We have compiled some information about the
mortgage process. Please read as much or as little as you like
then complete our fact find with your requirements.
New Mortgage
Property ownership in the UK shows no sign of waning. About
two-thirds of homes in the UK are owner occupied.
House purchases are normally funded by taking out a mortgage.
A mortgage is one of the biggest investments you are likely
to make. On a £100,000 mortgage you are quite likely to pay
back over £200,000 to the lender. Plan your investment
carefully. Is your objective to remortgage every few years or to
keep your mortgage for the full term
Remortgage
Most people with an existing mortgage should consider
remortgaging as part of a periodic review of their finances.
Competition amongst mortgage lenders is fierce and the potential
savings significant.
Finding the right deal can be difficult given the vast number
of mortgages available. Using a mortgage broker such as
ourselves will enable you to find the best mortgage.
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Buy to Let
Click on the Buy to let link for
more information
Capital Raising
As part of a new mortgage or a re-mortgage you may wish to
raise finance for home improvements or for another purpose.
Mortgages are available for this purpose up to 95% loan to
value, please tick the appropriate box on the 'fact find'
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Borrowing Limits
If you are currently working abroad, or recently returned and
you are looking to purchase a home for living in (as opposed to
letting) you will need a minimum 10% deposit. If you have been back
in the UK for 1 year then 5% may be sufficient. The larger
the deposit, the better the mortgage terms available.
Most building societies and banks will allow a mortgage
loan of 3 to 3.5x's the annual income of the first
applicant (plus the annual salary of the second applicant if joint mortgage)
or 2.5x's the combined salary if greater. Any loans or credit
agreements should be deducted from your salary before applying
the multiple.
Some lenders are prepared to extend these multiples. If you
wish to borrow in excess of the criteria,
complete our fact find, we may be able to help.
It is important to assess whether you will be able to
afford future mortgage payments. Think about what would
happen if you or your partner were unable to work in the future
(see insurances)
Mortgage Options
There are many different mortgage options available:
Fixed Rate allows you to fix the interest rate of your loan
so that for a set period you have the reassurance of knowing
that your repayments will not alter.
A Capped Rate fixes a upper ceiling to the interest rates so
that in the event of rising interest rates you will not pay any
more than the limit set by the cap. If rates fall below the cap
then your repayments will reduce.
Fixed and Capped rate mortgages are most suitable to those
who are working to a budget and need to know that their
repayments will not exceed a set figure.
Discounted Rate mortgages allow a discount to the standard
variable interest rate for a set period.
As an incentive to attract new clients many companies now
offer a lump sum Cash back. These are obviously useful if cash
is needed at the outset, however the opening interest rates may
not be as attractive.
Flexible mortgages , also termed Australian mortgages have
become increasingly popular in recent times. They enable the
borrower to actively manage their mortgage perhaps by altering
the monthly payments or by paying off lump sums. Other options
include the facility to take payment holidays and to borrow
further amounts.
Early repayment charges: To attract new borrowers, mortgage
lenders may offer an introductory discount or some other
incentive. This will invariably cost the lender money. To
protect their investment the lender may impose early repayment
charges, should the borrower redeem their mortgage within a
specified period. These charges are likely to apply during the
first few years of a new mortgage. Schemes are available which
exclude these charges.
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Repaying the Loan
While there are many different mortgage options, there
are just two types of mortgage, interest only and
repayment (capital and interest).
With a interest only mortgage you pay the interest only to
the lender and take out a further investment alongside which you
hope will pay off the loan at the end of the term.
Mortgage lenders are fairly flexible about what investment
method is used to pay off the loan and popular choices have been
endowment policies, unit trusts and pensions.
With a repayment mortgage each payment made pays
both the interest and a small part of the capital. With
this type of mortgage your mortgage loan will be paid off at the
end of the term.
With a repayment mortgage you are using your capital to
actively reduce your debt at whatever the prevailing lenders
interest rate is.
With a interest only mortgage you hope that your invested
capital will achieve a better rate of return than the lenders
interest rate.
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Investments
The following investments have been popular choices for
people with interest only mortgages.
Endowment policies : These policies are run mainly by
insurance companies and friendly societies. They are regarded as
low to medium risk investments. The fund managers invest on the
stock market, in property and in fixed interest investments.
Policies can be unit linked or with profits. Unit linked means
that a value is calculated, usually daily which directly relates
to the value of the underlying fund. Unit prices can be followed
in the broadsheet newspapers.
A 'with profits' policy entitles you to a share in the
profits of the insurance company. Issuing companies vary their
annual bonus according to investment performance and anticipated
future investment conditions. The variance in annual bonus has
historically been small which provides a degree of security to
the policyholder. A terminal bonus is also normally declared at
the end of the term. Life assurance is included in the contract
which will pay off the mortgage in the event of death.
Unit trusts : Predominantly stock market investments where
your money is 'pooled' together with other investors in a fund
which may be managed or unmanaged (tracker). There is a risk
element to your capital as unit prices can fall as well as rise,
and a periodic review would be recommended to ensure that the
fund performance is adequate. This type of fund is quite
flexible and tax free benefits are available if taken out within
an ISA.
Pensions : If you are eligible for a personal pension, you
can opt to use part of your pension fund to clear your mortgage.
This will obviously reduce the amount that you will have
available to go towards your pension, however you will receive
full income tax relief on your contributions. This means that a
higher rate taxpayer paying £100 per month into a pension fund
will in fact only contribute £60 per month, the balance being
paid by the inland revenue. There are many different types of
pension fund available and we would be happy to advise on this
subject.
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The Market
There is a vast array of mortgages available. The deals on
offer change weekly as companies compete for business.
Newspapers and magazines regularly produce 'best buy' lists, but
do not show the total costs. Our computer programs will analyse
all cost elements, such as fees, discounts, cashbacks to arrive
at the total overall cost, for all the schemes on the market.
The Costs
At the outset you will need to have funds available to pay
for the following:
- Deposit
- Legal fees (including stamp duty). Your solicitor may have
to act for both you and the lender. Some lenders may charge
you for their legal fees.
- Valuation and survey fees
- Lenders fees, for example booking fee, arrangement fee and
mortgage indemnity premium.
With some mortgages it is possible for some of the above to
be included in the mortgage loan. Alternatively some of these
items could be funded from a cashback mortgage. If you have no
funds to put towards these costs then tick the 'add initial
charges' box in the fact find.
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Insurances
Insurance provides the protection against unforeseen events
in the future.
Some insurances are compulsory.
Buildings insurance will be required to protect against loss
or damage to your home. Cover is required from exchange of
contracts.
Home contents insurance, though not compulsory would be
recommended to protect your possessions.
Life assurance is often required by mortgage lenders and when
linked to your mortgage will clear the mortgage loan on the
death of the policyholder.
Accident, Sickness and Unemployment insurance : For most
people their mortgage payment is their largest single outgoing,
this insurance provides some protection against loss of income
due to accident , sickness and unemployment.
Critical Illness cover : Normally pays out a lump sum
on the diagnosis of a critical illness ( ie. cancer, stroke,
renal failure and heart disease).
Permanent Health insurance : Provides income protection if
the policyholder is unable to work because of accident,
disability or ill health.
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Step by Step Guide
Think about what type of mortgage you would prefer, would you
want low payments for the first two or three years, would a
cashback be useful. Complete our fact find, we will e-mail you
with a full illustration. If acceptable, the next stage is to
obtain a decision in principle from the lender, you will then
know how much you are able to borrow and you will be in a
position to make an offer.
- House hunting.
- Make an offer, subject to survey and contract.
- Contact us, we will instruct a valuation.
- Appoint a solicitor.
- Exchange contracts, pay deposit.
- Arrange removals.
- Move home!
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Your home is at risk if you do not keep up
repayments on a mortgage or other loan secured on it.
