EXCLUSIVE How choosing the right mortgage lender could allow a first-time buyer to borrow £124,000 more

Daily Mail​

3 days ago

First-time buyers may be pushed into buying smaller, cheaper homes in less desirable areas if they pick the wrong mortgage lender, new analysis has revealed.
Mortgage broker Trinity Financial entered details of a fictional typical first-time-buyer couple into nine mortgage lenders' online calculators to find out how much they could borrow.
It found that mortgage lenders offer different loan amounts to applications with identical circumstances due to their varying mortgage affordability assessments.
Based on a joint income of £80,000 and a 25 per cent deposit, the research uncovered a near £124,000 difference between the most and least generous maximum loan amounts.
It means those who don't shop around for their first mortgage may end up compromising on the home they buy, not knowing they could potentially borrow more elsewhere.
The analysis found that Nationwide Building Society and Atom Bank are the most generous towards first-time buyers.
Nationwide offers to lend up to six times annual income, via its Helping Hand scheme, which is available to eligible first time buyers with its five and 10 year fixed rate mortgages.
Securing a Helping Hand mortgage with Nationwide on a five-year fix with a 25 per cent deposit could mean a couple earning £40,000 each (£80,000 combined) could borrow up to £480,000.
This means they would be able to buy a home worth £600,000, which is more than the average property price in London.
At the other end of the spectrum, the analysis found that the same first-time buyer could be limited to borrowing £356,000 if they chose Santander.
With a 25 per cent deposit in place, this would mean they might end up buying a property worth £445,000.
Aaron Strutt of Trinity Financial, said: 'Many first-time buyers do not realise that the amount they can borrow ranges so significantly depending on the lender they apply to for a mortgage.
'It does pay to shop around when it comes to mortgage affordability and borrowing the amount you need.
'Most lenders use completely different calculations to determine how much their customers can borrow, and as a result, the maximum loan sizes can vary significantly.
'Lenders can also offer surprisingly large loans to joint applicants with clean credit histories and strong incomes.'
A string of mortgage lenders have been relaxing their affordability rules and launching products that could benefit first-time buyers in recent months.
Yesterday, Nationwide announced it will be offering first-time buyers the chance to get a 5 per cent deposit mortgage when buying a new-build.
The day before it was announced that first-time buyers with at least a 20 per cent deposit can now buy with an interest-only mortgage via lender Gen H.
Since March, multiple high street lenders have loosened their mortgage rules, allowing people to borrow more when buying a home.
And only last month, two smaller lenders announced they are now offering people the chance to buy a home with a mortgage covering the entire purchase price.
April Mortgages and little-known lender Gable Mortgages are both providing the home loans which don't require the borrower to put down any deposit.
'The mortgage market is quite complex these days, and lenders are keen to attract first-time buyers, which is why there are numerous products designed to help them get on the property ladder,' adds Strutt.
'Generally speaking, the largest lenders offer the most competitive rates, while smaller lenders charge more, especially if they are offering a more bespoke product.
'Just because a lender offers high income multiples, it doesn't mean borrowers need to max out their borrowing - it's simply good to know the options they have available to them.'
How to find a new mortgage
Borrowers who need a mortgage because their current fixed rate deal is ending, or they are buying a home, should explore their options as soon as possible.
Buy-to-let landlords should also act as soon as they can.
Quick mortgage finder links with This is Money's partner L&C
> Mortgage rates calculator
> Find the right mortgage for you
What if I need to remortgage?
Borrowers should compare rates, speak to a mortgage broker and be prepared to act.
Homeowners can lock in to a new deal six to nine months in advance, often with no obligation to take it.
Most mortgage deals allow fees to be added to the loan and only be charged when it is taken out. This means borrowers can secure a rate without paying expensive arrangement fees.
Keep in mind that by doing this and not clearing the fee on completion, interest will be paid on the fee amount over the entire term of the loan, so this may not be the best option for everyone.
What if I am buying a home?
Those with home purchases agreed should also aim to secure rates as soon as possible, so they know exactly what their monthly payments will be.
Buyers should avoid overstretching and be aware that house prices may fall, as higher mortgage rates limit people's borrowing ability and buying power.
What about buy-to-let landlords
Buy-to-let landlords with interest-only mortgages will see a greater jump in monthly costs than homeowners on residential mortgages.
This makes remortgaging in plenty of time essential and our partner L&C can help with buy-to-let mortgages too.
How to compare mortgage costs
The best way to compare mortgage costs and find the right deal for you is to speak to a broker.
This is Money has a long-standing partnership with fee-free broker L&C, to provide you with fee-free expert mortgage advice.
Interested in seeing today's best mortgage rates? Use This is Money and L&Cs best mortgage rates calculator to show deals matching your home value, mortgage size, term and fixed rate needs.
If you're ready to find your next mortgage, why not use L&C's online Mortgage Finder. It will search 1,000's of deals from more than 90 different lenders to discover the best deal for you.
> Find your best mortgage deal with This is Money and L&C
Be aware that rates can change quickly, however, and so if you need a mortgage or want to compare rates, speak to L&C as soon as possible, so they can help you find the right mortgage for you.