The past few months have been challenging in many different ways, but the housing market seems to be one area in which the rulebook has been re-written, with sales volumes in July reaching a 10-year peak. The increase is being put down to a number of reasons including pent-up demand, the Chancellor’s Stamp Duty holiday and a refocus from people on the importance of investing in their homes, having spent weeks within their own four walls during lockdown.
Here at largemortgageloans.com, we can certainly corroborate the latest figures from Rightmove[i], as we too have seen record levels of activity driven by the reasons outlined above, along with historically low interest rates. Many clients have been looking to buy large, high value homes outside of the traditional city hotspots, which is another trend highlighted by one of the UK’s largest property portals[ii] and a result of the distinct lifestyle changes brought about by COVID-19.
It’s not all plain sailing for clients however, and although our heartland territory of large mortgage loans has been incredibly busy, we have also seen significant challenges for some. This is where our offering in specialist mortgages really comes into its own, as we’re often able to broker solutions which you just can’t find with a traditional mortgage adviser.
Take, for instance, first time buyers. It’s not necessarily an area you might consider as our heartland but, in fact, we do help a significant number of first-time buyers every year because their situations are often more challenging than the norm. Now is no different. A recent survey of the mortgage market claims the number of high loan to value products is down 95% on pre-crisis levels[iii] and lenders are introducing even stricter terms for first time buyers. For instance, the likes of Nationwide has announced that their 90% LTV deal for first time buyers will come with an additional condition; lenders need to prove that at least 75% of any deposit has come from their own savings, and not been gifted from the so-called ‘Bank of Mum and Dad’.[iv]
These challenges in lending have a huge effect on the success of first-time buyers to secure that vital foot on the ladder and take advantage of the all-important Stamp Duty holiday. So, what are their options? We’ve written before about guarantor mortgages[v] and Joint Buyer, Sole Proprietor mortgages[vi] both of which allow first time buyers a ‘leg up’ by naming a close family member on the mortgage, giving lenders the assurances they need that repayments will be met. These can be great solutions, but often they do come at a cost and it’s this factor which we have recently been challenging, by working with one of our lenders to restructure these loans to make them more affordable in the long-term.
Our approach caught the eye of The Daily Telegraph, who last week covered this innovative mortgage[vii], driven by our Associate Director Daniel Gracie.[viii] A mother and daughter were buying a property via a guarantor mortgage with the daughter’s salary representing two thirds of the mortgage amount and the mother’s the remaining one third. Usually, the mortgage term is based upon the age of the oldest applicant – therefore terms are usually short, and repayments reflect this fact. However, Daniel hit upon an idea…
What if the loan could be structured so that two thirds could be paid off over 35 years, in line with the daughter’s age, and one third paid off in 12 years to satisfy the lender’s upper age limit? He put the idea to the lender and, after approval from their highest levels of management, it was given the green light.
Although the rate was around 1% higher than a high street lender might offer, the total repayments on this particular loan offered a saving to the client of almost £900 a month. By structuring the loan this way, our mother and daughter clients will benefit in the long-term, as one third of the loan will be paid off in 12 years. This makes the finance package more affordable now and in the future and it’s an idea that the lender is happy to consider going forwards, so we could be seeing a new precedent set in the world of guarantor mortgages.
If this is something you’re keen to explore, why not give us a call? Our team doesn’t take a tick box approach and we’re really proud of that. We are driven by finding financing solutions which help people in specialist and challenging situations. We’re always happy to discuss individual circumstances with no obligation to proceed, so if it’s a clear plan or just an outline conversation you’re after, don’t hesitate to get in touch.