First time buyers have been given a huge helping hand this week with the launch of a new 100% mortgage scheme. This works using the process of a legal charge being registered against immediate parental property, effectively using the equity as a guarantee. However, the key point here is that the applicant’s income must be sufficient to cover the whole of the mortgage on their own. Up to 80% of the value of the mortgage is charged to the applicants property and the remaining amount is charged against the parents property. The charge on the parental property, plus any existing mortgage, should not exceed 75% of the total borrowing on that property. What this means is that, for those with good income, supportive and accommodating parents yet little or no deposit, a property purchase is eminently possible enabling clients to get a foot on the property ladder. Good to see such product innovation!
The Government recently announced an increased availability to council tenants enabling more of them to purchase their own properties and this has resulted in a large number of enquiries for Right to Buy mortgages. Right to Buys often result from a local council selling the subject property to an existing tenant and at a discounted price. This discount can be up to £75k (£100k in
) and tenants must have been with the council for five years or more to obtain the maximum discount level. Some lenders will allow borrowing of up to 100% of the discounted sale price, and possibly slightly more if the extra funds are to be used purely for home improvements. If you re-sell your home within five years you will usually have to repay some, or all, of the discount you received. However, re-mortgaging is usually allowed during this time period. This is covered under the term ‘Pre-emption Clause’ London
The other big hitter for first time buyers is through Shared Ownership Schemes, normally provided through designated housing associations. You buy a share of your home, between 25% and 75% of the property value, and pay rent on the remaining share to the housing association. You usually have the opportunity to purchase a bigger share of the property later on (known as ‘staircasing’). Local housing associations must confirm your eligibility in order to join these types of schemes.
These schemes are proving popular in the local area and a wide number of lenders are looking to lend in both scenarios and to a number of differing customer types, so always seek advice. Especially as some of these lenders may not be household names. But that shouldn’t deter you as their volumes are hugely on the increase and they are great lenders to deal with.