10% deposit, 90% loan and up to 5 and half times your income now that’s what I call a good first time buyer mortgage option!
I’m delighted to say that the market seems to be picking up for first-time buyers with a range of attractive products recently launched which enable you to borrow up to 90% of the value of the property by simply putting down 10% deposit.
90% mortgages are not a new concept but what I have found is you tend to pay a lot more for them with rates often over 5%. Some lenders also incorporate additional fees to reflect the perceived added risk such as ‘higher lending charges’, which make the products appear unattractive.
Fortunately, as a whole of the market broker, I’m to access all of the UK lenders to select the best 90% mortgage products, sieving out those whose rates are high and charges penal. First time buyers in particular can be susceptible to ‘gimmicks’ and the clever marketing ploys of lenders to draw the business in without looking at the true value of the product and ultimately end up being stuck on an inferior product with hefty exit charges.
As well as the product many lenders restrict their lending policies at the 90% mortgage bracket. Despite this approach, I can still have homes for mortgages with 5 times your income if that is what’s needed, and you may even be able to achieve higher multiple if you achieve a very good credit score with the lender.
Option 1
First Time Buyers only
Current rate: 4.79% (APR 4.9)
3 year variable rate
90%LTV
Cashback: £250
Valuation Fee: Free
Booking Fee: Free
Arrangement Fee: Free
Min Loan Size: £6,000
Have to complete the Mortgage by 31 May 2013
Maximum loan size: £300k
10% capital overpayment allowed per year without charge
Early Repayment Charge: 2% of Loan + Return of Benefit until 3rd anniversary
Capital repayment only
Good Points
The lender offers an excellent all round service proposition which will facilitate quick completions. Typically, I can obtain a decision in principle in the same day as this lender evaluates cases very quickly. Using this lender also operates one of the most flexible affordability models in the market for applicants with good historic credit profiles, this means that they are a great choice should you need to stretch your income multiple calculation beyond the norm.
Not so good points
If you have had any credit issues past or present they are very unlikely to consider your application. Self-employed applicants must have been trading for at least two years and an average of the net profits rather than the highest year is taken when assessing affordability.
Option 2
Home Purchase and Remortgage
Current rate 4.69% (APR 5.6)
3 year discounted rate
Up to 90% LTV
Cashback: £Nil
Valuation fee scale based on property value (refunded to a maximum of £400)
Booking Fee: £199
Arrangement Fee: £1,100
Minimum loan £25,001. Maximum loan £200,000.
England and Wales only
10% capital overpayment allowed per year without charge
Early Repayment Charge: 3% in the discount period
Capital repayment only
Good points
A traditional building society with a ‘common sense’ approach to underwriting conducted by a person rather than a computer. We have an excellent and historic rapport with the underwriters. This is not just a great product not just for first-time buyers but anyone looking to purchase a property or remortgage one.
Not so good points
Lender is a small building society which means their systems are not as streamlined and automatic as some larger lenders. If you are earn under £40,000 then the income multiple is restricted to 3 ½ times single or joint income. If you earn above £40,000 then four times single or joint income is applied. The lender doesn’t have a formal decision in principle process which means you need to have a property in mind before applying nevertheless a great option which should not be overlooked.
Payam Azadi is a partner at Niche Advice Ltd who are Independent Financial and Mortgage Advisers in London.
Author: Payam Azadi
Payam Azadi is a partner at Niche Advice who are whole of the market Independent Mortgage Brokers. His role is very much focused on Property financing both on residential and commercial lines. To get in contact with him please click here.
