Archives June 2019

Help to Buy; it seems to be helping the people better off than those in need of property.

Help to Buy; it seems to be helping the people better off than those in need of property.

It was reported on Jeremy Vines radio 2 show, a little guilty pleasure of mine, that the Help to Buy scheme is being exploited by people who could afford the deposit in the first place. It reported that nearly a fifth of those who had used Help to Buy are not first time buyers. And that a typical household using Help to Buy had a household income of £44,000, compared to the national average £25,000.

I had not managed to totally remember all those statistics from the radio report. This article here was incredibly helpful.

(you are now departing from the regulatory website, Coleshill Mortgage Services or Quilter Group are not responsible for the accuracy for the linked site)

But if you cannot be bothered to read all those statistics, I want to speak about why and how Help to Buy is being used for what it was not meant for.

If you don’t know the Help to Buy scheme we have written blog here explaining it.

I feel this is happening because of two reasons. The first reason is what is stipulated on the article, that developers are using Help to Buy as a way to drive up the price on houses so they can get a higher price per unit. It’s all pretty nasty, but as they know that people have the option for Help to Buy and the government has set aside the cash to help people get onto the property ladder. But the developers understanding that the Government will give others up to 20% of the deposit. Means they bid more for the land, and therefore need to get more for it. So what does it result in. Higher price on houses, and therefore the people who need houses can’t afford them.

Secondly, is something a little more natural, and this is just, my feelings for it. Is that it is a good deal, with some areas, still growing in value for houses. So if you get a new house you may be in for a good investment, and if the government help you with a deposit (which acts as kind of a loan), then it can mean you get onto the property ladder, with a new house and the potential for it to really grow into something worth a lot in the future. But it really is a risk. And should not be done lightly.

It is a shame that people are abusing the system to get a better lift onto the property ladder. The idea is to bring more house into the market and help the availability of property for young families or couples looking for a hand to owning their home.

But the scheme is still there for now and it is still available if you feel you need it, but if you don’t then its always better to have paid your own deposit. It means it is your money that is placed in the property and it means no surprise payments when the “Help to Buy” tenure lapses.

As always, speak to someone you trust get the right advice so you can make the right decisions for you.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Are you renting? Can it put you in a good place for a mortgage.

Are you renting? Can it put you in a good place for a mortgage.

Can rental help your mortgage application?

While saving for deposit for a property it is not uncommon for people to live with their parents until they are well into their late twenties, sometimes thirties. It’s not only not uncommon but according to the press its more likely than not. We do not want to make much of what the press says. But with house prices and wages unable to keep up for people, it has become harder and harder to get a successful mortgage application.

Now we have written quite a bit about all of this. Even a helpful guide that went through different aspects of how you could improve your chances of getting a mortgage. Please find the article here.

One of the things that is not on our guide, is your record for renting. And that’s because its not technically counted as part of your mortgage application. Some lenders may look at it. But basically you could pay your rent on time for 5 years and still its not even considered as part of your application.

When a lender looks at your application they want to see if you are “worthy” to pay your mortgage payments. Firstly the lenders want to see if you can afford it, considering your pay and life outcomes. Secondly they look at your credit history to see if you have a past of paying things back right. Finance deals, credit history etc. But they do not necessarily look at your rent history.

It is not per se a debt but it is a show of your ability to pay something back. In a world of climbing debt, credit card spending going out of control. You could be super sensible, live your life to your means, rent, and not rack up debt. You get kind of punished for not having a good credit history.

Back in 2017 there was a petition set up online that wanted parliament to look at encouraging lenders to look at renting as a way to encourage an application for mortgage. It was debated in parliament and some lenders have adopted a policy to at least consider rental history.

So why is rental not as important?

Well there are a few reasons that your rental history is not considered.

  • Rental is not a long term debt

Thing is landlords are looking for possibly a year’s worth of rentals, whereas a mortgage advisor is looking for 25 years plus from someone.

  • Employment changes

You may be fully employed now, that may change, for a landlord, that may mean you leave the property. For a mortgage lender that could be disastrous for both them and you.

  • It is not a debt.

The act of taking a debt is a full promise. You take something and you pay it back. It really resembles a trust, and even if you have any life’s unexpectant events, you still have to pay it back.

So at the moment, yes some lenders look at rental history. But for now you cannot rely on it unfortunately, you have to make sure all the other elements are in line.  But on the bright side, lenders are looking at the full picture these days. A good rental history is not a bad thing and it keeps a roof over your head. Never despair always speak to someone you trust and pay your bills!

Your home may be repossessed if you do not keep up repayments on your mortgage.