No Mortgage Mortgage

by Mark Johnston

Great, finally we can all get enough money to buy a house without actually taking out a mortgage.  Dreamland right, more like reality but there are a few catches. 

A few years ago the UK government decided that it wanted to help the ailing and failing first time buyer market.  They pushed banks and building societies to lend more and we can see that taking shape. 

Nationwide have just begun to offer a 95 per cent mortgage linked to a savings account.  Nationwide has launched a new savings account designed to offer first time buyers a new type of savings account that could help them get a loan with just a 5 per cent deposit.

The product is called a Save to Buy Deal and uses the savings account platform to offer the saver better loan offers in the future.  Users of this account would be expected to make regular payments into the account and after a period of time they could be offered better deals, usually only deals reserved for long standing mortgage customers.  Savers can open this account with as little as £50 and are expected to commit to at least 6 months of regular payments.  Customers are offered an interest rate of 2.5 per cent gross per annum, only applicable on balances up to £20,000 and customers are given a payment break of three months over a rolling 12 month period.  Handy at Christmas or in the January fall out.  The account should be maintained for at least 6 months before they can apply for a mortgage deal.  This could include the Nationwide 95 per cent loan to value rate or any of the other first time buyer rates and deals.

Local councils in partnership with Lloyds have begun a new scheme.  Check with your local council to see if they take part in any of the help for first time buyer schemes. 

Now a company by the name of Mill Group will, this autumn, launch a brand new idea into the housing market to support the first time buyers and put a win in the landlord corner too. 

The idea from Mill Group is to provide an opportunity for investors to get a bigger stake in the residential property market at the same time to present an opportunity for the first time buyer to gain liquidity in stead of a hefty mortgage. 

Small print.  The investor in the partnership would put up 95 per cent of the cash for the home while the buyer or would be homeowner would put up 5 per cent.  Together they would jointly own the property but the tenant (the buyer) would have sole tenancy rights and wouldn’t pay any stamp duty. 

The buyer could begin to purchase more of the house as and when they chose but only after a few years and at the current market value for the house, not the value of the house at the time of buy in. 
CEO of Mill Group, David Toplas said “The most significant obstacle preventing more meaningful investment by UK institutions into residential property over the past decade has been a perception of intensive asset management and low income yields. 

“Quite simply, a tenant does not have enough financial or emotional investment in the property to maintain it to a reasonable standard, and this ultimately costs landlords so much money that the investment potential is undermined.

“Home buyers will be asked to purchase a minimum of 5% of the property – a deposit amount that is not currently accepted by most mortgage providers as a deposit, and so begin their purchase of a property without a mortgage lender.”



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