Boost your chances of getting a mortgage as a first time buyer

As many people are already aware getting a mortgage can be difficult for anyone these days, with the banks exercising extreme caution over who they lend to and putting a range of restrictions in place with regards to mortgage loans. However, one of the groups most likely to experience difficulties when it comes to mortgage loans is first time buyers.

There are many first time buyers that are desperate to get onto the property ladder, and have been for some time. However, for many years these potential buyers have faced difficulties when it comes to getting a property. Until the global credit crisis swept the nation first time buyers could get mortgages without even having to put down a deposit in most cases, but many could not afford the extortionate house prices that resulted from the many years of house price inflation.

Once the credit crunch hit property prices began to tumble, which is what many first time buyers may have been waiting for. However, at the same time as this the banks started to really rein in their lending, wiping out the 0 percent deposit that so many first time buyers had come to rely on and demanding huge sums up money upfront before even considering granting a mortgage loan. This has left first time buyers out in the cold once again, albeit for different reasons.

Whilst there is no doubt that first time buyers still face many challenges when it comes to getting a property there are some steps that they can take to try and improve the chances of getting onto the property ladder. One important thing to remember is that lenders are being very cautious over who they lend to, so it is advisable for first time buyers to be prepared and be aware of their credit rating. Before applying for a mortgage buyers are advised to order a copy of their credit report and check how good the rating is, as this will provide an idea of how likely it is that a mortgage will be granted.

Another think to consider is the level of deposit that the lender will want. Before wasting time looking at properties and applying for mortgages first time buyers should plan their budgets and spend time saving as much as possible, as the higher the deposit the more likely it is that an affordable mortgage will be granted by lenders.

Finally, more and more first time buyers are now turning to shared equity schemes, where they get a mortgage out to purchase a percentage of a property and rent the remainder from a housing association until they can also afford to buy the remaining share, which can be done in stages. This is a more effective and affordable way for first time buyers to get onto the property ladder these days, and it is possible to get a brand new house without having to take out a huge mortgage by using this option.

Tags: potential buyers, check, finance, first time buyer, mortgage, money, Mortgage loan

First-time buyers turn to families for help

First-time buyers are increasingly being forced to ask family members for help in raising a deposit as the mortgage market tightens under the global credit crunch. Read more

Tags: family, first time buyers, First-time, housing ladder, mortgage lenders

Only five% of first-time buyers used 100% plus mortgages

Despite being “very good” for first-time buyers, only five percent of them used the 100 per cent plus mortgages to get themselves onto the property ladder, one financial expert has claimed.

According to Firstrung these 100 per cent plus products were “niche products” which never became as popular as people made out.

Paul Holmes, chief executive officer of Firstrung, said that the media tried “to portray that people went out and had a hundred per cent mortgage on their property … they didn’t. They had a 95 per cent mortgage, and could take a loan up to 30 per cent or £30,000 – whichever was greatest”.

Firstrung said that the majority of first-time buyers who took 100 per cent-plus mortgage product took a 95 per cent mortgage and a ten per cent personal loan.

Mortgage lenders Northern Rock, Alliance & Leicester, Birmingham Midshires and Abbey have all withdrawn from the 100 per cent mortgage market.

These lenders have begun to require borrowers to supply the deposit on a new home themselves.

Tags: cent plus mortgages, Birmingham, loan, ladder, abbey, plus, alliance

Interest rate rise reaction

The Bank of England yesterday (July 5th) announced another 0.25 per cent increase in the base rate, taking it to a six-year high of 5.75 per cent.

Mortgage holders, credit card borrowers and those with loans will be hit hardest and many industry figures are warning of the implications of the rise.

Citizens Advice warns that many people will be adversely affected by the rate rise and says that it has seen an increasing number of people visiting its local bureaux after falling behind with mortgage payments.

It says that the rate rise will tip over the edge those who are just about struggling along and is calling upon lenders to be sympathetic to their borrowers.

Despite the dangers associated with a base rate increase, many first-time buyers (FTBs) will not be deterred from trying to get onto the property ladder.

That is according to new research by Bradford & Bingley that shows 46 per cent of FTBs are concerned that house prices will become even more unaffordable in the future and so do not want to wait.

Many industry figures are predicting that the Bank of England will announce a further rate rise before the end of the year, taking the base level to six per cent.

However, this could lead to further criticism from many, with Scottish Widows Investment Partnership already saying that a further rise is unnecessary as it expects inflation to fall in the coming months.

Tags: high, Loans, cent, ladder, cent increase

Young buyers mortgage illiterate

Many first-time buyers are mortgage illiterate, according to new research by AA Legal Services.

Those looking to get their first mortgage on a property are confused by certain terms and may not be completely aware of what it is that they are buying.

The research found that 40 per cent of new buyers do not know the difference between a leasehold and freehold property, with those aged between 18 and 24 being the worst offenders.

AA Legal Services has expressed concerns that many young people are feeling the pressure of rising house prices and this may be forcing them into getting onto the property ladder without fully understanding what they are signing up to.

First-time buyers spend an average of £159,653 on their first property but 41 per cent have no idea what freehold means and 43 per cent are clueless as to the meaning of leasehold.

“Our research suggests that many homebuyers are so desperate to get onto the property ladder that they may be over looking vitally important basic legal principals,” commented James Molloy head of AA Legal Services.

The term leasehold means the right to hold or use a property for a fixed period of time according to a contract. However, many 18-24-year-olds thought it meant that the property could be rented out and others believed that it made the house exempt from council tax.

Freehold means that there is no limit to how long the property can be held and remains with the holder until he or she willingly transfers it. Six per cent of 18-24-year-olds thought freehold meant exempt from capital gains tax, while two per cent thought that only freemasons could buy freehold properties.

Tags: leasehold, Many first-time buyers, first mortgage, legal, difference, pressure

FTBs struggling more than ever

It is more difficult for a first-time buyer (FTB) to get onto the property ladder now than it has ever been before.

That is according to housing charity Shelter which has carried out a study into FTBs and found that increasing house prices are leaving them without a chance of making a purchase.

Shelter found that it is nearly twice as hard for an FTB to get onto the property ladder today than it was ten years ago.

This conclusion is based on the gap between how much people earn and the costs of a mortgage, with the gap today being larger than ever.

“These figures show the gulf between those who can afford to buy and those who can’t is widening at an alarming rate,” explained Adam Sampson, chief executive of Shelter.

“For first-time buyers, the housing ladder is becoming a housing tightrope. Buying a home is becoming an ever-more distant dream for first-time buyers and as housing becomes increasingly unaffordable, repossessions are likely to spiral and more families will face the nightmare of homelessness.”

Although the outlook is bleak for the majority of regions in England, Shelter points out that the South East and the East Midlands have shown slight improvements in affordability.

Tags: gulf, ladder, repossessions, outlook, Economy of the Republic of Ireland, charity

Brits think of retirement first

The majority of Brits are more concerned about their pension than getting a mortgage.

New research shows that the average person in the UK begins putting money towards their retirement before taking their first step onto the property ladder.

A report released by Axa shows that the average person starts planning their retirement at the age of 28 but does not buy a house until the age of 29.

Britain, in fact, is a world leader when it comes to planning for retirement, beating off competition from the US, Canada and Australia.

Although the British attitude is commendable, some industry experts are warning that too many people (one third) are relying on property to secure a retirement income.

“Homeowners have limited options for generating earnings from the property they live in,” said Steve Folkard from Axa.

“Many people don’t take into account how emotionally attached they can become to a family home.

“By the time they retire, people are often loathed to move away from their friends and family or rob their children of their inheritance by handing over their home to an equity release company. This can scupper plans to take an income from the equity in their home,” he added.

Tags: mortgage.New research, ladder, uk, CAC 40, Steve Folkard, equity, income, folkard

New buyers will feel pinch

First time buyers will be adversely affected by recent interest rate rises, says the Royal Institution of Chartered Surveyors (Rics).

The organisation believes that people taking their first step onto the property ladder are likely to fall behind with mortgage repayments as a result of the rise.

Conversely, Rics points out that buy-to-let investors are less likely to suffer the same fate, with age being cited as one of the key factors.

Figures show that those with a buy-to-let mortgage are generally older and have more disposable income, making them more secure in the market.

Rics says that 0.96 per cent of all mortgages in the UK are in arrears, with only a tiny percentage of these being buy-to-let properties.

“Buy-to-let investors will be less at risk from repossessions in the coming months,” said David Stubbs from Rics.

“Older, wiser investors are likely to ride out periods of interest rate rises looking to the benefits of long term capital growth rather than short term rental income.

“January’s surprise interest rate rise is likely to soften new buyer enquiries in the coming months but those buyers who have already taken the housing market plunge could find mortgage companies knocking at their doors in the near future as affordability conditions bite.”

Tags: future, interest rate rise, ladder, interest rate, Business Finance, periods, interest