It’s often said that ‘necessity is the mother of invention’. Well most of the time anyway. It’s debatable whether Steve Jobs would ever have given us the iPhone if he’d waited for it to become a necessity. Apple created the product and then created the market. We didn’t know we needed one until we saw one.
According to the Government’s most recent English Housing Survey (2016/17), since 2013/14 the proportion of owner occupiers owning their properties in England outright has steadily been increasing. 14.4m (62%) of the approximately 22.8m households in England are owner occupied – 28% are mortgaged and 34% are owned outright. Mortgaged households have declined by proportion from 31% to 28% in a relatively short period and that trend looks set to continue as large numbers of baby boomers are reaching retirement age, paying off their mortgages and becoming outright owners.
That means around 7.7m households in England alone are owned outright. 7.7m households who, if they wanted to access some of the capital tied up in their homes, could now consider UTB’s newest mortgage product as a great alternative to equity release.
Equity release may be ok for some but certainly not for all, and not for those that are younger. For starters it can be quite an expensive way of borrowing and the compounding of rolled up interest means your debt can grow quickly. At 6% it will double in less than 12 years. Of course, you don’t have monthly repayments, but some potential borrowers are certainly put off by the fact that their debt increases, they can’t pay it off over the term and the debt grows more quickly the longer they live or keep their house. So, having successfully launched into the mortgage market with our range of second charge loans, we decided that our move into first charges should be similar but cater for those 7.7m people who don’t already have a mortgage.
UTB’s Mini Mortgage is designed to enable customers to access some of the capital tied up in their mortgage free property, typically at loan sizes below standard minimum mortgage amounts and for customers that don’t necessarily fit an automated underwriting process. Loan sizes range from £5,000 to £100,000 and up 75% of LTV. Repayment terms can be from 3 to 30 years and borrowers can be up to 85 years old at the end of the term. Having similar lending criteria to our second charge mortgages, there’s no minimum credit score required and interest rates available are a selection of Bank of England Base Rate lifetime trackers and 5-year fixed rates, none of which have early redemption charges.
The Mini-Mortgage gives intermediaries an extra tool in the box when talking to clients who are mortgage free. Think of it as the iMortgage. There’s a huge potential market for them, customers will love them, and now it’s time to spread the word.
This customer’s finances were back on the road in eight days UTB recently completed a £35,000 Mini-Mortgage secured against the applicant’s home. The money would enable them to purchase a new car and repay their existing credit commitments with an overall lower monthly cost.
Our applicant had realised that their car was becoming a money pit. It regularly needed repairs and the costs of keeping it on the road were not going to get any lower. With the bills coming on top of their other outgoings, finances were feeling the pinch. They decided the answer was a more reliable car, but how could they afford it?
The customer spoke with a Credit Intermediary and completed a fact find. The applicant could see that by consolidating their outstanding credit as well as the funds to purchase a new car, their outgoings would be slightly less than they were currently paying, and there would be no more repair costs. Looking for certainty in their outgoings, they also wanted to take advantage of UTB’s 5-year fixed rate product. Following a fully advised sale, releasing some of the equity in their unencumbered home was the best solution and they were keen to progress the application as quickly as possible.
The application was submitted to UTB and allocated to an underwriter. With the Credit Intermediary also an approved UTB packager they ensured that the pack included the applicant’s last two months payslips and an automated valuation report, which negated the need for an in-person inspection. Within four days of receipt of the application we were able to issue the Binding Offer. At UTB offers are accepted by returning the original Mortgage Deed, which the customer did quickly and UTB released the funds to them 48 hours later. From application to completion in eight days.
Mini-Mortgage – £35,000
Term – 10 Years (5 Year Fixed rate)