Typically a First Time Buyer is someone who hasn’t owned a property before, but this is not always the case. Some lenders have criteria that ‘resets’ their First Time Buyer policy, for example Nationwide will allow you to utilise their First Time Buyer products again if you haven’t owned a property or been on a mortgage 3 years prior to any application*.

As a first time buyer you generally have more options which are essentially ‘introductory’ offers. For example, Nationwide offer a ‘Helping Hand’ scheme which offers a 5.5x income multiple for sole and joint applicants, whereas most other lenders will only allow you to multiply your income by 4.25 or 4.5 times.

Lenders also typically give first time buyers a number of incentives such as cash back with their first purchase.

*Criteria subject to change by the lender.

Having bad credit means your credit file shows things that may put lenders off from providing you a mortgage. This can include late or missed payments, or having lots of existing debt. More severe things that can impact you getting a mortgage can include Defaults, County Court Judgements (CCJ), Bankruptcy, Individual Voluntary Arrangement (IVA) or a Debt Management Plan (DMP).

The good news is that there is a whole sector of the mortgage market geared up to lend borrowers/clients money for their next or first home purchase or remortgage if they have bad credit. These mortgages are just like regular mortgages, except they come with higher interest rates and there could be a lower limit on how much you can borrow. You might also be asked to come up with a larger deposit of at least 20-25% of the value of the property, rather than 5-10%.

With the cost of this type of mortgage being higher it is important you speak to a specialist.

A 95% is like any other mortgage but it only requires a 5% deposit to purchase your home. This is fantastic news as previously you needed 10% or more!

This isn’t just available for First Time Buyers these mortgages are available for anyone looking to buy for the first time or moving.

As you would expect, with a low deposit the interest cost of these products is higher than if you had a 10% or 15% deposit.

Speak with an expert today to find you the best 95% mortgage.

This scheme works by providing you a mortgage on part of the property, and you then pay rent on the rest e.g. you own 40% of the property and pay rent of the un-owned 60%. This means you can buy a home with a smaller deposit and will own 40% of the property.

For example if you found a property at £300,000 and wanted a 40% you would be buying £120,000 of that property and this is the part you would seek a mortgage on. If you wanted to put down a 10% deposit, you would only need to put down 10% deposit on the part you are buying e.g. the £120,000 so £12,000 deposit and not the full £300,000 value of the property.

Rent is typically charged at around 3% of the unowned portion of the property. In the example above if you take £180,000 which is the unowned portion you pay rent on, and multiply this by 3% this gives you £5,400. If you divide this by 12 this gives you the monthly rental figure of £450 (£300,000 x 60% x 3% / 12).

You have the option to increase you share from 40% up to 100% (usually) and this is called ‘Staircasing’.

Advantages of shared ownership

• You can buy the part of the home you’re renting out at a later date
• Gives you a chance to own your home, even without a big deposit
• You pay rent on a property that you have a chance of eventually owning
• You can sell your shared ownership at any time, even if you don’t fully own it

Disadvantages of shared ownership

• When selling your home, the housing association may not give you full control over who you sell to
• You have to pay ground rent and service charges on your home
• If you’ve purchased a flat, you might need to pay maintenance charges

100% mortgages are few and far between as lenders are more cautious since the 2008-2009 banking crisis and recession. Prior to this it was typical for lenders to approve mortgages with no deposit or even 100%+ mortgages that allowed you to borrow more money than the property was worth.

Following the banking crisis ins 2008-2009 lenders tightened up lending criteria and the mortgage market regulator, the Financial Conduct Authority, eventually introduced new affordability rules designed to ensure that lenders (and borrowers) didn’t get into the same mess as was 2008-2009.

However, there is a lender that offers 100% mortgage on shared ownership. Refer to the Shared ownership section to find out more.

The new Deposit Unlock scheme is for first time buyers and home movers who are looking to buy a new build home with just a 5% deposit. This scheme is exclusively for new build homes. Certain house builders are participating in Deposit Unlock (see a list below) and using a mortgage offered by a number participating lender (currently Newcastle Building Society, Accord Mortgages and Nationwide)

Usually with a new build property, lenders expect a minimum deposit of 15% which is why this scheme is really supporting buyers with their first or next move.

There are some limitations to the scheme as it is not suitable for individuals who already own another property on completion. Nationwide will not lend to self-employed applicants although Newcastle Building Society says it will consider self-employed applicants. However, Newcastle Building Society will not consider any business that has been closed or received government funding during the pandemic.

If you’re a first-time buyer, you may be able buy a home for 30%-50% less than its market value. This is via the First Homes scheme which is supported by the government.

The home can be:

• A new home built by a developer
• A home you buy from someone else who originally bought it as part of the scheme
• The home cannot cost more than £420,000 in London, or £250,000 anywhere else in England, after the discount has been applied
• The First Homes scheme is only available in England.

Eligibility Criteria:

• Must be a first-time buyer
• Must be able to get a mortgage for at least half the price of the home
• Need to be buying the home as part of a household where total income is no more than £80,000 (or £90,000 if you live in London)

The local council may also set some eligibility conditions. For example, some councils may prioritise giving First Homes discounts to:

• Essential workers
• People who already live in the area
• People who are on lower incomes

More information on the scheme can be found here on the government website: https://www.gov.uk/first-homes-scheme

For this type of mortgage, it’s important to note that there’s no such thing as a ‘Self-Employed Mortgage’, you would be applying for the same mortgage as any other type of borrower/client.

However, the key thing is to ensure that you work with a broker that knows how to treat your income and ensure you are placed with the correct lender as your income could be treated differently compared to an employed applicant.

You’re likely to be self-employed if you are:

• A sole trader. You work on your own, keep your profits and are responsible for your work and business
• A freelancer. You’re hired to work for different companies on specific jobs
• An business owner. You own and are responsible for the day-to-day running of a business that you own
• An independent contractor. You work for one client, sometimes for months at a time

Depending on how you are paid will depend on which lender will be best for you. For example, if you pay yourself a salary and dividend(s) some lenders will be better than others. If you operate via a limited company, some lenders can utilise your limited companies net profit which may yield a much better affordability calculation for your mortgage than other lenders.

Typically you would need 2 years accounts with supporting tax calculations/SA302 and tax year overviews, but some lenders accept 1 years accounts!

A Buy To Let (BTL) mortgage is designed for investors/landlords to purchase or remortgage an investment property. As the name states, the property has been bought with the purpose of letting the property out to a tenant.

When purchasing a Buy-to-Let there is a Loan-to-Value (LTV) limit typically of at least 75% so you will need a minimum 25% deposit for a buy-to-let mortgage. There are a small number of lenders that will do 80% & 85% mortgages on Buy-to-Let’s but these products are not common.

With this type of mortgage, the amount you can borrow is based on the monthly rental you are getting or are likely to get. Your rental income should cover 125% of your mortgage repayments.

The fees and interest rates are usually higher versus standard residential mortgages.

Most BTL mortgages are interest-only. This means you pay the interest each month, but not the capital amount. At the end of the mortgage term, you repay the original loan in full. This means if you buy a property for £200,000 at 75% Loan-to-Value your mortgage would be £150,000. If you took this mortgage out on interest only over 20 years, the £150,000 would still be outstanding at the end of the 20 years as this is not a capital repayment mortgage it is just interest only.

BTL mortgages are also available on a repayment basis.

An ExPat mortgage is a mortgage for a borrower/client that is a UK National based overseas in a foreign country.

For example if a UK National has moved to Singapore for work and has decided to purchase a property in the UK but still requires a mortgage, this would need to be an ExPat Mortgage.

Typically these mortgages are slightly more complex as more detailed mortgage governance and due diligence is required from a lender to satisfy themselves that a new borrower/client has the capacity to repay any new mortgage. The fees and general costs are usually slightly higher, including the mortgage interest rate.

Usually a lender will determine which countries they lender to based on the risk factors assigned to it from the Financial Action Task Force (FATF) https://www.fatf-gafi.org and this centres around risks associated with money laundering, terrorism etc. For example, getting a mortgage for an ExPat living in Cuba is going to much for difficult than a borrower/client living in France.

These mortgages work in exactly the same way as a standard Buy-to-Let except a few differences.

Firstly, you are buying the property in a Limited Company and not in personal names so this might be Joe Bloggs Property Limited rather than Joe Bloggs buying the property.

Secondly you have the stress testing. For a Limited Company this is often lower than in personal names. In personal names you have the take into account an individuals personal tax threshold e.g. whether they are a lower, higher or additional tax payer whereas with a Limited Company you do not have this issue. This typically works in the favour of Limited Company applications and means you can borrow more.

Thirdly, the interest rates and costs for buying in limited company are slightly higher than in personal names.

Lastly, buying a Buy-to-Let in a Limited Company as certain benefits like mortgage interest costs being tax deductible and other possible Capital Gains benefits versus buying in personal names.

A Right To Buy mortgage allows you to buy your council property for a discount, sometimes for a very considerable reduced price! It was introduced in the 1980’s and over a million tenants have bought under the scheme so it is very popular in the UK.

You qualify for the Right To Buy scheme if you meet the following criteria:

• You’ve been living in a council property for 3-5years minimum
• It’s your only property
• It’s self-contained, which means you don’t share any facilities or utilities with other people outside of the household
• There’s a legal contract between you and your landlord
• They have had a public sector landlord for at least 3 years
• The property is in England (Northern Ireland and Wales have their own schemes, and Scotland no longer has one)

——————————————————————————————

What discount do I get with Right to Buy?

Your Right to Buy discount depends on where you live and whether you’re in a house or flat. The maximum discount you can get is £87,200 or £116,200 if you live in London. This is regardless of how long you’ve lived in your home, or how much it’s worth.

If you live in a house, you get a 35% discount if you’ve been a tenant for between three and five years. After five years, the discount goes up by 1% for every extra year you’ve been a tenant.

If you live in a flat, you get a 50% discount if you’ve been a tenant for between three and five years. After five years, the discount goes up by 2% for every extra year you’ve been a tenant.

In both cases, the maximum discount you can get is 70% – or £87,200 across England and £116,200 in London (whichever is lower). For example, if you’ve been a tenant for 10 years, you could buy your flat worth £100,000 for just £40,000 – using a 60% discount.

https://www.gov.uk/right-to-buy-buying-your-council-home/discounts#:~:text=You%20can%20get%20a%20discount,where%20it%20is%20%C2%A3116%2C200

The Mortgage Guarantee Scheme is a government scheme that supports first-time buyers and people looking to move to a new home with deposits of between 5% and 9.99%. It’s available for buying a property that will be a clients home, and the scheme is currently set to end on 31 December 2023.

Mortgages issued under the scheme are backed by the UK Government. This means that if you were unable to pay back what you borrow, the UK Government would financially support the lender to help mitigate any losses, essentially the lender is insured by the government if you miss any payments and fall into arrears.

Scheme unavailable for the following;

• Buy a new-build property
• Buy a second home, or a buy-to-let property
• Apply for a commercial mortgage
• Apply for an interest-only mortgage

This type of mortgage is designed for borrowers/clients looking to buy a property that will be let out on a short-term basis to tourists as a business, unlike a standard Buy-to-Let mortgage which is let out for the purpose of longer term letting e.g. 6 months+.

It is also different to a Holiday Home mortgage where you get a mortgage to buy a second home that only you will use for your holidays.

As a holiday let is typically charged per night, you have the opportunity to yield a much higher return than a standard Buy-to-Let investment.

However, it is also much more ‘hands on’ as you need to arrange key hand overs, cleaning, bookings etc. You can arrange for a Management Agent to manage the property for you and they would typically take 15-25% of the profit from your bookings but they would sort everything for you in an attempt to make it a ‘hands off’ investment.

There are some benefits to have a fully furnished holiday let as they are treated differently from a tax perspective. You can treat this as operating a business and therefore you can still claim mortgage interest relief which means your mortgage interest is potentially tax deductible.

Please speak with an expert to guide you on this type of mortgage!

A self-build mortgage is funding taken out to finance a property you are building yourself. This is different from residential mortgages because the money you receive doesn’t get released in one lump some it is released in phases throughout the build. This is primarily to reduce the Bank’s risk and to ensure that the money is spent as planned.

Each lender has their own appetite for when and how funds are released. Typically though, the first payment will be received once you have bought buy the land. You’ll then receive more when the foundations are laid and a further payments when the property is built up to eaves level and then again when the roof is watertight and the interior walls are plastered. The final payment is paid on completion.

For self-build mortgages, typically a lender is going to check whether you have experience if development or large DIY projects to get comfortable with the project. This will also potentially stipulate the deposit required. For example, a client that has undertaken previous self-build or development projects is likely to require a 25% deposit whereas a first time self-builder with little to no experience is looking at 50%+ deposit.

A lender will need to be comfortable with the planning, drawings, building regulations, architect & building team well before a mortgage is approved so a lot of homework goes into this type of mortgage but the rewards can be significant.

Construction Industry Scheme is a scheme for self-employed builders and trades persons who are paid a day rate and allows registered contractors to deduct money from the payments they make to subcontractors (client). The deducted amount instead goes to HM Revenue & Customs as an advance payment towards the National Insurance contributions and income tax that subcontractor will be required to pay for their tax account. There isn’t a ‘one-size-fits-all’ criteria among CIS lenders and the criteria varies significantly amongst them all which is why speaking to an expert is vital.

Lenders deal with CIS clients in two ways, they are either treated as self employed or employed.

If they are treated as employed, they will average their last 3 months income which can be really beneficial. For example, if income in January, February and March is used, payslips/invoices/statements and corresponding bank statements must be for January, February and March. An average of the latest 3 months income should be used. This average amount should then be calculated based on a 46 week year e.g. multiply the average monthly pay x 12, divide by 52 weeks and multiply by 46. This route can be of particular benefit for applicants who have fewer than 2 years of accounts to provide.

If they are treated as self-employed (e.g. if they have had a poor latest 3 months and a better prior 9 months) then they would need a minimum of 12 months contracting experience or a two year track record employed in the same line of work with income evidenced by a full compliment of tax documents including SA302/Tax Calculations and Tax Year Overview.

First thing you should know is that there are no products specific for NHS staff or any other sector of workers for that matter.

However, you can get special discounts on fees with brokers, solicitors, cash back etc to help with the cost of applying for a mortgage. The mortgage sector do this as a way of saying thank you to the NHS.

What is important is selecting a mortgage broker that can understand how your income is derived and how that translates to the best recommendation for you.

There are different types of income in the NHS such as;

Fixed Term or Short Term Contracts

For a Doctor it is common that they would be on a fixed term contracts (FTC). A handful of mortgage lenders require a certain level of experience or job history in that role or they’d expect it to had a contract renewed previously. This isn’t always the case which is why speaking to an expert is so important.

Newley Qualified or Junior Doctors

If you’ve just qualified as a Doctor and only starting a new role or you might not even have started your new role yet but you’d like to purchase a property, you can do this with just an Employment Contract.

Locum Doctors

As a Locum Doctor a lot of lenders will view you as self-employed which means 2-3 years track record of income with the usual Tax Calculations/SA302 documents with accompanying Tax Year Overviews.

This type of mortgage is designed for borrowers/clients looking to buy a property that will be a second home that only you will use for holidays.

To get this type of mortgage, you only need a second home mortgage which is fairly straightforward. It is the same as the mortgage you would obtain for your home but you are obtaining for another property. Nothing more complex than that!

The complexity comes about when a lender assesses your affordability they will take into account two sets of running costs all year round for your existing home and your holiday home. They will need to ensure that you can afford to run both homes all year round.

You also have to consider any stamp duty implications of having an additional property.

Please speak with an expert to guide you on this type of mortgage!

This type of mortgage allows a parent or direct family member to contribute to their son or daughter’s mortgage without being a co-owner, or in other words without being on the mortgage deeds.

For example, if the son or daughter can not afford to buy a property themselves, you can add another family member to the mortgage for affordability. In real terms, if son or daughter only earned £20,000 you may only be able to multiply their income by 4.25 so that would give £85,000 mortgage maximum. If another family member earned £40,000, not only can you add their income to the son or daughter’s £20,000 to give a combined total of £60,000 but you can use an enhanced income multiple of at least 4.5x the income to give a potential borrowing of £270,000 versus the £85,000 if the mortgage was just in sole names. You add the deposit to either of these totals.

The additional family member would only be on the mortgage and would not be on the title deeds for the property. There are certain considerations for this type of mortgage such as potentially shorter mortgage term due to the supporting family member age, additional stamp duty if a property is already owned and complications if a party passes away. Independent legal advice is likely to be required by any lender so that all parties to the mortgage have had adequate advice given the nature of this type of mortgage.

An offset mortgage is a type of mortgage that is linked to one of your savings accounts.

The money in your savings isn’t used to pay off your mortgage. Instead, it’s used to lower the interest you’ll be charged on your repayments each month.

Even though it could make your mortgage repayments cheaper, you won’t earn any interest on those savings your mortgage is ‘offset’ against.

For Example;

If you had a mortgage of £400,000 with a savings account of £40,000, with an offset mortgage, you would only pay interest on £360,000 of your mortgage, instead of the full £400,000. This means that you could make a 10% saving on the amount of interest you’d pay back on your mortgage.

There are several ways a Contractor can be assessed when applying for a mortgage and each type of contractor is reviewed differently;

Professional Contractors – Lenders will typically assess a Professional Contractor based on the underlying contract day/hourly rate. This is regardless of the payment mechanism being used (limited company/umbrella). Quite often, the Lender will need you to have been contracting for a set period of time or at least have been in the same line of work.

Limited Company Contractors – Dependant on how the business is being run, Lenders may be able to assess as borrower/client on the taxable income such as the salary and dividends being drawn. In some cases, retained profit can also be considered.

Umbrella Contractors – An Umbrella Contractor can be mistaken as being employed. The issues arise when it comes to Lenders reviewing Umbrella payslips. All Umbrellas work differently in detailing income as basic, bonus or commission with various deductions also being included.

Fixed Term Contractors – Typically, High Street Lenders will insist upon 6-12 months remaining on your fixed term current contract at the point of a mortgage application. Most fixed term contractors are taxed at source and from a Lenders perspective you will be treated as permanently employed.

Agency Workers – The way in which Agency workers are assessed varies hugely from Lender to Lender. Often Lenders will want to review 3-12 months’ payslips in order to understand earnings and produce a usable average for mortgage purposes.

As the calculation for the different types of contractors varies so broadly it is advised to speak to an expert who can guide you on the right path to the correct lender.

A House of Multiple Occupation (HMO) is a property rented out by at least 3 people who are not from 1 ‘household’ (for example a family) but share facilities like the bathroom and kitchen. It’s sometimes called a ‘house share’. A HMO is a house of multiple occupation which is often a normal home used as an investment property.

Each individual bedroom is rented to a separate tenant, which can either have its own tenancy agreement or each tenant would be added to a house level tenancy agreement each time someone moves in or out.

If you want to rent out your property as a house in multiple occupation in England or Wales you must contact your council to check if you need a licence. You must have a licence if you’re renting out a large HMO in England or Wales. Your property is defined as a large HMO if all of the following apply:

• It is rented to 5 or more people who form more than 1 household
• Some or all tenants share toilet, bathroom or kitchen facilities
• At least 1 tenant pays rent (or their employer pays it for them)

Even if your property is smaller and rented to fewer people, you may still need a licence depending on the area. Check with your council.

HMO properties tend to yield much higher returns than a standard Buy-to-Let and of course the products and costs for HMO’s also higher. Another consideration is the compliance of the property to ensure it has the correct fire alarms, fire rated doors etc it is very important that you check the regulations required for a HMO property and adhere to them other you face potential fines & prosecution.

A Second Charge mortgage, which is also known as a ’secured loan’ or ‘second mortgage’ allows you to borrow additional money but it leaves your existing mortgage in place. A second charge mortgage requires you to provide your home as security and this means taking a legal charge over the property, in the same way the original mortgage provider did. This would be removed once the mortgage/second charge loan is fully repaid.

A second charge mortgage is great when your existing Bank will not provide you with additional funds for clearing debt, or to complete that extension you have always wanted to do. These types of lenders often have different criteria to High Street lenders so can lend much more than existing lenders.

Speak to an advisor about Second Charge Mortgages and whether it is the best option for you.

Being a director or managing director of a company or if your own business means you are in control, which is why a lot of the time it feels so uncomfortable dealing with your mortgage as you need to ensure you have an experienced professional that understands all the nuances of how a limited company mortgage works and which lenders are best for your circumstances.

Depending on how you are paid will depend on which lender will be best for you. For example, if you pay yourself a salary and dividend(s) some lenders will be better than others. Some lenders can utilise your limited companies net profit which may yield a much better affordability calculation for your mortgage than other lenders.

Typically you would need 2 years accounts with supporting tax calculations and tax year overviews, but some lenders accept 1 years accounts!

A Portfolio Landlord is a borrower with four or more distinct mortgaged Buy to Let UK rental properties.

If a portfolio landlord has ten properties typically they wouldn’t all be with the same lender. For example, if a portfolio landlord is invested in a block of ten flats, most lenders are unlikely to take them all so you would need to split the aggregate or total lending between several lenders to reduce their risk. Most lenders tend to max out at 25% exposure. So in this instance you may have 5 lenders taking two flats each.

There are of course lenders that will take an entire block or a Multi Unit Freehold Block (MUFB), again there are restrictions on criteria with flat sizes, height of the block, individual leases, splitting of services/utilities such as gas, electricity and water.  This can be a more cost effective way to finance a portfolio if it’s in the same block as there would be one lender fee, potentially one mortgage broker fee and one legal fee where as using several different lenders could yield a wide range of differing costs.