Renters who lack savings or financial support from their family can potentially make the jump on to the housing ladder with a new zero-deposit mortgage.
Skipton Building Society’s new track record mortgage could give a helping hand to people with a strong history of paying their rent but who have been only able to save a little or nothing for a deposit to buy their first home.
The deal is available for first-time buyers across Britain. Tenants aged 21 and over may be able to take out mortgages at between 95% to 100% of the value of the property they want to buy.
In return, they will need to demonstrate a strong track record of paying their rent, with evidence of a minimum of 12 months of rental history.
Aberdeen property expert
Sean Sinclair, a mortgage and protection advisor at Aberdeen based estate agent Peterkins, says the new mortgage is good news for first time buyers.
“This offering from Skipton Building Society will be a welcome development for those first time buyers who have been unable to save a deposit to allow them to get a foot on the property ladder, despite being able to demonstrate a track record of effectively paying their landlord’s mortgage,” says Sean.
“The financial crises of 2008 taught us that negative equity is a risk with high loan-to-value (LTV) borrowing; if property prices fall, borrowers may find that they have no equity and few options open to them at the end of their initial fixed rate period. A relatively long five year fixed rate will help mitigate this risk.”
People may be eligible if they have paid in full at least 12 months rent in a row within the past 18 months and are looking to borrow up to £600,000.
How it works
Renters will also have to pass affordability and credit checks.
It’s also worth noting in the terms and conditions for the track record mortgage deal on its website, Skipton said that it will not lend on new-build flats.
It also said the track record mortgage cannot be used with any other borrowing scheme.
Skipton also said it will be ensuring, when looking at affordability, that buyers will not be paying more on a monthly basis than their current rent.
For example, a tenant paying an average of £800 per month over the past six months will have a maximum monthly mortgage payment of £800.
The fee-free mortgage is a five-year-fixed-rate product with a rate of 5.49% and the maximum mortgage term is 35 years.
Helping first-time buyers
Charlotte Harrison, chief executive of home financing at Skipton, said: “We need to tackle the UK’s housing affordability crisis to enable more people, especially renters who are trapped in renting cycles, to buy their first home.
“People trapped in renting is one of the UK’s biggest housing challenges, having a massive impact on the fabric of our society.
“With escalating rents and the cost-of-living squeeze further impacting people’s ability to save for a house deposit, it’s making it almost impossible for people get on to the property ladder.”
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