Whether you are on furlough, self-employed or simply concerned about how the pandemic will impact your homeownership prospects, our columnist, Greg Cunnington, is on hand to help with expert advice for first-time buyers
Since the Government guidelines were revised last month, allowing the property market to reopen, we have seen a significant increase in enquires from first-time buyers.
I would like to answer some of the main questions we are hearing from them in relation to their mortgage options – many of which are actually relevant to all prospective home buyers, including movers, in the current environment.
Can I view properties currently?
Yes. The Government guidelines were updated in May to allow property viewings to take place, as long as social distancing and other guidance is adhered to.
You will find that the estate agents will go through these guidelines with you when booking a property viewing.
However, ultimately, you can view a property in person once more, which I know is very important when looking at your potential new home, and most estate agents are now operating and open to help you here.
Can I purchase right now with a 5% or 10% deposit?
Lenders will typically require a surveyor to physically inspect the property where a client has a 5% or 10% deposit (typically classed as higher loan to value lending by mortgage lenders).
During the early lockdown period, mortgage lenders could only use ‘automated’ or ‘desktop’ valuations (where lenders use market data and knowledge of the location to estimate the value), so the mortgage options for clients with these deposits were mostly removed.
The good news is that now lenders can send surveyors to physically inspect properties once more, we have seen several lenders offering deals for clients with a 10% deposit, a big boost for first-time buyers in particular.
HSBC continued offering mortgages to clients with a 10% deposit throughout the lockdown period and are still doing so.
Accord, Virgin Money, Clydesdale and Coventry Building Society, among others, have all brought options to the market for these clients.
What we have found is that the lenders are returning with mortgage products for clients with a 10% deposit on a temporary basis, or only offering a limited number of applications to be accepted per day, whilst they look to ensure they do not take on too many applications to impact service levels.
An intermediary can ensure you are kept updated on the options available at any specific date.
As lenders work through their valuation pipelines we expect to see more providers and options return for clients with lower deposits.
The income multiples offered, and maximum loan amounts available, from these lenders varies massively depending on your scenario.
As such, it is vital if you are thinking of purchasing this year with a 5% or 10% deposit you get in touch with an intermediary with access to as many lenders as possible to ensure you receive sound expert advice and are set up with the best option for your individual circumstances.
What other mortgage options are there for clients with lower deposits?
There are also some other mortgage options available for clients with a lower deposit which allow them to tap into family support.
For example, Barclays offers a ‘Springboard’ mortgage whereby if a family member or friend can put the equivalent of 10% deposit funds into a Barclay’s savings account, they will receive interest on this and can take it back after a five year period. This means they can offer mortgages to first-time buyers with no additional deposit required.
There are other similar schemes available using equity in a parent’s property, on which an intermediary can provide advice. In this scenario, a charge can be placed on this property instead of the cash deposit being required.
There is also the popular Help to Buy which, with Government support, can assist first time buyers with a 5% deposit as well as shared ownership.
I’m a first time buyer and I am self-employed. Am I able to get a mortgage currently?
The good news is very much “yes”. I know there has been some nervousness on this topic and some confusing and misleading press articles on what the mortgage availability is like for self-employed individuals currently.
We have been receiving a lot of client enquires from self-employed clients on the back of these, worried about their current mortgage options. The good news is that all major lenders remain open for self-employed applicants, meaning we can help with your mortgage enquires as always.
What we have seen is most lenders will now assess self-employed clients’ applications in more detail.
Some lenders are now requesting the latest three months’ business bank statements for all new self-employed applications.
These applications will then be manually assessed by an underwriter, with the lenders wanting to see the income has not been negatively impacted if you are looking to use the latest available annual income figures to support the mortgage borrowing.
A good intermediary will be able to help guide you through these documentation requirements, and can also speak to the underwriters at the lender pre-application to get a good idea of whether your scenario would fit their current criteria.
I’m currently on furlough and was hoping to purchase a property this summer. Is it still possible to apply for a mortgage whilst I am furloughed?
If you have been furloughed and are currently on the Government Job Retention Scheme, you may understandably be worried about how this may affect your ability to get a mortgage, especially if you are a first-time buyer.
Good news is that most of the major lenders will continue to accept mortgage applications for clients who have been furloughed. However, typically they will assess affordability based on 80% of the normal income , to be in line with the income you will receive from the job retention scheme.
In a further positive move, some lenders have now confirmed that where the employer is topping up your income to 100% of your normal salary then this can all be taken into account for your mortgage application. Evidence of this additional income will be required.
Once you return to work from furlough in the future we anticipate most lenders being flexible in accepting your updated normal income fairly quickly.
What’s more, if you have a return to work date set, which your employer can evidence, then we have seen lenders agree to use the normal income figure on this basis also.
I receive regular commission income and when I got an agreement in principle earlier this year the borrowing was based on this income. Can this still be taken into account by mortgage lenders?
Additional income, such as commission, bonus and overtime, is a tricky issue for mortgage lenders currently. Where the income was paid pre-lockdown it is hard for a lender to verify if that income level will be paid in the coming months once more. Hence some lenders took a decision to temporarily no longer accept additional income when looking at mortgage borrowing calculations.
The more positive news is there are lenders who will still take this income into account. They will undertake a manual assessment based on your job role, employer and the frequency of the additional income to ascertain it appears realistic.
We can speak to the underwriters (the decision makers) at the lenders before an application is submitted to, so an intermediary can help you to get a more accurate assessment on your budget and also know what lenders would be happy to use your additional income in their borrowing calculations.
If you are a first-time buyer and want to speak to a mortgage adviser please don’t hesitate to contact us directly.
Similarly, if you have any questions that have not been answered in this article please use the below details to contact us and we hope to answer some more in next week’s article.
You can email us at AskAlexanderHall@alexanderhall.co.uk or use the contact us page on our website.
Greg Cunnington is director of lender relationships and new homes at Alexander Hall
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBT SECURED ON IT
