A Mortgage Now - Blog
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The problem with deposits? |
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We are frequently approached by buyers who are not sure how much deposit they need, or if they need a deposit at all.
For the record, as of today they are no Lenders offering mortgages without deposit. The exceptions to this are in the affordable housing markets such as shared ownership and shared equity. (Although the 100% mortgage rate of 12.75% in the shared ownership market does put buyers off). Borrowers should expect to put down a minimum deposit of 10% in the current market. Even this is not a given as most Lender’s require larger deposits for newly built properties (typically 15% for newly built houses and 25% for newly built flats). What if you do not have any cash?
This is an area fraught with difficultly and a sensible buyer will consult a mortgage broker in the first instance. Finally – investors should know that Lenders currently require 25% deposit on buy to let mortgages. |
A taste for the market |
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The big change in the market this quarter?
We are starting to detect a taste for buying back in the market. For the past two years we have seen both buyers and sellers use any excuse to pull out of a deal - buyers concerned about paying too much, sellers concerned about making too little. In the past few weeks that attitude has changed. We find that clients are now keen to buy. First time buyers are coming back into the market, and existing owners are trading up. Now may be the optimum time to make that sale or purchase. |
The end of self certification? |
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Will the last self certified mortgages on the market be banned?
The FSA are looking into the idea of banning mortgages offered on a true self certified basis. In fact they may decide on the matter this week. Will they? Should they? It is not something we are losing sleep about. There are only a handful of true self certified deals left on the market - those left carry unattractive interest rates. If that is the state of self certificiation, why bother with a ban? Answers on a postcard please. |
Mortgage Aparthied? |
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Are we seeing mortgage applicants split into two groups?
It used to be about deposit funds. To get the best rates you needed 10 per cent deposit, then 15, then 25, now 40. In recent months however the self employed have come under the cosh. Time was when a strong credit rating and generous deposit made for an attractive borrower. In recent months this has been good enough for most employed applicants to sail through with no proof of income required. Not so for the self employed. In the vast majority of cases Lenders are now asking the self employed to provide three years accounts. Not so easy if you are newly self employed. Not so practical if your accountant has been helping you to reduce your net income for tax planning purposes. If it is not bad enough missing out on employee pension benefits, now the self employed have their mortgages to worry about too. The answer - keep your credit record squeaky clean, and don't push yourself on loan to value. |
Buy to let in the background? |
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One of the issues we frequently encounter with residential clients is problems due to ownership of rented out properties.
•Problem one – The client does not mention to us that there is a property and mortgage in the background. Why? Because the property is self funding, in other words the rental income covers the mortgage in full. Clients therefore feel they have no need to mention the property or mortgage – they do. All these mortgages will show on the credit search and the new Lender will pick them up. The Lender may decline to lend if outstanding debt is not disclosed at decision in principle stage. •Problem two – The property rental does not cover the full amount of the mortgage. This shortfall will cause a hole in the maximum that the Lender will lend on the residential mortgage. •Problem Three – Some Lenders will deduct to cost of the buy to let mortgage from the affordability calculation but will not factor the rental income in. Others apply aggressive calculations to the figures to load them against the client. How to approach this issue as a client •Deal through a mortgage broker, do not go direct to the Lender. An experienced mortgage broker will know which Lender(s) will accept your particular case. •Make sure the broker is informed of all mortgages in the background – even if you are about to pay them off. (This goes for all Lending) •Be careful if applying for buy to let mortgages at the same time as a residential mortgage as it can affect your credit score. •If you are letting your current property out to purchase another, Lenders have differing views of whether they will accept this and the information they require. Talk to your broker. Overall the message is that if you have more than one mortgage in your name you should approach a qualified and experienced mortgage broker in the first instance. |
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