Our residential mortgage expert is Craig McKinlay, new mortgages director at Halifax
QI’m a potential first-time buyer and very clueless about how buying a home works. I have my eye on a property that is well out of my price range. Should I make an offer based on what I can afford or will this insult the seller? I don’t want to put them off negotiating by coming in too low.
A First-time buyers, buyers with no chain and buyers who have pre-arranged mortgages have a head start on most of the competition. If this is you, then make the agent and seller aware of this, as this can put you in a very favourable negotiating position, especially if the seller is in a chain.
In a slow property market, it can be tempting to make a low offer. But be fair – you can slash the asking price dramatically but unless you give a good reason you risk losing the property you want. If your offer is below the asking price be sure to justify your decision. The key is to do your research on similar properties in the areas that have recently sold.
Speak to the estate agent to get an understanding of how motivated the seller is – do they need to sell up sooner rather than later or do they have the luxury of being able to wait for their asking price. Ask the estate agent whether any other offers have been made. The agent is not legally allowed to tell you how much any other offers were but may indicate whether or not they were close to the asking price.
Make sure that your offer is subject to a survey and mortgage offer, so that after your offer is accepted there is still the opportunity to revise the amount you pay.
QI have been renting for over ten years and I would really like to purchase my own home, but I have very little savings. However, I have a good credit history and earn a reasonable wage. Is there any way that I can get on the property ladder with only a small deposit?
A In the current market, the majority of lenders require a borrower to have a minimum 10 per cent deposit of the purchase price. Don’t let that dishearten you though as there are a number of schemes that will allow you to get on the property ladder with a 5 per cent deposit.
The government’s NewBuy scheme launched last year would be one to consider. This scheme allows customers to borrow between 90 – 95 per cent on new build properties. If you want to take advantage of the scheme, you will still need to qualify for a mortgage with a mortgage lender in the usual way and be subject to the lender’s normal assessment criteria.
There are also a number of options through shared ownership and shared equity schemes. Many of these schemes are available through local housing associations or through builders. These schemes allow a borrower to take out a mortgage on 75 per cent of the property value and in some cases, such as shared ownership, pay rent on the other 25 per cent.
For example, in a shared equity scheme: With a deposit of 5 per cent, you could take out a mortgage on 75 per cent of the property’s market value to secure a 75 per cent equity share of the property. The additional amount (25 per cent equity share) is retained or funded by the company providing the scheme and is secured by a second charge which on re-sale, you will have to repay by same percentage, e.g. 25 per cent of sale price.
QMy son has recently married and we are looking to help him and his new wife get on the property ladder but we don’t want to remortgage our home as we are afraid this will put us at risk of repossession. Are there any alternative ways to release finance from our property?
A Mortgage affordability is assessed on the borrower’s ability to repay the mortgage; therefore, all loans or gifted deposits must be disclosed during the application process. If you give money as a gift this is classed as a gifted deposit and will be accepted. If you require the loan to be repaid, like any other loan it will be taken into consideration by the lender when assessing affordability of the mortgage.
Most lenders want to see that deposits are coming from a potential borrower’s own resources and taking a loan to raise a deposit is not acceptable by many. There are alternative ways for parents to assist. There are generally two ways in which buyers and family members combine forces to buy a property. This can be through a joint application and guarantor mortgages.
A joint mortgage application requires the parent(s) and their offspring to be named on the mortgage deed. The lender bases its decision as to how much it will lend on the combined income of all the applicants, including both the first-time buyer and their parent/family member.
On guarantor mortgage applications, only the buyer is named on the mortgage deed; the family member(s) assisting them are not named but provide a guarantee that they will be responsible for all the mortgage repayments in the event of their son or daughter being unable to do so.
You could also consider the Lloyds TSB Lend a Hand Mortgage proposition. First-time buyers only need a 5 per cent deposit, plus the backing of someone who will put their savings up as additional security for the mortgage. The helper will need savings of up to 20 per cent of the property value. The first-time buyer’s deposit plus the savings of the helper must equal 25 per cent of the property value.
This way you will still earn interest on your savings, but it means that buyers can benefit from the lower mortgage rates similar to those available to customers with a 25 per cent deposit.
