LOUGHBOROUGH Building Society has become the latest lender to offer a mortgage that lets buyers borrow up to 5.5 times their salary.
Clydesdale Bank rolled out a similar deal last summer, but it’s only available for accountants, barristers, pilots or doctors who earn at least £40,000.
PA:Press Association Loughborough Building Society is now offering a mortgage where you can borrow 5.5 times your annual salary
To get the Loughborough deal, you’ll need to earn at least £50,000 a year, but you don’t need to work in a specific profession.
Normally, banks tend to only lend a maximum of four times your salary, which means that if you earn the average UK salary of £26,000 then you could potentially get a mortgage for £120,000.
But with the Loughborough mortgage, you could potentially borrow £275,000 if you apply on your own.
If you apply for the mortgage with someone else, you’ll need to earn a collective total of £75,000.
How to get the best mortgage dealONCE you’ve got your deposit together, you can start looking for a mortgage deal.Websites like Moneysupermarket and Moneyfacts have mortgage sections so you can compare costs and all the banks and building societies have their offers available on their sites too.
If you’re getting confused by all the deals on the market, it might be worth you speaking to a mortgage broker, who will help find the best mortgage for you.
A broker will typically cost between £300 and £400 but could help you save thousands over the course of your mortgage.
You can also get advice from a digital mortgage broker for free, like Habito or Trussle.
Money.co.uk have a list of top mortgage brokers that specilise in the specifics to suit your needs.
You’ll also have to decide on if you want a fixed-deal where the interest your charged is the same for the length of the deal or a variable mortgage, where the amount you pay can change depending on the Bank of England Base Rate.
And David Hollingworth from London and Country Mortgages warned buyers not just to be swayed by the headline rate and to take into account product fees, which can typically be around £1,000.
He said: “It’s always important to shop around and have options.”
“Paying a higher rate interest rate could still work out as better overall value than paying a chunky arrangement fees.”
The new home loan deal is a variable rate mortgage, and it comes with a two-year discount period.
This means that for the first two years, you’ll pay a set amount less than the lender’s standard variable rate (SVR) – currently working out to 2.45 per cent.
After that, you start paying the full SVR, which is a higher 5.34 per cent.
Just keep in mind that the SVR could change at any time, so your monthly repayments may go up or down.
To get the mortgage, you’ll need to put down a deposit of at least 15 per cent and pay a fee of £999. The most you’ll be able to borrow is £750,000.
What help is out there for first-time buyers?GETTING on the property ladder can feel like a grim task but there are schemes out there to help first-time buyers own their own home.Help to Buy ISA – It’s a tax-free savings account where for every £200 you save, the government will add an extra £50. But there’s a maximum limit of £3,000 which is paid to your solicitor when you move.
Help to Buy equity loan – The government will lend you up to 20 per cent of the home’s value – or 40 per cent in London – after you’ve put down a five per cent deposit. The loan is on top of a normal mortgage but it can only be used to buy a new build property.
Lifetime ISA – Another government scheme that gives anyone aged 18 to 39 the chance to save tax-free and get a bonus of up to £32,000 towards your first home. You can save up to £4,000 a year and the government will add 25 per cent on top.
Shared ownership – Co-owning with a housing association means you can buy a part of the property and pay rent on the remaining amount. You can buy anything from 25 to 75 per cent of the property but you’re restricted to specific ones.
“First dibs” in London – London Mayor Sadiq Khan is working on a scheme that will restrict sales of all new-build homes in the capital up to £350,000 to UK buyers for three months before any overseas marketing can take place.
Starter Home Initiative – A government scheme that will see 200,000 new-build homes in England to be sold to first-time buyers with a 20 per cent discount by 2020. To receive updates on the progress of these homes you can register your interest here.
Just remember that only the best rates are offered to those with the best credit scores so you could end up with a deal with higher interest rates than the one advertised.
The “monster mortgages” are not always a good idea either, as it means you rack up a lot of debt right from the beginning.
Andrew Hagger, founder of Moneycomms.co.uk, told The Sun: “Offering larger income multiples enables people to get on the housing ladder who may otherwise be excluded.
“However the lender will still go through a rigorous application process to ensure that the borrower is able to afford the monthly repayments – this is vital and in both the lender and the applicants best interests.
“The downside is because the lender is taking a slightly greater risk, this can be reflected in the rate charged.
“For example, if you look at the Loughborough website you can currently borrow at 90 per cent LTV (a smaller deposit) on a 2 year discount for 1.74 per cent and £999 fee – so borrowers appear to be paying a premium on the rate for greater flexibility.”
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As of December last year, there were nine banks and building societies offering customers the chance to borrow five times their salary to get on the property ladder.
Recently, Nottingham Building Society started offering home buyers £1,000 to take out a mortgage.
Meanwhile, new mortgage rules will make it easier to get cheapest home loan deal.
Millennial Hazel Wood buys first home aged 22 and reveals the tricks that helped her to save deposit
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