How to secure a mortgage in the current property market
Friday 18 September, 2020
Errol Hall, mortgage broker in Cricklewood, North London reviews all the options available to borrowers in the current property market.
Mortgage lenders ask for larger deposits
Mortgages are hard to obtain at the best of times but what we are seeing at the moment is that mortgages are becoming more difficult to secure. Unfortunately, many mortgage lenders are now unwilling to lend on a 5% deposit and most lenders are not even lending on a 10% deposit. This presents a big issue for some first-time buyers, as many first-time buyers find it difficult to save a 5% deposit but are now being told they need a 15% deposit to buy a property. For many individuals this is unrealistic, and they need alternatives. For more information read my recent article 5 – 10% deposit: What are your mortgage options?
The Help to Buy option allows you to make a 5% deposit and get a government loan
Over the last two weeks I have written about the importance of the Help to Buy option which allows you to put down 5% and get a government loan to form part of your deposit so you receive a mortgage. The problem with this product is it is only applicable to new builds and although the scheme has been extended for existing sales and purchases, the scheme is technically closed for new applications until April next year. For more information read Our mortgage brokers advise on the recently extended Help to Buy scheme.
If you want to purchase an older style property and are finding it difficult to save the deposit, these two schemes tmay help you.
Shared Ownership Scheme
The first is the shared ownership scheme which is great if you are struggling to save a deposit as you can choose to purchase as little as 25% of the property and put down a smaller deposit. This means you could put down a 10% deposit on a 25% share of the property, equivalent to 2.5% deposit on the overall property price. As a result, this helps people struggling to save a deposit to get on the property ladder. However, there are drawbacks and not least is the fact you will have to pay rent for the share you don’t own. Consequently, it is important to understand how much rent is payable on the share you don’t own as when you compound this with service charge, ground rent and mortgage payments, affordability may mean this is not such a viable option. Therefore, shared ownership is a great option if it is your only option to obtain the property but you may want to consider other options first.
Family Springboard Mortgage
The second option which I personally think is a fantastic scheme especially in this volatile market is the family springboard mortgage. This mortgage product actually allows you to obtain a mortgage with 0% deposit. This is fantastic news, but it does involve a family member locking up 10% of the value of the property you are purchasing in a savings account for 5 years. However, unlike a gifted deposit they do get their money back after 5 years if the borrowers maintain payments. The deposit also accrues interest over that period in the savings account. This means they receive interest as they would in a normal savings account. Consequently, family members can help out young first-time buyers who are struggling to save their deposit and they get their capital back with interest.
Errol Hall, mortgage broker in Saffron Walden said: ‘The mortgage market is currently difficult for first time buyers and home movers, but we recommend that if you are looking to secure a mortgage you contact our mortgage broking team for expert mortgage advice. We will assess your personal financial circumstances and recommend the best mortgage product for you. As I discussed in this article the family springboard mortgage gives clients an opportunity to buy a property without a deposit and you can even purchase a flat, where 10% deposits don’t currently exist. However, I understand some clients won’t have family members that are able to lock away the required deposit for five years. In this situation they may want to consider the shared ownership option, as this can work out to require as little as a 2.5% deposit of the overall property value.’
Errol Hall, mortgage broker offering mortgage advice in Hertfordshire, Buckinghamshire, North London and Essex continued: ‘Our mortgage brokers regularly review the mortgage market, so we are well placed to offer you the most appropriate mortgage advice. We are aware of any new mortgage deals or mortgage products for first time buyers, home movers, buy to let investors or anyone looking to re-mortgage. If you take mortgage advice from our mortgage advisors, we can process your mortgage application for you, we can liaise with your mortgage lender and solicitor on your behalf which will save you time. For an initial mortgage consultation to discuss your requirements call our mortgage broking team based in Cheshunt, Hertfordshire on 01707 872000.’
