20th July 2018
Ten Things You Need To Know About A Mortgage – Part 3
The Best Mortgage For You
Under the new rules, almost all mortgages will have to be taken out with financial advice. This can be via a bank adviser who will only recommend their employer’s products or an independent broker. The broker can check out the whole of the market to find you the best rate and deal. If using your Bank’s adviser be sure to do your own research too. It is vital that the mortgage you choose is the best one for you.
Using a broker can be beneficial as they can help you through the whole application process. A broker knows what type of applicants a lender will accept. This can speed things up and means you don’t waste time with other lenders. Additionally they might have access to exclusive deals. This could help clients with a poor credit history for example or those who are self- employed.
Some brokers will not charge any upfront fees. Others might get paid from commission if you take out a mortgage with them. If you don’t take out the mortgage they recommend, and there is no obligation to do so, you should not end up paying. Other brokers will charge you for searching for products and for the application process itself.
All mortgage brokers should be listed on the FCA register – if a broker doesn’t appear there then they are not authorised to provide mortgage advice. It is worth checking!
Struggling to find a deposit?
Rising house prices, stagnant wages, low rates of interest on savings and the cost of living can make it very hard to save a deposit. This ends up being the biggest barrier many homebuyers face. Raising just a 5 per cent deposit against a £150,000 home means you will need £7,500. To get to ten per cent you will need £15,000. To reach the average first-time buyer deposit of 20 per cent you will need £30,000.
Saving that amount of money is a tall order for most people. The government is trying to alleviate this with the Help to Buy Scheme. This scheme encourages lenders to provide mortgages that require just a 5 per cent deposit from the borrower. The properties can be worth up to £600,000.
The first part of Help to Buy offers to boost small deposits for those buying a new build home. The government provides an interest-free loan of up to 20 per cent of a property’s value. The buyer must put down at least 5 per cent. The loan is interest-free for five years. After this a low rate of interest starting at 1.75 per cent and rising gradually each year is triggered.
The second part of Help to Buy offers banks and building societies a guarantee against losses on up to 20 per cent of a property’s value. This being subject to the buyer putting down at least a 5 per cent deposit on any home. Some lenders will also offer guarantor schemes where a charge is placed on a parent’s house or some savings are put aside as part of the deposit.
How To Re-Mortgage
Lenders usually offer attractive rates at the start of any deal but you do not have to stay with the same product forever. You can often get a better mortgage deal by remortgaging. You could either remortgage to a different rate from the same lender or with a new one.
Going through a remortgage is similar to getting a new mortgage. However much of the legal work should already have been done, so may not have to be repeated in such detail.There may still be valuation and mortgage arrangement fees to pay though. If you are moving to a new lender you will need a redemption statement from your current lender showing the amount currently outstanding.
Your new lender will look at how much you owe and you will then need to go through a standard mortgage application to see how much the bank or building society is willing to lend. They will also check how much you can afford to pay. If your application is approved, and as long as the value of your property is agreed the process should be seamless. The new lender then provides funds to pay off your remaining debt to the old one and you move over. Repayments are then made to the new lender at the new rate. Simple!
There will only be early re-payment charges if you opt to re-mortgage while still in a fixed rate period. We can help you work out the dates! Just drop us a line.
We hope you found our guide both interesting and informative. Mortgages can be a minefield so please don’t hesitate to ask should you have any related questions. We would be delighted to help!