by Mark Johnston
Following the financial crisis many borrowers have had to move away from the sub prime mortgage market and undertake much less riskier lending. This means that it has become much harder to find mortgage deals that first time buyers can afford. This is many due to the increasingly largest deposits that are been ask for by lenders. This is referred to as loan to value (LTV). Loan to Value (LTV) is the ratio of how much you much you are looking to borrow over how much the property is worth. If the property is worth £100,000 and the LTV is 75% then you would only be able to borrow £75,000, the remaining £25,000 would be made up from the deposit. This would usually be your savings, profit from the sale of your house or an additional unsecured loan or more than often a mixture of the three.
Many first time buyers have little to spare in terms of deposits and look to lenders who provide higher loan to value mortgages. Before the credit crunch many lenders would offer 100% mortgages but these have al but been taken off the market because they are too risky and can result in losses to the mortgage provider. This happens when a borrower is unable to pay for the mortgage and the property is repossessed. Because the value of the mortgage is the same as the value of the house the mortgage lender would need to sell the house for market value. This doesn’t tend to happen because either the market has moved and the house is worth less or the lender wants to recoup costs quickly and sells the house at less than market value.
Although many lenders have taken their more riskier products off market it is still possible to borrow a considerable amount towards the value of the property so long as you have a good credit rating. Mortgagerates.org.uk have searched the market for some great deals for those looking for a 90% LTV mortgage.
Northern Bank, the Northern Ireland based bank is offering a variable rate mortgage for a maximum loan to value of 90% which is based on the lower purchase price or valuation. The variable rate mortgage is currently 4.3% (5% APR) . A variable rate mortgage will mean that any rise or fall in interest rates will affect your mortgage repayments.
You need to have a Northern Bank account to get this deal; but you can always open one at the time of application. The arrangement fee is £799 unless you have a Northern Prestige, Choice Plus or Freedom account with the bank, if you do you get a £300 discount.
Natwest is also offering a 90% LTV mortgage so borrowers would only need to find a 10% deposit. The 5 year fixed rate mortgage is only available to first time buyers at 6.89% (5.2% APR) which reverts to their standard rate which is currently 4%. First time buyers can only lend up to £300,000 subject to approval but Natwest is offer the mortgage with zero fees.
Although the market for first time buyers is difficult there are some very good deals out there and hopefully more on the way. Mortgagerates.org.uk will be monitoring the market to bring you the best news and deals form the UK mortgage market.
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