First Time Buyers Taking Out Loans For Deposits
It is becoming harder and harder for first time buyers to get themselves accepted for a new home owner loan or mortgage and get onto the housing ladder. With tighter lending criteria and lower loan to value levels from lenders, many would be buyers simply can’t afford the loan or deposit they require.
As a result of this, a growing number of potential first time buyers are taking more drastic steps in order to be able to buy the house they want, according to a new survey from Santander.
The bank found that many individuals were taking on a second job in order to raise their income multiple on a loan, as well as to help build a deposit to meet loan to value criteria. Other potential borrowers have also taken out personal loans in order to raise funds for a deposit.
The survey found that somewhere in the region of 28 per cent of first time buyers had either increased their working hours, or taken on a second job to increase their chances of getting the home owner loan they wanted.
More worrying is the fact that around 27 per cent had actually taken out a personal loan to help fund their deposit so they could get a lower loan to value deal on their home owner loan.
The main problem with that option is that the monthly personal loan repayments, not only place an additional strain on finances, but also reduce the total amount which may be borrowed on a home owner loan.
Most first time buyers now expect to have to save for at least five years to achieve the deposit they require, unless they receive financial help from their families.
Phil Cliff of Santander said “Saving for a deposit is no easy task, especially in today’s financial climate, with many customers, particularly in recent years, having to put down larger deposits to secure their loan.”
