Low mortgage rates: Is now the right time to buy?
Buying a home is always an exciting and slightly daunting move. Whether you’re a first-time buyer, upgrading or downsizing, you’ll most likely need a mortgage and with the economy as it is, can there ever be a “best” time to make your move?
We spoke to Ross Jefferies from Panoramic Wealth Management, who are a team of financial advisers in Kent. Ross deals with Mortgage Advice in the business and particularly specialises in helping young professionals. We asked Ross a few questions that no doubt have been on your mind too if you’re thinking of moving:
We hear in the news that mortgage rates are very low at the moment. Does this mean I’ll be able to move into my first home quicker with less deposit because monthly payments will be less?
Ross says; “Whilst there are good deals out there, lenders primarily base mortgage loans on the affordability in total over time, not purely on the monthly mortgage payments. For first time buyers who are renting it can feel like getting on the property ladder no matter what is best and although in some cases that can be correct, it isn’t always. What we at Panoramic tend to advise is not to overreach, not to push affordability to the nth degree, and favour capital and repayment loans over interest-only loans to ensure you hold maximum equity in the property at the end of your mortgage term.”
I’ve been furloughed but I’m going back to work in July. Will this affect how much I can borrow?
Ross says; “With the current market, lenders will be keen to make sure that the loan and its’ repayments are affordable at all times, so where furloughed, it may have an impact on the “affordability” side of borrowing. Once back in work, although you’ll likely be back on full pay, lenders will still scrutinise income over the past year, and it may lead to further questioning about your furloughing situation, but with common sense, they should be able to understand your income reasonably and make you a fair offer.”
Are there any special types of mortgages for new build homes or first-time buyers? Or any restrictions because of Covid19?
Ross says: “Getting on to the property ladder is often the first key goal in life for many but it does take a fair amount of funding behind you, not least your deposit. What can help is certain schemes such as the Help to Buy ISA where for every £200 saved, the Government will give you £50 up to a total bonus of £3,000 which requires savings of £12,000. This did close to new entrants in November 2019 but leaves the Lifetime ISA an option which allows a yearly maximum of £4,000 and receives a Government bonus of £1,000 if you meet the yearly limit.
Not everyone is aware, but some professions can obtain higher lending multiples that make a greater difference in loan amount than small bonuses added to a deposit. We regularly advise on Professional Mortgages where First-Time Buyers who are Accountants, Architects, Barristers, Chartered Surveyors, Dentists, Medical Doctors, Pharmacists, Pilots, Solicitors, Vets, with a current income of £40K or more can borrow up to 5.5x income. As an example, if a single person is earning £40,000 and does not qualify for the young professional mortgage, they may be able to borrow £180,000 whereas someone who qualifies can borrow £220,000 making a serious difference. It is definitely worth investigation into whether your profession attracts different lending rules”
At Gold Property Developments, we also take part in the Help to Buy Equity Scheme, which allows buyers to borrow 20% of the purchase price separately, meaning that only a 5% deposit is needed and a mortgage loan of 75% of the value of the property. This can make it easier to raise finances if a mortgage with 95% LTV is unachievable. In addition, we run several incentive schemes including Keyworker Mortgage Supplements, which can help lower the cost of moving and effectively add a little extra to your deposit.
Are mortgage decisions in principle and offers taking longer because of Covid19? What if I need to complete quickly to secure a new build home?
“Unfortunately, the whole world is moving at a slower pace at present and we won’t see that return to “normal” for quite some time. What I am seeing with buyers, sellers and lenders alike is that everyone understands what we are going through is not close to normal and are allowing extra leniency. What you can do to help the process is to respond to your solicitor and mortgage lender as quickly as possible to avoid any unnecessary delays.”
How can I ensure my new home is still affordable if mortgage rates go up?
Ross says; “Ensuring you’re on a fixed rate will mean your monthly payments don’t fluctuate with bank interest rates. Fixed-rate mortgages may not be the cheapest way of repaying the loan but as we have seen of late, we do not know what’s around the corner for the economy so it can be worth paying slightly more for the reassurance of knowing your mortgage payment to the pound and penny each month for the next few years.”
Taking mortgage advice
We hope the advice is useful and if you have any questions at all about our Sales processes at Gold Property Developments, do feel free to contact our sales team who will be happy to talk to you about our reservation fees, the Help to Buy scheme and incentives. We always recommend you seek independent advice from a Mortgage Adviser before viewing homes and in that case, if you are based in Kent then you may like to contact Panoramic Wealth to help you.