Even on Furlough, lenders may consider you for a mortgage.

Just because you’re on the Furlough Scheme(or have been on it), does not necessarily mean you cannot get a mortgage.  Several lenders have issued guidelines to accommodate those on Furlough and will offer mortgage products to them.  Especially clients looking to stay with the same lender and do what is called a ‘product transfer’.  As with all instances, you should speak to a professional broker who can review the whole market.  Staying with your current lender might be the easiest option, and a broker can arrange this for you, but it does not necessarily mean it will be the best rate and option available to you.  Always shop around, loyalty to lenders should be the least of your priorities as they may not be loyal to you!

This also relates to mortgage payment holidays.  A number of lenders have advised they will consider clients who have taken a mortgage payment holiday, depending on their circumstances.  However, many have said they will not assist if the client is still in the mortgage payment holiday so check the lenders requirements.  And we’ve been made aware of instances where a client has applied to a lender for a mortgage payment holiday, whilst also applying to purchase a new property for investment!  This was not taken lightly by the lender and the mortgage payment holiday had to be repaid, before the new mortgage could proceed.  Mortgage payment holidays really are for those who are having difficulties in the current climate.

We’ve also had recent updates from lenders who will look in detail at self-employed clients who have taken out Bounce Back Loans and CBILS funding.  Both cannot, in the main, be used as a deposit for purchasing premises and the lender will want to look at the self-employed clients cashflow forecasts, management accounts and really understand the impact of COVID-19 on their businesses, specifically with regards to how income will recover in the short to medium term.

Finally, the higher loan to value market is like the ‘hokey cokey’.  Some lenders are in, some are out, some are back in and so on.  One lender even launched a 90% lending product for just 48 hours.  Another has launched a ‘tranche’ of funds for the month.  Once it has been used up, that is it.   This is the benefit of using a broker as we will know what lender will offer such products and monitor the very strict deadlines to ensure you get the right deal for your circumstances. 

Small deposits, LTVs and credit scoring

You may have heard the term LTV a number of times when it comes to mortgages.  This stands for Loan to Value and effectively the definition is the amount you are borrowing compared to the value of the property.   This is especially key when a lender is a assessing your mortgage, as a higher LTV will create more of a perceived risk to the lender.  Mainly due to the fact that if house prices dropped sharply, the lender may not get their full loan amount returned, should they need to repossess the property for whatever reason.  Some lenders will charge a separate insurance for such high borrowing, normally called a Mortgage Indemnity Guarantee or Higher Lending Charge.  As such, you might find that a person who is borrowing 95% LTV and just investing a 5% deposit will attract the higher mortgage rates versus someone investing  a 25% or larger deposit.  Usually these are stepped, so up to 60% LTV, rates will be around 1% cheaper than those borrowing up to 70% LTV.  Then in turn these tend to be 1% cheaper than those borrowing up to 80% LTV,  and this will be cheaper than the next 5% LTV increase, and so on right up to 95% LTV.  So, in short, the more you can save for a deposit, the lower the interest rate you will probably receive from the outset.

This also is the same with credit scoring.  Credit scoring is one of the most widely used means to assess a customers ability to obtain a mortgage.  If you have had a number of recent credit searches for home insurance, car insurance, mobile phones, etc, this may affect your ability to achieve the best rates available to you.  In some cases it might also affect the amount of loan offered to you.  So make sure you have seen you credit report (experian, equifax, noddle), and know what appears on there.  This is your financial history to any lender and should be treated as your CV to a prospective party!  Try and keep payments up to date as anything within the last six years will probably be visible and may affect your ability to borrow.  However, if you do fail a lenders credit score, don't give up.  There are an increasing number of lenders willing to assist (depending on the nature of the decline) and they will also manually assess. A human making the decision, rather than a computer.