High LTV mortgages - who can actually use them?

[Simbu]

Can anyone explain the scenario where a high LTV mortgage is actually useable for a first time buyer?

As an example...

Say you want to buy a flat for £150k (quite typical around here).

Nationwide offer a 95% LTV mortgage product, so you need £7500 as a deposit. But... when you plug into their mortgage calculator that you earn say £30k the most they can lend you is more like £110k. How do these figures stack up? £30k isn't a bad salary at all and well above national average.

I'm not interested in a 95% LTV mortgage, the interest will no doubt be brutal. But what demographic of FTBers does this product appeal to?

[ChrisMCoupe]

I would suspect that a large percentage of first time buyers have a joint mortgage with their partners to get the required lending amount.

[scotal]

Simbu said:

But what demographic of FTBers does this product appeal to?

Those who earn enough to qualify for the product, and don't want to wait and save a larger deposit before they buy.

[Simbu]

So.. i basically need to find myself a newly qualified doctor to marry then

[scotal]

Simbu said:

So.. i basically need to find myself a newly qualified doctor to marry then

or get to 36k per year, they do take bonuses, overtime into account.
oh and open one of their STB savings accounts for 6 months, they wont lend without it.

[Simbu]

scotal said:

or get to 36k per year, they do take bonuses, overtime into account.
oh and open one of their STB savings accounts for 6 months, they wont lend without it.

Already done it, having maxed my cash ISA allowance this year - the interest rate isn't completely terrible at 2.5%.

My salary is nowhere near £36k (yet) so I think by the time I have the income to maintain a mortgage (in Nationwide's view) i'll have a much larger depsoit than 5%. My question was largely academic for my circumstances.

[ATM]

Some get parents to guarantee if their salary is short.

[BoRED S2upid]

Im guessing they won't be used to buy such an extravagant flat! £150k must be massive you can buy a 4 bed house for that kind of money. Buy a flat for £70k and the 95% LTV works.

[Simbu]

BoRED S2upid said:

Im guessing they won't be used to buy such an extravagant flat! £150k must be massive you can buy a 4 bed house for that kind of money. Buy a flat for £70k and the 95% LTV works.

Depends where in the country you are. Where I'm based a flat you'd be happy to set foot in would be £130k. Really nice 2 bed flats can go for anything up to £200k.

Suffice to say i doubt i'll be staying in this town when I buy.

Under £100k property doesn't exist unless you're retired.

[BoRED S2upid]

Simbu said:

BoRED S2upid said:

Im guessing they won't be used to buy such an extravagant flat! £150k must be massive you can buy a 4 bed house for that kind of money. Buy a flat for £70k and the 95% LTV works.

Depends where in the country you are. Where I'm based a flat you'd be happy to set foot in would be £130k. Really nice 2 bed flats can go for anything up to £200k.

Suffice to say i doubt i'll be staying in this town when I buy.

Under £100k property doesn't exist unless you're retired.

My answer should have been anywhere North of London.

[Easty-5]

BoRED S2upid said:

My answer should have been anywhere North of London.

Try Aberdeen. I am a FTB and currently saving a deposit. To buy a flat in an area that isn't usually on fire is easily going to cost 150k.

[ATM]

Easty-5 said:

FTB

Full Time Bum?

[pharmvrs]

Aberdeen.... wish i'd bought a flat in "The Bastille" 10 years ago when i was a student in the city.

I think these high LTV mortgages are aimed at people desperate to get on the property ladder whatever the cost and are earning below average salaries. I'd also hazard a guess that the mortgages in question would be below £100k in most instances.

[Diablos-666]

I'm in that exact position. Earn a bit more than £30k and was offered £143k (95% LTV) the rate is 6.14%

Repayments are around the £900 mark for 25 years.

[pharmvrs]

£900 a month is a lot of money, i'd be aiming to reduce that 95% LTV any way i could even if that meant selling some prized possessions and living the life of thrift for a few months. I mind having no car for 10 weeks whilst id ordered a new motor and sold my other one too quickly (fool with his money and i couldn't turn him away) and it was the best thing for saving cash!! No car meant no insurance, fuel, tax etc etc but also meant fewer trips to the shop for things i didn't actually need.

Basically some hard months now will save you years off paying £900 a month so evaluate every pound you spend and and put it into essential or non-essential lists

[Diablos-666]

Yes it is a lot to pay each month but I don't have much choice. I don't have any rich family or inheritance money to help me out.

I have my car but I'm not willing to sell that. The only other way to reduce the payments is to take out a 30/35 year mortgage.

Obviously it's not ideal but don't have much option.

[Easty-5]

ATM said:

Full Time Bum?

Haha very good. I meant First Time Buyer

[BrabusMog]

Easty-5 said:

ATM said:

Full Time Bum?

Haha very good. I meant First Time Buyer

I think he's a bit cheeky calling you on acronyms when he is called ATM...

[NorthernBoy]

Diablos-666 said:

Yes it is a lot to pay each month but I don't have much choice. I don't have any rich family or inheritance money to help me out.

I have my car but I'm not willing to sell that. The only other way to reduce the payments is to take out a 30/35 year mortgage.

Obviously it's not ideal but don't have much option.

It's rarely a good idea to take out such a long mortgage, as it doesn't drop the payments by very much.

[Diablos-666]

It doesn't drop the repayments by much but enough for me to make it affordable without too much sacrifice.

Ill be left with about £150-200 per month after all my costs.

So that extra £50 a month I "save" by extending the mortgage term does make a difference to me.

I'm not in a rush to buy, have time to find the perfect property for me and in that time I'll still be saving £1k pm towards the deposit. So hopefully I won't need to take out that longer mortgage.