Innovative mortgage deals to get you on the property ladder
WE are first time buyers and have managed to save a healthy £10,000 deposit. Will it be enough?
Ordinarily, I would advise you to save more to give you access to better deals. However, I do have better news for you. The start to 2013 is seeing a wave of innovative mortgage deals on the market, some of which could accommodate your deposit.
Barclays have launched a first-time buyer focused Family Springboard Mortgage which is available to borrowers with only a five per cent deposit. Unique to the intermediary market, it is a 95 per cent LTV three-year fixed rate. The scheme recognises that first time buyers, and those wishing to move up the property ladder, are increasingly looking to close family for assistance with securing a mortgage. The scheme allows this with the tempting offer of a secure investment that will earn interest.
It comes in two parts. The borrower takes out a Family Springboard Mortgage while the helper opens a Helpful Start account. The helper then puts 10 per cent of the house purchase price into the Helpful Start account.
After three years, the helper gets their money back with interest and the mortgage becomes a lifetime tracker at 3.99 per cent plus base rate. This could be a great proposition if you have no means to save more money and can find a guarantor. For instance, if your parents have money in various savings accounts we can guess they’ll be earning little interest. Helping you could be an alternative way to invest and with the money back after three years, with interest, what is there to lose?
However, at 4.69 per cent it’s not the best deal on the market and if you could save more you would certainly find a better deal. You also need to be aware that through the Family Springboard the Helpful Starter Account may be at risk if any contractual monthly payments on the connected mortgage are missed.
Can the Government’s Funding for Lending Scheme really help me get on the property ladder?
There has been much scepticism primarily because of the consumer trust concerning banks. The fund incentivises banks and building societies to boost their lending by reducing bank funding costs.
However, it does depend on your own personal situation. There is no doubt there is more lending. The Bank of England has reported that mortgage availability has soared to its highest level since the onset of the credit crunch nearly five years ago.
This increase isn’t necessarily where it is needed though. Proportionally, it hasn’t had a huge impact on the increase of 90 per cent mortgage availability. There is no doubt if you have a healthy 20-25 per cent deposit, a secure job, good credit rating and no debts then you’re in a really good position to secure a great mortgage.
The choice is less for 90 per cent mortgage options but there are a few initiatives. The Government’s FirstBuy shared equity scheme has seen property developers and the Government team up to provide 20 per cent equity mortgages so that only a five per cent deposit and a traditional mortgage to pick up the remaining 75 per cent is needed. This is available on selected new houses only and comes to an end in March.
Another Government and property developer initiative is NewBuy, a special indemnity fund, which sees the Government underwrite the mortgage. It’s applicable to new builds only and requires a five per cent deposit. Various lenders have signed up to offer NewBuy mortgages offering 95 per cent LTV loans so it’s a compelling offer if you have a limited deposit. I would advise you discuss these incentives with an independent mortgage adviser who will be able to clear any confusion you may have and find the right deal for your personal situation.
Franz Muehlthaler is mortgage adviser for Holroyd Miller Properties in association with Reach 4 Mortgage Solutions