Posted on 7th April 2017

Choosing the Right Mortgage for You

Martin Williamson, Director and Head of Residential Property
Martin Williamson, Director and Head of Residential Property

We’re experiencing something of a mortgage revolution, with new and innovative options entering the marketplace on a regular basis. As lenders introduce competitive deals to fight for a share of the marketplace, we see more buyers, particularly first-timers, able to take advantage of record low interest rates and longer borrowing terms.

Since the financial crisis in 2008, lenders have had to be more creative to ensure they are responsible while they chase a successful turnover. With so many different products now available, it can be confusing for a buyer to know which option is best for them.

Amongst new entries to the market is one that caught me by surprise, Loughborough Building Society’s new ‘Buy for Uni’ mortgage. Launched in February, it aims to help university students get onto the property ladder whilst they are still studying, offering a loan of up to 100% of the value of the property. I was taken aback by the fact that whilst most university students are learning - and often struggling - to budget for themselves for the first time, some are getting a welcome leg up onto the property ladder.

Of course, there are stipulations, which actually give a sound introduction to the world of the residential landlord. They must have a guarantor parent, step-parent or grandparent, and use the rental income from renting to roommates to cover the mortgage payments. I imagine the wrath of mum and dad can be as equally terrifying as the bailiffs knocking at the door.

Many providers, such as the Yorkshire Building Society, offer a Family Offset option for their mortgages, where family members can link their savings accounts to a mortgage product. The combined balances of the savings can either reduce the monthly payments or allow the borrower to pay off their mortgage sooner. It is worth being aware, though, that if the family member withdraws any or all of their savings, this could impact the mortgage payments.

Other entrants include mortgages which provide a cash back option to cover the cost of stamp duty or pay for furnishings and mortgages that are specifically aimed at the self-employed and contract workers. Nationwide are offering £500 cashback to first time buyers, which they will get within one month of completion – a very attractive prospect for someone who has just made their first property purchase. Kent Reliance, who offers products exclusively through brokers, will take applications from only 12 months’ worth of income, which will be a relief for some, as providers often require three years of trading history from self-employed applicants.

‘Buy to Build’ mortgages are also becoming more prevalent for those customers who wish to start their new home from scratch. These products usually involve the customer receiving their payments in stages, with each payment being released once an assessor has viewed the progress. Although this is an excellent opportunity for those who dream of designing their own home, be aware that these deals often require a large deposit, with some lenders asking for around 40% to get their best deals.

The days of the one size fits all mortgage are over. With so many products available, it’s wise to shop around and find what’s best for you.

Please note: This article is intended as guidance only. No responsibility for loss occasioned/costs arising as a result of any act/failure to act on the basis of this article can be accepted by Latimer Hinks. In addition, no responsibility for loss occasioned/costs arising as a result of any act/failure to act on the basis of this article can be accepted by the firm