08th December 2020

To Buy Or Not To Buy?

Mortgage lenders and solo buyers

Covid-19 has made many lenders nervous about new mortgage customers, with thousands of products being pulled and often the minimum deposits have been lifted.

But there are those who ‘appreciate that people are struggling, and they are trying to help’, and are promising words appearing in mortgage arenas of late. There are a few things you need to be aware of first though.

People focus on the end goal, but often they forget about the foundation stones you need to get to that point. If buying a home just for yourself is something you are only just starting to think about, it might be worth contacting your friendly financial advisor to devise a savings plan. But do not assume buying a property will be impossible because of your complicated circumstances.

Do not be concerned if you have been told previously that you are ‘unmortgageable’. It is about understanding different lenders and their criteria, and getting creative with the options available. If you are ready to move to the next stage, here are some ideas which may help.

Consider all the costs

People often only look at the price of the property they want to buy. They don’t consider solicitor fees, stamp duty (holiday currently expires 31st March 2021, but rumours suggest an extension), the mortgage arrangement fee, a removal van, the new sofa they need, and other peripheral costs.

We recommend that people add 10% to the purchase price to arrive at a more realistic figure. Affordability is the first thing to consider, before looking at schemes which may apply to your circumstances.

What about Shared Equity and how is it different to Help to Buy?

Under the Government’s equity loan scheme, it is possible to get a mortgage to cover 80 per cent of the price of the property and borrow the other 20 per cent. For the first five years, you won’t pay any interest on that loan. Help To Buy is a similar government scheme which was recently extended to 2023.

The Government will lend the homeowners 20 per cent of the cost, in a loan which is interest-free for the first five years. This only applies to new build homes, and there are not as many of those around. Make sure that the property you want to buy is included in this scheme.

Joint Borrower, Sole Proprietor

Joint Borrower, Sole Proprietor allows multiple incomes to be considered when it comes to calculating the mortgage, but their names won’t appear on the deeds. It can allow you to borrow more money if you have a deposit, but not a very high income.

Should I buy with someone else?

There are some lenders who will take a lodger’s income into account if you buy a place with more than one bedroom.

Siblings can also buy together, but be aware that once you sell, you would no longer be eligible for schemes for first-time buyers including stamp duty exemption, and it may be difficult for one sibling to take on the mortgage alone if the other leaves.

Think laterally

Even if the well-known schemes don’t suit you, there may still be a way. Parents and grandparents can release some of the equity from their homes under a reversion scheme.

This releases some of the value of the property which will go to the firm it is sold too after the death of the owners, who can live in it until then as tenants.

If some equity is released, this could be blended with a mortgage for a smaller percentage of the cost of the property, and work out cheaper overall. This is what’s known as ‘thinking outside the box’ and whatever you decide, ensure that you fully understand what you are doing.

Some lenders are now beginning to improve their offers, and accept mortgage applicants who take out a loan for their deposit in certain circumstances. Right now could be a very good time to start realising your options.