After the perilous financial crash in 2008, known as The Credit Crunch, the government brought in some backup to try and provide a much needed boost the mortgage market. They brought in new ways to help First-Time Buyers get onto the property ladder, with these being called Help-to-Buy schemes.
There are a number of different Help-to-Buy schemes available in the market. Some you may be able to match with and some others maybe not so much. Here is a list of the Help-to-Buy schemes and some other similar schemes that you may have access to.
The Help-to-Buy Equity Loan is the most popular of the various schemes. If you are a First Time Buyer in Cardiff and want to get your mortgage process rolling, this could be the ideal way for you to do so.
Firstly, you have to be First Time Buyer to be able to access this scheme, as well as only being able to purchase a new-build property too. A minimum of a 5% deposit is also a necessary requirement.
The way this scheme works is that you put down a deposit of 5% or more and then the government loan you rest to make up a total of a 25% deposit. Two examples of this would be if you have a 5% deposit they will loan you 20% or if you have a 10% deposit, they will loan you 15%.
This will leave you with a 75% mortgage and the government equity loan which you will have to pay off. You will get a period of 5 years to pay off this equity loan interest-free. If you are unable to meet the 5-year cut off point, you will start building up interest on the amount of the loan that is remaining. This interest rate starting point is 1.75%.
As a dedicated Mortgage Broker in Cardiff, we know that it can be quite difficult to balance your mortgage payments and the equity loan repayment alongside each other. There are ways around this, such as being able to remortgage to raise capital for this loan. This one, however, will increase your mortgage payments.
The Help-to-Buy Shared Ownership scheme was introduced as a means to help applicants to purchase a percentage of a property and then pay the rest back on rent over time.
The percentage of the property that you own in your name usually has to be between 25-75%. The remaining percentage will most likely be owned by the housing association. This share can possibly be increased at a later date, maybe at a point when you have more money.
The way that your payments work is that you have to pay your mortgage as well as your rent. So what this means is that you are basically paying 100% of the ground rent and service charge on the property. This is still the case, even if your share is the lowest available amount.
The Armed Forces Help-to-Buy scheme was introduced in 2014 following the previous success of the Help-to-Buy Equity Loan scheme. This scheme had the same concept of the prior version, however, this one was specifically for members of the armed forces.
If you match the criteria of the scheme, it could be a great option for you to take. The government has now extended the deadline/review date of the scheme to later in time at December 2022. Here at Cardiffmoneyman, we are hoping that it stays around, as the scheme is incredibly helpful for existing armed forces members who really need that extra help with getting onto the property ladder.
The Lifetime ISA is often a scheme that is forgotten by homebuyers. It’s not a go-to scheme, however, it’s still very useful to be aware of it, it can help you secure a new home as a First Time Buyer in Cardiff.
A Lifetime ISA is basically a savings account where your money grows, free of tax. The government will also give you a nice little top up of your savings by an extra 25%, so if you meet the £4,000 maximum amount, you will receive a pretty handy bonus of £1,000.
You have to pass certain criteria in order to gain access to this type of mortgage scheme. All of these details are available on the Lifetime ISA website.
During the many years we have spent as mortgage advice experts in Cardiff, we have, together with many of our advisors, witnessed a continuous increase in the number of enquiries made by private tenants in relation to becoming First Time Buyers in Cardiff by buying their current home from their Landlord.
As a private tenant in Cardiff, this is possible as long as you have been presented the offer of “first refusal” by your Landlord. First Refusal basically refers to the fact that the Landlord has given the tenant the option of buying the home directly from them, as opposed to going to the open market. In cases where the tenant has not been offered first refusal or is unsure whether or not such an offer has been made, we always recommend reaching out to your Landlord to confirm.
One of the main reasons for this trend is a change in certain government policies. Buy to Let purchases were previously given a certain tax relief by the Government. This tax relief has now been completely removed and as such, many Landlords are faced with paying higher tax bills than they usually do.
As many Landlords will agree, the act of buying and renting out a home serves as a great long-term investment plan. This has been the case for a long time, and many still find it so in spite of the policy change of recent years and have decided to continue (even with the issue of higher tax bills), keeping the brighter future of the property market in mind.
However, for other Landlords, they have decided to sell their previously rented out homes and move on to other ventures, whether as a result of the aforementioned issue, general financial constraints, or other personal reasons.
Whatever their reasons may be, if you find yourself as a tenant of such a landlord, note that you would not exactly be doing them any special favours as there are a number of merits they will enjoy by selling the home directly to you.
By selling the home to their tenant, the landlord can save some money that would otherwise be spent paying estate agents.
If the landlord puts the home up for sale on the open market, would-be buyers will have to schedule times for viewing the property, an activity that would prove difficult with a tenant still occupying the property.
Since the landlord will be selling directly to their tenant while they still occupy the property, there will be no need to set some money aside for paying cleaners, making certain repairs (whether major or minor), and repainting if need be. Such activities would be necessary to make the property attractive to the would-be buyer, a stranger, and not for someone who already occupies the property and sees it as it is.
Putting the home on the open market and asking the tenant to leave (or in cases where the tenant leaves willingly) places the landlord in a position where they are unable to maintain the steady income they usually obtain from payment of rent – rental void. This is because it could take a while to find a willing buyer and complete the sale. Selling to the tenant however means that the tenant will continue paying rent until they are able to finalise the purchase.
You know the property in and out and understand the necessary improvements, if any, that need to be made.
Buying a home you are already used to and love gives you the liberty to make any changes you want – whether as regards interior decorations or the surroundings – without the usual permission and deliberation involved as a tenant.
Since you would be saving your landlord some money as the property buyer, he or she could offer you a discount from the open market price.
For other buyers or movers who own property already, the issue of property chain can bring about some discomfort as a buyer could be waiting for the occupant of the property to move out so they could move in, while that occupant is also waiting for someone else to move out of another property. This has hindered the sale of many properties. As a sitting tenant however, you are not burdened by this as you already occupy the property you plan on buying; you only need to meet lender criteria.
Once you have saved for your deposit and you have enough money for a mortgage, it’s time to get prepared for your mortgage application. There are lots of different things that you will need to provide alongside your mortgage application, so we thought that we would give you a handy list so that you know what you need:
This item should be at the very top of your list; ideally, it would be handy if you can obtain this before you approach your Mortgage Broker in Cardiff. Your credit report will show you how your credit score is looking, which is what lenders will use to determine whether you’ll be accepted for a mortgage.
They are going to look at everything on your credit file, this will allow them to match you up with a lender that will be best suited to you. If your credit score is low you may need to look at a way to improve your credit score, for example, getting yourself on the voter’s roll seems to really help in terms of your credits score.
In terms of proving that you are, who you say you are, you will need to provide some in date photographic ID. Most of our customers use a driving license or passport for this part of the process.
However, you can’t use driving licence for ID though if you are also using it for proof of address. If you are a non-UK national working over here on a Visa, you’ll need to produce that too.
In addition to your ID, you’ll have to prove where you live. As mentioned above, you can’t use your driving licence or passport if you are already using them for your proof of ID.
We usually advise people to use a utility bill or an original bank statement dated within the last 3 months.
Your bank statements are needed to evidence your income and regular expenditures. When your lender analyses your bank statements, they are going to look for a variety of different things. For example, if a lender notices gambling transactions on your statements, they may not be so happy, it depends how often you gamble. They will also look at whether you stick to your agreed overdraft limit and if your direct debits bounce regularly. They need to be confident that you are going to be able to meet your monthly mortgage payments.
The Bank Statements you need to produce tend to be the ones where your salary goes in and your bills go out.
You will need to prove where your deposit has come from and show that you have the correct amount needed. This is all for anti-money laundering purposes; your lender will need to be certain on everything. I always think it’s best not to move monies around your various accounts too much. If you do, it will make evidencing the audit trail more difficult. Lenders also like to see that you’ve saved up for the deposit, so be careful on transferring large sums of money close to your application.
It’s not unusual for a portion of or the whole of the deposit to be covered by a gifted deposit from a family member or friend. These funds will also need to be evidenced and the person who has gifted you the deposit will need to sign a letter to confirm that it was a gift and not a loan.
In terms of affordability, the most important thing that you will need to evidence is your income. If you are employed this tends to be through your last 3 months’ payslips and some may even want your most recent P60. Lenders can consider regular overtime, commission, shift allowance and bonus. If you are lucky, your lender may accept earnings from more than one employer. This situation comes around when the applicant has a part-time job or is Self Employed.
Many of our customers in Cardiff are Self Employed. If this is you, then you’ll need your Accountants’ help to request your last 2 or 3 years’ proof of earnings from the Revenue. If you submit your own Accounts’ please contact us and we will advise you what to download from the Government Gateway.
As an experienced Mortgage Broker in Cardiff, we always advise that you do your homework and write down an estimate of your anticipated outgoings after you move to a new house. You can then work out a rough idea of how much your council tax and utility bills will be plus your regular expenditures such as food and drink. You will then be able to demonstrate how much disposable income you have available to pay your mortgage from.
Before we carry out an appointment with you we can send you our version of a Budget Planner to help you with this.
As you can see from the above, preparing for a mortgage isn’t easy. Think of it like the “Tortoise and the Hare” – if you want your application to run like clockwork, you’ll need to put the time aside to get everything together. You’ll get there much quicker if you put in the work at the outset!
How much deposit you need to buy a property depends on your personal situation and what it is exactly what you are looking to do. Here we take a look at how much you might need based on your own circumstances.
In previous years, 100% mortgages were readily available and before they were taken away, Northern Rock was offering 125% loan to value mortgages. What this meant is that if you were buying a property valued at £100,000 they would lend you up to £125,000.
Lenders require you to put down a deposit simply to reduce their risk of lending. If they lend you 100% of the purchase price then you happen to accrue any debts leading to property repossession, then they could be at a financial loss, especially if the house prices dip and they can’t make their money back.
You will also find that some say if you haven’t invested some of yours or your family’s money into your home, then you might find it a bit too easy to “walk away” should the going get tough and you were finding it difficult to meet your monthly payments. If you are not in a position to save up at least 5% of the purchase price yourself, then it could be argued that you’re not quite ready to take that first step onto the property ladder.
Unfortunately no, but if you are able to find 5% of your own resources then you could qualify for the government’s Help to Buy equity loan scheme. This applies to new properties only. You put in 5% and the Government loans you up to 20% to make up a 25% deposit. After 5 years you need to start looking at paying the equity loan back possibly by way of a remortgage or from any kind of savings you have been able to make in the meantime.
At the moment, yes 5% is enough in many circumstances. Not all Lenders will accept only a 5% deposit though so your options are more limited and normally you will need a reasonable credit score to qualify. There are lenders out there that would consider you for a 95% mortgage with an average credit score but the interest rates are usually higher in those cases.
A majority of the specialist lenders want you to put down at least 15% deposit if you have a history of poor credit once again as above this is simply to reduce their risk in case a repossession becomes necessary. It is much more difficult to obtain this type of mortgage than it was in the mid-2000s but it’s not completely impossible to find one.
You’ve always needed to put down a much larger deposit for Buy to Let Mortgages and most lenders at the moment are looking for at least 25%.
This could be possible but the vast majority of lenders won’t allow this as it would more or less still be 100% lending.
Yes, this happens all the time. Usually, it’s “bank of Mum and Dad” gifting or other family members but lenders have been known to accept family friends for gifting the money, so long as they can evidence the funds, prove who they are and confirm they are not expecting repayment of the gift as some kind of loan.
If you are buying as a sitting tenant at a discount from the open market value, from a family member or if you qualify for a discount under the Right to Buy scheme then generally speaking you wouldn’t need to put any of your own money in as the equity is already “built-in” to the deal.
Please remember that the above information is for reference purposes only and is not to be viewed as personal financial or mortgage advice.
First Time Buyers or any applicants with high credit scores are more likely to get accepted for a mortgage over applicants with a lower credit score. Lenders study your application carefully in order to ensure that you are able to afford a mortgage with them. You will never be guaranteed a mortgage and this is because every lender has different lending criteria and the chances of you matching every single one of these is unlikely.
Each lender has developed their own way of identifying whether you match their criteria or not. It is your Mortgage Advisors’ job to try and find you a lender who has the most criteria you match up to. They will also try to find the best deal for your personal circumstances. Whether your advisor is from your bank, the mortgage lender or a Mortgage Broker in Cardiff, your advisor will try their best to match your personal circumstances.
By going with a Mortgage Advisor in Cardiff, you will always know what is going on and will always be updated if anything changes or something comes up. We are a dedicated mortgage broker, here to help improve your credit score and help secure that perfect mortgage deal. Whether you are a First Time Buyer, Moving Home or Self Employed, we think that you would benefit from fantastic Mortgage Advice in Cardiff.
There are many different credit reference agencies in Cardiff that you can go to, with the most popular are Experian and Equifax. Before you make a decision, research each agency as it is a possibility that some of them could be holding incorrect data and discovering any discrepancies will be very beneficial to you.
Improving your credit score can be difficult but there are ways you can do this effectively in a manner that allows you to reap the rewards down the line.
Making multiple credit searches could actually have a adverse impact on your credit score. Price comparison websites are risky as they can also damage your score, so be extra careful. We also advise you to not apply for credit during the mortgage process as this may signify to the lender that you are struggling financially, even if you are not. It is a good thing in the long term though as it shows that you are reliable in making recurring payments.
Another simple but useful tip for improving your credit score is by registering for the Electoral Roll. In the eyes of the lender, it shows stability which they will favour. When registering, you must spell your name correctly and set your address to your current one and not a previous one. If you are not registered then you definitely should do this asap, as it’s quick and easy to set up and it could have a really positive impact on your credit score. Make sure everything is correct though to maximise the benefits!
Maxing out your card each month is not recommended and is bound to reduce your credit score. The lender looks at your credit card statements to check whether or not you have paid off balances by the due date. If you are meeting due dates and have never exceeded overdraft limits then a lender will see that you are more than capable of handling your finances well and it could prove beneficial towards your mortgage application.
On the flip side, if you don’t manage your finances carefully then the lender will believe that you don’t take payments seriously, thus reducing your chances of being accepted by them for any amount.
We often find that people who have moved house have not told their previous credit provider, which means that on their records you still are shown as living in the other property. Make sure you are on top of this as lenders don’t like to see your address history all mixed up and shown as living in two different places when you are not.
Some people, without even realising, have a family member or ex-partner connected to their financial commitments. It’s worth checking just to be sure, as you can’t get the financial association removed if the account is still live. If you are trying to remove any of these links then you should contact the credit reference agencies and make a request with them directly.
Applicants see credit scoring as being an unfair approach to accessing whether or not they can obtain a mortgage. Lenders disagree as this method provides a faster, fresher approach to their system of credit scoring. It’s also a lot cheaper for the mortgage lender and it provides always provides a result that they deem trustworthy.
If you want to get ahead of the game, you should send an up-to-date copy of your credit report in advance to your Mortgage Advisor in Cardiff. Starting early will increase your chances of being accepted for a mortgage the first time. The more that your advisor knows about your financial situation the better your chances will be.
Also, there are still some lenders that will want to do the process the old-fashioned way and will prefer a manual approach. They will have certain rules that they stick by about the number of defaults and CCJs that they will allow.
One of the most popular questions we get asked here at Cardiffmoneyman is “How much can I borrow for a mortgage?”. In this post, we will go into the details of affordability assessments and how they apply post-2014.
Whether you’re a first time buyer, moving home in Cardiff or looking to delve into buy to let mortgages, we hope that this article can help!
Back in the day, before the era of credit scoring, mortgages were assessed manually by your local Building Society Manager. Lenders moved towards more uniform income assessments to bring forward a more consistent approach in the 1990s.
Maximum lending “caps” were introduced to prevent budding homeowners from borrowing more than 3-4 times their income.
Around the time of the early noughties Credit Crunch, these income multipliers started to become more “generous”. Shockingly, lenders would allow some customers to self-certify, without the need for background checks!
As you can imagine, that went very wrong. Post-financial crisis, everything became stricter, with far more rules being put in place to try and protect the market from future disrepair. This made getting a mortgage significantly more difficult for some.
In 2014, the mortgage market had managed to recover, and we were introduced to the Mortgage Market Review 2014. This was a new set of guidelines for Lenders to follow in order for things to go smoothly. The old income multiplier method was no more, and we saw the emergence of more sophisticated affordability calculators.
With these new calculators, it became possible to delve deeper into how the applicant was spending their money and what their net disposable income would be. Advisors were looking at bank statements more closely to make sure the customer could only get a mortgage they were able to afford. One of the many factors included regular large expenses such as childcare.
Lenders can get quite competitive with one another, on the likes of price and lending criteria. Because of this you will find that things like the maximum borrowing capacity can completely differ between lenders. You may fit into a different niche depending on the lender, so if you are unsuccessful with one it does not mean your journey is over.
Some Lenders will take into account state benefits such as tax credits for a mortgage. Others are more generous if you are self-employed and looking for a mortgage. Taking out the longest mortgage available also opens you up to a larger amount you can borrow.
As time went by throughout the noughties, Lenders were a lot more lenient with how much they would lend. Some would offer self-certified mortgages without bothering to do a background check to see if they were being honest! Yet they wondered why it went wrong… Predictably so, the market crashed and the time between 2008 and 2010 were very difficult indeed, making it harder to get on the property ladder.
When the market eventually recovered in 2014, we saw the regulator launch the Mortgage Market Review (MMR). There is still a “cap” on how much can be borrowed (the majority of lenders prefer to stay below 4.75 times your annual income) but spending habits now become a factor in the process. Examples of these include high childcare costs, credit commitments and student loans. If you have any of these, you could be offered a lot less than someone earning the same amount who does not need to worry about those things.
We are still regularly surprised by what some lenders will and will not accept. In some cases, lenders may penalise low-earners (it could be that they’re not the type of applicant they want), some take pension contributions as a fixed outgoing so if you were, for example, a public sector worker with a big pension deduction that is less than a private sector and so on.
Different people are often better suited for different things. If you need to maximise your borrowing capacity to secure your dream home, then you will definitely need the support of a Mortgage Broker in Cardiff. We will be able to work alongside you, seeing which lenders will be able to lend you the amount you were hoping to borrow.
It is important to sit down with an advisor prior to making any kind of offer, so you can figure out what is within the realms of affordability.