• Brian

Update: Low Deposit

Lenders are still reluctant to offer mortgage products without a 15% deposit

Currently HSBC are the largest and most popular lender to offer 90% (10% deposit) deals for loan up to 400K. Rates start from 2.56% but to secure that type of product with them you will need to enter a "lottery". It is tricky, they set aside a daily tranche of funds that are snapped up in seconds. You will have to be patient to benefit from this process but as least they have decided to lead the market here where others have not.


If you need to move quickly, it will be frustrating as it may take a week to be able to submit a full application and approval could take a further 2-3 weeks.


Other lenders such as Platform (part of Co-op) and Coventry are offering 90% 5 year fixes for mortgages up to 500K but these are nearly 1% higher than a 2 year fix with HSBC. They are easier to secure but do you want to fix in at a high rate for that time period?


Nationwide will be bringing out their 90% proposition next week (just for First-Time Buyers for mortgages up to 500K), and their deals are comparable to HSBC starting from 2.49%. But these are still going to be at around 0.50% higher than they were pre-Covid . They are the UK's largest Building Society so this might be the start of more lenders entering the 90% market


Credit scoring and affordability will also be tightened up for these products


So, what can you do if you do not have a 10% deposit?


Guarantor

You can consider a version of the guarantor mortgage. This is when you can afford the mortgage but cannot show the funds to put down a deposit. A guarantor can leverage their own money or house to keep the lender happy. In some instances, the bank will lend 100% of the property value as long as :

The guarantor can leave 10-20% of the property value in savings with the mortgage lender as security. At the end of a 5-7 year period the guarantor will get their money back, with interest.

Or

The lender puts a legal charge put against the guarantor’s property for a percentage of the new property purchase value. This charge will be in place for 7-10 years before being released

These options are not for everybody, you need to have a family member happy to temporarily hand over a large sum of cash or put the family home up as security. If you have siblings, this would probably hinder your parents being able to help them


You should seek independent legal advice before arranging a guarantor mortgage


Government Schemes

Please follow this link for more information on this - https://www.imabristol.co.uk/government-schemes


What else can you do?

Speak to you mortgage broker – they can guide you through these options. We are happy to help with these enquiries, so please feel free to drop Ideal Mortgage Advisers a call. There is no cost or obligation for speaking to us.


If you have a question regarding the above information you can send it to info@imabristol.co.uk or comment on the original Facebook post


Your home could be repossessed if you do not keep up with your repayments