Property price inflation has majorly overruled the increases in standard wages over the years. These days, a home buyer may look at the option to purchase a property with a friend or partner in order to be able to afford a property.
It all comes down to looking at affordability. Having two parties within the process, lenders will be calculating two incomes instead of one, which could lead to an increase in the maximum mortgage amount. Obviously, the mortgage will be more affordable between two people because the costs will be split between two people.
You may that many mortgage lenders will let up to four people co-own a property together. With many parties being involved, it can result in some debate with changes in circumstances. Let’s as one borrower decided to stop their contributions to the group mortgage payments, the lender will still go to the rest of the group for payment.
Therefore, it’s important that you are careful with who you buy with. All joint owners still hold a legal right to stay within their home unless a court rules otherwise. Because of this, the person failing to put forward their contribution doesn’t have to leave as they are still a part-owner of the property.
In the case where one of the parties is looking to increase the mortgage at any point in the future, then you need permission from all borrowers to do this. Planning ahead for the future is good practice just in case circumstances change.
Many couples who are married, in civil partnerships or simply cohabiting to go for joint tenancy for a mortgage. If you are looking to buy with a relative or friend, you may look at a Tenancy in Common. In the case that you are wanting to sell or remortgage the property in the future, you will need the consent of the other applicant.
When it comes to a tenancy in common, you will still jointly own the property, however, there is no legal requirement to do so in equal shares. Having this option is helpful if one party is earning a lot more per month than the other. As well as this you can act individually if you are a tenant in common. You can freely sell or give way your share of the property to another person, if you wish to remove yourself from the agreement.
If one of you were to, unfortunately, pass away, the property will be in possession of the other owner on the mortgage. We do recommend taking out life insurance to protect yourself from this in the future. The mortgage would be repaid at that point.
It’s important to know that all mortgage borrowers are jointly and severally responsible for mortgage payments. With this in mind, if one of the parties stops paying, then the other parties involved have to help with the shortfall to avoid the mortgage falling into arrears. This can stop you from getting another mortgage in the future. See it as you not owning 50% of a property but 100% of it jointly.
No one who buys a home with a partner does so with the intention of things not working out. If you are looking to remove a mortgage, it can be very challenging. This is because a mortgage is a big financial commitment so making changes to it later is not always straightforward. Before you can proceed with this, lenders will need to be certain that you can manage the mortgage payments on your own.
Regardless of if you can show that you have managed to maintain mortgage payments since your ex moved out does not always mean that a lender will agree to your request to put the mortgage into your sole name. Lender do prefer two people to pursue in case of arrears occurring.
When it comes to removing someone, they will carry out a brand-new affordability assessment, in the exact way as they would at the point of purchase if the lender declines the request. It’s best that you get in touch with a Mortgage Advisor in Leicester to look at if other lenders would agree to your request to transfer the mortgage into your name.
In the circumstance where you and your partner split up and you leave the family home, you are still responsible for mortgage payments with them. Regardless if you agree with your ex that they will make all the payments it’s still your responsibility. If you are sending your partner money each month, you should keep an eye on your credit report to ensure they are paying the mortgage.
Choosing to default, will impact your score. If you get connected to an old mortgage, then the payments for that will be considered if you subsequently want to buy a new home of your own. That will mean Lenders might not lend you as much as you would like. Buying a home with anyone is a risk, so you need to go into it with your eyes open.
It’s always better to agree on what would happen to the house should things not work while you are all still getting along well! It can be helpful to speak to an expert specialist mortgage advisor in Leicester to look at what your option might be. If you are looking for more information, check out our article ‘divorce & separation mortgage advice.’
It is a common practice nowadays to seek Specialist Mortgage Advice in Leicester when clients have bad credit or not paying off their bills on time.
Something as small as a missed or late payment from your bills may result in a default attached to your credit report. Which may harm your capability to obtain a mortgage because it implies that you cannot keep up with repayments on time.
But that doesn’t mean it’s impossible, having any missed payments or defaults in your credit file may require some additional help from a Mortgage Broker in Leicester like ourselves. This is because most High Street Banks will reject your application for a mortgage, especially if you only have a small deposit.
Your lender will need to know the date the default was registered against you and how long ago it was. The more details are given, the more likely it is that the lender will be able to help you. Especially if it was down to a life-related event such as ill-health, redundancy or separation.
We tend to find that clients often make mistakes in the past, and these financial mistakes can come back to haunt them. We may also be able to help you if you have had historic mortgage arrears or a CCJ (County Court Judgement).
Below are some helpful responses to frequently asked questions about Bad Credit mortgages in Leicester and nearby areas. If you can’t find what you need in our bad credit FAQs, one of our Mortgage Advisors in Leicester will be more than happy to get back to you.
Your advisor will need to see an up-to-date copy of your credit report and show any previous credit problems you had in the past. You can find a copy of your recent credit report online for free.
Before applying for any mortgage, doing multiple credit searches can damage your credit rating. However, it’s still vital that you obtain an up-to-date copy of your credit report.
This all comes down to your circumstances and affordability. Some customers find themselves a little perplexed by their credit reports. It might look bad, they may have had issues, but they have a stable income and enough deposit to reduce a rate and obtain a decent mortgage deal. It makes you wonder if you are in that same position but the lender still won’t let you borrow the amount you’ll like or need. That’s because it all comes down to risk.
After all, your lender needs to be convinced that you afford all your repayments on time without a likelihood of any arrears occurring. In the event of these arrears, the lender may need to repossess the home, which is something that everybody wants to avoid.
There may be a chance for those who are looking to get a mortgage while having bad credit, you just may have to pay higher rates. For more information, it’s best to speak to a Specialist Mortgage Advisor in Leicester, with their help they can hopefully find you a potential mortgage.
One day you may find yourself in financial trouble and no longer able to keep up with the mortgage payments. These circumstances are unfortunate, and whilst it could be a short blip that you can pay back not too long after, the damage is done, and it will be on your credit report as a missed payment.
You may be faced with other credit issues too, and when it comes to getting a Remortgage or a new mortgage after Moving Home in Leicester, you may find yourself struggling to obtain a new mortgage. As previously stated, this always comes down to risk. Can the lender trust you? Will you be in the same position again?
The good news is, with the help of Specialist Mortgage Advice in Leicester, we have had helped previous customers who have had a mortgage and have since ended up with Bad Credit. If you are in a similar situation, speak to a Mortgage Broker in Leicester like ourselves, we may be able to help you achieve your mortgage goals.
Customers may find themselves in a position to have adverse issues regarding their credit, all of which can impact your affordability for a mortgage. These issues vary from, but are not limited to;
Whilst this is an awful situation to be in, it’s not the end of the world. Your mortgage process may be longer, more challenging, and you may end up on a higher rate, but there are lenders out there, who might have a mortgage deal on their panel, who will accept your mortgage application.
To boost your chances of success and open yourself up to better rates, you need to focus on improving your credit score. We have a handy guide on different ways to improve your credit score, which will hopefully put you in a much better place for obtaining a mortgage in the future.
If you require any Mortgage Advice in Leicester regarding a Bad or Adverse Credit situation. Don’t hesitate to get in touch with a member of our team. Utilising their knowledge working in the industry, working extra hard to try and put you in the best possible position to eventually obtain you a mortgage.
It can be tough saving money for a deposit, particularly if you’re paying rent as well. To help those struggling to get on the property ladder in Leicester, the government introduced various Help to Buy Mortgages.
This article will include the following:
All aimed to help First Time Buyers in Leicester who are struggling to save for a larger deposit to get onto the property ladder.
The Help to Buy Equity Loan scheme is popular amongst first time buyers in Leicester. To qualify for this scheme, you will need a minimum of a 5% deposit, and you can only purchase a new-build property.
Once you have saved up for a 5% deposit or more, the government will loan you 20%; if you have a 10% deposit, which makes up a 25% deposit.
You will be left with a 75% mortgage and a government equity loan to pay off. You get five years to pay off this equity loan interest-free.
If you can’t meet the 5-year cut off point, you will start receiving interest in the outstanding loan amount.
As a mortgage broker in Leicester, we understand the challenges of balancing your mortgage payments and the equity loan repayment at the same time.
There are ways around this. For example, you may be eligible to remortgage to raise capital for this loan, however, doing so may lead to your mortgage payments increase.
The Shared Ownership scheme allows applicants to purchase a percentage of a property and then pay the rest back on rent.
The percentage of the property that you own usually needs to be between 25-75%, though this can change. The remaining portion is likely to be owned by the housing association.
The way that your payments work is that you will have both your mortgage plus rent outgoings. So, you are paying 100% of the ground rent and service charge on the property.
Following the success of the Help to Buy Equity Loan scheme, this scheme had a similar concept as its predecessor, except you have to work in Armed Forces.
If you fit into the criteria, it could be an excellent option for you. The good news is that the government has now extended the deadline/review date of the scheme to December 2022.
The Lifetime ISA can be still beneficial, and it can help you secure a property as a First Time Buyer in Leicester. Essentially it’s a savings account where the money grows tax-free.
The government will also top up your savings by an extra 25%, so if you meet the £4,000 maximum amount, you will receive a nice £1,000 bonus.
You have to pass specific criteria to gain access to this scheme. All of the details will be on the Government Lifetime ISA page.
Suppose you fall into the category of military personnel. In that case, you might have heard that Army Families Federation Defence Secretary Ben Wallace has chosen to extend the existing Help to Buy scheme.
Thanks to this scheme, military personals have more time to decide if they want to put their foot onto the property ladder.
The scheme was initially brought into prominence back in 2014. The £200 million scheme’s purpose is to provide a boost to anyone from the forces who needed help buying a property.
The project was not intended for the long term, though, as this scheme was due to end in December 2019.
As a thank you to everyone’s commitment to their Queen and country. The government decided to extend this until the end of 2022.
If at any point, you served in the military and can meet the criteria, you will have access to this scheme. You can borrow a deposit of up to half your annual salary (maximum of £25,000) without any interest added.
If eligible, you can use the scheme to purchase your first home. The perks of this are that you do not need to have any current savings to take that first step onto the property ladder.
The money you will be using is raised from the Forces Help to Buy loan and spent for anything, from your deposit to any additional costs.
These can include but are not limited to stamp duty costs, estate agent fees or even the costs of finding a solicitor.
This government scheme tends to be a little more relaxed than some other schemes, as the Forces Help to Buy loan can be drawn out and paid back over a term of 10 years.
It helps give you room to breathe and not feel so rushed at any point.
With all this in mind, the Forces Help to Buy loan is a lifeline to those who never even thought they’d be able to own their own home.
Bear in mind that you’ll still have to qualify for eligibility based on if you have served your country and can meet the correct criteria (length served, service term left, and medical categories).
Click here to read additional information on this scheme from the government.
With the assistance of a dedicated and experienced mortgage advice team in Leicester, your mortgage process may go quicker and smoother than it would be going alone.
Your advisor will walk you through every step you need to take. From the start of your mortgage process, when you get in touch, right through until your mortgage journey has ended.
Your dedicated mortgage advisor in Leicester will make sure you are cared for and hopefully end up with the best result for your circumstances.
As a company that prides itself on a reliable and efficient customer experience, it aims to take the stress away and, most importantly, loves and respects the nation’s forces.
Don’t hesitate to get in touch with us today. We will take a look at how we can help with your home-owning dreams.
Please bear in mind that the Forces Help to Buy is not the same as the standard UK Help to Buy schemes.
Gazumping is a term that is used to describe a situation, whereby a seller accepts a better offer from another buyer before the sale of a property, has gotten complete.
Gazumping is not uncommon, part of the property-buying process in England and Wales. This is because an agreement to buy or sell a property doesn’t become legally binding.
Until the lawyers exchange written contracts. Until that point, you only have a verbal agreement.
Gazumping can be a very traumatic experience for first-time buyers in Leicester. You may think you are about to purchase the property of your dreams when the sale comes hurtling down.
You may also be part of a chain that breaks and, as a result, you have to move your moving date back. It can be much more painful if you lose money as a result.
The reason for this is that you can sometimes be left out of pocket by non-refundable survey costs, conveyancing fees, and mortgage arrangement fees.
As we have mentioned, an agreement to buy or sell a property does not become legally binding until written contracts get exchanged.
Regrettably, there can be delays of up to several weeks between a seller accepting your offer and the exchange of deals taking place.
It can be due to having a property survey undertaken, your conveyancer carrying out the necessary searches and you have received your mortgage offer.
During this period, other First Time Buyers in Leicester may make a better offer on the property. Which the estate agent has to pass on to the seller.
Still, these preferable offers are not always better in terms of financial value. They may offer a faster sale or not have the burden of a chain.
Hence why the phrase ‘gazumping’ covers any preferable offer the seller decides to accept.
Sadly, certain things won’t happen until you have decided to make an offer, namely the property survey, conveyancer searches, and mortgage offer.
Nevertheless, you can decrease the time between making an offer and the contract exchange. Methods for doing this may include:
Also, there are a couple of tactics you could use that may help out. Add more security to the deal ahead of the exchange of contracts.
Firstly, as part of your offer, ask the seller to take the property off the market as this reduces the risk of other people seeing the property.
There is no obligation for them to agree, but it isn’t uncommon for them to respect this request, especially if they’ve struggled to receive offers in the first place.
Secondly, you could try to put in place a Lock-in Agreement that sees both parties put up a deposit as part of a binding agreement.
If either party attempts to change the deal or back out completely, then the other side takes their deposit.
These arrangements can incur costs such as legal fees to set it up, but you might feel it is worth the price for the security.
Finally, there are options to take out insurance to protect yourself against gazumping. These policies agree to pay you a set fee in the event of being gazumped.
At the start of the Coronavirus pandemic, the Government promised that all borrowers would be allowed a three-month mortgage payment holiday if they needed it. Most lenders followed the Government’s guidelines and did their best to help out their borrowers during these hard few months.
We feel that it is best, to sum up, what mortgage payment holidays are, what lenders are doing, and who can deliver you with help and advice through these next few months.
Mortgage payment holidays are an agreement entered into with your bank, building society or mortgage lender to defer your monthly mortgage payments for a set period. In this case, 3-months.
It does not mean you never have to pay the amount back, but the interest you defer gets added back onto the loan amount, while your capital balance will not decrease. In other words, your mortgage amount will increase slightly, and you will continue to attract interest on the whole amount.
When you are ready to continue the payments, this could mean that either your monthly payments recalculated at a slightly higher level or your mortgage term increases to some extent.
Most lenders will probably prefer not to extend your mortgage term as this could take you past their standard retirement ages, but the detail on this will follow in due course.
Dependent on your mortgage deal, you may be able to pay off a lump sum later in the year to bring your mortgage back to where it would have been.
Mortgage Payment Holidays are available both for those with residential or Buy-to-let Mortgages in Leicester, which means landlords also have assistance if rental payments are affected.
The full proposal is in detail below:
We would recommend speaking to your Mortgage Advisor in Leicester. They will asses your financial situation first before looking to defer your payments as your situation may not yet be pressing.
Approaching a Mortgage Broker in Leicester like us will allow you to explore all of your current mortgage options and could make things feel a lot less stressful.
For a customer, up to date with payments, not in arrears, and impacted by COVID-19:
In some cases, a mortgage payment holiday can harm your credit score, but most lenders have now said that for matters linked to the virus, they will ensure that this is not the case.
You must ask this question to your lender directly and record the response, including the date and the name of the person you are speaking to avoid confusion later. Different lenders are doing different things.
At first, everything seemed like it would remain the same, and you would still be able to make changes to your mortgages as usual. Leading to a change over in the last couple of days, and lenders have been asking borrowers to avoid making changes while you are within a mortgage holiday period. So, at the moment, they are not allowing mortgages and product transfers.
Borrowers nearing the end of their existing product could get compelled to move on to the higher lenders variable rate, which means that borrowers who act too early could find themselves on a mortgage payment holiday that accrues interest on a costly variable rate.
We would highly recommend speaking to your Mortgage Advisor in Leicester, and they will determine the best course of action based on your personal and financial situation. If possible, arranging your mortgage transfer first then asking for the holiday would seem to be the most sensible way forward.
At the moment, no Lenders have withdrawn mortgage offers; in fact, some are extending offers past the standard six-month expiration date.
You should not pull out of your purchase unless, for example, you are worried about losing your job as a result of Coronavirus. We are advising everyone to proceed as usual for now and “wait and see” – you are not committed to completing your purchase until contracts get exchanged.
In some cases, lenders can offer you a temporary switch to interest-only to reduce your monthly payments but not to add any further to the loan amount by still servicing the interest payments each month.
It may not be necessary to convert all your mortgage to interest only, and it may be that putting part of the mortgage on this basis could give you the breathing space you need.
People with savings may find that remortgaging onto an offset basis could give them a helping boost they were looking for, and they will be cutting down on their monthly payments while keeping hold of their savings.
For example, someone with a £400,000 loan and £100,000 in savings would only pay interest on £300,000. Meaning their monthly mortgage payments will massively be reduced.
For others, a straight remortgage to another lender, calculating the cost of any early repayment charges, may well be enough to ease the burden or simply extending the term of your mortgage.
If you still have any other questions on mortgage payment holidays or just want general Mortgage Advice in Leicester, give us a call today. We want to help you and your mortgage journey through these tough few months ahead. Speak to an experienced Mortgage Advisor in Leicester today.
This insight provided by UK Finance from June 2019. The overall number of First Time Buyer in Leicester is still increasing meaning numbers are topping numbers from when they were at their highest in 2007, before the Credit Crunch.
External economic factors such as Brexit are sometimes less likely to deter first-time buyers than Home Movers in Leicester. It is also apparent that Home movers are never normally 100% certain that they ought to move.
So when you add in extra factors such as political uncertainty it’s completely natural for them to say, “Let’s just wait and see what happens”.
Things are more straightforward for first-time buyers. The hard bit is the deposit but if this is available then the choices are clear-cut, they can either:
Most of our customers often go down the more popular route of buying, the number of First Time Buyers has increased by over 130% when reviewing statistics from the past ten years.
This is because more options such as the 95% Mortgages are more available and there is also further access to Help to Buy Equity Loan Mortgages.
Over half of all homes purchased with a mortgage consist of first-time-Buyers with the remainder being Home Movers and Buy-to-Let in Leicester Investors.
The last time first-time buyers had more than 50% of market share was in 1995 when only a small number of Buy to Lets were taking place. The percentage of first-time buyers has been rising nicely for almost 20 years.
When reviewing properties in terms of value, homes in the North East of England the homes seem to hold the lowest in value. The average sits currently just shy of £140,000.
We have found that first-time buyers really value trusted advice from a Trusted Mortgage Broker. It’s not just simply about finding the cheapest deal.
We understand their appreciation of having support available whenever it is needed when in the process of buying their first home. They want straightforward advice.
What protection insurance to buy, the right amount to pay for a deposit, and many more questions.
We love helping First-Time Buyers in Leicester achieve their goals and we’d love to hear from you, feel free to contact us for a Free Mortgage Consultation to find out more.
First-time buyers in Leicester making an offer on a property is an exciting part of the process. However, it’s a little tricky. You want to be able to obtain the house at the lowest possible price. But then again, you might feel uncomfortable about making an offer so low as to upset the seller.
The first thing to understand is that this is a negotiation process. It’s unlikely that your first offer will be accepted unless you go in at very close to the asking price.
Most sellers (aka Vendors) aim to maximize their selling price. They have plans of their own, and perhaps they need every penny possible to secure a new home for themselves. Whatever their intentions, you are also trying to find the “magic number.” That is to say, the lowest possible price they are willing to accept so that you can move forward.
This number is often slightly lower than they ideally wanted to achieve and slightly more than you ideally wanted to pay!
To help you get to this point before you offer, you need to get organized to give yourself the best possible chance of success. The matter of being organised is especially important if the property is new to the market or you are in competition with another prospective purchaser.
Here are some of the things you can be doing to help yourself:
Any decent Estate Agent will want to check whether you are a cash buyer or if otherwise, that you have funds in place. No one wants an agreed sale to fall through, so it’s reasonable for them to check you have the means to proceed.
They also have their anti-money laundering checks to run, so you may also get asked to prove your identity and address. Some corporate Estate Agents exploit this diligence (aka Offer Qualification) to cross-sell other products and services to you.
They prey on purchasers who have fallen in love with a property by intimidating them by stating they have a greater chance of success by using an in-house Mortgage Advisor in Leicester. However, this isn’t true; most people see right through it, and it is a poor practice that ought to be banned.
Sending in your Agreement in Principle and other documents should be proof enough that you can go ahead, and if not, tell the Estate Agent, you will bypass them and approach the vendor directly.
If you have a property to sell to raise a deposit for your purchase, it is far more effective to have sold it before making an offer. The issue sometimes is that you might not be looking for a new home until a specific one comes up for sale!
If this happens to you, then go ahead and view the property and express an interest. At this point, sellers are trying to agree on a price at this point, though it is to negotiate from a position of weakness. Even if you ignore this advice and agree on a purchase price, the vendor will be advised by their Estate Agent to keep the property on the market, so it doesn’t achieve very much.
Make sure to get all your paperwork in order. When you apply for a mortgage. You will get asked to provide proof of income, ID, address, deposit, and three months’ bank statements.
Start to pull all your documents together into a folder. So that the second your offer is accepted, you can put the wheels of your formal mortgage application in motion.
Emotions can run high when it comes to selling a home. If you are buying a house for your family and the seller has raised their own family in that house. Then it might well resonate with them if you tell them your plans. It will help build empathy.
Telling them about all the shortcomings of the property is unlikely to get you very far when negotiating. For example, if the property is not double-glazed. Then the vendor already knows that so pointing out the obvious will not help you.
Finding out a little bit about the seller’s plans doesn’t do any harm at all within reason. Have they already found a house to buy themselves? What are the reasons they are moving? Have they had many offers?
Answers to these questions and others may signal how likely the vendor is to take a low offer. Generally, people can’t wait to talk about themselves, and if you listen carefully. You could easily find yourself in a better negotiating position.
One final thing – if your first offer is accepted, then chances are your opening bid was way too high! Always offer less than you are truly willing to pay.
A Mortgage Agreement in Principle (AIP) is essentially a document to prove you have a mortgage in place. To the Estate Agent, it shows you are creditworthy as you have passed the lender’s credit score.
However, it is not a guarantee that you will get a mortgage as a full application. It will require further background checks.
How having your mortgage agreed at the outset can help you negotiate on an asking price. A Mortgage Agreement in Principle is essentially a document to prove you have a mortgage in place. It is something we obtain for all of our clients, and almost all Lenders offer them.
A Mortgage Agreement in Principle is not a guarantee that you will get a mortgage. As your full application will require further background checks. Such as evidence of income) and a satisfactory valuation of the property itself.
However, it is a good idea to get one done at the earliest opportunity for the following reasons:
When you are ready to make an offer on a new home most Estate Agents will undertake due diligence. This will result in them asking you to produce evidence that you have funds available to complete the purchase.
It will take the form of bank statements and also an Agreement in Principle certificate that we can provide for you. Once you have provided them with all this documentation, the Estate Agent will then frequently stop marketing the property and put a “Sold” or “Sale Agreed” board up.
If you already have a Mortgage agreed before you make an offer you are making yourself appear as an attractive proposition. In any case, this proves you are not making an offer on a “whim”, you’ve thought about how you’re going to fund the purchase and do something about it.
However, this might persuade a seller to accept an offer you put forward on their property underneath the asking price.
When it comes to buying a house, some clients have always “put the cart before the horse.” They go full steam ahead and make an offer on a property without first checking that they can proceed. It can lead to terrible disappointment if the mortgage application fails.
By that time, they have got their heart set on their new family home. This disappointment can get avoided by contacting us at an early stage.
Sometimes some things are causing a mortgage to decline that can get overcome given a little time.
For example, there may be a niggling issue on your credit report, perhaps a disputed mobile phone bill that can get easily rectified.
Maybe you thought you were on the Voter’s roll, and you’re not – once again, that can get sorted out given a few weeks.
Or maybe you can’t get a mortgage at all! But if that’s the case, it’s better than you know now rather than mess people about and we’ll be able to tell you what you need to do to improve your credit-worthiness for the future.
Ok, so you know you’ve got a good credit rating because you’ve never get turned down for credit, register on the Voter’s roll and you’ve always made your credit card payments on time.
You could approach ten different Lenders these days and get ten different maximum mortgage amounts!
They all calculate affordability in their unique ways. If you’re Self-Employed in Leicester, it is a minefield: some Lenders take your net profit, others your salary and divided. Some use your latest year, others an average over three years.
Knowing your borrowing limits is essential as then you know for sure what your price range is. We’ll be able to advise you of the maximum mortgage available to you.
Also, more importantly, together, we’ll work out how much you can afford to pay back each month.
The Government launched Help to Buy equity loans to mortgage applicants back in 2013. The property market got prolonged to recover from the credit crunch. This was one of many schemes designed to give it a boost. The interest-free period of the equity loan was for 5 years. So many of these are now due for repayment to avoid interest accumulating.
If your 5-year period is ending soon or has already completed. You should consider speaking to a Mortgage Broker in Leicester like us. We may be able to reduce your monthly payments or re-organise your finances.
The scheme works by the Government typically loaning the applicant up to 20% of the property’s value. There is no interest payable for 5 years. If the property increases in value. Then the amount you owe to the Government increases also, so in that instance. The zero % could be quite misleading to some people.
The buyer is only required to put down a 5% deposit, and that is what made the scheme so famous.
We have seen of Help to Buy; many borrowers are unsure of what they signed up to when they bought the house. The reasons being the scheme was not explained adequately to them. Or they got a little carried away with the excitement of purchasing a home. Either way, it comes as a nasty shock when the letter arrives. Asking what action you intend to take to repay the loan.
In any case, it’s a loan, not a gift, and the Government owns a percentage share in the borrower’s home. The borrower has 25 years to repay the loan unless they sell the house beforehand. At the end of the interest-free period, the interest gets charged at 1.75%. In year 6 should the borrower not repay the loan at that time. The interest rate then goes up each year after that.
When the interest repayments kick in, some customers may struggle to keep up their payments. Most customers look to try and remortgage at some point.
Not all lenders will accept remortgaging applications from Help to Buy customers. There are restrictions on the maximum loan to value when raising the capital to repay an equity loan. Some Lenders can consider going up to 95% though. The significant advantage of repaying the equity loan in full is that any future increase in the value of the property will be 100% to the homeowner’s benefit and won’t be shared with the Government any longer.
If a Lender cannot get found who will lend you the full amount to repay the Government loan when you come to remortgage, then another option could be “staircase”. In any case, this is when you gradually pay off the loan in instalments over some time, thus reducing the percentage of your home the Government owns. You can only use the staircase in multiples of 10%.