Mortgage with little/no deposit

[ButYouGottaHaveASkillJeff]

I realise asking a mortgage broker would be good in the first instance and I'm going to do that but in the meantime...

Are these possible? After reading the other low mortgage thread I put my salary into a mortgage broker calculation and it came out a lot more than I had anticipated.

I have rented for 10 years, never bought a home and whilst the sum given wouldn't get me anything decent in my area or anything like where I live now, it did get me thinking would I be able to buy a 2 bed elsewhere and perhaps rent it out?

Or is that a ridiculous idea? I only have a couple of grand in savings. Quite prepared to be told I'm being stupid!

The best you can get at the moment is 95% and only a few lenders offering those. A LiSA might help you save deposit if you fit the criteria?

Thanks @BeaBeaBuzz I'll look into that.

Honestly though 95% are possible most places will ask for a minimum 20% deposit these days. No where will offer you 100% mortgage. Bear in mind you will have additional costs as well - convayncing fees, mortgage fees, removal costs, change of land registry, stamp duty.

As a mortgage broker/lender I'd be very concerned that you were a decent earner with no or very little savings. Would make you a bit risk if you were to lose your job or something

How much is the property you want to buy? You generally need at least 5% but more commonly, at least 10-15% of the property price as deposit.

I think there are mortgages available if you have a guarantor (but the guarantor would literally be risking their home if you were to come out of work and unable to pay).

If you're buying a new build, you could access help to buy which pays part of the deposit. It's a loan though so you'd need to pay it back. I think you need 5% deposit to access that.

You could put your savings into a Lifetime ISA and the government will top it up 25% but you can't access it for 12 months

Buy to let mortgages are always more expensive as well. With higher deposit required

Also if looking for a BTL property it will be fairly high interest rates (usually 3%) and looking for at least 75% deposit. you'd be unlikely to make much of a profit either by the time you've paid service charges/maintance charges, tax on the income, agency fees (if not in your area you will have to pay an agent to maintain it as well), electrical and gas safety certs, inventory etc. I'd sit down and work out the maths before jumping in. I had a 60% mortgage and barely broke even if you didn't take into account the capital repayment of the mortgage. it's not worth BTL unless you have a very small mortgage

would I be able to buy a 2 bed elsewhere and perhaps rent it out?

As Bea said, the best you'd get would be 95%, and they are very difficult to get. 100% mortgages don't really exist anymore.

But if you intended to let out the place you buy, you'd need a BTL mortgage not a residential one - letting out a house on a residential mortgage is against the terms, without express permission, and you can't typically get that until you've owned the house for quite a while. Barclays won't allow it within 2 years of owning the home, and then they'll assess based on individual circumstances. We've owned our flat for 7 years and they were happy for us to let it out for a maximum of a year, with proof that our circumstances had changed.

You'd usually have higher rates for a BTL, and you'd need to look at the tax implications etc. You'd also need to make sure that wherever you buy meets current letting requirements - there were some big electrical changes recently, for example, which mean that a lot of the traditionally let out small houses where I am are now requiring a lot of electrical work to update them, and therefore are all for sale.

And I'm 95% sure that you'll lose your FTB stamp duty exemption, although that might not matter to you - you can't claim it for a BTL, as the scheme only applies to somewhere you are buying as your main residential home; and it only applies to your first purchase.

It's worth talking to a mortgage broker and looking at options, including LiSAs etc as mentioned above; and also a financial advisor could be a good idea if you're going down the BTL route.

I've only just become a decent earner in the last couple of years.

A lot to think about. I was looking at properties in close by commuter towns a bit under what was coming out in the marriage broker calculations.

Looks like I'll have to start working on building the savings (or meet someone 🙄). I'm going to look up the help to buy scheme. Do I have to pay stamp duty? I thought I'd be exempt.

So yes, a regular mortgage is nearly always max 90% LTV (loan to value rate) meaning you'd need a 10% deposit. There are a few specialist products, usually specifically for first time buyers that are 95%, sometimes linked to a LISA or other saving or government scheme so you should look into these. But you will still be constrained by your income as well as your deposit level, so if your income is low you still may not be able to borrow that much. Bear in mind also you'll need to pay solicitors fees and removal costs - these alone could run into a couple of grand so if that's all you have you probably do need to save a lot more, sorry.

I am not sure a buy to let is the answer, these are viewed as higher risk products by lenders so pretty much you will need a 25% deposit minimum and you will need to show that your income is enough to cover the mortgage in the event of tenants not paying the rent or a void period. Plus remember you'll need to pay a lot of additional costs for a rental as well as the mortgage, tax on all the income, agents fees, insurances, maintenance costs etc, so if you have little to no savings cushion and a small income it's probably not advisable. If you do want to look into this use a calculator specifically for buy to lets as different income and deposit rules do apply, don't just assume you can get a normal residential mortgage and then let it out afterwards...

Would you consider looking into shared ownership (where you own a defined % of the the property and pay rent on the other %) - this is generally a better way onto the property ladder for those on lower incomes and more secure than private renting, it is your permanent home and you have much more control over it than when renting, it's not perfect (can be issues if you eventually want to sell it on) but I think a better option for you than buying a rental?

Normally a buy to let mortgage has an LTV requirement of at least 75% so you would need a substantial deposit to buy a rental. You also wouldn’t be able to us help to buy or any similar scheme unless it was for a house that would be your main residence.

Your best bet is to keep saving and try for a 95% mortgage on a house for you to live in.

I totally missed BTL bit sorry

(I should add that you can't use a LiSA for a BTL, only a residential mortgage, so again - a financial advisor is a really good idea if that's the way you intend to go; to make sure you're set up well)

Ok so BTL seems definitely out! Thanks all for your input, very helpful.

I honestly thought I'd never ever be able to own my own home where I live as a single person, then put my details into that calculator and thought 'ooh maybe I can'.

Knew it wouldn't be that easy!

@ButYouGottaHaveASkillJeff you can't buy a help to buy and rent it out i am afraid. but it may be a good option for a high earner with low deposit.

Stamp duty will depend on the price of the property. as a first time buyer you get properties up to £300k stamp duty free and anything under £500 you don't pay on the first £300k. Over 500k you pay full stamp duty

Thanks @Bells3032 the property would definitely be under £300k.

@Bells3032 I'm pretty sure you can't use the first-time buyers exemption for a buy-to-let, so stamp duty would be due at the normal rate.

@TakeYourFinalPosition no you are right, you can't - but you don't have to pay the additional 3% if its your only property

If you could buy a 2 bed for yourself and rent a room out (have a lodger) you can an receive £7500 from lodger without paying tax on it. It's called Government's Rent a Room scheme.