Archive: MoneySavingExpert's Money Tips Email

Is now the perfect time to buy a home or remortgage with stamp duty slashed & super-cheap mortgages? Yet it's never that simple...

A few words from Martin first (written on Fri before property tax changes were announced in Scot & Wales): "The Chancellor made a huge housing intervention last week, scrapping stamp duty (in Eng & NI) for properties up to £500,000. Nine in 10 purchasers won't pay a penny, and those who do will save £15,000. Plus UK interest rates are at a 325yr historic low, so mortgage rates are seriously cheap, meaning it's easy to think this is the moment to buy.

"Yet life isn't binary. Mortgages are cheap, but you'll need good credit and affordability scores and a much bigger deposit or equity (15% with some lenders) to get one. And with a third of people struggling due to the pandemic, a UK-wide recession of unprecedented swiftness, and unemployment rocketing, that's not easy for all.

"Then we need to remember that's just one of the reasons why the Chancellor intervened. The housing market faces a period of real uncertainty, and he wants to get it moving. The fact he feels intervention is needed raises a point of caution in itself. Plus of course, as the stamp duty rise is temporary, it could cause a demand bubble.

"So what am I trying to tell you? Good question (if I say so myself). While it's almost certainly a good time to get a mortgage if you can, sadly only a crystal ball will tell you if it's a good time to buy or move.

"So ensure the financials are sound, don't overstretch yourself, pick a budget and stick to it (even if that dream home is just a little bit more, stick to your budget). Buy a home you'd be happy to stay in for longer, as that's the best insurance possible.

"I've actually taken the start of this week off, to recuperate after my TV series, so I wrote this on Friday. The team will take you through the key details (I really hope so or I'll look very silly)."

1) New. Use our updated Stamp Duty Calculator. When you buy land or a property you usually pay tax on it. While often referred to as stamp duty, that's the name in Eng & NI - it's different in Scot & Wales. In each case though, there are thresholds below which no duty is charged - and these have now been raised. Use our updated UK Stamp Duty Calculator to tell you what you'll pay and how it all works. Here are the key updates:

- Eng & NI. From last Wed (8 Jul) till 31 Mar 2021, you'll pay NO stamp duty on the first £500,000 of the purchase price of a primary home.
- Scot. From today (Wed 15 Jul) till 31 Mar 2021, you'll pay no land & buildings transaction tax on the first £250,000 of the purchase price of a primary home.
- Wales. From 27 Jul till 31 Mar 2021, you'll pay no land transaction tax on the first £250,000 of the purchase price of a primary home.

Given the way stamp duty is charged, the biggest saving is actually on pricier homes. Eg, in Eng & NI on a £600,000 home after the cut, as there's nothing to pay on the first £500,000, you just pay 5% of the amount over £500,000 - which is £5,000. Early last week, the total stamp duty in that case would've been £20,000.

What matters in Eng & NI is the date you complete the purchase, so if you've exchanged contracts already but not yet completed, you'd pay the lower (or zero) stamp duty. We're still awaiting that exact info for Scot & Wales. Our Stamp Duty Calculator has more info on that and how it works for 2nd or additional homes.

2) You'll need a bigger deposit or more equity to get the best rates. When you apply for a mortgage, lenders offer a rate based on how much you borrow as a proportion of the property value (known as loan to value - LTV for short). The lower the LTV, the better the rate - see more on how LTVs work.

Since coronavirus hit, the number of mortgage deals at higher LTVs - eg, 90-95% - has dramatically decreased. So you'll likely struggle to get a mortgage with a small deposit. According to data firm Moneyfacts, the number of 90% mortgages available has fallen since late Feb from 776 to just 70.

This means first-time buyers will have to save harder to get on to the housing ladder (see below for tips on boosting your deposit). But those looking to move or remortgage should also look at using any spare savings to help bag a better deal, as mortgages get cheaper as you pass down LTV bands, as this table shows...

3) Compare to find the cheapest deals, incl 1.09% 2yr fix. While not quite at all-time lows, rates are still seriously cheap. Yet always check what your existing lender can offer you first, as it may have lower fees. Then use our mortgage comparison tool as a benchmark to see what's out there in the wider market - here are a few examples below.

But don't take these as gospel. The key is what you'll be accepted for, as lenders' criteria are tight and not everyone qualifies for every mortgage (we've help on acceptance below).

4) It isn't just about the best deal, it's about getting accepted too. There are a couple of possible hurdles, incl:

- A rotten credit report can torpedo a home loan application. So double-check your credit file for FREE.

- Lenders must also obey strict rules to check if you can afford mortgage repayments - not just at current rates, but if they rocketed to 7-8%. They want evidence of income, bills, expenses and sometimes even eating out. So being frugal now will help.

Note that the financial impact of the pandemic could mean acceptance has already become harder for some and could get worse yet. 

5) Brokers can help find the best deal for you. It can be difficult to know which lender will accept you, which is why we suggest you use a broker. They can help cut through the complexity, particularly with the mortgage market in a state of flux, and give you access to extra deals not available to the public.

Brokers can also help if you've unusual circumstances, eg, you've more than one mortgage, you're buying an unusual property or you're self-employed. See our Top Mortgage Brokers guide.

6) First-time buyer but don't have a big enough deposit? What to try. If you're looking to claw your way on to the ladder, then you'll need to save up and save hard - especially if you want to take advantage of the temporary stamp duty cut before it expires next Apr. Try...

- Buying longer-term? Get a Lifetime ISA - and there's a trick to get a 25% boost with NO CATCH. Anyone aged 18-39 can open a LISA and get a 25% boost, worth up to £1,000/yr, on saving towards a first home that costs less than £450,000. The LISA must have been open a year to get the boost, so it's too late to do this if you're hoping to buy before the stamp duty cut ends next Apr - this is about buying longer-term. If you've already got a LISA, try to max out this year's allowance for the full bonus.

Normally, the big worry with LISAs is if you don't use it to buy a home, you must keep the money saved until you're 60, or pay a 6.25% penalty to withdraw it before. Yet right now the rules have been relaxed due to coronavirus - withdrawals are penalty-free until 5 Apr 2021. So you can open one now, and if it's not right for you, withdraw by then with no penalty. FULL explanation & info in Top Lifetime ISAs.

- Speak to family and friends for help. There's no harm in asking. Even if you can scrape 5% together yourself, if family can bump you up to 10% you'd get a better rate and more choice of mortgages.

- Ask your parents to be guarantors. Some of the few 95% deals around are 'guarantor mortgages', which take parental income into account as well as their offspring's income. This can help you get a bigger mortgage as it's worked out on a higher income - but if you can't pay it, your parents'll be on the hook.

- Apply for Govt help. There's a rapidly-closing window to get Help to Buy equity loans - that help you build a bigger deposit when buying some new-build properties - before the scheme is watered down next Apr. We're working rapidly on a revamped Help to Buy Equity Loans guide, but for now, see the Gov.uk site for more help.

7) Got a mortgage already? Get to know your current deal to help you save by remortgaging. It's wise to understand how it works to see if it's worth switching, so it's important to know:

a) What's the rate? Plus monthly payments & outstanding debt.
b) What type is it? Is it a fix, tracker, SVR etc? See fixes vs variables.
c) When's the intro deal over? Eg, when does the 2yr fix end?
d) When must it all be repaid? Eg, in 10, 20, 25yrs?
e) Will I be penalised to switch? Any early repayment/exit penalties?
f) What's the LTV? As explained above.

8) Midway through your mortgage? It could pay to ditch your fix, especially with rates so low. Use our Ditch your fix? tool to see if you can save by switching from a pricey fix. It won't work for all, as some will face exorbitant early repayment fees - but with rates so low, why not check just in case?

9) Want to remortgage and stuck on a low LTV? Speak to your lender. If you're trying to remortgage and struggling to get a deal with another lender - either because your LTV's too low or you're struggling to meet strict borrowing criteria (eg, if you're on furlough or have been made redundant), try speaking to your existing lender. It may be able to do a product transfer, eg, some offer a 95% mortgage to existing but not new custs.

Yet we need to be clear here - not all lenders will help. We've long been campaigning to help 'mortgage prisoners' - those who are trapped on expensive mortgages because they don't meet the borrowing criteria for a cheaper deal.

Sadly, the pandemic is likely to have created many more prisoners. We'll continue to highlight the problem and fight to help - but ultimately this is a problem that politicians need to fix. If you think you're affected, you can join the UK Mortgage Prisoners campaign group.

10) Can I afford it? What will it cost? We've 8 calcs to help you further. They are...

Basic Mortgage Calc | Compare Two Mortgages | Mortgage Overpay Calc | Compare Fixed Mortgages | Ditch Your Fix | Saving For Deposit | How Much Can I Borrow?

PS: Struggling to pay your mortgage? Don't panic. The first port of call is always to speak to your lender to see what help's available - including 3mth mortgage payment holidays. For other help available, see our Mortgage Arrears guide.