Mortgages

Friendly and Reliable Mortgage Advice for all

First Time Buyers

Buying your first home should be exciting!

Anything unfamiliar can be worrying so it is vitally important to have reliable advice and somebody to answer your questions.

I love helping people buy their first property and would encourage clients to make lists of questions – there are bound to be lots!

Re-Mortgages

Typically, a re-mortgage transaction is appropriate when an existing mortgage rate/deal is coming to an end and a client is looking to secure a new rate of interest.

Often this is a point when people may consider reviewing the amount they are borrowing or take the opportunity to review the term of the mortgage.

Circumstances change at different stages of life, so it is always a good idea to make sure the mortgage is suitable for your current circumstances.

Moving Home

Buying your first home is exciting and moving to a subsequent property should be no less special however buying and selling simultaneously can become complex – especially if there are a number of people in your chain.

With this in mind, obtaining accurate and reliable advice is essential and good communication with the other parties involved in the transaction is key to keeping things on track.

Buy To Let

Whether you are buying a rental property or re-mortgaging an existing one, it is crucial that you secure the most cost-effective mortgage so as to make the rental property as profitable as possible.

Mortgages FAQs

First Time Buyers

How much deposit do I need?

Is has always been the case that the more deposit you have the better, however this has become even more crucial in recent months.

There is a selection of lenders able to offer mortgages at 95% of the value of a property – meaning a 5% deposit would be needed, however if you have a 10-15% deposit available you will certainly have a greater choice of lender and more attractive interest rates.

Deposits can come from savings or family gifts and even if you don’t have the full amount of deposit available now, I am always happy to look at figures and talk about affordability so that people have a plan as to how much they will need in order to achieve the property price they have in mind.

Is my credit score important?

Yes!

When considering applying for a mortgage there are certainly some “dos and don’ts” as far as credit score is concerned.

The most important advice I would give is to be honest with your mortgage adviser about anything in your credit history that you feel may be relevant when applying for a mortgage. Your credit reports generally hold information for 6 years and any adverse credit or missed payments showing on your record could have an impact on your ability to secure a mortgage.

This said, there are things that can be done to repair and improve your credit, so if you are considering a house purchase and are worried about your credit I will happily speak with you to discuss some of the things that may help to put you in a better position in readiness for applying in the future

When should I get an Agreement in Principle?

If you are considering making an Offer on a property the Estate Agent will usually want sight of an Agreement in Principle (AIP) so as to verify that you are in a financial position to proceed with the purchase.

AIPs are usually valid for between 30 and 90 days (depending on the lender) and it is important to be aware that in most cases a credit search will be performed at this stage. You don’t want to have multiple credit searches conducted as this in itself may have an adverse effect on your credit score.

There is no need to secure an AIP too early as it may expire before you find a property. I would advise getting a good understanding of what is affordable for you and also having a look at properties so you know what kind of price bracket you are considering before then applying for an AIP.

There is no cost for securing this and certainly no obligation to proceed if you have obtained a successful AIP.

Shared Ownership/Help to Buy/Equity Share – what are all these different options?

It can be confusing as there are multiple different “schemes” available.

This is all good news as there are different schemes to suit different circumstances however it can be confusing.

An ideal scenario for most people is to be able to buy a property without any other “assistance” however it doesn’t always add up, so shared ownership options or government backed schemes can help people to buy a property that may otherwise be unaffordable.

As the suitability of each option is very individual, I would always try and establish what is affordable for you first before considering whether an assisted route would be helpful,

What fees do I need to pay?

I do not charge an “up front” advice fee as I feel strongly that you need to know what options are available and how much you are likely to be able to borrow before you start having to pay fees.

I will happily do the “homework” on your behalf, working out how much you can borrow and what mortgage rates are available. I will also happily request an Agreement in Principe for you and there is no cost for doing so – and certainly no obligation to progress from there.

At full application stage I will ask for payment of my fee. I charge £399 at the point of making a full mortgage application for you.

Other fees include:

Mortgage arrangement fees – these can often be added to the mortgage and vary from one lender and product to another

Solicitors fees – again these vary from one firm to another and I would always recommend obtaining 2 or 3 quotes and getting a feel for the firm before deciding who to instruct.

Valuation/survey fee – in many cases a valuation fee will be covered by the lender, particularly for first time buyers, however the cost can vary depending on the value of the property you are buying and also depending on what level of survey/valuation you opt for.

Admin fees and bank charges – typically there will be a bank transfer fee payable of around £30 and other admin fees can vary from one lender to another.

The important point regarding fees is that you will never get any nasty surprises -  I will always set out exactly what cost are associated with individual options before you decide to proceed and the fees can be a determining factor when choosing one mortgage option over another.

How do I know how much I can borrow?

Most lenders use an affordability calculator to establish how much you can borrow. This will take into account things such as your income, your financial commitments (any loans/credit cards outstanding) whether you have any financial dependents, your credit score and the Loan to Value (LTV). (if you are borrowing 70% of the value of a property compared with borrowing 90%, the calculations are likely to be more generous).

I will ask you about your income and expenditure and will calculate how much you can borrow with a variety of different lenders.

Each lender has its own way of assessing income so understanding how your income is made up ie. Is it all basic salary? Do you have overtime or bonus? Are you self-employed or the director of your own Limited Company? These are all factors to consider when finding the right lender for you and making an accurate assessment of the amount you can borrow.

What are the different types of rates?

Historically there has been a large selection of rates however nowadays most lenders offer fixed rates or variable (usually tracker) rates.

A fixed rate of interest will stay the same for an agreed period of time. The advantage of a fixed rate is that it enables you to budget. The disadvantage is that if you have a fixed rate and interest rates go down, you could be paying more than the prevailing rate for a period of time.

A variable rate of interest can change depending on the economy and the prevailing Bank of England Base Rate. A tracker will follow, or “track” what the Base Rate is doing and can go up or down in line with the Base Rate.

What paperwork do I need?

The paperwork can vary from one application to another depending on your circumstances however in order to make a new mortgage application, these are the kind of documents an underwriter will ask for:

Identification: Current Passport or Driving Licence.

Proof of Address: Utility Bill (no more than 3 months old) or latest Council Tax Bill.

Evidence of income and expenditure:

  • Last 3 consecutive full months’ bank statements.
  • Employed Income - Last 3 months’ payslips (or last 13 weeks’ payslips).
  • Self-Employed Income - Last 2 years’ SA302s and Tax Year Overviews.
  • Pension Income - P60 / State Pension Award Letter.
  • Current Mortgage - your most recent mortgage statement.
  • Buildings and Contents Insurance Schedule (ER).
  • Most recent statements for Credit Cards / Loans / Hire Purchase etc.
  • Life Insurance / Protection documentation.
  • Evidence of Deposit - I will discuss the requirements with you.
  • Other - e.g. P60 / State Benefits Letter / Credit File.
Re-Mortgages

What is the benefit of re-mortgaging?

There is only a benefit in re-mortgaging if we are able to make your mortgage arrangements more cost effective for you. Whether you decide to move to another lender or remain with your existing lender very much depends on your financial needs at the time. Some people change lender every 2-5 years, others stay with the same lender for 30 years – the decision should be made based on what is right and most financially beneficial for you.

My current rate is ending – do I have to move to another lender?

No!

I would always ensure that we fully consider both what your existing lender is offering and what is available on the wider market. There are a number of reasons why either remaining with the same lender or moving to an alternative lender might be right for you at this particular point. My role is to assess your current circumstances, search the market for alternatives and then advise you which option is most cost effective. It may be that remaining with your existing lender is the most suitable option – the important thing is to look at all the options before deciding which route is most appropriate.

What costs are involved in re-mortgaging?

In many cases, lenders offer “fee free” re-mortgage packages where they will cover the costs of valuation and legal fees and will often not charge an arrangement fee.

When looking for the most suitable options for you, I will weigh up the costs versus the rate being offered so as to make sure we opt for the most cost-effective option. Generally speaking, if you have a relatively low balance outstanding on a mortgage it is not as cost effective to be paying high lender arrangement fees in order to secure a lower rate.

My fee is £399 and is only payable at full application.

If I arrange a “Product Transfer” with your existing lender I do not charge a fee. This is to reflect the reduced amount of administration involved in securing a rate with your existing provider.

What if my salary/circumstances have changed since I arranged my last mortgage?

If your financial picture looks very different since applying for the original mortgage it may be that remaining with your existing lender is the most appropriate course of action. Most lenders will offer an alternative rate when your current “deal” ends and in most circumstances, this can be secured without additional underwriting.

How important is LTV?

Very!

The mortgage balance, when reflected as a per centage of the valuation of your property, (the Loan to Value) is significant in determining the rate of interest applicable. It may be that reducing your balance slightly, if you are in a position to do so, may enable you to secure a more attractive rate.

This is one factor that forms part of the “homework” I conduct when establishing how I might advise you.

Moving Home

I already have a mortgage and want to move house – how does this work?

Essentially, just like when buying your first property, we need to calculate how much deposit you will have and therefore how much you need to borrow to make up the shortfall. The slightly more complicated element when you are moving is that sometimes, until you have secured a sale for your existing property, you don’t know exactly how much you are going to have available.

I will happily work through the selling and buying calculations with you so that we have a figure which is as accurate as possible. It is always helpful to slightly over estimate the cost of fees etc so as to have a little contingency in the calculations.

Can I take my current mortgage with me?

In many cases, yes, but this will very much depend on the terms and conditions of your existing mortgage and will also be determined by your personal circumstances. If your financial situation has changed since you arranged your current mortgage it might be that the lender’s criteria cannot accommodate your “new” circumstances. This is something we would consider when establishing whether it is suitable to “port” the existing mortgage (take it with you) or apply afresh to another lender.

What are ERCs and why are they relevant when moving house?

Depending on the terms of your current mortgage, it may be that there are penalties associated with repaying the mortgage mid-term. If, for example, you are in the second year a 5-year fixed rate, it would be reasonable to expect that the lender would charge an Early Repayment Charge (ERC) if you repay the mortgage before the end of the 5 years. In these circumstances it is likely that remaining with your existing lender and “porting” the rate would be most cost effective however, as is always the case, this depends on your current financial situation.

What costs do I need to allow for?

When buying and selling you will quite possibly have the following fees to consider:

  • Estate Agent’s fee for selling
  • Solicitors fee for sale
  • Valuation/survey fee for buying
  • Mortgage arrangement fees
  • Solicitors fee for buying

As with any transaction I would set out all mortgage related costs for any proposed option so that you have no nasty surprises later in the transaction.

What is “simultaneous completion”?

This is the process of selling your existing property and buying your new property on the same day. This is particularly relevant if you are “porting” an existing mortgage because it would be significant in determining whether any Early Repayment Charges need to be paid.

How do I work out what I can afford?

Calculating affordability is no different from when you bought your first property as the amount you can borrow is calculated based on your current income and expenditure.

I will ask you about your income and expenditure and will calculate how much you can borrow with a variety of different lenders.

Each lender has its own way of assessing income so understanding how your income is made up ie. Is it all basic salary? Do you have overtime or bonus? Are you self-employed or the director of your own Limited Company? These are all factors to consider when finding the right lender for you and making an accurate assessment of the amount you can borrow.

Buy To Let

Can anybody buy a property to rent out?

Most lenders require that in order to purchase a BTL property, you already own your main residence. This said, there are a few lenders who will consider lending to First Time Buyers. Most lenders also require a minimum personal income of £25,000 but, again, there are lenders who do not have this requirement. As with any mortgage, it is a case of finding the right lender for the individual circumstances.

Why would I buy a property to let?

It may be that you are looking to make a healthy monthly return or you may be planning for future growth.
Some people wish to make profit on a monthly basis while other are hoping for longer-term gain. Whichever is more important to you, it needs to work – after all, this is a business transaction.

How much can I borrow?

With the majority of lenders, 75% of the value of the property is the maximum they will lend. The borrowing available is also determined by the rental income the property would generate. This means that as a MINIMUM a 25% deposit would be required, and in some cases, depending on the rental income calculation, a larger deposit may be needed.

Is my own salary important?

Most lenders require a minimum personal income “in the background” so they can satisfy themselves that the applicant is not solely reliant on the rental income however criteria differ from one lender to another. Some providers are more flexible and do not need to verify personal income.

What are the costs?

In addition to the deposit required, in most cases there will be fees such as: Mortgage Arrangement fee; Valuation fee; Legal fees; Mortgage Advice fee; Stamp Duty. It is important to be aware that when purchasing a second property, a higher level of Stamp Duty is likely to apply.

What are the tax implications?

Rental income is treated as part of your personal income (unless the purchase is via a Limited Company). This being the case, the income will usually be taxed at your highest rate of income tax. If rental income is likely to increase your income to such a point that you fall into a higher tax bracket then it is a good idea to speak with your accountant before embarking on the purchase of a rental property to be sure that you are clear as to what the tax implications may be for your personal situation.

Can I have an Interest Only or repayment mortgage?

Yes – in most cases you can choose. Many people opt to have an Interest Only mortgage so as to profit as much as possible on a monthly basis. If, however, your focus is on longer term capital growth, rather than on regular income, you may decide to opt for a repayment mortgage.

Should I buy a rental property in my personal name or should I set up a Limited Company?

Depending on your personal situation a Limited Company may be the most suitable option. There are advantages and disadvantages of both personal ownership and Limited Company ownership and the “right” route very much depends on your personal financial situation and your plans for the future. Before deciding, I would recommend a detailed discussion with both your Accountant and Mortgage Adviser so you can fully understand the implications of each.

Should I use a management company?

This depends very much on your personal preference and your personal level of experience. There are advantages to using an agent to manage your rental property – but there are also costs involved. As a new landlord there is certainly merit in considering using a letting agent to manage your property and different levels of service/packages are available to suit your personal requirements.

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