Activity in the housing market is on the rise as a result of lockdown easing and people wanting to avail of the stamp duty holiday. However, there is still a lot of uncertainty, particularly over the availability of mortgages. On the one hand, interest rates are at an all-time low. On the other, lenders have reduced the number and range of mortgages they offer.
If you are thinking about moving or remortgaging, Charlotte Ernest, residential property lawyer at B P Collins cuts through the confusion to answer key questions.
As a first-time buyer, will I still be able to get a mortgage?
Since the pandemic, lenders have become more cautious. Most have now removed their low deposit mortgage deals, so it may be more difficult to find a suitable mortgage if you do not have sufficient savings.
Meanwhile, Nationwide won't allow the Bank of Mum and Dad to add so much to a deposit for your first home. Now, to get a mortgage with a 10% deposit, the buyer must prove that they saved 75% of that deposit themselves.
Specialist lenders have also decreased the number and type of mortgage products they offer, which will affect non-conventional borrowers such the self-employed.
The situation isn’t all bleak. There are still mortgage deals out there, and a good broker can help you find one that suits you. Most lenders now require a deposit of at least 15 per cent of the purchase price. Some lenders still offer higher loan-to-value mortgages. However, you may want to save more or be flexible about the type of property you buy to boost your chances of getting a mortgage in the future.
If you are struggling to find a large enough deposit, you may also want to consider help to buy, which could allow you to borrow with a deposit as low as five per cent.
I am in the middle of buying a new house. What will happen to my existing mortgage offer?
It is essential to know that you will be able to afford to complete your purchase. If you are buying with the help of a mortgage, you need to ensure your offer will still be valid when you expect to complete.
Most mortgage offers are valid for between three and six months, and this period will vary depending on your lender. So, it is vital to check.
Unfortunately, the current situation means some transactions are taking longer to complete than they normally would. This increases the risk of your mortgage offer expiring before your expected completion date. The good news is that most lenders now have processes in place for extending mortgage offers where completion is delayed due to coronavirus. Some lenders automatically extend offers made before a certain date, usually for three months. Others require an express application. In this case, you should apply before your existing offer expires, or you may not be able to extend it.
In any case, you and your solicitor should keep your offer expiry date under review. Most lenders will try to be flexible if approached in advance.
What will happen to my mortgage offer if my circumstances change?
You and your solicitor must tell your lender about any changes relevant to your mortgage application. This includes any changes in your income or employment status.
Both you and your lender need to be completely sure you will be able to keep up your mortgage repayments, and your lender will usually reserve the right to withdraw their offer, right up to completion. If this happens, you will probably have abortive costs to pay or you could lose your deposit if you have already exchanged contracts.
For the most part, however, most lenders will want to find a solution that works for both of you. For example, by reducing the amount you borrow or extending the mortgage term.
The uncertainty caused by the pandemic has, however, slightly increased the risk of an offer being withdrawn. It may be some time before the market settles down.
In the meantime, your solicitor may suggest ways to cut this risk. For example, by including a provision in the purchase contract to let you withdraw if your lender withdraws your mortgage offer. Alternatively, they may recommend exchange and completion on the same day, so you do not become legally committed to buy until you know your mortgage advance is on its way.
Should I think about remortgaging now?
Interest rates are extremely low, and some lenders have seen a rise in remortgage applications as borrowers look to reduce their monthly outgoings. For those with a relatively high proportion of equity in their homes, there may be some attractive deals out there.
It will always make sense to keep your borrowings under review, particularly if you are on a fixed rate or tracker mortgage.
Any other tips for home buyers and borrowers in these uncertain times?
Choosing the right solicitor is vital. Someone who you’ve got confidence in and is familiar with your lender’s requirements will help make the process easier and avoid unnecessary holdups. A good solicitor should also be acquainted with the latest legal developments and government schemes, and who can think creatively. A solicitor who can tailor their advice to your individual needs, in order to see your transaction through to completion is essential.
For further information please contact Charlotte Ernest, associate in the residential property team.
