Mortgages

First Time Buyer

Struggling to find a mortgage for your first home? Buying a house is one of the most important purchases you will make and buying a home for the first time can be an even more daunting prospect. Add to this the vast array of mortgage products on the market and you could be left with a stressful and confusing decision. To help you make the right decision, we have put together some top tips for all First Timer Buyers.

  • Ensure that you are realistic when working out exactly how much you can afford to spend on your new house. You should ensure the intended mortgage is affordable (by way of a budget calculation). If interest rates are low at the time of applying you must also ensure affordability if the interest rate increases in the future. It is wise to seek a Decision in Principle confirming your affordability
  • Allow for any expenses on the property – furnishing, carpets etc. If you are buying an old house this may require extensive refurbishing and building work, ensure you factor in all these possible expenses.
  • In addition to the purchase price you will need to allow for stamp duty (if applicable) and conveyancing (solicitors) costs.
  • If you have been living at home with your parents, remember to budget for expenses such as council tax, utility bills, boiler servicing and other home repairs.
  • Even if you do not have children but are planning to in the future, remember that a property in a good school catchment area saves you moving on at a later date. Also, if you decide to up-size, properties in good catchment areas are much easier to sell on.
  • If you drive look for a property with good parking facilities or a driveway. Look at the availability of public transport such as bus and train services.
  • Write down a list of amenities that are important to you, such as shops, restaurants, pubs, sports centres and parks. Before making any final decision about where to move to, take a stroll or a drive around the area at different times of day to ensure you like the neighbourhood.
  • If you are a heavy internet user, check to see that broadband or other high speed internet connections are available in the street you are moving into. The selling agent or vendor (person selling the house) should be able to tell you this.
  • Bear in mind the distance to your work place, the cost of travelling will need to be budgeted for. Commuting can be one of the biggest household expenses.

Remortgage

When you remortgage you are switching your mortgage to another deal and in most cases to another lender.

Remortgages can be used for various reasons, however, most people simply switch their mortgage for a better deal, which will work out cheaper for them.
For example, the introductory discounted interest rate on your current mortgage may have finished and your current lender will swap you onto their standard variable interest rate. Therefore, you may switch to a new discounted rate or a lower APRC (Annual Percentage Rate of Charge) with another lender. Another example of remortgaging is when you may need to remortgage to consolidate debts, however, this may not be the best option in all cases. By consolidating debts you will pay back more over the longer term. Think carefully before securing other debts against your home.

If you remortgage whilst still in penalties with your existing lender, you will incur early repayment charges. We recommend that you do not swap your mortgage whilst in penalties.

In most cases the new lender will pay the valuation(survey) and solicitors costs. It is important that we find the best product to swap you to, without incurring costs.

Buy to Let

Having a second property as an investment could reap considerable financial rewards over time. Becoming a private landlord should not be seen as an easy way of making money. It can be risky and complicated and very time consuming. You must think carefully about becoming a private landlord.

There are 3 main differences in Buy to Let mortgages:

  1. Rent potential – the decision as to whether or not a mortgage will be offered is usually based on the rent you will earn as well as your income. In most cases the landlord's income will need to be proved.
  2. Interest Rate – Buy to Let mortgages have slightly higher interest rates
  3. Larger Deposit – typically a larger deposit is required for a Buy to Let property than a residential property.

When buying a second property to let, as a private landlord you will need to decide whether your primary objective is income or capital growth, i.e. are you looking to make profit on a monthly basis from the rent or are you looking to make a long term profit through increased equity over the years? The decision may affect the type of property you purchase and the location.

If a Buy to Let mortgage is required, it is important to know that a rental property must be suitable for renting purposes and tenants must be able to move straight into the property. If the property is derelict with no bathroom, kitchen, heating etc, this will not be deemed suitable for rental purposes and the lender will not lend on a property in this condition.

When managing a property as a landlord there are many costs involved in addition to the monthly mortgage repayments.

These additional costs include:

  • Maintenance costs for the property
  • Letting agents fees – these can be around 10% (or maybe more) of the monthly rent for finding and vetting tenants, with an additional cost of around 5%-10% if you require a full management service.
  • Ground rent/service charges – applicable to leasehold properties, i.e. flats.
  • Legal insurance – to cover costs from evicting tenants in the event of non-payment of rent, this is very important due to high expense.
  • Insurance – buildings insurance and contents insurance for any items provided as part of the tenancy agreement.
  • Furnishings – the purchase of any furniture if the property is to be let furnished.
  • Gas/electrical appliances – service cost of maintaining appliances and ensuring they comply with regulations and safety tests.
  • Decorating and upkeep costs – the property may require work ranging from painting to a new bathroom suite or kitchen, before it is suitable for letting to tenants.

Repaying The Loan

There the three main options of repaying your mortgage:

Repayment Mortgage

This works in the same way as most types of loans. You make regular monthly payments to the lender. This payment will be made up of capital (repaying the ongoing amount you have borrowed) and interest, therefore the debt will reduce over time.

Interest Only Mortgage

This is where you pay on the interest to your lender. This means that you need to make separate provisions to pay off the mortgage at the end of the term and the lender will need proof of this. However, due to changes in the mortgage market, interest only mortgages are highly restrictive and you would have to have a considerable amount of equity in order to proceed on this basis.

Part Capital & Repayment/Part Interest Only

Some lenders will allow you to combine both repayment methods and you must have a provision to pay off the interest part of the mortgage as in the interest only section above. For example you could have a £100,000 mortgage made up of £50,000 repayment and £50,000 interest only. Due to changes in the mortgage market these types of mortgages are highly restrictive and you would have to have a considerable amount of equity/deposit in order to proceed on this basis.

Your property may be repossessed if you do not keep up repayments on your mortgage.

For Mortgages you pay a fee normally £199, and we receive commission from the lender. This varies according to individual circumstances.

The FCA does not regulate some forms of buy to let mortgages.

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