With all that’s gone on in 2020, including Covid-19, an economic standstill and thousands of workers facing furlough or redundancy, many hope that 2021 brings positivity and opportunity.
With Boris Johnson’s plans to “End generation rent” and create around two million more property owners by making mortgages more affordable with longer-term fixed rate deals, first-time buyers and those looking to buy a house in 2021 want to know what this means for them and how they can start preparing for the mortgage application process.
Can I still buy a house in 2020?
If your circumstances allow for you to meet your chosen lender’s eligibility criteria then yes, it may be possible for you to get a mortgage in 2020.
Back in the three months that led to June, 2020, the housing market came to an almost total halt.
Surveyors were unable to complete valuations, with a backlog, at its peak of 65,000 and solicitors were unable to complete transactions while the Government led land registry was closed.
However, the Government acknowledged that the housing sector has a vital role in building back the economy and Housing Secretary Robert Jenrick stated in November 2020 that, “The property market needed to be kept open” with house moves allowed to proceed during the second lockdown in England.
How can I check my eligibility for a mortgage in 2021?
Lenders look at lots of factors like your annual income, job stability, debt, credit history and age to decide whether they should lend to you.
It’s important to avoid applying to a lender without knowing the likelihood of being accepted because if you get rejected, it could show up on your credit report as a potential red flag to future lenders.
To avoid this, ask a mortgage broker to check your eligibility for a range of products with different lenders. Not only can this help you find a better deal but it can quickly highlight the lenders that are more open to loaning to people with similar circumstances to you.
What will house prices be like in 2021?
No one knows precisely how the pandemic has impacted the property market and demand has fluctuated across the UK, affecting price.
Areas such as Southampton saw an increase in price in 2020 but the predictions from CEBR have forecasted a decline in price as unemployment begins to “fall progressively” over the first three quarters of 2021.
In stark contrast however, predictions from Savills indicate an increase in demand which they state will lead to an, “Average UK house price growth of 4.0%”
Economic stability plays a huge part in what happens to the property sector and if employment becomes stagnant, buying power reduces. This can have an affect on those that currently own property, especially if they become furloughed or unemployed and unable to pay their mortgage.
This could lead to an increase in properties being marketed and if the UK market experiences a drop in demand, the result could be reduced asking prices.
No one has a crystal ball able to precisely predict market changes within the property sector but you could still potentially save money on your mortgage. A broker can compare the market and present you with the best options so you don’t have to spend time searching and potentially missing out on the best deal.
How can I buy a house in 2021?
If you want to buy a property, whether to live, rent out as a buy-to-let landlord or use as a commercial space for a business, you’ll likely need finance unless you have substantial savings put aside or have made other financial arrangements.
There are lots of finance options in the UK including bridging finance, short-term loans and mortgages. A mortgage is a common route of finance for a lot of purchases but speaking to a mortgage broker can help you find out whether it's the right option for you.
A mortgage broker’s job is to assess your situation by talking to you and getting to know what you need from a mortgage as well as what you can afford. They can then search the market and present you with options that are realistic and more likely to be attainable.
Can first-time buyers get mortgages in 2021?
Boris Johnson spoke in October 2020 about the potential for first-time buyer mortgages with 5% deposit requirements as well as the removal of stress testing.
Speaking at a virtual conference he spoke of his fears that, “People feel totally excluded from capitalism, from the idea of home ownership, which is so vital for our society and we’re going to fix that”.
First-time buyers can certainly apply for mortgages, despite an economic downturn which some say has led to a restriction on lending.
Many lenders and banks in the UK are still providing mortgages to first-time buyers and with the help of a mortgage broker, it may be possible to find an advantageous deal that fits in with your circumstances.
Can I buy a property in 2021 with bad credit?
Having bad credit doesn’t exclude you from homeownership yet we speak to so many people who avoid applying for a mortgage because they think lenders won’t accept them.
While you should always check your eligibility for a mortgage before applying, it can be reassuring to know that there are lenders who provide finance for applicants with credit issues.
Your choice of lenders is likely to be decreased depending on the severity and date of the bad credit but our brokers can find the rates available for you and compare which ones would be more viable.
How can I purchase a buy-to-let property in 2021?
The UK has a variety of buy-to-let lenders, each with their own criteria and deposit requirements. BTL investors may well be aware that banks and lenders can stipulate higher deposit requirements due to the perceived higher risk that BTL mortgages present.
The amount of deposit that you’ll be asked for specifically will vary depending on an array of factors like your credit history and even your current property portfolio but usually it can range between 15 - 40% of the property’ market value.
Whether you’re interested in buying a student BTL, a commercial property for offices or a property to let out on a long term basis, our advisors can ascertain the deal for you.
How can I prepare for a mortgage in 2021
Save as much deposit as you can.
Check your credit report for any errors and request for them to be removed via the creditor.
Repay any debts on your credit file, if affordable to do so.
Stay out of your overdraft and if you have to dip into it, borrow as little as possible and repay it back quickly.
Don’t apply for any loans or credit in the run up to applying for a mortgage, or if you’re in the process of getting a mortgage.
Organise your bank statements, birth certificate, passport, tax returns and proof of employment or contracts if you’re self employed.
Seek the advice of a professional broker who can help you find a lender, fill out your application and manage the process on your behalf.
Are there any Government schemes that can help me buy a house in 2021?
Housing Secretary Robert Jenrick spoke at the RESI convention on the 11th of November, 2020 and spoke of the Government’s commitment to “Build the homes the country needs, make housing more affordable for the young and those on lower incomes and to level up.”
2021 could prove to be a hopeful year for first-time buyers, key workers and those seeking to purchase a local property. We’ve listed some information about some of the current and upcoming schemes below but for advice relating to your situation specifically, contact one of our brokers.
The First Homes Programme
This initiative is still being debated and finalised, with further details expected to be released in early 2021.
Properties are sold with a discount of at least 30% below the market value.
The properties are sold to local people who want to stay in the community where they live or work but are struggling to purchase a home at market prices.
First-time buyers, key workers, serving members and veterans of the Armed Forces, will be prioritised
The discount will be passed onto future buyers when First Homes are resold so more people can be helped onto the ladder.
You can find out more about the scheme in our First Homes Programme guide.
Help to Buy: Equity Loan
The Help to Buy: Equity loan scheme officially starts in April 2021 but applicants can apply for the scheme from December 2020.
First-time buyers who are eligible for an equity loan can borrow up to 20% (40% in London) of the purchase price of a new build home, if the housing developer is registered with the scheme.
The property must be a new build with a price tag up to £600,000
The buyer pays a deposit of 5% of the purchase price of the new build home at the point of exchanging contracts and arranges a repayment mortgage of at least 25% of the purchase price of the home.
Interest on the equity loan isn’t charged for the first 5 years but after that period ends, interest fees start at 1.75% and rise each year in April by the Consumer Prices Index (CPI) plus 2%.
You can find out more about the scheme in our Help to Buy guide.
What is the mortgage process like?
The property sector has adapted in light of the Coronavirus pandemic with many appointments and viewings managed digitally.
Many banks, lenders and mortgage professionals had already made steps to provide digitally tuned experiences for their customers, including our own.
Our mortgage brokers provide online mortgage advice but regularly provide face to face appointments while following Government guidelines.
The stages of the mortgage process in 2021
Find a trusted mortgage broker who can calculate how much you can borrow and the lender’s you’re eligible to apply for a mortgage with.
Have your broker compare a range of deals and explain the pros and cons of each, including how much the associated fees are with their mortgage agreements,
Organise your papers and financial statements and have your broker manage your mortgage application to avoid mistakes.
If you’re accepted you’ll receive a mortgage agreement in principle (AIP.) This is essentially confirmation from a bank or lender that they will be willing to lend you a certain amount.
View properties (either in person following Government guidance) or virtually
Make an offer that is subject to a survey and the property being taken off the market.
Find a surveyor or solicitor that specialises in property, as they’ll need to manage the legal process of you completing on the property.
Arrange a property survey which can identify any issues with the condition or structure of the building ahead of you completing on the purchase.
Take out home and mortgage insurance before you move in as most mortgage providers will make this a condition of lending.
The final stage of the process is to get a written mortgage offer and complete contracts.
Ask for advice before you buy property in 2021
Applying for a mortgage is a big financial decision that can impact your circumstances greatly, so check, check and check again that you have the right deal for you.
Our mortgage brokers thoroughly compare the UK lenders and only ever recommend suitable options that are affordable and manageable for you.
They know the mortgage process and can save you the hassle of negotiating lender contracts and corresponding with numerous professionals throughout the mortgage process.
So, if you're looking for a mortgage and don't know where to start call us and speak to an adviser.
023 8098 0304