Track Record Mortgages

What is a Track Record mortgage?

Designed for renters, a Track Record mortgage enables you to buy your first home as long as you have a proven track record for maintaining your rental payments. Offered as a 100% mortgage, there’s no need for a deposit although you can pay up to a 5% deposit if you have some savings you wish to use. This type of mortgage has a fixed interest rate for 5 years. As the rate won’t change during that time, you know exactly what to pay each month, helping you to budget as a new homeowner. As another financial bonus, the lender won’t charge you a completion fee for this mortgage.

This mortgage product has evolved since it was first launched, with new-build flats now allowed, cashback incentives offered and the maximum mortgage term increased from 35 to 40 years. This mortgage can’t, unfortunately, be used to buy a property in Northern Ireland. Another version of the Track Record mortgage has been launched for shared ownership.

How does a Track Record mortgage work?

Originally only available to first-time buyers, this mortgage is now available to renters who haven’t owned a property in the last 3 years. You need to have a track record of keeping up with your rental payments for a minimum of 12 months within the last 18 months. Your rental payment history demonstrates to the lender that you can consistently meet your mortgage payments. A deposit is accepted if you have one, provided that it is below 5%. This includes a gifted deposit. You can borrow up to a maximum of £600,000, depending on your affordability. A Track Record mortgage can be taken out for a maximum term of 40 years.

How much can you borrow for a Track Record mortgage?

The amount the lender can potentially lend you is based on your average monthly rental payments – as a mean average of the last 6 months – as well as your income and expenditure. In some cases, loans can be approved for monthly payments of up to 120% of the rent currently being paid.

Eligibility criteria for a Track Record mortgage

To be eligible for a Track Record mortgage, the following criteria must be met:

• You must be aged 21 or over.
• You haven’t owned a property in the UK within the last 3 years.
• If applying with another borrower, at least one of you must be a UK national or have indefinite leave to remain.
• You do not wish to buy a property in Northern Ireland.
• You wish to borrow up to £600,000.
• If you have a deposit, it must be less than 5% of the property’s value.
• There mustn’t be any missed payments for your debts or credit commitments, such as your mobile phone bill, within the last 6 months.
• You need to provide proof that you have paid rent for a UK property for at least 12 consecutive months within the last 18 months.
• You have kept up to date with household bill payments for at least 12 months within the last 18 months.

Criteria specific to sole or joint applicants

The following criteria must be met depending on whether you’re applying for a mortgage on your own or with other borrowers:

• A sole applicant: You need to prove that you have paid all rent due by yourself for 12 consecutive months within the last 18 months. You may also have to provide proof of paying household bills, depending on your circumstances.
• Joint applicants: Up to four people can apply for this mortgage. Proof must be provided that all of the rent has been paid by one applicant or collectively for 12 consecutive months within the last 18 months. If paying rent separately, each applicant must prove that they have covered all of their rent. Proof of payments made for household bills may also be required.

Advantages of a Track Record mortgage

There are several benefits to having a Track Record mortgage. These include:

• You don’t need to save a deposit. This product enables you to secure a 100% mortgage, helping you to get on the property much faster than if you had to save for a deposit.
• If you do have a deposit, whether saved or gifted, you can use it. This is provided that it’s lower than 5% of the purchase price.
• There’s no need to have a guarantor or other mortgage helper. You don’t need to rely on getting help from someone else to be accepted for this mortgage, such as needing a guarantor for your mortgage payments or a relative who’s prepared to tie their savings to your mortgage for a set term.
• Your money pays for your property instead of someone else’s. Rather than paying rent to a landlord for their property, your mortgage payments build up equity in your own property. Once your fixed deal has ended, this should enable you to remortgage to a better deal.
• You can make overpayments. Overpayments are allowed on this mortgage in line with the lender’s terms. This helps to reduce your outstanding mortgage balance faster and protects against the risk of negative equity.
• There’s no completion fee. The lender doesn’t charge a fee to complete on the mortgage.
• You have a fixed rate for 5 years. This not only helps with budgeting but gives you peace of mind that your mortgage payments won’t increase during this period should interest rates in general go up.
• There are no restrictions when you wish to sell the property in future. With some mortgage schemes, restrictions apply on resales. This isn’t an issue, however, when buying a property with a Track Record mortgage.

Disadvantages of a Track Record mortgage

There are various drawbacks to consider too before applying for a Track Record mortgage. These include:

• You may be limited as to how much you can borrow. If the rent you’re currently paying is low, you may not be able to borrow as much as you hoped.
• You’re at risk of going into negative equity. The higher the loan-to-value (LTV) ratio, which is how much you borrow compared with the property price, the greater the risk of going into negative equity. With a 100% LTV mortgage, you have no equity in your property. If property prices drop so that your home has a lower value than when you purchased it, you’ll owe more for your mortgage than your property is worth, which is negative equity. If you buy a newly built property, you’re at even greater risk of negative equity. This is because they can drop in value within the first few years of being occupied.
• The interest rate may be higher than alternative mortgage deals. A 100% mortgage poses more of a risk for the lender than a mortgage deal with a lower LTV. This means that the interest rate payable is likely to be higher than for other deals to reduce their risk.
• You may be liable for an early repayment charge. If you wish to leave your mortgage deal early or to overpay more than the allowance, it’s likely that you’ll have to pay an early repayment charge (ERC). This can be very costly so it’s important to check the lender’s terms on this. Think carefully before taking this mortgage if there’s a possibility that you may need to remortgage before the end of the introductory period.

Alternatives to a Track Record mortgage

There are alternatives to consider if you’re not sure as to whether a Track Record mortgage is right for you.

Guarantor mortgage

For a guarantor mortgage, a parent, another relative or close friend agrees to act as your guarantor for the mortgage payments. They need to sign a legal agreement for this commitment and have to provide the lender with security. This is usually in the form of savings or their property. They are not named on the property deeds so you benefit from sole ownership of your home.

Your guarantor’s income is taken into account for the affordability checks. This may enable you to apply for a 100% mortgage or potentially allow you to borrow more than you’d be approved for if applying on your own. They must have a strong credit rating, which also helps you get over a hurdle if you have a bad credit score.

Shared ownership

Shared ownership enables you to buy a share of a property and pay rent at a discounted rate for the remaining share. The share you buy is typically 25% to 75% of the property’s value although some homes are available at a 10% share. A minimum deposit of 5% is required for your share but this is much more affordable than saving a 5% deposit for the entire property price. You also have a smaller mortgage, making it easier to pass the lender’s affordability checks. You can increase your share in the property in the future when you’re in a position to do so.

Family springboard mortgage

If you have a small deposit or none at all, a family member can help you get on the property ladder or move up it with a family springboard mortgage. They place funds, which need to be a minimum of 10% of the property’s value, into a savings account that’s linked to your mortgage. This acts as security for the lender. The savings are held for a fixed term, such as 5 years, and earn interest during that time. The savings cannot be accessed, even in an emergency. At the end of the term, provided that you have maintained your mortgage repayments, the funds and interest earned are returned to your family member.

Available for first-time buyers and home movers, lenders are usually happy to accept the security in place of a deposit. This is ideal if you’ve been unable to save a deposit while renting. Although your family member is providing security for the lender, the property is in your name only so can enjoy sole ownership of your home.

Family offset mortgage

With a family offset mortgage, your family member’s savings are held in an account that’s linked to your mortgage. The savings typically need to be a minimum of 10% of the property’s value and are held until you have repaid a certain amount of your mortgage, such as 25% or 30%. The funds are offset against your mortgage balance, reducing the amount that interest is charged on. This reduces the amount you have to pay compared with a standard residential mortgage, making home ownership more affordable.

This flexible mortgage allows you to choose between making lower monthly payments or keeping your payments at a higher level but reducing the mortgage term. Your family member can also access their savings during the period they are linked to your mortgage. If they do so, your mortgage payments are likely to increase. Unlike a family springboard mortgage, interest isn’t usually earned on the savings for a family offset mortgage.

Own New

Own New is a scheme designed to make new-build homes more affordable. As a collaboration between home builders and lenders, you can either apply for a mortgage with a 5% deposit or benefit from a lower interest rate for a fixed term. You can take advantage of this scheme whether you’re a first-time buyer or a home mover. You still need to pass the affordability checks carried out by the lender but this is easier with a 5% deposit or a lower interest rate.

First Homes

First Homes is a scheme available in England that enables first-time buyers to purchase new builds at a discount of at least 30%. The property price is capped at £250,000 after the discount has been taken into account unless you’re buying in London. In London, the property price cap is £420,000. You need to pay a minimum deposit of 5% based on the discounted price. This makes it easier to save than if buying a property outside of this scheme. You also need to arrange a mortgage for at least 50% of the discounted purchase price. With such a large discount on the purchase price, this makes the affordability of a mortgage much easier.

Deposit Unlock

This scheme enables you to buy a new-build home from a participating home builder with a 5% deposit. You can apply as a first-time buyer to get onto the property ladder or as an existing homeowner wishing to move up it. Mortgage loans via Deposit Unlock are available up to £750,000, depending on your affordability and the lender’s terms.

Put renting behind you and enjoy home ownership with a Track Record mortgage

If you’re ready to break the rental cycle and buy your own home, give us a call on 01322 907 000. Our mortgage brokers can discuss your circumstances and check your eligibility for a Track Record mortgage. They can ascertain how much you can borrow to buy a property and advise you on other schemes available if you need help with your purchase. They can also advise you of the alternatives available so that you have access to all the information needed to make the best decision for your needs.

If you choose to proceed with a Track Record mortgage, your dedicated mortgage broker will ensure that you have the correct documentation ready for your application. They will oversee the process from start to finish for a smooth, stress-free transaction. At Trinity Finance, as well as arranging your mortgage, we can also help with other aspects of the home-buying process. This includes arranging your home insurance and mortgage payment protection insurance.

If you’re unable to contact us by phone, send us an email at info@trinityfinance.co.uk or an enquiry via our contact form. One of our mortgage brokers will reply to you as quickly as possible with further information. Once you have connected with them, they’ll take a detailed look at all of your options and compare different deals to find the best solution for you. They’ll also advise you on ways to boost your affordability and credit rating before applying for a mortgage. This helps to maximise your borrowing potential and chances of having a successful Track Record mortgage application. Providing you with impartial advice, you can then make an informed decision as to whether a Track Record mortgage is right for you or whether you prefer an alternative way to buy a home and put renting behind you.