Is It Still Hard To Get A Mortgage?
A lot of people we speak to are of the opinion that it is hard to get a mortgage, they have usually read in the press that lenders are not lending and that it is only people with big deposits that can buy property. I can clarify that lenders are lending and that lenders are only asking for 5% as a deposit and it is affordable.
Let’s look at some typical first time buyers who jointly earn £35k and have now repaid all unsecured debt. They have managed to save up £7,500 and wish to buy somewhere for £150,000. Based on a loan of 95% Halifax and RBS who have both signed up to the Help to buy scheme will lend these clients the amount they need. Furthermore the repayments can potentially be placed over a terms of up to 35 years and repayments would therefore be approx. £718pm putting it on par with the amount of rent you will pay on a similar property of similar value.
The main reasons a lender will not offer a mortgage to a new client:
- Poor credit history – Where a client fails the credit score we will advise how a client can improve their score. Most lenders quite rightly won’t lend to a client that can’t manage their debt.
- No deposit – The days of 100% mortgages are long gone and it is only through government intervention that 95% mortgages are and will be more freely available next year under the help to buy scheme.
- Affordability – With the mortgage market review implementation next April all lenders will use an affordability calculator that takes into account outgoings some of which may include pension contributions, child care costs as well as unsecured debt. This is more responsible lending than an income multiple of 3 to 5 x gross income. If a loan is deemed not affordable by the lender then it will be for good reason.
- Interest only requirement – The market has changed its stance on interest only. These mortgages are offered by a few lenders who will accept the sale of the mortgaged property as the repayment vehicle and by many more where there are investments such as savings, stocks and shares or a pension lump sum sufficient to repay the loan. It is not acceptable to just want interest only as it is ‘more affordable’ .
The mortgage and housing market are currently going through a revival and our business levels have increased significantly in 2013 compared to the levels of business we were writing in 2008 to 2012. We do not see any reason to believe that these levels of business won’t continue into next year.
There are a number of new lenders who will enter the market next year some of which who are in the public eye such as TSB (previously Lloyds TSB) as well as some niche lenders that will add some further competition to some of the more specialised areas of lending.
So next time you read in the press or someone at work or down the pub says mortgages are hard to come by you will know better. By using a mortgage broker we can ensure the application is made to the correct lender, first time and that we secure the funds you need to make your next property purchase.
Fox Davidson are contactable on 01173 736200 or by email email@example.com