Low deposit mortgages are mainly the domain of the first time buyer of a residential property where their income and savings are quite low. Expats would normally be in a better financial situation with only a small number requiring this. However, where expats have family members living in the UK, then they may be interested in these mortgages where they could provide help to their offspring or other family members not in such good financial circumstances.
In the current UK market, a low deposit mortgage would be any mortgage offering a loan of 90 percent or more of the property purchase price and as already mentioned, these mortgages would only be available on residential property.
Loan-to-value
The loan to value ratio on a mortgaged property is the amount of the mortgage loan divided by the value of the property. For example, a mortgage loan of £180,000 awarded on a property where the purchase price was £200,000 would have a loan to value of 90 percent. In such a situation, the purchases would have to put down a deposit on the property of £20,000.
With property prices in the UK now reaching quite high levels, it is not uncommon for first time buyers to be looking to purchase property in the £200,000 range and with all of the other things young people need today, and with the levels of debt that they often carry, many will find it very difficult to save the £20,000 deposit that would be needed. Yes, there are lenders who will grant 95 percent mortgages requiring a smaller deposit but these are not plentiful in the current market.
Once the loan to value ratio reaches these high levels, lenders tend to increase the applicable interest rates and sometimes take out insurance to cover them for losses should the borrower default. The cost of this insurance is passed on to the borrower.
It is often in the deposit area that first time buyers turn to the bank of mum and dad and this might be the route that expats would take to support their offspring who are living in the UK and looking for a first time buyer mortgage.
Help to buy and other government schemes
The UK government has over recent years, introduced a number of schemes designed to help people on lower incomes to purchase residential property. From the point of view of expats, these schemes would not be available to them personally as they are only open to people resident in the UK who meet the lower income criteria who will be considered.
Where these schemes might be of interest to expats is when they have family members living in the UK who would qualify for one of these schemes and they want to help them to get onto the uk property ladder.
Most of the schemes are operated through local housing associations so once you have decided where you want to live, you would need to apply for acceptance into the scheme through the registered housing association in that area.
The process is never entirely straightforward as the government only allocates set amounts of funding and the schemes are often oversubscribed. This meant that there can be a very long delay between applying for help with one of the schemes and getting into a position where funding is being granted.
Details of the various schemes can be found on the UK governments website.
Unsecured borrowing
Unsecured borrowing is where you take out a loan that is purely based on your financial status without your having to offer up a valuable asset as security for the loan. Unsecured loans can be used for a multitude of purposes but some of the main ones are as follows:
Consolidating debt – Where people may have a range of debts which are all charging different interest rates and where some or all f these interest rates are high, consolidating all of these debt into one unsecured loan at a lower overall interest rate can be beneficial.
Home improvements – where money is required for general home improvements and where it would not make sense to change the mortgage arrangements then taking an unsecured loan from your bank can be a straightforward way to satisfy the requirement. With these loans usually being repaid over a fairly short term, it avoids holding long term debts.
Car purchase – Although the car can be repossessed if the loan on it isn’t repaid, it is still essentially an unsecured loan as you don’t usually own the car until the debt has been fully repaid.
Bank overdrafts and credit cards – these are further examples of unsecured borrowing where no item of security is held by the lender.
Although the above can all be used in a sensible and economic way, there are a great number of small unsecured loan companies that generally operate at the bottom end of the market giving small loans at unrealistically high interest rates. The dangers people can face with these loans have been well publicised and some people have found that the small amount they originally borrowed has been multiplied many times over through the application of very high interest rates.
