What you need to know about applying for a mortgage this year
During the restrictions we have been placed under since the lockdown was lifted in June, one thing that has remained open is the property market. What’s more, the UK has seen an unprecedented boom in sales with demand outstripping supply.
As the housing market continues to be exceptionally busy and the LBTT deadline approaches in March 2021, you may be wondering if and how the mortgage market may have been affected at this time. Have lenders changed their criteria? Do you need a larger deposit? How long will an application now take? Here we look at the answers to some of the most common questions that house buyers are asking:
What mortgages are currently available?
Over the last few months, many lenders have restricted their products and withdrawn the high LTV (Loan to Value) mortgages. Before the pandemic, the banks were starting to bring in 95% and even 100% mortgages, but along with lockdown came a stricter lending criteria as affordability became an issue for many. However, it’s worth noting that some lenders have ‘flash’ offers so talk to an independent mortgage advisor who will have their finger on the pulse and be aware of who is offering which deals and what you are eligible for.
Can I use Help to Buy or the First Home Fund?
Both of these schemes are operating as normal and require just a 5% deposit when used – however, the First Home Fund has temporarily put a hold on applications and will re-open early next year for properties purchased from March 31st onwards. Help to Buy (Scotland) is still running as normal and you can apply when buying an Urban Union property (terms and conditions apply).
There have been some changes in lending this year, but mortgage approvals are currently the highest they’ve been since 2007. This is a result of the demand for new homes since March due to the LBTT holiday (no LBTT is payable up to £250,000 in Scotland and £500,000 in England) and a change in buyer’s priorities with more home working, demand for outside space and less importance on being close to the city and transport links. The most significant change is the amount of money that banks are lending – instead of the high LTV deals, more common today are the 85% deals. They have also slightly changed the affordability criteria with buyers in certain industries (such as travel or hospitality) required to give more evidence of earnings and job security. They have also started to recalculate earnings and you may have issues if your wages are being paid by the furlough scheme. Applications are looked at on an individual basis so talk to a mortgage advisor to find out what yoru options are. You can improve your chances by saving for a larger deposit, reducing your debts before you apply, improving your credit rating and looking at other ways to finance a new home – for example help from parents or Help to Buy.
Mortgage application times
As the market is so busy and many offices and banks have been temporarily shut, there is a backlog and so an application could take slightly longer to be processed. The mortgage is only one part of the buying process and at present you also need to allow up to 3 months for conveyancing. You can speed things up by getting a Mortgage in Principle before you purchase a home.
Buying new can save a lot of time – once you have paid a reservation fee (which will be offset on completion) the property is yours and the process is much quicker. There’s no chain, no negotiating and you don’t have to rely on your seller’s timings for when they can move out.