How Much Can I Really Borrow?
Whether you are a first time buyer, moving home, remortgaging for a better deal, buying to let or releasing equity, Mortgage Help Centre experienced financial advisors will help guide you through the procedure. They will also conclude how much you can afford to borrow. The real amount you are able to borrow depends upon your individual financial situation and your credit history.
What Type of Mortgage Suits You?
The major types of mortgages available are: Interest Only, Repayment and Flexible. We facilitate you to recognize the choices and the variety of mortgage product options available e.g. Discounted, Fixed or Capped, so that you conclude what best suits your needs.
Which Mortgage Deal Is Most Suitable For You?
We research the financial market available to Mortgage brokers, to make certain we get the most appropriate mortgage for you. At the same time as considering your monthly mortgage payments we also consider additional costs such as High Lending Charges, Redemption Penalties, Survey costs and Arrangement fees.
How Much Will It Cost?
As well as your monthly mortgage payments and other extra costs, we also consider other linked costs. These can include your Solicitors Fees & Stamp Duty, Valuation and Surveys: through to individual Protection and General Insurance costs. We tolerate the costs of our initial meeting for half an hour and is without commitment. If you then choose to use our services you have the option of us being paid a fee where any commissions can be credited towards the fee.
Who Will Help Me?
All of our mortgage advisors hold their Mortgage Advice Qualifications (MAQ) and offer Independent Mortgage Advice to succeed your plan.
Mortgage Types
1. Repayment MortgageYou make monthly payments to the lender over an agreed number of years (the 'mortgage term'). Your payments will gradually pay off the whole amount that you have borrowed as well as the interest.
Provided that you make all the payments that have been agreed with the lender, a repayment mortgage guarantees to repay the entire loan by the end of the term.
2. Interest Only Mortgage
With this method, you make monthly payments to the lender that cover only the interest on the loan. They do not pay off any of the amount you have borrowed.
Usually separate payments are made into a savings or investment scheme, to build up a lump sum to pay off the amount originally borrowed. It is your liability to make sure you have sufficient funds available to repay the loan at the end of its term.
As the mortgage is reliant upon an investment vehicle to repay the borrowing over the settled mortgage term, there is no assurance that the borrowing will be repaid.
3. Offset Mortgages
Off setting gives you the capability to link your mortgage to your present and/or savings accounts. Instead of receiving interest on the monies within these accounts, the interest is offset against your mortgage payments due.
The mortgage can be set up on either a Repayment or Interest Only basis (if allowed by the lender).
Products Options
FIXED RATE MORTGAGE
With a fixed rate mortgage, the interest rate is fixed for a given era, normally between two to five years. That means you know accurately what your monthly payments are during the fixed period. If you move to one more rate before the end of the fix you will normally face Early Repayment Charges.
Fixed rates can be extremely competitive, particularly in a low rate environment. However, you always face the risk that rates could fall further, leaving you on an uncompetitive rate.
VARIABLE RATE MORTGAGE
A variable-rate agreement, as distinguished from a fixed-rate agreement, is an interest rate that will fluctuate over the life of the loan. The rate is often tied to an index that reflects changes in market rates of interest. A variation in the rate causes changes in the payments. No limits are placed on the degree to which the interest rate or the payments can vary. Should rates increase, you are at risk of paying higher rates that can become a financial problem.
RE-MORTGAGE
Because of the huge choice of mortgages available on the market today lenders have been required to become more competitive by offering competitive rates.
This can be a way to raise cash and save hundreds of pounds at the same time.
DISCOUNT RATE MORTGAGE
A discount rate mortgage offers a percentage discount from the lender's normal variable rate for a set period of time.
When the standard variable rate fluctuates, the discount will remain fixed, and the rate you pay will fluctuate.
Example:
If variable rate is 5% and discount is 1%, then the pay rate will be 4%. The 1% discount will be fixed for the agreed period.
FIRST TIME BUYER MORTGAGE
As the name suggests, it is a rate directed at first time buyers. It is a way to attract first time buyers and may give them a better incentive than a normal mortgage. However, this isn’t always the case.
CAPPED RATE MORTGAGE
Capped rate mortgages use the facilities of both variable and fixed rate deals.
Over a period of time an upper limit is set- a cap - on the highest amount of interest you will pay over a particular period while allowing it to fall if the variable rate drops.
Associated Costs
Deposit: Although some lenders used to offer mortgages up to the full purchase price of a property, it is usual of the borrower to contribute some of the amount. The size of the deposit will affect the amount you need and are able to borrow as well as the cost of your loan. So the larger the deposit in relation to the loan, the better the rate available.Solicitor Fees: Charges for 'conveyancing' will depend on a number of things including the value of the property. It is advisable to get a quote from a number of solicitors for this service. The following costs are usually also payable via your solicitor:
(i) Variety of Searches including: HM Land Registry Search, Local Authority Search, Bankruptcy, Drainage and Water Search, Environmental and Chancery Search.
(ii) Land Registry: You must pay a fee to register yourself as the new owner with the central record of land ownership.
iii) Stamp Duty Land Tax*: This one-off tax payment is based on the purchase price of your home:
*Correct as at 01.06.2017
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Valuation and Surveys:For their individual advantage lenders will want to check the state and marketability of your chosen home. They will use a capable surveyor to make this assessment and provide a current valuation. This type of survey is called a 'Valuation report'. The fee is usually based on your home's value. For an extra cost you can get a more detailed 'Homebuyers report' or for much older properties or those with defects a full Structural Survey may more appropriate.
Lenders Fees: Depending on the lender and the product, additional fees may be payable. Our advisors will specify whether or not these are built-in in the mortgage application:
- Lenders Arrangement or Completion Fee
- Lenders Legal Fees
- Lenders Valuation Fees
- High Lending Fee
Mortgage Broker Fees: At Competitive Mortgages charge a minimum fee for our mortgage advice of £500. However, this is only payable where we are not remunerated to this level by the lender we suggest.
Building & Contents Insurance: The insurance of the property against fire and other risks will usually be a condition of the mortgage loan. You may also wish to insure your contents.
Personal Insurance: To ensure that in the event of death, illness, accident or unemployment you, your family and home are protected.
Shared Ownership
Shared Ownership €“ The Pros & Cons of Shared Ownership Schemes
Evaluating the advantages and disadvantages of any potential project is necessary before deciding whether to proceed. Given that a home is likely to be the most expensive thing you will ever purchase, it's very important that you carefully weigh up your options before going ahead.
The Pros - Benefits of Shared Ownership Schemes
- It helps you get that first foot on the property ladder, especially if you do not have enough deposit.
- It may enable you to buy a bigger property than you would otherwise be able to afford.
- If you are on a low income, housing associations will usually give you priority. They will typically consider what money you have coming in, as well as your housing need (i.e. whether you have children).
- Your combined monthly rent and mortgage repayment might be less than if you had bought the property outright.
- You may need little or no deposit.
- You will be exempt from paying stamp duty if the share you are buying is worth less than the lowest stamp duty threshold.
- It is an investment, allowing you to receive a share of the increase in the value of the property should you sell.
- You can build up the share of the property you own until you own it outright, thus investing in your own home rather than just paying rent.
- You save money on maintenance and redecorating as the housing association is typically responsible for the property's structure.
- It is a useful scheme for people who expect their income to increase in the future.
The Cons - Potential pitfalls of Shared Ownership Schemes
The problems you experience will largely depend on the terms of the shared ownership scheme you use, which is why you should ensure that you read terms and conditions thoroughly before going ahead. However, below are some of the more general problems that might occur:
- There may be limited or no properties available for shared ownership in your preferred area.
- You may not qualify to participate in a shared ownership scheme.
- You still have the responsibilities of a homeowner but the home does not belong to you only.
- As you do not fully own the property you may have to ask for permission from the housing association regarding redecoration or home improvement.
- Valuer’s and Solicitors fees are payable should you wish to increase your share of the property.
- There may be restrictions upon selling.
- Some Housing Associations may restrict your ability to buy further shares or may retain the right to buy back the property when you sell.
- Even if you own your home outright, you may still have to pay some service costs to the housing association.
If you wish to discuss this or any other mortgage option in greater depth please contact our mortgage advisors.
Valuation & Surveys
There are generally 3 types of Surveys
1- Basic Mortgage Valuation
All lenders require a basic valuation. They need to know that they are not lending you more than the agreed purchase price and that the property is an acceptable risk to the lender.
Although this is often referred to as a survey, it is really too superficial to merit this title. The Value arrives at a value by comparing the property with similar ones, taking factors such as age, condition and location into account. The valuation also points out any obvious major faults which could affect the property's value, but is very brief and is not nearly as detailed as a real survey.
The basic valuation is commissioned by your mortgage lender but is paid by you. It is for their benefit. If the house is valued lower than the purchase price or lower than the agreed loan to value, then the lender may decline to offer a mortgage or offer a mortgage upon the condition that specified work is carried out on it first. If it does reveal that the house is worth less than the price you have agreed to pay for it, you may be able to renegotiate the purchase price with the buyer.
The basic valuation takes up to 45 minutes, and typically costs between around £100 and £600, depending on the price of the house. Some mortgage lenders waive the fee for the basic valuation as part of a package to attract your custom.
We would only suggest this type of Survey (Valuation) where you are buying a new build property or a property built within the last 15 years which still has a building guarantee. Some individuals choose this Valuation as it is the cheapest option. However, in our opinion this is a false economy and would suggest that paying a little more for the peace of mind is well worth it.
2- RICS Homebuyers Report
In most cases this is the Survey we would recommend. The cost depends upon the value (agreed purchase price) of the property you are buying, but as an example tends to range from £500 to over £1000.
The RICS (Royal Institution of Chartered Surveyors) introduced the new RICS Homebuyer Report in July 2009. The report was quite a radical departure from earlier formats and was developed following considerable market research and feedback from the general public. It is designed to be a user-friendly report with the minimum of technical jargon. The most significant change was the introduction of colour coded Condition Ratings usually referred to as the 'Traffic Lights System'. The surveyor must rate each element of the property using one of the following Condition Ratings.
- Condition Rating 1 (green) - No repair is currently needed. The property must be maintained in the normal way.
- Condition Rating 2 (amber) - Defects that need repairing or replacing but are not considered to be either serious or urgent. The property must be maintained in the normal way.
- Condition Rating 3 (red) - Defects that are serious and/or need to be repaired, replaced or investigated urgently.
The report is now quite lengthy, usually in the region of 15 to 25 pages, but it is divided into easily readable and logical sections as follows:-
A. Introduction to the report
B. About the inspection
C. Overall opinion and summary of the condition ratings
D. About the property
E. Outside the property
F. Inside the property
G. Services
H. Grounds (including shared areas for flats)
I. Issues for your legal advisers
J. Risks
K. Valuation
L. Surveyor's declaration
The report will also include a number of appendices which provide useful information about what the purchaser needs to do next and, particularly in the case of leasehold properties, any enquiries that legal advisers need to make prior to exchange of contracts. The format also allows the surveyor to add photographs to the report.
Section C is particularly useful to the buyer as it gives an overview of the Condition Ratings for each element of the building and includes a fairly concise section giving the surveyor's overall opinion of the property. This will include a comment as to whether or not the surveyor considers the agreed purchase price to be reasonable. Normally this would be the section that most would look at first.
Section D includes a brief section related to energy efficiency and will include reference to the Energy Performance Certificate that must be prepared before a property is marketed.
Section G will give an overview of the condition of the services based on a visual inspection. However, the surveyor will not test the services. If the property is vacant the services may have been turned off or disconnected. The surveyor will generally not be able to turn services on unless the vendor is present and is able to turn them on. The surveyor will recommend further investigations if these are considered appropriate. Often it will be necessary to have the gas, electric and central heating systems tested in older properties.
Section J of the report and is used to identify risks to the building, grounds or occupants. This could cover such problems as potential flooding, the presence of asbestos based materials, an unprotected pond that could be a danger to small children or lack of safety glazing to doors.
In most cases where an issue or problem is raised by the Surveyor who has conducted the report, it maybe prudent to make further independent enquiries or have a specialist look at the issue of concern.
3- Building Survey
This is the most comprehensive and the most costly type of survey. It is suitable for any building, but is especially recommended for older buildings (75 years and upwards); those constructed out of unconventional materials such as timber or thatch; and properties which have had lots of alterations or extensions, or which you intend to alter or renovate.
The surveyor will check the property thoroughly, looking at everything that is visible or easily accessible to examine the soundness of the structure, its general condition and all major or minor faults. The report you receive will be extremely thorough and very long, as Surveyors are legally obliged to inform you of all the findings of the survey. Don't necessarily be put off if it seems that endless defects are listed, every house has some defects and surveyors tend to show the worst-case scenario for anything they discover. You should be provided with a list of prices for repairs and maintenance work, which will also tend to over- rather than under-estimate prices.
A full structural survey normally takes much longer than the one or two hours required for the homebuyer's report. The survey report can also take a long time to produce, so this is a much lengthier process than for a homebuyer's report. You will probably have to wait up to two weeks after the inspection for the report, for which there is no standardised reporting format. The cost of the Survey is typically upwards of £1,000 depending upon the value of the property you are buying