Halifax launches new 100% mortgage with no deposit for first-time buyers
FIRST-time buyers can now get a mortgage with NO deposit at Halifax, as long as a family member contributes 10 per cent of the property price from their own savings.
But as a perk for lending the cash, the bank will pay 2.5 per cent in interest on the money they deposit.
The three-year mortgage, which is available to home buyers where at least one is a first-time buyer, is fixed at 2.90 per cent.
It's available on mortgages of up to £500,000 over a maximum period of 30 years.
There's no fee and family members can also bag £300 cashback towards their legal fees.
But be warned that you can't take the mortgage with you if you move as you'll no longer qualify as a first-time buyer, although you may be able to port the rate as long as you qualify for Halifax's standard lending criteria at the time.
You also need to be aware that if you miss your mortgage payments, the bank can take the cash from the 10 per cent "deposit" your family member has stumped up.
How does the mortgage work?
How it works, is that the family member who stumps up the effective deposit sets up a "Family Boost Fixed Savings Account" with Halifax before mortgage completion.
Either borrower or supporter must also have either a fee-free Halifax Reward account or an Ultimate reward current account, which comes with monthly fees of up to £17.
After the three years, whoever helped you with the funds will be refunded their 10 per cent plus the 2.5 per cent interest.
In comparison, the best buy three-year fixed rate savings account is currently 2.15 per cent from Zenith Bank.
The idea is that the homeowner will have paid down enough of their mortgage to be able to remortgage to a lower loan-to-value mortgage once the fixed term is up.
How do you find the best mortgage deals?
IF you have or haven't got a deposit lined-up to buy a home,shopping around for a mortgage is the same.
Websites like Moneysupermarket and Moneyfacts have mortgage sections so you can compare costs and all the banks and building societies have their offers available on their sites too.
If you're getting confused by all the deals on the market, it might be worth you speaking to a mortgage broker, who will help find the best mortgage for you.
A broker will typically cost between £300 and £400 but could help you save thousands over the course of your mortgage.
You'll also have to decide on if you want a fixed-deal where the interest your charged is the same for the length of the deal or a variable mortgage, where the amount you pay can change depending on the Bank of England Base Rate.
Remember, that you'll have to pass the lender's strict eligibility criteria too, which will include affordability checks, and looking at your credit file.
You may also need to provide documents like utility bills, proof of benefits, your last three month's payslips, passports and bank statement.
And while you might be tempted to get a mortgage without a deposit, they tend to be more expensive than other deals, so you could be better off saving up instead.
You can check out our guide to the best first-time buyer mortgage deals here.
The "no deposit mortgages", which often means a family member is brought in as a guarantor to get around tough restrictions, used to be really common.
But after the financial crisis 10 years ago, lenders started to withdraw these types of home loans from the market.
One of the risks with these mortgages is that if house prices fall, borrowers can fall into negative equity, which means the current value of your home is less than the amount you have outstanding on your mortgage.
This, in turn, means that if you were to sell their home you would find yourself owing the bank the difference between the value of the mortgage and the value of your home, meaning some may struggle to remortgage.
Yet now, more and more lenders are launching such deals, with Lloyds Bank offering them again as of January while Barclays has offered them for even longer.
Is it a good deal?
The mortgage could be an option for those who are unable to save up for a deposit, which has risen from an average of £27,059 in 2009 to £41,099 now, according to Halifax.
It is similar to Lloyds Bank's deal, which offers a fee-free three-year mortgage fixed at a slightly higher 2.99 per cent and the same savings rate.
Meanwhile, Barclays' 100 per cent mortgage is fixed over five years at a rate of 2.95 per cent.
It's also fee-free and the savings rate is set at 1.50 per cent above the Bank of England's base rate of 0.75 per cent, meaning savers can currently earn 2.25 per cent in interest on their savings.
Rachel Springall, finance expert of comparison site Moneyfacts, told The Sun: "Those first-time buyers who have a family member who are prepared to put down a 10 per cent deposit on their behalf may find this deal from Halifax a viable option to get onto the property ladder.
"It is important that all parties understand how this Family Boost deal works, as the person who puts down the deposit will see it locked away for the duration of three years within a fixed term savings account.
"It is also important that first-time buyers try and overpay their mortgage to increase the amount of equity they own."
What help is out there for first-time buyers?
GETTING on the property ladder can feel like a daunting task but there are schemes out there to help first-time buyers have their own home.
Help to Buy Isa – It's a tax-free savings account where for every £200 you save, the Government will add an extra £50. But there's a maximum limit of £3,000 which is paid to your solicitor when you move.
Help to Buy equity loan – The Government will lend you up to 20 per cent of the home's value – or 40 per cent in London – after you've put down a five per cent deposit. The loan is on top of a normal mortgage but it can only be used to buy a new build property.
Lifetime Isa – This is another Government scheme that gives anyone aged 18 to 39 the chance to save tax-free and get a bonus of up to £32,000 towards their first home. You can save up to £4,000 a year and the Government will add 25 per cent on top.
Shared ownership – Co-owning with a housing association means you can buy a part of the property and pay rent on the remaining amount. You can buy anything from 25 to 75 per cent of the property but you're restricted to specific ones.
"First dibs" in London – London Mayor Sadiq Khan is working on a scheme that will restrict sales of all new-build homes in the capital up to £350,000 to UK buyers for three months before any overseas marketing can take place.
Starter Home Initiative – A Government scheme that will see 200,000 new-build homes in England sold to first-time buyers with a 20 per cent discount by 2020. To receive updates on the progress of these homes you can register your interest on the Starter Homes website.
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