It might be tempting to believe a case with a range of complexities is an outright ‘no’. However, before you give up on a case, perhaps it is worth another look with West One.
In today’s world most borrowers often need more flexibility when it comes to income multiples. This means you could be seeing more borrowers requiring LTI’s above the standard offerings available from high street lenders.
Specialist lending is great for these kinds of cases where a borrower wants to stretch their income just a little bit further. At West One, for instance, the majority of our products have a 5.5x LTI cap as standard, including first-time-buyers. However, in our Extra Range we’d go up to 6.5x income and even more through LTI Boost. Our individual underwriting approach means we can look at these cases and assess whether it is affordable for the borrower in question on a case-by-case basis.
In recent years, rents have grown disproportionately compared to wages. This means more people are struggling to save up a deposit for their first home. In London it takes over 10 years to simply save up for a reasonable sized deposit (15%).
For many people, saving up a deposit of 5% is realistically all they can muster without saving for years upon years. The problem is that on the high street, 95% LTV mortgages are generally only available to first-time-buyers with a high credit score, which is particularly challenging to those looking to get onto the housing ladder with a limited credit history or many who have less than a perfect credit profile. Meanwhile those who can save only 5-10% typically face a loan-to-income limit that might impact their chance at become homeowners.
Specialist lending is valuable to borrowers who need a high loan-to-value combined with a flexible approach to income multiples, in the right circumstances. West One, for instance, can lend up to 97.5% LTV, (a 2.5% deposit) up to 6.5x LTI through our “Extra” product range.
At West One, we can also support foreign nationals, working in the UK on skilled worker visa’s, health and care workers and ancestry visa’s up to 90% LTV providing they have lived in the UK for a minimum of 24 months.
So don’t be too quick to say no to a client with a limited deposit, they still could have a route to yes on their mortgage application.
Not every FTB can afford the full value of the average home. This has led to some affordable housing schemes that make homeownership more accessible. Currently two such schemes stand out.
Firstly, the availability of Shared Ownership mortgage products is limited in today’s mortgage market. Even more so for borrowers looking for no deposit mortgages and for those with a less than perfect credit profile. This is why, at West One, we developed a range of Shared Ownership products, including options up to 100% LSV, to meet the needs of borrowers who would typically fall outside of high street eligibility requirements. Our products are designed to provide options for borrowers with recent or historic CCJ’s and Defaults as well as unsecured arrears.
Secondly, the Right to Buy scheme allows those who live in council housing to purchase their home at a significant discount to market value. At West One, for example, we'll lend up to the lower of 100% of the discounted purchase price or 75% of the OMV (open market value), meaning your client may not need to find any additional deposit. It also caters for borrowers who may have experienced credit issues in the past.
In both cases, a borrower exploring an affordable housing scheme is a strong signal that a specialist lender may be better placed to say yes.
Not every FTB fits the standard employed-with-payslips profile. Self-employed applicants, contractors, employed applicants working in a new role, self-employed with shorter trading histories, and those with multiple income streams or variable earnings are increasingly common among first-time-buyers, but many high street lenders are cautious about how much of this income they'll actually count towards affordability.
The result is that a buyer's real earning capacity often doesn't translate into what a mainstream lender will lend against, leaving a client underserved simply because their income doesn't arrive in the neat, predictable shape most high street criteria are built around.
Specialist lenders tend to take a more individual, case-by-case approach to assessing this kind of income, which can unlock affordability that would otherwise be missed. There's plenty more to say on how to approach these cases well, but for now it's worth flagging as a clear sign that specialist lending may be the better route for your FTB client.
Sometimes an affordability assessment relies on minimising, as far as is reasonable, the monthly payments an FTB is able to make. Affordability models on the high street often have various restrictions regarding maximum loan terms, lending up to retirement, and income multiples.
Many buyers might find that they can afford to buy a property could they reduce the monthly payments. However, the ways to manage this are few and far between on the high street. For instance, the difference between a 30- and 40-year term could make the difference between an affordable and unaffordable mortgage, yet many high street banks won’t offer 40 years (whereas West One does). This also comes with the option to overpay to reduce the loan term, which can give a first-time-buyer additional flexibility when they take their first steps onto the housing ladder. The average age of first-time-buyers is increasing, which means a more flexible approach to the maximum age at the end of the term can help support older first-time-buyers. Even when a long loan term of 30+ years is possible, some high street lenders won’t lend far into retirement, typically capping the end-of term age at 75. West One, however, can offer loan terms up to a maximum age of 85 years at the end of the term. Aspirational homeowners may want to look into Shared Ownership schemes where owning a part of the property lowers monthly payments, and with no deposit options available, this could make home ownership a reality.
There are many ways in which monthly mortgage payments can be reduced, many of which could be restricted on the high street, especially once the conversation starts revolving around more than just affordability.
For some FTBs, getting onto the property ladder is only possible with a little help from the bank of mum and dad, often through a gifted deposit.
Gifted deposits are relatively common, but they can still create complications depending on the lender’s criteria. Some only accept deposits up to a certain amount, while others still prefer to work only on arm’s length transactions. At West One, our second charge mortgage range could support parents or grandparents looking to gift equity to their younger family members to help them get onto the property ladder.
Family concessionary purchases is another potential path to homeownership but can be more complex . Having low and zero deposit options is important for younger family members purchasing a property directly at a discounted purchase price from parents and grandparents. Specialist lending can further support where the lending decision is based on credit assessment rather than credit scoring, which may really help provide increased options for first-time-buyers.
These types of family-supported purchases aren’t necessarily straightforward for mainstream lenders, so if a client mentions that a parent or other family member is helping them buy, it’s worth looking beyond the standard mortgage options.
It could be another sign that a specialist lender has a route to yes.
A case that doesn’t fit neatly within mainstream lending criteria isn’t necessarily a case that can’t be done. For first-time-buyers in particular, a more flexible approach to affordability, deposits, income or family support could make the difference between a declined application and a viable route to homeownership.
The key is recognising the signs early and knowing when it’s worth looking beyond the high street. If your client’s circumstances don’t fit the standard mould, perhaps it’s time you explored your options in specialist lending with West One.
Have a case you’re not sure about? Find your local BDM to talk it through or email mortgagesales@westoneloans.co.uk to make an enquiry.