Are you currently renting and feeling trapped in a cycle that will never allow you to buy your first home? The high cost of living makes it impossible to save a deposit. The high property prices put the affordability of buying a home out of your reach. Yet your rental payments are higher than the amount you’d need to make for mortgage payments. Now, thanks to Skipton Building Society, there’s an end in sight to this scenario and a way for you to escape the rental cycle. Read on to discover what their newly launched Track Record mortgage has to offer you.
What is the Track Record mortgage?
This new mortgage product provides you with a loan that has a 100% loan-to-value (LTV) ratio. That means you can be accepted for a mortgage without having a deposit. It’s specifically aimed at first-time buyers who are currently living in rented accommodation. Its name reflects the fact that you must have a proven track record of making rental payments for 12 consecutive months out of the last 18.
How does the Track Record mortgage work?
As well as being able to apply for this 100% LTV mortgage without having a deposit, there’s no arrangement fee to pay either. The maximum loan size you can apply for is £600,000. It has to be taken out on a repayment basis and over a 35-year term.
To take advantage of the Track Record mortgage, the mortgage payments you agree to must be lower than the average rental payments you have made across the last 6 months. So, for example, if the average rental payment for your property in Bexley over the last 6 months is £650, your mortgage payments must be £650 or less.
The Track Record mortgage is offered with a fixed rate of 5.49% for the first 5 years. After that, it will revert to the lender’s standard variable rate (SVR) of 6.54%.
How is the Track Record mortgage different from other 100% mortgages?
Whilst other 100% mortgages for first-time buyers are available, they can be more restrictive than the Track Record mortgage. Lenders often stipulate that you have to have a guarantor. This is usually a relative or close friend who can guarantee that they’ll make the mortgage payments if you’re unable to. Other lenders insist that a deposit is paid by your relatives, which must be held in a separate account. With this new 100% mortgage, neither of these restrictions apply.
The eligibility criteria for this no-deposit mortgage
To be eligible for this 100% LTV mortgage, you must be a first-time buyer and aged 21 or older. You need to have a good credit rating. There mustn’t be any missed payments on your credit commitments within the last 6 months. You must also have a proven track record of paying rent and household bills for 12 consecutive months within the last 18 months.
Your affordability for the Track Record mortgage will be calculated using an income multiplier of 4.49x your salary. It’s important to note that you can’t apply for this mortgage if you’re buying a new-build flat. If you have a small deposit, as opposed to no deposit, you can still apply for this mortgage provided that it’s less than 5%. A maximum of four joint applicants can apply.
Considerations before applying for the Track Record mortgage
One concern that has cropped up over this 100% LTV mortgage is the potential risk of negative equity for borrowers. This means that if the market turns and the value of your property falls in the future, the outstanding loan will have a higher value than your property. Skipton Building Society has acknowledged this concern. It has confirmed that the long mortgage term of 35 years has been stipulated for that reason.
As with any mortgage, there’s a risk that your home may be repossessed if you don’t keep up with the mortgage repayments. Skipton Building Society has referred to the eligibility criteria as their way of addressing this. As mentioned above, borrowers have to provide a proven track record of their rental payments for 12 consecutive months. The agreed mortgage payments must not be higher than the average of these rental payments over the last 6 months.
Break free from the rental cycle with a Track Record mortgage
If you’ve been waiting for the opportunity to escape the rental situation you’re in, just give us a call on 01322 907 000. Our mortgage brokers are here to discuss this new no-deposit mortgage with you and check your eligibility criteria. They can also advise you on other mortgages aimed at first-time buyers.That way, you can compare the options available to you. You can choose the best mortgage to suit your circumstances and look forward to owning your first home.