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How to get a first time buyer mortgage

Taking out a mortgage for the first time buyer has become increasingly harder since the credit crunch. With the slowdown of the economy, the rules have become more stringent and lenders too have become more particular regarding whom to lend to. There are a few new schemes available too.

First time buyer: Taking out a mortgage

First time buyer mortgage

First time buyer mortgage

The things that you would require to take out first time buyer mortgage are:

  • Good affordability – In order to take out a mortgage even if it is a first time buyer mortgage, it is important for you to have high affordability. This will mean that if you have high affordability, you will also be able to manage to make the timely mortgage payments. Lenders prefer people who have at least more than average or high affordability.
  • Good credit score – It is important for you to have a high credit score so that you can get a mortgage with low interest rate. Without a high credit score, you may not be able to get low interest mortgages.
  • Clean credit report – In addition to high credit score, you should also have a clean credit report with no missed payments. When you apply for a mortgage, lenders pull your credit reports. If you have missed payments, lenders tend to believe that you are not a responsible borrower. Thus, your loan application may get rejected. Check your reports at Experian, Equifax and Call Credit
  • Low debt to earnings ratio – In order to take out a mortgage, you are also required to have a low debt to earnings ratio. This is checked by lenders to decide if you are a responsible borrower.


Other than having these, in order to obtain a mortgage, you will be required to:

  1. Check out different offers – In order to take out a mortgage, it is important for you to check out the different offers by various lenders. You will have to compare and then decide which the best offer is for you.
  2. Use a mortgage calculator – In order to decide on the cost of a mortgage, you can use a mortgage calculator. This can help you in determining which mortgage you can afford to take out.
  3. Get pre-approved – It is good for you to get pre-approved for a mortgage as this can help you to obtain a loan easily enough. Use an a recommended advisor

So, these are the things that you will be required to do in order to take out a mortgage to buy a home for the first time. Look into new schemes like NewBuy and Helpful Start that have recently been launched

For impartial and honest advice and a FREE consultation get in touch with us info@PropVestment.com

 

NewBuy scheme: What it means for first time buyers

Today Monday 12th March the NewBuy scheme was launched.
The NewBuy scheme assists buyers who have a deposit of at least 5 per cent to buy a new build home. This is a smaller deposit than is normally required. The scheme will allow more borrowers to secure up to a 95 per cent Loan to Value mortgage on new build residential properties from participating builders in England.

What NewBuy means for FTBs

The Government is backing the scheme to help those home buyers who have found themselves excluded from sections of the market because they don’t have a large enough deposit.
NewBuy is expected to assist up to 100,000 households in buying a new home. All mortgage lenders and house builders operating in England are welcome to join the scheme.
But like many other schemes before, will this actually have a significant impact on the property buyer and will it mean first time buyers are helped.

How NewBuy works?

Developers pay the lender 3.5% of the purchase price of a new-build property, while the government provides an additional guarantee of 5.5%, allowing mortgage providers to lend to people with a lower deposit than they would normally need as it reduces the risk.
This effectively means the lender lends a maximum of 91.5% LTV but is secured with an extra 5.5% from the Government.
The scheme should increase the availability of mortgages with a high loan-to-value (LTV) and the government says it will help up to 100,000 first-time buyers.

Do you qualify?

  • The scheme applies to buyers of new-build homes in England if the developer is taking part in the scheme.
  • The purchase price must be £500,000 or less
  • It must be a standard purchase (ie not shared equity or shared ownership),
  • It must be the buyer’s main home rather than a second property or one that will be rented out. Although aimed at helping people on to the housing ladder, the scheme is not exclusively for first-time buyers.
  • You only qualify if you have a minimum of 5% for the deposit.

Which lenders and builders have signed up to NewBuy?

Nationwide building society, NatWest and Barclays have already signed up, with others expected to follow suit, including Halifax by April and Santander by the middle of the year. Construction companies including Barratt, Bovis, Bellway, Linden Homes, Persimmon, Redrow and Taylor Wimpey have signed up.
Barclays is offering 95% LTV mortgages at 4.99% fixed for two years and 5.89% fixed for four years; Nationwide is offering 95% LTV mortgages at 5.69% fixed for three years and 5.99% fixed for five years; NatWest will offer 95% LTV mortgages at 4.29% fixed for two years and 4.99% fixed for five years.

PropVestment’s Thoughts

  • Firstly the property market is down by upto 50,000 transactions a month, thats 600,000 a year compared to the peak in the property market a few years ago. So even if the full 100,000 NewBuy properties are reached, it will not have a major impact on the market as a whole.
  • The scheme only helps buyers of new builds, these are not the most desirable properties, often built very fast, with out fine finishing. These properties are clones of each other and often lose significant value when it come to resell. The price is set by the builder, they will just inflate the original asking price so the 3.5% contribution by them is a false reality.
  • Although major lenders have signed up there is no indication of how many of these products they will allow or how tight other criteria may be. There may be a significant difference in the volume of NewBuy Mortgage approvals to actual potential properties in the scheme.
  • Finally what will be the location of these NewBuy properties, will we see small NewBuy villages full of first time buyers in indentical homes?


Overall PropVestment welcomes such schemes and it is a positive move by the Government, but like other schemes before we doubt there will be a significant impact in reality.
It will be more a headliner to make the government look like they are helping first time buyers.

For Official advice, see http://www.newbuy.org.uk/

Check out our First Time Buyers Posts on the last Government Scheme First Buy

Are you a First Time Buyer and need advice, contact us today for a FREE consultation

Allsop Residential Auction February 2012: Results, Analysis & Conclusions – PropVestment

PropVestment provides a brief but insightful analysis of the results from Allsop Residential Auction in February 2012. We spent some time attending on behalf of a client looking to make a cash investment.

Allsop Residential Auction Headlines

  • 90% success for all lots in London and South East.
  • AST (Assured Shorthold Tenancy) yields over 10% 
  • Northern England struggling
Allsop Residential Auction

90% success rate at Allsop Residential Auction for London and South East

As you can see with the above chart, London as shown by the M25 statistics shows that over 90% auction success with an average price of £324,074. South East and South West also sold well with almost similar success rates however the values were significantly lower.

The worst success was the North East and Northern Ireland. The North East had the lowest success and the lowest average value for the Mainland. This means that this part of the country is the worst effected and the limited activity shows that even bargain hunting investors are staying well way.
The Northern Ireland results could be attributed to problems in mainland Ireland, however with only 6 lots that all sold, the data set is very limited.

Rental yields above 10% , investors market

The main information to be taken from these statistics is that most sales are investments for rental yields, with ASTs demanding lower prices but therefore higher yields. This can be attributed to risk factors.

An interesting stat is that sites with planning permission had a very low success rate, there are buyers there but sellers are keeping a high reserve on these.

CONCLUSIONS

As with previous auction articles like Auctions are for sellers we see similar stats here, majority of lots in London and South East sell well at high prices, however the rest of the market is struggling.
Auctions are for experienced investors and sellers, and not currently for first time buyers. 

*Graphics from www.allsops.co.uk Allsops Residential Auction