It’s arguably a great market for sellers looking to cash in on their cottages but buyers have concerns that they won't meet the eligibility criteria for the larger mortgage they might need to buy a house in the countryside in 2021.
With so many people keen to put their roots in rural retreats we’ve written this short country mortgage guide, to give advice on how to increase borrowing power and prepare for a mortgage application.
UK home movers convinced to move because of the pandemic
Earlier this year, a Royal London survey of 1,000 current and pending UK home movers revealed that 38% were persuaded to move homes because of the pandemic.
Home movers said the main features that made lockdown harder were:
small garden/outdoor areas (33%)
lack of indoor space (27%)
no outdoor space (24%)
Because of this, unsurprisingly, priority key features for a new home included:
having more indoor space (51%)
more outdoor space (46%)
more natural lighting (34%)
more space for pets (28%)
Does living in the country reduce stress?
Research suggests that chemicals released by trees and plants, called phytoncides, boost the immune system and that those living in areas with more green space have lower levels of cortisol and adrenaline, stress hormones that can lead to an increased risk of heart attacks and strokes.
In studies where participants had been exposed to phytoncides, a significant increase in the immune system was recorded. In particular they recorded an increase in natural killer cells (cells of the innate immune system).
That same research concluded that people living near trees and green spaces are less likely to be obese, inactive or dependent on antidepressants too.
Homes near nature improve creativity for professionals working from home
Self-employed artists, writers, designers and creatives can also benefit from living in the countryside and the abundance of nature.
In a 2012 study Ruth Atchley and her colleagues explored the impact of nature on higher-level tasks, such as creative problem solving.
In Atchleys’ study participants had four days of immersion in nature and disconnected from multi-media and technology. The performance of participants on a creative, problem-solving task increased by 50%.
Perhap it’s no wonder that professionals working from home want to trade in their smoggy windows with curbside views and head to Dorset, Devon or the Dales.
Adam Lock, a director of the prime and country house department at Hamptons, says:
“As a buying demographic I think they’re younger than they used to be. I see a lot of people leaving London ten years before they would have done pre-Covid.”
Find out how much you can borrow and start your search for countryside properties
Getting a mortgage in principle can help people searching for a home in the countryside look at relevant properties within their budget and confidently place offers, knowing that they have their finance secured.
Not knowing how much you can get approved for a country home mortgage slows the process down and can leave people waiting in the wings watching as another buyer bids and successfully secures their dream house.
Before this stage though, hopeful buyers need to compare mortgage lenders, find out the maximum amount they can borrow and then check their eligibility.
Countryside mortgage eligibility
There aren’t necessarily mortgage products designed specifically for countryside home purchases but certain lenders may have eligibility criteria that is easier to meet for borrowers looking for the finance needed for a typically more expensive purchase.
Of course, countryside homes don’t all reside in private estates with high market values and affordable housing can be financed with the help of a mortgage broker too.
In fact, our brokers work with New Homes companies across the UK and help first-time buyers and movers meet the eligibility criteria for a range of mortgage products and mortgage amounts.
How can I qualify for a mortgage to buy a house in the country?
Having a good credit history which indicates careful borrowing and consistent repayment, as well as saving a bigger deposit, can help some borrowers improve their affordability for mortgage products.
Importantly though, an individuals’ ability to get a particular mortgage amount is dependent on a variety of factors, each differing between lenders, including:
Type of income (self-employed vs non-self employed)
Credit history and debt-to-income ratio
Size of deposit
How many times my salary can I borrow for a mortgage?
Most lenders cap the loan-to-income ratio at 4.5 X an annual income but lenders who provide higher income multiples between 5 - 6 X an annual income can be found with specialist mortgage advice for applicants with good affordability.
For an applicant with an annual salary of £20,000, a 4.5 income multiple could allow them to borrow £90,000, whereas an income multiple of 5 could allow them to borrow £100,000.
Can I get a mortgage in the country if I’m self-employed?
Mortgage lenders will want to see proof of income from anyone applying for a mortgage and this is usually evidenced with bank statements and payslips, though self-employed borrowers can provide an SA302 to provide information about their income.
Limited Company Directors may also be eligible to purchase property in the country by means of a mortgage and additional income and assets may be included within affordability calculations in certain circumstances, with the right lender.
Can I get approved for a mortgage to buy a house in the country if I have bad credit?
When demand for a certain type of property or location soars, price tends to increase too, pricing out lots of people with credit issues who can’t get approval for larger loans.
Saving a deposit of 10-20% could also help some borrowers with bad credit access lenders who are more willing to approve them, though this can depend on the severity and the date of the bad credit incident.
Some lenders have criteria that permits them to approve a mortgage for an applicant with bad credit, if the debt has been settled or occurred a long time ago.
The Mortgage Hut brokers have helped hundreds of people get the finance they need to buy a house or flat in the country and through their informed advice, many have obtained affordable mortgages big and small, under a whole host of varying conditions - even after being bankrupt!
Can I get a countryside mortgage with a 5% deposit?
95% mortgages require the borrower to deposit 5% of their chosen properties market value and there is an increasing selection of lenders that are prepared to provide mortgages under these circumstances.
For example, if an eligible applicant wanted to buy a house in the country valued at £200,000 with a 95% mortgage, they would put down £10,000, either from savings or potentially a gifted deposit, and borrow the remaining £190,000.
5% deposit mortgages aren’t always offered exclusively to first-time buyers in need of an affordable route to homeownership, some products are open to people moving home too.
If you’re curious about your own eligibility, ask an expert to compare countryside mortgages with low deposits.
Are there Shared Ownership homes in the countryside?
Yes lots of new build developers are currently building or have already completed new affordable housing throughout the UK, including countryside and coastal locations such as Burridge, Romsey and Hamble.
Many of the homes have been built in line with the Governements’ plans of turning generation rent into generation buy and are being offered on Shared Ownership agreements.
Shared Ownership in England and Wales allows those earning less than £80,000 a year (or £90,000 in London) to purchase a share of a property with as little as a 5% deposit and pay affordable rent on the part they don’t own.
The minimum share that a person can buy at the initial purchase is due to be lowered to just 10% in 2021; it currently stands at 25%.
Further shares can be purchased in the future, with savings or a remortgage, with the majority of Shared Ownership developers allowing tenants to purchase the full share over a period of time.
Is a 95% mortgage for a house in the country a good idea?
It’s not always easy to save a chunk of money and our brokers understand this, as do a handful of lenders in the UK.
A smaller deposit can help lots of people buy a home but weighing up the pros and cons of buying a house in the country with a 5% deposit is necessary to finding the right mortgage, afterall, the agreement could span up to 40 years.
House prices may have risen 8.8% in the UK countryside but if they were to drop, many homeowners who have recently bought with a 5% deposit could end up with negative equity, which is when the borrower owes more money to the lender than their property is worth.
Having a larger deposit can help to reduce the risk of falling into negative equity as the borrower owns more of the properties value upfront.
Furthermore, lenders can charge lower rates of interest for mortgages with higher deposit requirements which can make the cost of a mortgage lower in the long run too.
Country homes are snapped up in record time
Research from Hamptons shows that the average time for a country home to sell in the first quarter of this year was just 42 days.
It is “the lowest figure for time to sell recorded in any Q1 since our records began in 2009”, says Aneisha Beveridge, the head of research at Hamptons.
“With fewer homes available to buy and demand robust, a record one in four country homes sold above their initial asking price in the first quarter of this year.”
Prepare for a countryside mortgage application
Gathering your legal documents such as your passport and drivers’ license and organising 3 months’ of your bank statements are just a couple of the tips you can find in our mortgage application guide.
It’s a 3 minute read if you’re scanning and could save you some time in the future but if you’d rather chat, we’d love to listen.
Our advisors love helping homeownership become a reality for people; call and tell them about your plans to live in the countryside and they can start the search for your ideal lender.