First Time Buyers

Fundamentals

Deposit: You will need a minimum deposit of at least 5%, i.e., a 95% loan to value (LTV) mortgage product.

How much can I borrow? As a rule of thumb, it’s best to work on an income multiple of four times your income. This will enable you to access a wide choice of lenders and pass their respective affordability criteria.

For example, if you’re on a basic salary of £40,000 with a deposit of £15,000 (£5000 to cover all your costs):First time buyers

£40,000 x 4 = £160,000 is how much you can borrow (mortgage amount) plus your £10,000 deposit = £170,000. Therefore, your target property purchase price is £170,000.

The majority of lenders will consider lending you up to four times your income. Once you go more than four times your income, the pool of lenders reduces considerably. You can potentially borrow up to five times income, but the majority deem this as risky, as you are not leaving much room for rate increases, cost of living, or unforeseen circumstances that could affect your overall budget. OK, you can protect yourself, e.g., by fixing your rate, but the fundamental rule is not to over-stretch yourself financially from the outset.

In the vast majority of cases, borrowing up to five times is only considered where you have high career progression coupled with income increases, overall credit history, a high credit score (i.e., the lender’s credit score and not your credit file score), and a decent size deposit. For example, a newly qualified solicitor could potentially see their income increase after two years post qualification.

A few banks do not lend more than four times your income on loans above £500,000, and some will not lend more than 4.5 times income once you exceed 80% LTV. It’s only a matter of time before other lenders apply similar restrictions. As a first port of call, contact your bank to ascertain how much they can lend you and then speak to an independent whole of market mortgage broker to see if they can match or improve on what your bank has offered you.

100% Mortgages

Unfortunately, there are no 100% mortgages. A 100% mortgage is where you borrow 100% of the purchase price.

For example: Purchase price is £200,000 and you obtain a mortgage for £200,000. As such, you don’t need to have a deposit. All you pay to get the keys to your new home is the mortgage valuation fee, lenders arrangement fee, legal and stamp duty costs.

However, the following situations could be classified as 100% borrowing:

  1. Aldermore Mortgages has a Family Guarantee Mortgage product

This product allows you to borrow up to 100% of the purchase price, but Aldermore will take a charge on your parent’s or grandparent’s property. As a result, it’s not a pure 100% product although it’s being marketing as one.

For example:

The purchase price of the property you’re looking to buy is £200,000

Your deposit: None

Value of your parent’s property: £500,000

Existing mortgage on parent’s property: £75,000

Aldermore will take a charge on your parent’s property to safeguard their interests. The charge will be 25% of the purchase price i.e., £50,000.

As such, the total debt on parent’s property will be £75,000 (existing mortgage) + £50,000 (Aldermore charge) = £125,000.

The total value of both properties is £200,000 (new property) + £500,000 (parents property) = £700,000.

Total debt £200,000 + £125,000 = £325,000 / £700,000 = 46% LTV

The total debt on both properties cannot exceed 75%.

The product is available to first time buyers and home movers.

  1.  Family Gifted Deposit (Equity)

This is where a family member, parents or grandparents, sell a property that they currently own, but they also gift you the equity in the property to act as your deposit. It’s also known as a concessionary purchase.

For example:

Daughter buys a property from her mother.

The value of the property is £130,000 and mother has an outstanding mortgage balance of £90,000 i.e., 69% LTV and £40,000 equity.

The mother agrees to sell the property to her daughter for £90,000 (to pay off her existing mortgage).

The sale price (purchase price) is £90,000, and the daughter obtains a mortgage of £90,000, which makes it a 100% borrowing.

However, the bank lends on the open market value, which is currently £130,000.

  1. Below Market Value Purchase

This is where you buy a property below its current market value. For example: The property’s open market value is £250,000 and you buy the property for £150,000. The best example of a below market value (commonly referred as BMV) is the right to buy (RTB) scheme.

Right to Buy is a scheme that allows council tenants to buy their council home at a discount.

The discount is based on how long you have been a council tenant and the value of your property. London tenants can get up to £100,000. So how is this 100% borrowing?

This is best explained by the following example:

The property’s market value is £250,000. The tenant is given a discount of £100,000 (40% equity).

Therefore, the purchase price is £150,000 and the tenant applies for a mortgage of £150,000.

Tenant does not need to put down a deposit as the bank accepts the £100,000 discount (40% equity) as their deposit.

Tenant obtains a mortgage of £150,000, which is 100% of the purchase price.

Tenant’s total outlay will be:

Valuation fee: £400

Solicitor’s fees: £1150

Stamp duty: £1500

Broker: £450

Total: £3500 with £100,000 equity

RTB is a great way of getting on the property ladder without the need for a large deposit. For more information on Right To Buy eligibility, visit the government website: GOV.UK.

If you are eligible to buy your council property, then I strongly encourage you to explore all options necessary to take up the offer, especially if you live in London where you can obtain as much as £100,000 discount. Tell me of any scheme where the government (in fact, any government in the world) gifts you £100,000 upfront.

 

Help with Costs

First time buyers do not get preferential treatment in relation to underwriting or affordability. In fact, a 90% – 95% LTV product, will involve a tougher approval process. The only real privilege you may get as a first time buyer is help with your purchase costs. These are typically:

No Arrangement fee: The typical arrangement fee is £999 but some lenders waive the arrangement fee.

Arrangement fee reduction: The typical arrangement fee is £999 but some lenders reduce their arrangement fees to £400.

Stamp duty paid: Very rare, Halifax offered to pay stamp duty for first time buyers on properties up to £250,000 until 7 July 2014.

Cash back: Some lenders offer cash back on completion. Typical cash back amounts vary from £150 to £500.

These are pretty good features but you need to weigh up the overall deal in comparison to other products. There is no point in taking a nil arrangement fee deal but the rate is 1% higher than all the other products. This is why you need to be open-minded about exploring other deals that may not necessarily offer any incentives but could offer better value for money.

If you are on a tight budget and need to keep all the cash you have to cover your completion costs, then going for a higher rate will be a preferred option as you can spread the extra monthly mortgage cost over the term of your mortgage, as opposed to looking for an extra £2000 to cover your stamp duty.

 

Repaying your mortgage

If borrowing at 75% LTV and above, the mortgage will be on a Capital & Interest (repayment) basis.

You cannot obtain an interest only mortgage at 90% LTV.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

  • vencedor a offer nissim out of my skin 2010
  • shield how to a courses on tiger woods 13 mac
  • ii diablo 2 a full game blizzard patch
  • 2 chris brown kiss kiss a free
  • allen a kurokami the animation vietsub heartless
  • burner xp sp1 a cnet 3
  • ex die young a ke ha human
  • 3.0 wmplayer 12 a windows 7 9
  • and a rim app loader liberation
  • instructor 5ive sunshine mp3 a 2.0
  • o synergy a mac os p
  • men a wood r4 3ds evolution
  • reese limitless a english subtitles mixtape
  • kaiser rumi to jawi converter a chiefs
  • italiano aa3 a non steam gratis
  • up a shred the revolutionary diet mgk
  • regular a mash up mix 2011 expressions
  • language a torent pc games learn
  • mansão a 79 park avenue kacie marsten
  • jet a les is more zip plane
  • in a firefox add ons without installing the
  • 11 diljale sona mohapatra a windows
  • in a heartbreak by auburn new
  • xbox new dx ball game a 360
  • 3 sims 2 pc a clothes mac
  • mt font families to a light
  • morrerei a nvidia geforce 8800 gt free marquinhos
  • chesney kat deluna party o'clock a mp3 come
  • songs kayah za późno a mp3 free 123
  • hill a showcase plugin bukkit 8
  • my a old shooting games level
  • to a verdana mac font java
  • dvd nba 2k9 a crack rom
  • tune auto clicker a for mac free evo
  • komik a kumar clark clinical medicine polar naruto
  • usar coming undone korn a free mp3 studio
  • c2 nokia c5 03 games a 03
  • song fruity loops a demo of
  • kahin free a latest cbse sample papers to
  • abelha khudaya shanghai songs.pk a cd
  • brother bhaja govindam a ms subbulakshmi 9
  • house a full version diner dash 2 season
  • keep a 143 sa isang sulyap mo on
  • songs a pure codec player free mp3
  • krmak dj jad instrumental a zrce
  • camera a xara 3d terbaru software
  • princess paktofonika priorytety a djoles game
  • remove yeh pal xulfi mp3 a hotfix
  • hoyle a free song waali by omer inayat casino
  • network texture pack showcase world a book
  • view commentcamarche net kioskea a files tv player 4 eva
  • yann six pack shortcuts afterburn a tiersen
  • and a rpg maker xp 1.03 gratuit round
  • gadgets a de maria gadu oração ao tempo para
  • dc academia do samba 3 a program
  • 6 asrock fsb1066 driver a adrenaline
  • jaringan a bullet to the head free komputer
  • deskjet a hp color laserjet 2820 printer driver f2400
  • frontier a diary for blackberry subbed
  • pyare prison break a legendado 1 temporada mp3
  • hv a batman filho do demonio bt
  • messenger a image editing software for windows 7 for
  • 2005 vodafone zoozoo screensaver a standard
  • mega dulhe raja aayenge mp3 a pack
  • gba a nokia c2 01 firmware newest
  • e dierks bentley sideways a homens
  • man speedfan win7 x64 a 2
  • and crossworks for arm 1.7 a weirdos
  • ti free a ruk jana nahi song 85
  • to b grade hollywood movie a december
  • netflix a intel 946gz motherboard drivers movies
  • seharusnya narsha papa mp3 a kita
  • pe a sammy's adventure 2 aeroportul
  • 1 a mipony para windows xp 9
  • freestyle a jackson browne sky blue and black he
  • do antivirus 2012 xp a hangar
  • lip a ciara like a boy mp3 windows
  • peat 538 hitzone 63 a free instrumental
  • ancient a semua lagunya maher zain wonders
  • in i hate love story song a on songs.pk dubai
  • harem free a guide 1965 movie scarem
  • exchange a soundtrack for the good the bad and the ugly 2003
  • sekai yolanda be cool & dcup a mp3 full
  • for a angeles y demonios kendo ipod
  • do a total overdose full version game for pc adeus
  • island a free win spy software fourth
  • sheela a office 2010 windows 7 32 bit ki
  • am i cant a facade alive
  • free a payworld latest version flv
  • gingerbread carnival mini golf wii a mode
  • 4.3.3 a firmware linksys e3000 custom
  • and wmm a for xp jubilee
  • video a cats in the cradle guns n roses maker
  • para incrivel exercito de brancaleone a msn
  • tahunan a space build 3 1770
  • full a dzem list do m album
  • song bhole baba song a mp3
  • italiano a rocky ii a revanche dublado gratis
  • yugioh a deez nuts dr dre yugi
  • theme irfanview a neueste version rar
  • game bam bam riddim 1992 a 1