ADVICE COLUMN: First time buyers can get on property ladder without breaking the bank

Hello and welcome to this months advice column where I want to explain an exciting development in the mortgage world in the last month which may help first time buyers finally get themselves on the property ladder without having to break the bank to do so.

At Mortgage Advice Bureau, we have access to over 90 lenders across the UK and one of those only available to brokers is Accord Mortgages who, around a month ago, launched a product that allows first time buyers to purchase a property with as little as one per cent deposit.

This could be a game changer for those looking to buy a house but struggling to get a large enough deposit over £5,000.

A lot of first time buyers we speak to have some sort of savings put away but are having to save for a long time, others are lucky enough to get a gift from family to help.

This product opens up a chance for home ownership without potentially having to wait as long to save or ask family for help.

As always with any mortgage borrowing there is standard criteria, credit and affordability checks to be met, however here’s some key information about the new mortgage with Accord:

• – Available to first time buyers only
• – Minimum deposit £5,000
• – Minimum Loan Amount £95,001 and minimum purchase price £100,001
• – Loan to Value 95.01% – 99%
• – Available only on a fic year fixed rate
• – Maximum age at end of the term is age 70
• – Not available on new build homes
• – Houses only, no flats
• – Maximum purchase price of £500,000

For joint applications, only one person must be a first time buyer. Here’s an example of a typical mortgage with this product:

• – Purchase Price – £150,000
• – Deposit – £5,000
• – Mortgage Amount £145,000
• – Mortgage term of 35 years
• – Mortgage payment of approx. £825 per month

Another innovative product on the market, which has been around for about 1 year, is the 100 per cent mortgage by Skipton Building Society, called the Track Record Mortgage.

These mortgages are designed to allow first time buyers who have a track record of paying rent and household bills to finance the entire purchase price of the property, eliminating the need for any deposit.

Some key criteria for this one are:

• – Applicants must not have owned a property in the last three years or be first time buyers
• – Each applicant must be 21 years or over
• – If there is a deposit available, it should be less than five per cent of the purchase price
• – Available on houses and non new build flats
• – Maximum Mortgage Loan of £600,000
• – Applicants must have proof of paying rent for at least 12 consecutive months within the last 18 months
• – The monthly mortgage payment must be equal to or lower than the average of the last six months rental payment
• – Applicants must have 12 months worth of evidence in paying all household bills within the last 18 months

Again this could help people who have been stuck paying high rent and unable to save a deposit but have the ability to show they have met their rent payments and other commitments consistently over a period of time.

There are still hundreds of 95 per cent mortgage products widely available for those with a five per cent deposit.

These products do often come with the highest interest rates as the loan secured against the property is higher and are often higher because it’s increasing the risk to the lender for that borrowing.

For example, if a borrower was to fall behind in their payments and/or the property value was to decrease, the property could potentially fall into negative equity meaning the borrowing outstanding is more than what the property is worth.

It’s important for potential borrowers to carefully consider the pros and cons of these mortgages before making a decision.

You should think about your individual circumstances and how much you can afford and seek advice from mortgage experts so they can help you to make the right choice.

Thank you for reading and see you all next month.

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