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Everything you need to know about Track Record Mortgages

By 26th October 2023November 8th, 2023Blog, Mortgages
White cubes showing icons of houses with percentage symbols, laid out across a blue surface

For years now, one of the most significant barriers to entry for first-time buyers in the UK is the deposit. How often are your customers forced into postponing their search for their future home in order to put away a five-figure sum for a deposit? Or how often do they reluctantly decide to repay larger monthly premiums as a way to sidestep the savings process? With the introduction of the Track Record mortgage, your customers who are currently renting a property will be able to seamlessly transition into owning a home without having to sacrifice a chunk of their savings for the deposit. The major upside of this mortgage type is that renters who are aspiring to become first-time buyers are able to focus on saving money to contribute towards paying their bills while also putting some funds away for contingency planning. If this unique mortgage solution is something that you think will add value to your proposition, then make sure you keep reading to learn all about its finer details including how it works and which lenders in the UK actually offer such a policy.

What is a Track Record Mortgage?

A Track Record mortgage is a type of mortgage that offers renters the opportunity to purchase their own homes without having to pay the deposit which would ordinarily be asked of the buyer. A guarantor is also unnecessary for this type of mortgage, making it a very accessible option for renters. In place of either a deposit or guarantor, the renter must have proof that they have managed to keep up with rental payments for at least 12 consecutive months within the last 18 months. The idea is that their ability to keep up with repayments will be demonstrated through this rather than with a deposit or guarantor, hence the mortgage is based on the applicant’s previous ‘track record’ for meeting rent commitments.

cropped view of mortgage broker holding piggy bank and moneybag isolated on white

Who is eligible for a Track Record Mortgage?

There are several criteria, in addition to providing proof of previous rental payments, that must be met to determine if a customer is eligible for a Track Record mortgage. In order for an applicant to successfully arrange this sort of mortgage, policy buyers must:

  • Be aged 21 or over
  • Have been renting a property for the previous 12 months
  • Not have owned a property in the UK or abroad in the previous 3 years
  • Not have missed debit/credit repayments within the previous 6 months
  • Not arrange a loan exceeding £600,000

How does a Track Record Mortgage work?

The prospect of purchasing a home without scrambling to save money for the deposit is sure to be one that appeals to renters across the UK, but with such stringent entry requirements it certainly won’t be suited to everyone. If you feel you have a customer who might benefit from a Track Record mortgage being arranged on their behalf it’s obviously essential that you know how such a mortgage works. Once arranged, Track Record mortgages behave similarly to a 5-year fixed rate mortgage, due to the fact the amount your customer will have to repay remains the same across the length of their deal. The maximum term of the mortgage is 35 years which is also worth making your customers aware of if for any reason they were set on a longer mortgage policy.

Track Record mortgages are made unique by the fact that deposits are waived in favour of a customer’s ability to prove to the lender that they are able to keep up with rental payments, in addition to managing any other financial commitments. Customers can still decide to save towards a deposit which can be used on a home bought with this type of mortgage to increase a buyer’s equity in the property, but the deposit cannot total any more than 5% of the overall house price.

Mortgage broker shakes hand with a customer, sample home model is placed on the desk between them

How to arrange a Track Record Mortgage

Track Record mortgages do not represent a sizeable section of the market, as you probably would expect with standard fixed-rate and variable-rate mortgages still being favoured by brokers and the UK public. This can be attributed to the particularly unique criteria needed for applicants to be eligible for such a policy, in addition to the fact that many mortgage brokers are simply unaware of its existence or its mechanics. As a result of this, there aren’t many lenders who offer this type of policy. Skipton Building Society was first in the market to introduce this type of mortgage after recognising the opportunity for turning a generation of renters into a generation of homeowners, which you can read more about here. That being said, more lenders have begun to incorporate this type of policy so you shouldn’t have much trouble arranging the ideal policy to suit your customer’s unique needs.

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