• Mortgage

    When you buy your home, you will probably need to take out a loan – a mortgage – to pay for it. The mortgage will be secured against your home, which means if you don’t keep up your mortgage payments your mortgage provider, or lender, could sell your home to recover the money you owe. A mortgage is usually offered at a much lower interest rate than you’d find for any other type of loan.

    Remortgage

    If you change your mortgage to a new lender by remortgaging – you may find you benefit from a better mortgage rate than the one you’re currently paying. Some lenders also offer to pay the legal costs and valuation fees associated with remortgaging. The process for remortgaging your home can take around eight to twelve weeks, as the new lender will need to make similar checks to those made when you first bought your home. You may have to pay an early repayment charge to your existing lender if you remortgage. Your current lender may also charge you a ‘deed discharge fee’ when you leave your current mortgage. These are all areas your adviser will be able to explain in more detail and help you with.

  • How Much Can You Borrow?

    This depends on:
    • Your income and outgoings
    • Your credit history
    • Whether you’re able or prepared to make
    changes to your lifestyle that may reduce
    your outgoings
    • How much deposit you have.

    You will need to find out how much you can borrow before making an offer on a property. Some lenders will work out how much they’ll lend you before you find a property – this is called an approval in principle. This will help you know the maximum offer you can make on a property and will also speed up the mortgage process. Lenders usually base their calculations on your guaranteed earnings such as basic pay, but some will consider part or all of any regular overtime or bonuses. They will want to see proof of your income.

    How long will my mortgage last?
    This is known as the mortgage term. Mortgages usually have a term of between 5 to 40 years. A mortgage should normally be for the shortest term you can afford as this keeps the overall cost down. A longer than necessary term means you’ll pay more interest. It’s advisable that your mortgage term ends before you retire, as it’s unlikely your mortgage repayments will be affordable on a retirement income.

    Consolidating debts
    If you have existing debts, it may be possible for you to add these to your mortgage rather than continue with your existing repayment arrangements. This is not suitable for everyone and you’ll need to carefully consider this with your adviser. When you add loans to your mortgage, it’s important you understand the risks:
    • Adding short-term loans to your mortgage means you’ll repay them over a longer term. Unsecured loans are generally paid
    back over a shorter term than mortgage loans. While the interest rate on your mortgage may be lower than you pay on your loans, by adding them to your mortgage you’re likely to pay more over time. It may not be appropriate to consolidate small or short-term debts.
    • Your existing debts might not be secured on your property. By adding them to your mortgage they become secured on your property.

    THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER DEBT SECURED ON IT.

  • Common Mortgage Terminology & Features

    Arrears and repossession
    If at any time you’re unable to meet your mortgage payments, you should speak to your mortgage lender straight away. Repossessing a property is generally a last resort – your lender will try to reach an arrangement with you to help you to keep your home. If your lender sells your property after repossessing it, if there’s any money owed following the sale you’ll be responsible for it plus any fees associated with the sale.


    Annual Percentage Rate (APR )
    As well as telling you the interest rate on your mortgage lenders must also calculate the APR. This is the total cost of the loan,
    including interest and fees shown as a percentage rate. The APR is intended to help you compare different types of mortgages
    from different lenders. When calculating the APR, lenders assume you’ll pay the mortgage for the full term. All lenders will tell you what their APR is before you sign up with them. Generally, the lower the APR, the better the deal but this is assuming you stay on the same mortgage product throughout the term of your mortgage.


    Cash back
    With a cash back mortgage, your lender pays you a lump sum when you complete your mortgage. The cash back can be a fixed
    amount or can be worked out as a percentage of your mortgage. If you move to another lender in the early years of the mortgage,
    it’s very likely you’ll have to repay some or all of the cashback received.


    Credit scoring
    When you apply for a mortgage (or any sort of credit) the lender will usually ‘credit score’ your application. This helps the lender decide whether to accept your application, the amount of money they’re prepared to lend to you and what rate of interest you’ll pay. Credit scoring works by awarding points based on your circumstances. Each lender has their own scoring system. You’ll generally score more points if you’ve been in your job longer, own your own home and have paid all of your loans on time in the past. Having a good credit history will improve your chances of getting a good mortgage rate. You can get your individual credit report from all 3 reference agencies by registering with CheckMyFile at www.checkmyfile.com The individual agencies can be found at Experian www.experian.co.uk Equifax www.equifax.co.uk Call Credit www.callcredit.co.uk


    Early repayment charge
    This is a charge you may have to pay if you want to pay off your mortgage before the end of a set period.


    Energy performance certificates
    Energy Performance Certificates (EPCs) are required by law for all homes bought, sold or rented. They give information on how to
    make the property more energy efficient and reduce carbon dioxide emissions. They are provided by accredited domestic energy assessors. They carry out the assessment and produce the certificate.
    EPCs contain:
    • Information on your home’s energy use and carbon dioxide emissions.
    • A recommendation report with suggestions to reduce energy use and carbon dioxide emissions.
    EPCs carry ratings that compare the current energy efficiency and carbon dioxide emissions with potential figures that the
    property could achieve if energy saving measures were put in place. EPCs are valid for ten years.

    Free legals
    Some lenders offer arrangements that include the cost of completing the legal work involved in arranging a mortgage and buying a home. These arrangements vary but could reduce the amount you’ll pay at outset.


    Higher lending charge
    Lenders sometimes charge a fee if your mortgage is a high percentage of the property’s value. This fee is used by them to buy insurance to protect them if they repossess your property and sell it for less than the amount outstanding on the mortgage. You’ll still be responsible for any money owed after the sale of your property.

    Negative Equity
    If the value of your property falls below the amount you owe on your mortgage this is called ‘negative equity’. If this happens and
    you need to sell your property, you’ll still be responsible for repaying the full amount of the mortgage.

    Overpayments
    Some lenders will allow you to make overpayments on your mortgage. This is generally restricted to 10% of the outstanding
    balance. Lender rules and restrictions may differ so speak to your adviser before you decide to make any overpayments.

    Portability
    Some lenders let you move your mortgage to a new property when you move house. Underpayments and payment holidays
    Some mortgages allow you to reduce the amount you pay each month, or to stop making monthly payments, if you’ve previously overpaid. Lenders only normally allow you to make underpayments or take payment holidays for a limited time. This can be useful if your income falls or stops for a short period. In both cases you’ll be paying less than the normal monthly payment so the amount of your mortgage will increase.

    Tax and Wills
    In some circumstances you may need to think about the tax implications of buying your property. Your adviser can’t give you any
    advice about the tax implications of buying property. If you are at all unsure about this, you should get advice from a tax specialist.

    When you buy a property, we strongly recommend that you ensure your Will is up to date. This means that your assets, including
    your property, are given out in line with your wishes.

  • Valuations & Surveys

    Basic valuation report This is a basic report paid for by you, but completed by the valuer for your lender. Your lender will use this report to help them decide whether they’ll lend you the amount of money you need to buy your property.

    Homebuyer’s report This is a more detailed report that a surveyor completes for you. There’s an important difference between a basic valuation report and a homebuyer’s report. The valuation report belongs to the lender and the valuer completes the report for them. With a homebuyer’s report, the surveyor works for you and they’re responsible to you if they fail to spot things. Whilst this costs more than a basic valuation, you should consider asking for a homebuyer’s report as it will give you more information about your property. It’s particularly useful if you’re buying an older property. Your lender will normally use the homebuyer’s report to help them decide whether to lend on your property, so you won’t normally need more than one report. Your lender can arrange this.

    Building survey (previously known as a full structural survey) This is the most detailed type of survey that’s completed by a surveyor working for you. The surveyor is responsible to you if they fail to spot something. Building surveys are recommended if you’re buying: – an older property – a property that needs substantial refurbishment; or – there has been structural problems in the past.  Additional surveys or reports may be needed by your lender before they’ll make you a mortgage offer.

  • Costs Involved in Buying a Home

    Application/arrangement fees Most mortgage lenders will charge you an application or arrangement fee.

    Solicitors fees As well as paying a solicitor or licensed conveyancer for the work he or she does, you’ll have to pay land registry charges and local search fees.

    Stamp duty

    Property or lease premium or transfer valueSDLT rate
    Up to £125,000 Zero
    The next £125,000 (the portion from £125,001 to £250,000) 2%
    The next £675,000 (the portion from £250,001 to £925,000) 5%
    The next £575,000 (the portion from £925,001 to £1.5 million) 10%
    The remaining amount (the portion above £1.5 million) 12%

     

    Valuation and survey fees You may need to pay for a valuation or survey. The amount you pay will
    depend on the type of valuation or survey you choose.

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