Purchasing a home with help

You might be a first-time buyer or looking to remortgage but the recent headlines have, understandably, left you feeling nervous.  In January 2022 the mortgage rates were averaging between 1.5% to 3%.  In October 2022 we saw those rates rise to 5%-6%, which the media was very quick to report on.  

But over the last few weeks those rates have been coming down.  Some lenders have cut their fixed rates by as much as 0.75%.  The recent Bank of England base rate rise didn’t cause lenders to increase rates in the manner in which they did before.  We're also seeing 4.99% fixed rate deals from lenders.  Not a jot of this has hit the headlines.

HOUSE PRICES

House prices are coming down in some areas but sales of homes is still a mixed bag.  Some areas will always be resilient because of their popularity.  Overall there is a drop in house price, however small it is, it’s still a decrease.   We look at the house price indices from Halifax and Nationwide but the data is quite generic, so be aware when looking at valuations.  It's always best to consult a local surveyor or estate agent for an accurate valuation figure.

Aberdeen City and Aberdeenshire house prices don't tend to follow national trends.  Over lockdown house prices soared across most of Scotland but Aberdeen City and Shire went downwards.  Currently with purchases we're not seeing any offers below the valuation figure.  

BANK OF MUM AND DAD

For first-time buyers it's not doom and gloom.  Legal and General* carry out quite a bit of research into the "Bank of Mum and Dad" (BoMaD) and they found parents funded 1 in 2 house purchases for under-35s in 2020. Nearly 75% of these home buyers would not be able to afford to purchase without this financial aid.  It's estimated that BoMaD has loaned up to £6bn, which would make it one of the top UK high street lenders...if it were a real bank.

If you were fortunate enough to receive financial assistance from friends or family then it's titled a "gifted deposit". A gifted deposit which is acceptable to lenders has to fit the following (preferred donor is usually a family member but some niche lenders will look favourably on non-family donations):

• It's a non-repayable gift
• There's no interest in the property e.g second charge being registered in the donor's name.  (Though there are a few specialist lenders who might accept this.)
• The donor will not live in the property and will never live in it.

The lender will need a gifted deposit letter which sums up all those points.  The solicitor who deals with the purchase transaction will also check on this.  This is to prevent money laundering.  Ask your solicitor for what they need to see to ensure you can get all the information to them in a timely manner.  

BUILDERS' INCENTIVES

Should you buy a new-build home there are various incentives, ask the Sales Team at the builders.  The thing to be aware of is it a cash or non-cash incentive.  

Cash incentives that we've seen range from;

• 5% deposit
• Mortgage paid for a year (up to xxx amount - always read the small print!)
• 105% part exchange
• Paying legal fees
• Paying for LBTT

A cash incentive will have an impact on your mortgage and it's down to each individual lender to set their own criteria.  In our experience most lenders don't have an issue with any cash incentive up to 5% of the purchase price.  Anything greater than that can impact on the mortgage application.  

Non-cash incentives are exactly what it says, there is no money that's exchanged.  Some of the incentives we've seen offered are:

• All white goods
• Carpeting and flooring
• Landscaping of gardens  

Check with the sales team if you're buying a new build and always ask for what incentives they have.  Some may not offer as the site you're viewing is selling well and therefore no incentives needed to get sales through the door.  But if you don't ask, you don't get.  

As ever, Team MFS is available to answer any bespoke queries.  We've given quite generic advice.  If you have something you'd like to discuss with one of our advisors, you can book an appointment online via www.mcleanfs.co.uk or give us a call on 01224 947 670.

‍

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE. This firm may charge a fee for mortgage advice. The amount of the fee will depend upon your needs and circumstances. This will be discussed and agreed with you at the earliest opportunity.

‍

‍

SOURCES

*https://group.legalandgeneral.com/en/newsroom/press-releases/bank-of-mum-and-dad-funds-one-in-two-house-purchases-among-under-35s-legal-general-research-reveals