90% loan to value mortgage in the UK with 10% deposit required by the lender
As a first time buyer looking for a 10% deposit mortgage you probably feel you are ready to go however the Summer 2020 has re-shaped matters and bought some concerns into sharper focus when it comes to 90% loan to value products.
A 10% deposit mortgage has perhaps for the first time in a generation the real possibility of resulting in “negative” equity trap with property prices widely predicted to fall in the short to mid-term. “Negative Equity” is when the property price is lower than the mortgage balance and as such you would need to clear the difference to be able to move again. Careful research should therefore be carried when buying a property with new build and studios often the most susceptible.
Market volatility and tough money market conditions has meant Mortgage Lenders are drifting in and out of 90% loan to value mortgage offerings. So you need to be ready with all your documents to apply otherwise the shutters may come down without prior notice. And, such is the scarcity of 10% deposit mortgage options that the Mortgage Lenders that have let them through the door will inevitably run into service difficulties.
Mortgage underwriting is generally harder right now and the 90% loan to value mortgage will feel the brunt of this as it is at the risker end of the market. Income multiples are normally tighter and track records on additional income such as commission, overtime and bonuses are hard to predict with the health crisis backdrop.
To qualify for the 10% deposit mortgage you must have permanent rights to remain in the UK and a very good credit rating.
A 10% deposit mortgage may also attract a disproportionate premium on the rate and some Mortgage Lenders are limiting their offerings to 5 year fixes only to make more money by tying you in for longer.
I’m a professional Mortgage Broker and right now I have access to the following 90% loan to value mortgage in the table below but as warned above the likelihood is it won’t be around for long. The income multiples are normally around 4.5 times. I also have access to another 10% deposit mortgage with a 5 times income multiple for applicants earning at least £60,000 which is market leading but the rate is higher.
10% deposit mortgage | 90% loan to value
| 2 Year Fix | 5 Year Fix | |
|---|---|---|
| Initial interest rate | 1.97% fixed until 31/10/2022 | 2.77% fixed until 31/10/2025 |
| Initial mortgage cost | £1,140.47 | £1,248.31 |
| Current revisionary rate | 4.39% | 4.39% |
| APRC | 4.1% | 3.9% |
| Lender application fee | £180 | £180 |
| Lender valuation fee | Free | Free |
| Lender arrangement fee | £999 | £999 |
| Main early repayment charge | 2% in the fixed period | 3% in the fixed period |
| Telegraphic transfer fee | £35 | £35 |
The generic example assumes:
Purchase price of £300,000 | Mortgage £270,000 | Deposit £30,000 |Term 25 Years | Repayment. The source of information is Twenty7tec as at 17/6/20. For an illustration specific for your circumstances please contact us via our website www.nicheadvice.co.uk
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