by Mark Johnston
A brand new mortgage product is being launched to help first time buyers with small deposits get onto the property market. The new product is being launched by Mill Group a leading investment fund firm.
The new product would enable first time buyers to co-buy the property of their dreams with an investment fund run by Mill Group. The idea would be that whilst the fund would part own the property, the buyer would buy the fund out within five to seven years.
One thing to be weary of is that the product would not be regulated by the FSA like a typical mortgage although as an investment fund firm, the Mill Group are. Although the product is aimed at those with little deposits of around 5%, the main market is those on higher incomes or those with high futuire potential earnings as the term is much shorter than a typical home loan which are on average set over 25 years.
Mike Wisgard, speaking on behalf of the Mill Group said: “first-time buyer households with an income from about £50,000, a 5–15% deposit and plans to stay in their first home for at least five years, would be eligible for consideration”
Mill Group are a market leading firm that offers specialist property and finance funds with around £1 billion of assets. Their new housing fund which will be used to help first time buyers is aiming to provide a 6% yield for investors.
First time buyers will need to provide a deposit of around 5% which means that the loan to value of the loan would be 95% which is not offered by any lenders following the financial crisis. One or two lenders do offer products which require a similar deposit but these require other means to secure the loan.
Lloyds TSB ‘Lend a Hand’ mortgage was launched to help first time buyers onto the market. The Lend a Hand mortgages allows borrowers to take out a mortgage with just a 5% deposit. Other lenders offering similar deals are offering their products at a much higher interest rate. Lloyds TSB offers the mortgage at a very competitive rate of 4.79% with a loan to value (LTV) ratio of 95%.
The Lend a Hand mortgage does require backing from a family member by securing part of the mortgage on their assets. The ‘helper’ benefits from getting a 3.75% savings rate on the funds that are securing the property although Lloyds TSB do take a legal charge over them in order to offset the overall risk. This is a new approach but does allow first time buyers a step onto the market with one of the smallest deposits on the market.
Many first time buyers have been priced out of the market as lenders are asking for at least 10% deposits; whilst better deals are asking for up to 40%.
Lloyds TSB commercial director, Stephen Noakes, says: “It’s not always easy to pull together a big deposit in today’s market, but this product can make the move to a new home not only more achievable, but more affordable.”
Applicants must hold a current account with Lloyds TSB to get the 4.79% rate whilst non account holders pay 4.99%.
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