Borrowing five times one's income or taking out a 50 year loan may sound tempting. Yet such options form a welcome opportunity for first time buyers desperate to get a foot on to the property ladder.
First time buyers are not being attracted to buy their first property due to house prices having fallen. Prices still outstrip wages, with the average first time buyer home costing 6.1 times the average salary.
Mortgage lenders are no longer relying on traditional calculations of 3 / 3.5 times one single salary, or 2.5 / 2.75 times salaries. They are looking at ability to maintain debt .
'Affordability-based' lending looks at a borrower's income, outgoings as well as future earnings potential to see what the borrowers can repay.
There are lenders like Abbey and the Cooperative Bank who lend first time buyers upto 5 times their salary. You are more likely to qualify for a high multiple loan should you have a high income.
The Abbey needs you to be earning over £60,000. Northern Rock will let you borrow 5.9 times your income should you be earning over £100,000. Plus you may have to put down upto 25% of the purchase price as a deposit.
Should you have no savings, the Co-op will consider lending five times your income without a deposit.
Traditional 25 year mortgages are being slowly replaced with 30 upto 50 year mortgages, dependent on your age. Monthly payments on a longer term mortgage are less. Yet over the long term it sets you back more than you bargained for.
Due to high house prices, interest only mortgages are very popular, representing 24% of all new mortgages.
A 100k mortgage, on an interest-only basis, would set you back £416.67 per month. Yet it is not a productive long term strategy.
10% of borrowers who take out an interest only mortgage have no idea how they are going to repay the capital on loan borrowed out.
Whatever you borrow, be sensible. Consider your monthly outgoings and whether you can meet all your outgoings comfortably.
Do not just borrow a huge mortgage because you are being offered it.
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Multiple Mortgage Options for First Time Buyers
Tue, 03 Apr 2007
Recommended links
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