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Mortgages for First Time Buyers
Since 2007 when the down turn in the property markets first started to bite and we saw the usual flood of repossessions and clients getting in financial difficulties, first time buyer schemes became a product that very few lenders wanted to offer. We had become used to mortgages being available up to 125% of the purchase price, which the lenders could market with some degree of safety in a rising market, because within the first year of the mortgage term most of these products were back into positive equity.
When the market changed to being flat and then negative, many of the lenders who had been pushing the boundaries with product innovation started to catch a very bad cold and the rest as they say is history.
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More About Mortgages for First Time Buyers
Today in June 2012 we have a very different market which still appears to be in decline apart from central London or the odd hotspot that has a special marketing feature.
With this in mind we are looking at 95% LTV for First Time Buyers, where lenders require proof that the clients have saved up the deposit and are 100% credit worthy. These schemes are not marketed aggressively by lenders and it is a question of shopping around. Lenders will in some cases accept a part deposit from the Bank of Mum and Dad, or a close relative. This tends to happen when the clients are buying from within the family and part of the equity is gifted to the clients.
There is one scheme on the market with a 100% facility on new build property only, but the lender requires a family guarantor to provide further security which is unencumbered to the value of 25% of the total mortgage. It maybe a slight fudge but the 100% mortgage is not dead it has just been repackaged with a new facelift.
We will see some new first time buyer products come onto the market as soon as the market becomes positive and lenders feel more comfortable lending at high loans to valuation, which in the current market they are reluctant to do.
What potential buyers should be a little wary of is the carrot dangled by some new build developers where there is a 5—10% gifted deposit by the builder, free carpets, free legal’s etc. The total value of the so called free benefits will be deducted from the purchase price by the surveyor, because as we all know, there is no such thing as a free lunch. The cost of providing these benefits has just been factored into the purchase price.
First time buyers who are struggling to find the required deposit should also consider Shared Ownership or Shared Equity as an alternative route to purchasing a property, click on the link to take you to the appropriate page.
Before you start to look at property or consider if you could qualify for a mortgage, getting a copy of your statutory credit file from Experian at a cost of £2 would be a very good idea. This will enable any competent mortgage broker to advise you how any lender would consider you for mortgage purposes.
You should go to www.experian/statutoryfile.co.uk and pay the £2 by credit or debit card, it will be £2 very well spent.