The Government has fast tracked its Mortgage Guarantee scheme by three months so that Contractors can start accessing 95% mortgages this week. The great news is that Contractor friendly Lender Halifax are one of the first to join the scheme and will be offering their new 95% mortgage from Friday. This will make the dream of homeownership a reality for thousands of Contractors who would otherwise have faced another three months of waiting and could mean that many Freelancers could start 2014 in a new home.
What is the Mortgage Guarantee Scheme?
The new Mortgage Guarantee scheme will be available on purchases and remortgages on any property under £600,000, regardless of the style, age or location of the property. Encouraging up to £130bn of funding, the Mortgage Guarantee will be available for three years and aims to offer mortgages to buyers struggling to come up with a large enough deposit to enable their house purchase. This will be hugely beneficial to Contractors who are eager to buy their first home or to move up the housing ladder.
Working in a similar way to the 'indemnity' policies of old, the Governments Mortgage Guarantee will help reassure Lenders that your purchase represents a sound risk, subject to the usual credit checks on you. If the worst should happen and they need to repossess and sell at a loss, the Lender can rest assured that in addition to your deposit covering part of the loss, the Governments insurance will help absorb all or a substantial part of any remaining capital loss.
The great news is that because the Lender is protected under the Mortgage Guarantee, the rates that they offer on high loan to value (LTV) mortgages should be far lower than those currently available, so homeownership will be more affordable for thousands of Contractors with low deposits.
How does it work?
When you apply for a mortgage that is covered by the Mortgage Guarantee Scheme, you will put down a deposit of between 5% and 20% and the Lender will carry out all of the usual affordability checks.
Essentially, the Mortgage Guarantee scheme allows you to take out a standard mortgage at a loan to value of between 80% and 95%. It should be available to almost any home buyer as long as you pass the affordability checks and have no adverse credit history. Unlike the Help to buy scheme, the Government won't loan you any money upfront, the guarantee is only in place to protect the lender if you default on your mortgage. All of the arrangements happen behind the scenes as the Lender will apply for the Mortgage Guarantee and will cover fees that the Government charges to use this facility. This saves you the hassle of repaying a Government loan after five years of homeownership as you would do with the Help to buy scheme. You will simply need to cover your mortgage repayments.
The Mortgage Guarantee scheme is also available on remortgages so Contractors who have been waiting on a lenders Standard Variable Rate (SVR) because you don’t have enough equity in the property to remortgage to a competitive rate, could save hundreds of pounds a month on repayments by switching to a lower rate on the scheme.
Headline rates for Contractors with the Halifax
The headline grabbing rates available through Halifax on the Mortgage Guarantee scheme are extremely competitive for lending at 95% LTV. At just 5.19% the rate is only 0.4% higher than their current 90% LTV rate for first time buyers and only 0.3% higher than the 90% LTV rate for next time buyers but it allows Contractors who are struggling to save their 10% deposit to buy now.
The 5.19% rate will be fixed for two years and there is a £999 arrangement fee charged by the Halifax but this can be added to the mortgage in most cases so you won't need to find this upfront. Don’t forget that, unlike other brokers, here at Contractor Financials, won't charge you a penny for our advice or for processing your application all the way through to your moving in date.
This Halifax rate will currently only be available on a property that is over two years old and up to the value of £600,000. It is open to first time buyers or next time buyers but the property must be your only residence so if you are hoping to move using the help to buy mortgage guarantee, you will need to sell your current home. If you are currently applying for a mortgage with the Halifax at a 90% LTV then you will have the option to switch to a 95% mortgage on the scheme so you should contact your Adviser today to get the ball rolling. This could save you valuable deposit money that can go towards stamp duty, moving costs or improvements to your new property.
The great news for Contractors is that Halifax bought in to the contract based underwriting that Contractor Financials originally negotiated with them over a decade ago and have continued to lead the way in the Contractor mortgage market. To this end, they have made their Help to Buy Mortgage Guarantee products as Contractor friendly as the rest of their range so Contractors can borrow based on a multiple of their annualised contract rate alone, even at a 95% LTV.
Start the New Year in your new home
There has been some confusion surrounding when you would be able to complete on a help to buy purchase because the Government brought forward the Mortgage Guarantee scheme launch by three months. However, contrary to what the press has been reporting this week, Contractor Financials are happy to reassure clients that if you are buying a home under the help to buy scheme you will be able to complete before January and so you could be in your new home before the New Year.
If you are ready to speak to an Adviser about a Contractor Mortgage or would like more information on the Mortgage Guarantee Scheme then call Contractor Financials on 0845 062 8888 or email firstname.lastname@example.org
This article was written by Tony Harris the MD of our IFA partners, Contractor Financials.