Real Estate Scale Innovation Achieves 10x Income Mortgage

Big home loans are back

There are exciting innovations in the world of mortgages and real estate that allow borrowers to get a loan of up to 10 times their income with just a 5% down payment.

These two regimes have their relative merits. For many, this will be the only way to access the property ladder, so this should be applauded. “

– Richard Campo

LONDON, UNITED KINGDOM, November 25, 2021 / – These new mortgage programs work in two very different ways.

The first concerns long-term fixed rates. Kensington, a mortgage lender other than High Street, has created a line of fixed rate mortgages that can last up to 40 years.

Due to the length of the fixed rate, they do not need to do any substantive “stress tests” which typically inhibit borrowing, as lenders must factor in a higher variable rate at the end of the initial product. , as well as any increase in interest rates. at the time. As this mortgage is fixed for the term of the loan, they do not need to consider these factors, which means First-time buyers, and those with an income of £ 100,000 + can borrow up to SIX times their salary

The second mortgage innovation is progressive home ownership. A new type of lender called Wayhome offers a condominium structure.

When a borrower initially deposits a 5% down payment, Wayhome purchases the remaining 95% of the property and the borrower “leases” the rest. The borrower is free to buy parts of the property on a monthly or one-off basis until he owns 40%. From that point on, the borrower must switch to a conventional mortgage to purchase the rest of the property. This scheme allows a person to borrow up to TEN times their income, as affordability will be evidenced by the rent already paid. The borrower’s income must be between £ 30 and £ 140,000 to qualify and the maximum property value for purchase is £ 500,000 and must be within an approved area.

Wayhome is very interesting because it is a different style of homeownership that is akin to sharia compliant finance. However, Kensington mortgages are relatively expensive, starting at 2.83% (with a 40% deposit up to 15 years) up to 4.30% (with a 5% deposit up to 40 years). , so if a borrower needs this amount to complete a house purchase Where remortgage, then it works fine. If a borrower needs a smaller amount but wants long-term security, most borrowers would probably still be recommended to take a standard 5-year fixed rate as they can start as low as 1.28% ( with a 40% deposit) as the interest rate. should not go high enough to justify the higher margin offered by Kensington’s Flexi Fixed line.

To put this in context, on a £ 250,000 repayment mortgage, over 25 years, in the first 5 years the borrower pays £ 70,124 * with the Kensington mortgage, up from £ 58,653 * with the 5-year fixed agreement, market leader. . A huge surcharge of £ 11,471 for ‘peace of mind’ against rate hikes that are unlikely to reach this level. (* Information provided by Twenty7Tec. This cost includes interest, fees and principal paid back.)

Richard campo
Rose Capital Partners
+44 20 7935 7866
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Essential consideration for large loans

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