Specialist mortgage products
There’s a wide range of mortgages available to suit all sorts of different circumstances, so if you don’t fit the profile of a typical borrower, or you’re buying an unusual property, the chances are there’s a specialist mortgage which could help.
Here, we look at some of the specialist mortgage products designed for those who might not be eligible for a standard mortgage.
Holiday Let mortgagesIf you want to buy a holiday home to let out, you’ll need a specialist Holiday Let mortgage rather than a standard Buy to Let mortgage. This is because holiday homes are usually only let out for short periods, and are often considered riskier by lenders than conventional Buy to Let homes which are typically rented out for several months or years at a time.
Lenders will usually require you to put down a substantial deposit if you want to buy a holiday home to let out, typically around 25% of the property value. You’ll also need to be able to demonstrate that you can afford to cover the mortgage payments during the weeks and months that the property isn’t rented.
You can find out more about how Holiday Let mortgages work here.
Buying a new build property can be a great way to get on or move up the housing ladder.
A new home can give you the freedom to make it your own and it should give you fewer structural problems than an old or period home. New homes usually come with a warranty in case something does go wrong.
However, not all lenders will lend on new build properties, particularly new build flats and those that do will have specific limits on how much you can borrow compared to the property value. If you're buying a new build property, it's important to make sure that you can secure the mortgage you need before committing to anything
There may be certain offers available from the house builder or developer and you may be eligible for Government home ownership schemes, such as Help to Buy.
You can find out more about how Help to Buy works here.
If you can’t afford to buy a home on your own, a Shared Ownership mortgage could help you get onto the property ladder.
When you buy a home through a Shared Ownership scheme, you usually buy between 25% and 75% of the property. A housing association will own the remaining share, which you will pay rent on.
You can buy additional shares in the property when you can afford to. This is known as ‘staircasing’.
Find out more about how Shared Ownership schemes here.
Green mortgages typically reward borrowers with discounted mortgage rates once they’ve taken steps to improve the energy rating of their home, for example, by installing double-glazing or cavity wall insulation.
Homeowners choosing this type of mortgage can therefore not only reduce their heating bills by making their homes more energy efficient, but their monthly mortgage payments too.
There are several different green mortgage deals available. If you choose this type of mortgage, you’ll usually have to make your energy efficiency improvement works within a few months of the mortgage completion date. The Energy Performance Certificate (EPC) rating of the property must typically be improved by at least one band to qualify for a discount.
Mortgages for Credit Impaired Borrowers
If you’ve had difficulties managing debts in the past, you’re unlikely to qualify for a standard mortgage deal. Problems that could lead homebuyers being refused a mortgage include missed loan payments, County Court Judgements (CCJs) or bankruptcy.
Borrowers in this position are considered by mortgage lenders to be at higher risk of defaulting on their mortgages, but there are specialist lenders who may be prepared to help.
If you have had a problem with debts previously, and want to apply for a mortgage, you’ll usually need to be prepared to put down a much bigger deposit than you would for a standard mortgage. Lenders may cap the amount they will lend to you as a percentage of the property value depending on your credit history, and you are also likely to be charged higher mortgage rates than someone with a good credit score.
A self build mortgage is aimed at people requiring finance to build their own property as opposed to buying an existing one - they can also be suitable for renovation projects. The money is typically released in stages as the build progresses with the mortgage lender visiting and assessing the build at each stage - depending on the deal, money is released either before or after each stage.
Some new build deals will insist that you already have the plot of land on which to build, whilst others will provide finance for that too.
Due to the risky nature of building your own home, it is essential that you have a detailed budget and good cashflow before embarking on a project and securing finance.
Self CertificationSelf-certification mortgages used to be an option for self-employed workers. They enabled you to obtain a mortgage simply by self-certifying your income. This involved telling the lender how much you earned without having to provide any proof.
Mortgage rules have become much stricter in recent years, however, so self-certification mortgages are no longer available. If you’re self-employed, you’ll need to provide evidence of your earnings and outgoings before your mortgage application will be considered. Lenders will typically require at least two to three years’ worth of accounts before they’ll offer you a mortgage.
You can find out more about self-employed mortgages here.