- How much they\u2019ll lend to you<\/a><\/li>
- The minimum deposit they accept<\/a><\/li>
- How they treat gifted deposits and family support<\/a><\/li>
- Whether they integrate with government buying schemes<\/a><\/li>
- Their fee structure and how it suits your loan size<\/a><\/li>
- Their flexibility on limited credit history, new employment, self-employment, etc.<\/a><\/li>
- Their reputation and track record with first-timers<\/a><\/li>
- How fast and reliable their mortgage \u201cagreement in principle\u201d is<\/a><\/li>
- How well they support you throughout the process<\/a><\/li>
- How flexible they are on overpayments<\/a><\/li><\/ol>
You can click on any of the factors above to explore them further. Let\u2019s break them down.<\/p>
1. How much a mortgage provider will lend to you<\/h3>
Each lender has its own policy determining how much it is willing to lend. But all lenders will focus on at least these key factors when deciding how much they\u2019ll lend:<\/p>
Income<\/h4>
Lenders think in \u201cincome multiples\u201d, and MoneyHelper says that most lenders cap lending at 4.5x your annual income. On a \u00a330,000 per year salary that means a \u00a3135,000 limit.<\/p>
But Lloyds actually stretches to 5.5x household income through its \u201cFirst Time Buyer Boost\u201d mortgage product. So with a combined household income of \u00a345,000 that would mean a cap of \u00a3247,500. Virgin Money says it will stretch to 5x, but specifically for incomes between \u00a350,000 and \u00a375,000.<\/p>
These specialised mortgage products go a bit beyond the 4.5x limit that MoneyHelper states, but they\u2019re the exception not the norm. The Bank of England\u2019s Financial Policy Committee warned banks to keep 85% of new mortgages at or below that 4.5x threshold.<\/p>
Bear in mind that income multiples are just one factor of several influencing what a bank will be willing to lend.<\/p>
Affordability<\/h4>
As well as your income, there\u2019s you outgoings to think about. And that\u2019ll include any existing debt you carry, because that will take a bite out of your monthly paycheck. Outgoings isn\u2019t just about servicing debt though. Your gym membership, Spotify subscription, mobile contract, etc. all count.<\/p>
Lenders don\u2019t tend to give us any helpful benchmarks on outgoings, unfortunately. BUT, they do offer mortgage calculators for rough initial estimates on affordability, and a \u201cMortgage in Principle\u201d for more accurate \u2013 and personalised \u2013 lending estimates based on your particular income and outgoings. <\/p>
Loan to value (LTV)<\/h4>
Lenders do openly declare their LTV limits. The LTV is the maximum lendable based on the deposit size. A lender offering a maximum LTV of 80%. would lend you up to \u00a380,000 if you had a \u00a320,000 deposit.<\/p>
Lloyds\u2019 helpfuly-named \u201c95% Mortgage\u201d is a market-leader (without leveraging a guarantor or scheme \u2013 more on that below). With a deposit of \u00a312,000 you could borrow up to \u00a3228,000.<\/p>
Stability<\/h4>
Lenders will evaluate your perceived risk based on your credit history and the nature of your employment, amongst other things. The riskier a prospect they think you are, the less they\u2019ll lend.<\/p>
While UK banks don\u2019t publish any benchmarks for credit scores, many can use a quick soft search of your credit file in order to provide you with a mortgage \u201cAgreement in principle\u201d \u2013 which is better really, because it\u2019s based on other factors as well. This takes about 10 minutes.<\/p>
2. The minimum deposit a mortgage provider accepts<\/h3>
64% of Brits trying to buy their first home said finding the deposit was their biggest hurdle. But specialist low-deposit schemes and mortgage products are out there.<\/p>
Lloyds offers its \u00a35,000 Deposit Mortgage<\/a> for first-time buyers, on properties up to \u00a3300,000.<\/p>
Newcastle Building Society\u2019s \u201cFirst Step\u201d is a similar \u00a35,000 deposit product. However this is only available on a specific fixed-term.<\/p>
But if \u00a35,000 is a stretch too far, you may be able to leverage family support<\/a>. <\/p>
3. How mortgage lenders treat gifted deposits and other family support<\/h3>
Family help can come in many different forms, the most common being \u2013<\/p>
- Gifted deposits<\/li>
- Having someone act as a guarantor<\/li>
- Family-assisted mortgages<\/li><\/ul>
These can be more little bit more involved than a standard mortgage, but could help you buy a house sooner.<\/p>
As an example of what you might be able to expect from a bank, Lloyds has its \u201cLend a Hand mortgage\u201d<\/a> \u2013 which lets a family member use their savings as security for a first-time buyer \u2013 and also its First Home Deposit Gift<\/a> scheme, which lets a family member borrow more on their mortgage to help a first-time buyer with their deposit.<\/p>
4. Which mortgage lenders work with government buying schemes<\/h3>
There are lots of government housing schemes so it\u2019s important to find out how well your lender can work with you on them. <\/p>
Schemes include:<\/p>
- First Homes<\/li>
- Shared Ownership<\/li>
- Lifetime ISAs and Help to Buy ISAs<\/li>
- Local or developer-specific assistance<\/li>
- Other government or housing-assistance schemes<\/li><\/ul>
5. How a mortgage lender\u2019s fee structure suits your loan size<\/h3>
On smaller mortgages, the impact of a product fee can be more impactful than the impact of a slightly better interest rate. That\u2019s especially true in an era where people tend to switch to a new mortgage product every few years.<\/p>
E.g. on a \u00a3120,000 mortgage over a 2-year fix, a 0.2% rate difference saves around \u00a3240 per year, but a \u00a31,495 fee wipes out that saving.<\/p>
- The minimum deposit they accept<\/a><\/li>
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