First Time Buyer Mortgages

First Time Buyer Mortgages

Firstly, be happy as you are now entering or taking interest of the UK property market. If you have not any missed payments on anything within the last 6 to 12 months and your income is minimum of £14,500, you may be qualified with most direct mortgage lenders. Each application is individually assessed based on a range of criteria, such as:

  • Affordability,
  • Credit habits,
  • Credit Behavior,
  • Credit Worthlessness,
  • Age,
  • Employment Status,
  • Property type

Credit history and credit scoring systems used by direct mortgage lenders, are used differently to assess your mortgage application. Bad or adverse credit history customers are also considered, Please read the blog post to do with bad credit mortgages UK.

The good news is that every mortgage lender is different, and if you have been previously declined, it does not mean you will be declined again by another lender in the UK market. Most or some lenders, are flexible with their decision models and rather use their own credit assessing tools and logic in place to help determine whether you are financially fit for repayments on any of their mortgage products, whether it is residential or buy to let investment purposes.

How much can I borrow?

The amount you can borrow mainly depends on your affordability elements of your mortgage application. Most direct mortgage lenders use the same or similar rule of, 4.5 times your yearly salary. For example, If you earn a gross annual salary of £36,000, you may be eligible to borrow up to £162,000. This means your loan will be £162,000 per term you applied for. Use our Mortgage Calculator to find out your monthly repayments.

Some lenders also take into account other income along with your main income. Other income would be:

  • Benefits,
  • OverTime,
  • Shift Allowance,
  • Bonuses,
  • Holiday Pay,
  • Dividends,
  • Investment Income,
  • Retirement income,
  • Overseas income

The normal calculations is 4 or 4.5 times your main gross annual salary and some direct lenders, may stretch to 5 times your gross annual salary depending on your circumstances.

How much Deposit do I need?

The main problem faced by first-time buyers is their deposit size. Most lenders can loan to the value of up to 95% LTV – Loan To Value. Thus ranging from 70,75,80,85 LTV and now, with the government new help to buy scheme, 95% LTV. This means, you may be eligible to just a deposit of 5% of the house price. For example, if the house purchase price is £200,000, your deposit would be just £10,000.

100% Mortgages are not available anymore and therefore, you are required to put down at least 5%.

What are the Monthly Repayments on my Mortgage?

Your monthly mortgage repayments will be determined when you accepted for a mortgage. It is dependent on the size of the deposit you are or will initially put down and the mortgage interest APR rate.

See our other posts to calculate your mortgage repayments. If you would like a future statement or want to see a breakdown of the monthly repayments for your mortgage, see our fully automated mortgage amortization schedule

 

Residential Mortgage for Bad Credit UK

Residential Mortgage for Bad Credit UK

Residential Mortgages are home loans with a variable or fixed interest rate base on your credit history. Although you may have a bad credit history or bad credit score, you may be eligible for a mortgage. The adverse of your credit history, will be used to determine the interest rate of the mortgage. For example, A bad credit customer, with a score of 400, may be offered with a mortgage at 5.20%. Although it is higher than normal, it is well worth it in order to help you step on to the property. This will increase your monthly repayments from normal to from, £50 plus.

After two years of repaying this mortgage, you may be entitled to remortgage with another or same lender at a much lower rate. I would call it your first stepping stone into the property market and baby steps for a couple of years until your credit history and repayment history is satisfactory without any arrears.

How to increase my credit history / score?

You can ensure the following:

  • Keep all repayments of existing in-store cards, Credit Cards, Loans on time,
  • Do not miss any repayments on any mortgage credit accounts,
  • Close any unused Credit Cards you may have – Unused credit cards reduces headroom of available credit you may be entitled to.
  • If you have a credit card account, repay the balance in full at the end of the month.
  • Try to avoid repayment plans for any credit accounts you may have. Having plans in place to repay a debt can be a serious impact on residential or buy-to-let mortgages.
  • Avoid using any unauthorised or authorised bank overdraft facilities.
  • Avoid using Short term loans, also known as Payday loans or High Cost Short Term Credit. Most direct mortgage lenders see this as a huge risk and may turn down your mortgage application whether it is a residential or a Buy-to-let mortgage.

Your main objective is, to try an show you are paying your creditors on time and show that you have the right behavior when dealing with your creditors. A good 6 to 12 months of a good standing credit record, will help you progress further with your mortgage application regardless or your previous bad credit history.

Which lenders deal with Bad Credit Mortgages

There are many direct lenders who will assist and offer mortgages for those who have a bad credit history or record, also known as adverse credit record.

The following are our recommendations for bad credit mortgages:

 

Buy To Let Mortgages – Application

Buy To Let Mortgages

Buy To Let Mortgages are booming and are popular mortgages product that will help you step into the commercial and investment ladder. The loan to value, also referred to as LTV, ranges from 80 LTV to 50% LTV. Loan amounts vary from as little as £50,000 to over a £1,000,000.

How do you obtain a Buy-To-Let Mortgage (BTL).

  • You will have to be a homeowner with at least one residential mortgage,
  • A landlord/homeowner for more than 6 months, some lenders require you to be a landlord for 12 months or more.
  • Be the over the age of 21 years old.
  • Have a sustainable income of minimum £15,000 or more. Although income is not an issue, direct lenders may still need to see sustainable income in case of any void your investment property may incur.
  • The rental per year is considered when deciding how much money a direct lender would wish to borrow you.
  • A standard or premium valuation, this costs between £100 to £3,000, maybe more depending on the type of valuation you wish to opt for.
  • These types of mortgages will only be used for investment only and therefore, most direct lenders in the UK market, may consider bad credit customers. Criteria for those applicants with bad credit history will vary.
  • Mortgage with a arrears, County Court Judgment (CCJ), Bankruptcy, IVA, insolvent, etc. These should not be within the 24 months from applying for a buy to let mortgage.

Where to buy a good Buy-To-Let property and with a good yield.

The following areas are hot areas with high property yields, 6% or more.

  • Hull,
  • Manchester,
  • Liverpool,
  • Birmingham,
  • Cambridge,
  • Cardiff,
  • Portsmouth,
  • Bournemouth

The following areas are those of lower yields, ranging from 4 to 6% Rental yields

  • London,
  • Gloucester,
  • Bristol,
  • Exeter,
  • Plymouth
  • Ramsgate,
  • Folkstone,
  • Ipswich,
  • Lincoln

Mortgage rental yields are very important, as these yields will need to remain constant or increase if you want a profitable return on your investment.

In the higher rental yield areas, properties may be more expensive but 90% of the time, they will deliver higher yields and therefore, will cover and create profitable gains for your buy to let property.

What are the fees to look out for?

There are many fees to look out for with mortgages, especially Buy-to-let mortgages.

  • Valuation fees are higher,
  • Completion fees are higher,
  • Interest rates are higher,
  • Commercial / Landlord /Building insurance are higher,
  • Stamp Duty stays the same but George Osbourne has realeased a statement in 2015 with regards to an increase of stamp duty. From April 2016, those with more than one property (Second home owners) will face an additional 3% stamp duty on top of the current rate. According to this, those may face fees as high as 8%.

Although, fees are higher than a normal residential mortgage, you should always expect to see profitable gains. If not, it will come as the market develops and grows.