Mortgages

What Is A Mortgage?

A mortgage is a loan which is used to purchase a property. This loan is secured on that property.

How Much Can I Borrow?

This does vary from lender to lender. The maximum loan you will ever be able to borrow is 5 times your gross annual income. For example, if you earn £20,000 per annum and have no debts at all then you could potentially borrow up to £100,000. There are certain stipulations to this but in essence that’s it. There are over 100 lenders on the market and they all differ massively so speak to an adviser to see if they can help.

Stamp Duty Land Tax(SDLT)

This is a tax which is payable when purchasing a property. It has 2 sub categories; residential rates and non-residential rates. Residential is on a property you intend to live in and non –residential is for a property you do not intend to live in.

Mortgage Fees Explained

There are many fees involved with setting up a mortgage. The typical ones are below. Any mortgage lender or adviser will give you an illustration. These fees will be explained to you before you take the new mortgage. Typical fees are as follows:

• Arrangement fee – a fee charged by the lender and not on every mortgage – in most cases can be added to the loan so not payable up front but not in every case
• Valuation fees – if you are buying a property then these are normally charged by lenders and they are payable on application. Some lenders do offer products with free valuations, but it does vary so please check

There are many other fees, but these are the two most common. Ask you adviser or contact us if you would like to know more information

Types Of Interest Rate And What’s Right For Me?

Fixed Rate

A rate which keeps your monthly payment the same for a given period of time, typically 2,3 or 5 years but longer fixed rate periods are available. These are suitable for people who want to know what they are paying every month. If interest rates increase then your monthly payment stays the same which is a bonus, however, if interest rates go down then your payment will also stay the same therefore you will not benefit.

Tracker Rate

This is a rate which goes up and down with (tracks) the Bank of England Base rate. Every month on the news you will hear the newsreader say “the Bank of England decided to keep interest rate the same today” this is what you need to keep an eye out for because if you are on a tracker rate then this could affect your monthly payment. If the BoE rate goes up then so does your monthly payment, but if the BoE base rate goes down then your monthly payment will also go down

LIBOR Rate Tracker

LIBOR stands for (London Inter-Banking Offer Rate) the rate at which banks charge each other to borrow money. This rate is reviewed every 3 months and can go up and down like the tracker or variable rate. These rates are normally associated with mortgage lenders in the “sub-prime” marketplace. These mortgage lenders normally charge higher rates and are designed to assist people who have had credit problems in the past. The rates are higher because of the higher risk in lending to someone who has a history of missing payments to their creditors.

Discounted Rate

This is a discount from the variable rate as described above. You normally qualify for a discount from the lender’s variable rate for an initial couple of years. After the discount period ends, the rate reverts to the lender’s variable rate

Offset Mortgages

Also known as an Australian mortgage – this is a brilliant concept. An Offset mortgage is a mortgage which is tied to a bank account and a savings account. If you have a £100,000 mortgage and £10,000 worth of savings then you only pay interest on £90,000 worth of mortgage. This is because your savings have been “Offset” against the balance of your mortgage. As interest on mortgages are mostly charged daily if you pay your salary through your linked bank account along with your savings you have one of 2 options in this instance to either reduce the term of your mortgage and keep the payment the same or reduce the payment and keep the term the same. Either way, depending on how much you pay through the accounts and dependent on savings, you could potentially save a great deal of money. You would not earn any interest on your savings, but you save interest on the money you owe on your mortgage, therefore if your mortgage is at a rate of 2% then you will be saving 2% per annum on that money. Savings accounts these days are below 1% normally depending on who and what savings account you have.

Tips:

After your initial rate finishes your mortgage will normally revert to a variable rate. The variable rate is higher than your initial rate in most cases so just before your initial rate finishes make sure you contact an adviser or your mortgage lender to negotiate a new deal before it increases to the lender’s variable rate.

What Is A Mortgage Broker?

A mortgage broker is a person who specialises in advising and arranging mortgages and insurances for their customers. There are a few types. Some are Independent meaning they can search the whole of the market for both and some are tied or can only offer mortgages or insurances from a range or even just one single lender. Banks and building societies can sonly offer mortgages from their own range but an independent can offer mortgages from the whole of the market, therefore, independent mortgage advisers or brokers are the best people to use.

A good broker will have a good knowledge of the whole market and offer you the cheapest rate on the market.

How Does A Mortgage Broker Work?

A mortgage broker will have an initial meeting to discuss how much mortgage you can afford, over how long, interest rate types you may be interested in (i.e. fixed rate, tracker rate etc) mortgage repayment types, and obtain a budget for you, they will then search the market or their own products and offer you the cheapest mortgage they can find based on what you told them in their initial meeting and present their research to you, if you are happy with the figures the mortgage broker has come back with, then the broker will apply for the mortgage you have discussed and agreed to apply for and they will process your mortgage application from start to finish updating you regularly every step of the way. They will contact solicitors, lenders, estate agents all for you

What To Ask Your Mortgage Broker?

You can ask a mortgage broker whatever you want. How much can I borrow? How long can I have a mortgage? Can I remortgage if I’m divorced? What will my monthly repayments be? You can ask them anything mortgage related and they will know the answer.

How Much Do Mortgage Brokers Charge?

Mortgage brokers all charge different amounts of fees. This can range from £0 (i.e. none) to any amount. Some may have a minimum fee but as I said they all differ. The brokers MUST tell you how much they charge if they are going to charge you a fee so you can decide whether to use them or not

Do All Mortgage Brokers Charge Fees?

Most mortgage brokers do charge fees. They all charge differing amounts and some even do not charge any at all.

Using A Mortgage broker According To Martin Lewis Of Money Saving Expert:

On 14th April 2006 Martin put on his website moneysavingexpert.com the following:

“The right broker is a big benefit. For better to go to a broker than direct to one lender who will simply try to flog you their own mortgage.They will look after the market and possibly bring you better negotiating power: Overall I’m a broker fan!”
Good advisers will contact their clients around 3 to 4 months before their rate is due for renewal to get their new mortgage deal in place in time. After all, you do not want to be paying the higher variable rate when your initial deal ends. Do not leave it until the last minute it can take around 6 – 8 weeks to get all the necessary paperwork sorted to re-mortgage to a new lender with a better deal, so, please do not start a couple of weeks beforehand otherwise it will not go through in time.

You should be aware that like most things in life if it’s too good to be true then sometimes it is. For example,various comparison websites may show you lists of great deals, but are they deals which you can apply for?

There may be an underlying issue which you may not think are relevant to doing the mortgage, for example, the lender may not be able to lend you as much as you need because some lend more than others, or, you may have a freehold flat with no lease which narrows the amount of lenders you can potentially use. These websites do not tell you all of the “lending criteria” of each lender,so if you do manage to apply for the mortgage and something comes up during your application which does not fit within the lenders criteria, you may have paid good money to be declined,this is why it is always best to speak with a professional.

Let’s face it, your adviser must justify to you and the FCA exactly why they have recommended the deal they have.

Another example of criteria that may hinder you in using ANY lender on the market are types of income or types of property. It is ALWAYS worth a conversation with a professional to see what deals are available to you. A professional experienced mortgage adviser will have an idea of where you can potentially obtain a mortgage within a few minutes of talking to you.Get In Touch withone of our professional and friendly advisers.It won’t cost anything to talk to someone

I do not mean to sound like the voice of doom, however, it may transpire that you apply for that mortgage and it goes through without any problem.

TIP: ALWAYS call the lender before you apply for the mortgage and part with any money to discuss all aspects of your situation to them because that way you find out up front whether your application is likely to go through or not. This is exactly what a broker will do for you