New House; New Mortgage Buying a new home can be an exciting experience. There are a number of factors to consider; Where would you like to live What is the price range, is it affordable Is it convenient for work, schools, shops, leisure What features are important, workshop, garden, parking
Historically, buying a house has been profitable over the long term. Please be aware that, as we saw in the 90's house prices can fall as well as rise. If you have to sell your home in the short term you may owe more money than you recoup from the sale of your home. 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 these are often selected from the lowest 'headline' rate. Taking professional advice from a mortgage broker will help you to make the right choice. 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, are you likely to move house or re-mortgage 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. Click on the remortgages link for more information <back to menu> Buy to Let Click on the Buy to Let link for more information Capital Raising As part of a re-mortgage you may wish to raise finance for home improvements, to consolidate debts or for another purpose. Mortgages are available for capital raising up to 90% loan to value. <back to menu> Borrowing Limits Mortgages are available for property loans of up to 90% loan to value. The larger the deposit, the better the mortgage terms available. Most building societies and banks use income multiples to calculate how much they are prepared to lend. Generally, lenders will offer between 3 and 4x's the annual basic salary of the first applicant (plus the annual salary of the second applicant if joint mortgage) or 2.5x's the combined salary if greater. the annual amount of any loans or credit agreements should be deducted from your salary before applying the multiple. Some lenders may extend these multiples. If you have a deposit and wish to borrow in excess of the criteria, complete our fact find, we may be able to help. Most lenders will allow 50% of your commission income, which can be added to your basic salary, providing that you can prove that you have received this commission in the past. If your income contains a large proportion of commission income, you may wish to consider 'self certification' mortgages. If some or all of your income derives from a source which you are unable (or unwilling) to prove, then you may wish to consider 'self certification' mortgages. 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) <back to menu> If your actual income is higher than your provable income, then there is a type of mortgage known as 'self certification' which may be worth considering. Please click on the self certification link <back to menu> If your income is currently insufficient to cover a mortgage, but you can show that this will change in the near future, then a guarantor mortgage may be available to you. A minimum deposit of 5% is required for this type of mortgage Mainly intended for students, a family member, normally the parents, would need to guarantee that the mortgage will be paid until the applicant is ready to take over the mortgage. For this to be acceptable, the guarantor would need to have sufficient income to cover both the new mortgage and any existing mortgage. A charge may be placed on the guarantors primary residence. This mortgage is not suitable for students intending to let their property to other students. A Guarantor mortgage should not be considered lightly. Legal advice should be sought by all parties, prior to entering into a mortgage. <back to menu> If you are self employed or a company director with over a 20% share of the company, your net income will be your drawings (salary) plus your share of the net profits shown on the annual accounts. If you do not file accounts, your taxable income will be that declared on your annual tax return. Some lenders will average your income over the last 2 or 3 years. If your accounts do not give a true picture of your financial situation, please see self certification For a full explanation of the self employed and the mortgage process, please visit our sister site at www.1st-mortgage-brokers.co.uk. 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. <back to menu> 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 an 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 building society interest rate is. With a interest only mortgage you hope that your invested capital will achieve a better rate of return than the building society interest rate. <back to menu> 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. <back to menu> A mortgage is agreed on the basis that the property is a good security. Lenders in general do not like lending on the following properties: Property that requires any structural work or remedial works Freehold Flats, Studio flats, Ex local authority flats, High rise flats, Flats above commercial premises (particularly food) Non standard construction, ie. timber or concrete walls. If the property you are considering falls into any of the above categories, please contact us. If you are considering buying a property at an auction. It is most important that you have a mortgage agreed before you bid for a property. On the fall of the hammer, you will be expected to pay a deposit (often 10%), with the balance paid within a short time period. Your deposit may be lost if your mortgage does not succeed within this time period. Please read carefully the terms specified by the auction provider. Please discuss with one of our advisers. <back to menu> Mortgage CostsPlease click on the mortgage costs link Insurances Insurance provides protection against unforeseen events in the future. Please click on mortgage related insurances Step by Step Guide Select and apply for the type of mortgage that suits your preferences (flexible, discounted, fixed rate etc.) 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. (Note: Some lenders will not permit you to apply without property details) House hunting. Make an offer, subject to survey and contract. Instruct the valuation. Appoint a solicitor. Arrange insurance Exchange contracts, pay deposit. Arrange removals. Move home!
How long will it take? It depends on the lender's administration and how quickly your references are returned - say 3-4 weeks from application to offer, another 2 weeks to exchange of contracts, another two weeks to completion. <back to menu> | 
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