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Intermediary response

Steve Pollard, director of Moneyquest, says the client&#39s options are limited by high income multiples and Ms Woods should consider borrowing or saving for a 5% deposit

Many first-time buyers like Ms Wood face the problem of having little or no deposit as well as the fact that wages have not kept pace with rising property prices. Lenders have reacted to this by creating products such as 100%-125% mortgages and various 95% MIG-free products. They have also brought more flexibility into their lending criteria by either increasing income multipliers or by introducing affordability calculations.

Despite this, Ms Wood&#39s options are limited as she wants a 100% mortgage and needs to borrow almost 4.8 x salary. Based on most lenders&#39 criteria, it is unlikely that she could borrow the amount requested without the use of a guarantor.

If she is determined to purchase a property of this value then the Graduate Mortgage from Scottish Widows Bank might suit. She may be able to borrow up to 102% of the value of the property with neither mortgage indemnity premium, nor redemption penalties. The interest rate will track Bank base rate less 0.25% for six months, then revert to base rate plus 1.25% for the remainder. The product would help with expenses as there is no arrangement fee, a free valuation up to £250 and £150 towards legal fees. However, Ms Wood would almost certainly have to use a guarantor to have this mortgage approved.

On the face of it, Ms Wood has no savings but it is surprising how quickly people can find a 5% deposit or more when they realise how much it could save them and how many more options it can make available. As the property is a new-build then the actual completion date could be many months away. Depending on Ms Wood&#39s current situation she may be in a position to put more money aside each month. This could form part, or all, of a deposit by the completion date. This gives her more mortgage choices now and means she will become accustomed to paying out the extra money each month before her mortgage commences.

Most lenders will now accept a deposit if it is gifted from a relative or friend. Many parents, for example, are more than willing to help their child in these particular circumstances.

Builders also run various incentives such as free carpets or white goods but, in some cases, can pay some or all of the 5% deposit, which is always worth exploring.

If Ms Wood could save, borrow or negotiate the 5% deposit then lenders like Intelligent Finance or Standard Life Bank may look favourably on her case. Both provide fast agreements-in-principle, which are worth getting but only if the 5% is available. Her income is still an issue and it would be tight. However, both lenders use affordability rather than standard income multipliers and Ms Wood has a good job and her pay is due to rise quickly. The product ranges are also flexible, which is favourable where salary increases are likely.

It is not always possible to place every mortgage. In this case the choices are limited, as most lenders simply will not take the risk. Sometimes it may make more sense to recommend that the client looks for a more affordable property within their price range.


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