A new mortgage product has been introduced by a building society to assist first-time buyers in entering the property market without the need for a deposit. Hanley Economic Building Society is offering the Rent to Own mortgage, allowing borrowers to access up to £350,000. To qualify, individuals must have a minimum annual income of £25,000, and the loan amount is capped at 133% of their current monthly rent.
With the average UK rent standing at £1,366 per month, potential borrowers could secure a mortgage with monthly payments reaching up to £1,817. Applicants will undergo standard credit checks as part of the process. The mortgage comes with a fixed interest rate of 5.79% for five years, which is comparatively higher than other deposit-requiring products available in the market.
For instance, Leek Building Society offers a 4.56% rate for five years with a 5% deposit, while Co-operative Bank provides a 4.5% rate fixed for two years with a 5% deposit. Mortgage experts caution that opting for a 100% mortgage could expose buyers to the risk of negative equity if house prices decline.
Ranald Mitchell, the Director at Charwin Mortgages in Norwich, emphasized the importance of meeting rent payment obligations promptly and ensuring affordability when transitioning to a mortgage. While the 100% mortgage option may lack a safety net in case of price drops, it presents an opportunity for disciplined renters struggling to accumulate a substantial deposit.
Skipton Building Society recently launched its Track Record Mortgage, requiring no deposit for renters with a year of on-time rent payments and a favorable credit history. Monthly mortgage payments should not exceed the average of the last six months’ rental expenses for each applicant. Alternative no-deposit mortgage deals necessitate a guarantor to support the borrower, typically a homeowner family member or friend liable for missed mortgage payments.
Consider selecting Daily Mirror as a ‘Preferred Source’ on Google News for swift access to your preferred news content.