment of such a large amount of money may not be possible in these restrictive conditions.  So the option is to raise further finance to repay the original loan or sell the property.  Thankfully, the first option is less onerous as it used to be.  Many non household name lenders will look at lending to customers a lot later in life, assuming the customers can prove  their continued ability to pay.   This can take the maturity age up to age 80, 85 or even 90 and above.  If the customer has a good amount of income, a good amount of equity in the property and can satisfy the lenders affordability requirements, then a lender should be happy to lend.  This almost demands that you seek specialist advice. 

There are a number of mortgages available to those over retirement age.  We’re seeing a lot of first time buyers turn to the bank of Grandma and Granddad as the money well of Mum and Dad appears to be running a little dry!  There are various ways in which the older generation are helping the first timers.  Some are gifting deposits, to help them on to the property ladder.  With most products, the larger the deposit, the lower the interest rate. Others have agreed to the placement of a collateral charge on the parents or grandparents property.  This gives a lender more security and maybe a better credit risk rational to the deal, than originally might have been the case.  In some cases the parents have joined in to provide additional income support and bolster the overall  application.  Whichever way required, always explore the options and have a conversation with a professional as there may just be an alternative way to do the deal.

Parental support might help achieve your dream home

Horsham is a popular location and as a result scores highly in the property price stakes. That said there are many 'would be' homebuyers with an appetite more expansive than their budget and this can be a deal breaker if income and deposits do not meet lender criteria. This is where parental support can help.

The traditional route has been through a parental guarantee, so parents guarantee the full amount lent to the siblings with the lender.  Although lenders no longer favour this so much on a stand alone basis.  Often a lender will prefer a parent to actually join in using their income to support affordability until such time as the original borrowers income has grown sufficiently to assume full responsibility.

Alternatively, the parents may gift the siblings the deposit toward the purchase of the new property. The parents must confirm that there are no monthly repayments, it is a non repayable gift and that they will have no interest in the new purchase.  

Finally, a lender may sometimes accept a charge taken on the equity of a parental property thus alleviating the need for such a large deposit.

It may well be that a hybrid of all three may work too.

Another potential stumbling block may be age with some of the high street lenders still working off a retirement age of 65. So what about the growing population of people working into their 70's and further?  Well there are options and not all based on Equity Release although there are hybrid options are available to cater for most needs.  Many will lend long in to later years, but these will be specialist lenders and not high street names.  In the current climate this is not an issue and you should not be shy of dealing with a non-household name.  Some of these are small regional building societies who have been established over 100 years!

As with any mortgage type you need to ensure that you take proper and in-depth advice before you commit.  Who knows, that dream property in the Horsham area may well be available to you.

Great time to be a First Time Buyer...

First Time Buyers are in the limelight again this week as lenders adjust criteria in order to assist.  The Saffron Building Society offers a 95% loan to value product which used to require the customer to have a twelve months rental history with a professional letting agent.  The lender has now removed this requirement entirely and the product is now available to those living with parents!  Even better news in that this product has no redemption penalties at any time, should the customer wish to change providers.

The ‘Bank of Mum & Dad’ continues to be a major player in a large number of enquiries received at AToM HQ.   Many options are available to first time buyers and parents, including guarantors, cross collateral charges (using parent’s property as additional security and grandparents in some cases!), gifted deposits or equity and more.  It is important to note that, in most cases, a guarantor must be a blood relative.

One such example causing quite a stir is provided by the Coventry Building Society.  Called the ‘step up’ mortgage, this allows parents/guardian or close relative to also add in their income when calculating the loan amount available to the applicants.  The lender then deducts the parent’s annual mortgage commitment and any other credit to reach a total loan available (this cannot exceed 7 x the First Time Buyers income).  The product requires a ten per cent deposit and all parties are named on the mortgage deed.  Other terms and conditions apply, but these show the innovative levels lenders are considering to assist people purchasing properties and, for this, they should be applauded. 

Let’s also not forget that the number of lenders now offering the Governments Help to Buy Mortgage Guarantee schemes has expanded.  Over the last few weeks, we have seen Aldermore, Woolwich (Barclays), Virgin Money and Santander all launch products to assist those with a 5% deposit.   In addition some lenders who are not on the Government Help to Buy register have also been offering good alternative product ranges, including remortgage options.

All in all, the number of options available to those with a small deposit or who are a first time buyer is on the increase and that can only be a good thing for the wider market!

Age is not an issue when it comes to mortgages.

You may have seen last week’s Watchdog where an article covered the maximum age that most high street lenders will allow customers to keep their current mortgage to.   The report, in the main, suggested that on the high street the term of a mortgage must finish when a customer’s age reaches 70.  A small number of lenders went slightly higher with one allowing a maximum age of 80.  But what happens when that age is reached and there’s still a debt outstanding?  Although the top six lenders have these stipulations, there are a further sixty other lenders who offer different criteria.  For example, we recently arranged a traditional style of mortgage for a 92 year old!  If the case is good, affordable and has a good amount of equity in the property, then there is every reason for a lender to carry on to lend to that customer.  You just need to know where to look and be happy to deal with a non – household named lender!

The rate price war has continued this week with a number of lenders lowering their two year fixed rates.   These are now at an all time low and some, for those with a 40 per cent deposit, can now offer rates in the late 1% range!

Finally, we’re seeing a lot of first time buyers turn to the bank of Grandma and Granddad as the bank of Mum and Dad appears to be running a little dry!  There are various ways in which the older generation are helping the first timers.  Some are gifting deposits, to help those get on the property ladder.  With most products, the larger the deposit, the lower the interest rate.  Others have agreed to the placement of a collateral charge on the parents or grandparents property.  This gives a lender more security and maybe a better credit risk rational to the deal, than originally might have been the case.  In some cases the parents have joined in to provide additional income support and bolster the overall application.  Whichever way required, always explore the options and have a conversation with a professional as there may just be an alternative way to do the deal.

Lenders targeting those with small deposits.

According to the Council of Mortgage Lenders (CML), gross mortgage lending fell in January by 9 per cent.  Lenders advanced £10.4bn, compared to £11.4bn in December.  This surprised me as with rates so low, the mortgage market has been buoyant with activity.  AToM reported our third best month, for four years, in January!  February was slightly quieter with a half term and a shorter month making a difference in figures.  However, overall, the continuing price rate war between the high street lenders is putting a huge amount of confidence back in to the mortgage market.

The higher loan to value (LTV) products are making an apparent comeback, especially for First Time Buyers.  We’re also seeing different ways in which a lender is looking to assist.  The most recent is from the Bath Building Society who has launched a 100 per cent home loan.  However, the brief details include the ‘bank of Mum and Dad’ allowing a charge on their own property to the equivalent of 25 per cent of the borrower’s property value.   This is pretty similar to a deal that Aldermore Mortgages recently launched.   Both signs that lenders have an appetite to lend and are being innovative in providing solutions.   Other lenders have lowered rates recently to those with small deposits.  Accord Mortgages recently reduced rates by 0.4% on their 90 per cent products (10% deposit).

With so many rate changes and reductions, lenders will look closely at recent payment profiles, how many recent credit searches you have incurred by financial institutions and more.  So don’t give any excuses not to lend to you.  The more credit searches you have on your profile, over a recent amount of time, the more likely your credit score will be lower as a result.  Try and ensure there’s no missed or late payments as these will also decrease your credit score.  In short, your credit search / score are the basis on which most lenders will initially decide whether to lend to you or not.   The best rates will almost definitely go to those with the best credit scores.   If you’ve not checked your credit file before, it is well worth a review.  Experian and Equifax tend to be the main two providers used in our market with both offering free trials and you can find links to these on the AToM website.