Stephen Lawrence Group National Sales Manager at Norton Finance Group commented:
"Primarily this product has been designed to help existing homeowners with limited or negative equity move house but it can also be used to provide a deposit for first time buyers struggling to save up for their initial deposit. There have been an enormous number of questions from Intermediaries who want to understand the process and product in more detail and below are some of the answers to those questions."
Q: How do I apply for a loan for my client?
A: You will need to complete a loan application form that provides information on the client’s house sale (if applicable) and new property to be purchased. A monthly budget planner will need to be completed which accurately details all monthly expenditure as evidenced on the customer’s bank statements. The budget planner should also include the proposed new monthly mortgage repayment with the 1st Mortgage Lender along with the deposit loan monthly repayment. Both forms should be returned to Norton Broker Services who will process the loan application and provide a decision in principle within 24 hours.
Q: How do I know my client can afford the loan?
A: The client will need a minimum income surplus of £250 per month. By completing the income and expenditure form and obtaining an approximate unsecured loan cost from Norton Broker Services the surplus figure can be verified.
Q: Can the client instruct his own solicitor for the new house purchase?
A: No there is a fixed fee conveyancing package included within the loan product. The client can use his own solicitor if they wish to for the property being sold however, it is likely to be cheaper for the client to combine their house sale using the same solicitor firm acting on the new purchase.
Q: Can the client retain his existing property as a Buy to Let and purchase a new home?
A: Yes, however the homeowner will need to provide evidence that the property has an agreed let in place ready to start within 5 days of the customer vacating their existing property and completing on their new home purchase. If a let is not already in place prior to completion of the new property being purchased then the monthly mortgage repayment on this existing property will need to be added as a monthly commitment item on the budget planner as it is not known how long it will take to let that property. The monthly mortgage repayment as well as other costs (utilities, council tax, etc) will still have to be paid hence it will be a monthly commitment for the customer until such time as it is let.
Where a let has been pre-agreed on a minimum 12 month Assured Shorthold Tenancy (AST) agreement then a signed copy of the tenancy agreement will be required detailing the monthly rent. Any shortfall in this monthly rent against the monthly mortgage repayment will have to be reflected in the budget planner as a monthly commitment as the customer will be responsible for making up the difference from their own personal income.
Any rental surplus can be used in the income and expenditure calculation to verify a minimum total income surplus of at least £250 per month.
Q: Can a first time buyer apply for a loan?
A: Yes as long as they satisfy the lending criteria rules they can obtain a mortgage and a deposit loan up to 100% of the house purchase price. If the client is currently renting a property a satisfactory rent reference will be necessary which must show no missed rent payments.
