Generating enough cash to be able to afford a deposit on a new property can be a very daunting experience for first time buyers, especially if they are paying rent on another property at the same time. It is understandable that there are so many people looking for a place of their own, especially since the pandemic began.
With experts advising us to stay at home to help reduce the numbers of Covid-19 cases, more people than ever before are working from home. Spending almost every minute of the day indoors has not been easy, especially for those living with others. These unprecedented times have motivated a lot of people to make the big step and get on the property ladder.
Those who are eager to get a place of their own in a short space of time without having the finances to pay for an expensive deposit often opt for a high-LTV mortgage of ninety percent instead. Financial experts reported the highest growth in high value mortgages in January 2021.
What Is A High Value Mortgage?
A high value mortgage or a high LTV mortgage is a very low deposit on a property. These are usually mortgages of ten percent or even less. Although these mortgages allow people who can’t afford an expensive mortgage to get into the property market, they must understand that they will own less of their property outright. On top of that, they will owe a lot more on a mortgage.
The majority of folks who get these high value mortgages are first time buyers, but this isn’t always the case. Some people who already own their homes are looking for a deposit remortgage.
Most first time buyers will need a minimum of a five percent deposit. The lender will examine your current expenditures, your salary, and your credit history before they can estimate how much money they will let you borrow.
If you are thinking about taking out a high LTV mortgage, consider talking to a financial advisor first. There are plenty of reputable agencies that can guide you through each step and help you with your mortgage, such as London FS Mortgages.
Is It Worth My While Waiting, And Saving For A More Expensive Deposit?
Although these high value mortgages are helpful for those desperate to have a place of their own, there are a lot of expensive fees included in these deposits and the interest rates are very high. There are a lot of risks involved in these mortgages, so it is not surprising that most financial advisors would recommend that their clients save for larger deposits.
However, if you are renting while you are saving for a deposit, you might find it impossible to save for a deposit, because you are spending a large sum of your salary on rent. A lot of people feel that rent is dead money, and if they didn’t have to give money to their landlord every month, they would easily repay their mortgage, so they are left with no other option apart from getting a high value mortgage.
However, during the ongoing pandemic, a lot of people are worried about their job security. There are lots of industries that have suffered during this time of Covid, and many people have found themselves unemployed. Lenders are well aware of the current situation, so getting a loan can prove even more difficult. If your job is in jeopardy, and you are thinking about taking out a high level mortgage on a new property, keep in mind that there are very high interest rates and fees. Will you still be able to afford them if you are unemployed?
Are There Any Other Alternatives?
The spread of the deadly virus has caused a disruption in almost every industry. It has had a devastating impact on businesses around the globe, and their employees. Although people are hoping to get a mortgage during the ongoing pandemic, it might be worth waiting a little longer and saving money for a more expensive mortgage instead. There are other options people should consider, such as:
- Lend money from a property developer: A lot of property developers will lend a person the cash for a deposit when they invest in a home the property developer has built. You will have to prove that you are able to pay back the mortgage and the loan to the property developer has given you.
- Help to Buy: Governments want people to have their own homes, so they often set up different schemes such as the Help to Buy scheme in the United Kingdom. They will offer you a twenty percent loan so that you can purchase a property. If you don’t live in the UK, it might be a good idea to find out the different schemes your government has in place.
Shared ownership is another option that will allow you to part-rent, part-buy your property from an official housing association. You will only have to pay a small amount of cash for your mortgage, and the option to buy the entire property down the line.