As the name would suggest, a 95% mortgage is where you are borrowing against 95% of the property price, paying the remaining 5% with your deposit. An example of this would be if you wanted to buy a property that was worth £150,000 with a 95% mortgage, your minimum deposit would be £7,500 and you would borrow the remaining £142,500 from the lender.
Following on from the March 2021 Budget, Prime Minister Boris Johnson announced a Mortgage Guarantee Scheme for mortgage lenders, something that would aim to make 95% mortgages more readily available from the high street banks.
This is very welcome news for First-Time Buyers and Home Movers, as this scheme will remain active until December 2022. Specific terms and conditions will apply, something your Mortgage Advisor in Liverpool will be able to look at with you, to see if you qualify.
All our customers who Get in Touch with us for Mortgage Advice in Liverpool, will receive a free, no-obligation mortgage consultation. Here, one of our dedicated mortgage advisors will be able to make a recommendation on the most appropriate route for you to take.
You will find that 95% mortgages are usually accessible by both First-Time Buyers in Liverpool & those who are Moving Home in Liverpool. The concept of saving for a 5% deposit sounds like a pretty straightforward plan of action, but you’ll still need to have an acceptable credit score and prove to the lender that you are able to afford your monthly mortgage repayments, before you are considered for a 95% mortgage.
You’ll need to demonstrate you have a good credit score before you’ll be accepted for any mortgage, especially a 95% mortgage. Handy tips for improving this will include paying any current credit commitments on time, ensuring your addresses are updated and checking that you’re on the voters roll. For a more detailed look at how and why you can help your credit score, please see our How to Improve Your Credit Score article.
Affordability is something else you should also consider. Providing the lender with enough details of your income and monthly outgoings (things like your bank statements will be necessary for this) and any pre-existing credit commitments will allow them to get a general overview of whether or not you are able to afford a 95% mortgage.
It’s a common occurrence these days to see lots of family members helping one another get onto the property ladder, especially with parents looking to further their children’s lives. This normally happens by a family member gifting the person looking to find their home, the deposit required to proceed. Known through the industry as the “Bank of Mum & Dad, Gifted Deposits should only be a gift, and not a loan to be paid back. The lender will need this to be agreed and proven, before it can be used towards your mortgage.
You always want to make sure you have the right type of mortgage, especially with something like a 95% mortgage. Each type works in its own way, with that choice allowing you to find one that is most appropriate for your personal and financial circumstances.
Some homeowners and buyers would rather go with a Fixed Rate or Tracker Mortgage, mortgage types which mean you either keep interest rates at a set amount or have your interest rates following the Bank of England base rates.
Alternatively, you might be more comfortable with the way Interest-Only or a Repayment Mortgages work. Interest-Only allows cheaper payments until you need to pay a lump sum once it reaches its end (mostly now used for Buy-to-Lets), whereas a Repayment mortgage (a normal mortgage if you’d like) means you’ll be paying a combination of both interest and capital per month.
You can read more about each of these mortgage types in our Different Types of Mortgages article, with informative videos for each type.
A mortgage is a hugely important financial outgoing, and as such you need to be prepared. If you aren’t prepared, you might find yourself more likely to be affected by things like higher interest rates, remortgaging difficulties due to less equity and then negative equity.
This is not something to worry about though, as these problems can be avoided if you’re smart enough with your process initially. The more deposit you put down, the less risk you’ll be to the lender.
A larger deposit would not only reduce the interest rates by a noticeable amount, but would also give the property more equity and reduce the risk of negative equity, which will be because you are borrowing less against the property.
So, whilst the risks may seem rather scary at first, planning ahead and saving for a larger deposit to access something like a 90% or even an 85% mortgage will be very beneficial in your mortgage journey and something you’ll be able to reap the rewards from in the future.
On the 3rd March 2021, we saw Chancellor Rishi Sunak present the Budget. Here we found out lots of great news regarding the property market. We also found out how Rishi Sunak plans to revitalise the mortgage market and the economy. Many people across the nation are beyond happy to hear the news announced. It seems like the end is in sight for the era of the pandemic.
In October 2020, 90% mortgages were finally reintroduced back into the market. Back then, it felt like we wouldn’t see 95% LTV mortgages for a while.
After the announcements made during Rishi Sunak’s 2021 Budget, we were very pleased to find out that 95% are finally making a comeback to the world of mortgages. Before you get excited about this though, you must remember that the name of the scheme is rather misleading to hopeful homebuyers and home movers. Whilst this is indeed good news, not everyone that applies for a house under the scheme is going to be guaranteed a mortgage.
Lenders will continue to assess your credit score as they have been, making sure that you are financially capable of affording a mortgage alongside all of the other financial commitments that you have. A mortgage lender will always try to avoid repossession, unless they genuinely have no choice. Another positive to take from the Budget though is if that happens, then the new government scheme would cover any potential shortfall.
For some time now, homeowners and lenders alike have been concerned about the potential for current home values to dip a little. This measure that has been introduced should help ease these concerns. The chances of negative equity occurring will naturally see a reduction, should we see property prices on the up again.
The Chancellor announced that both First-Time Buyers in Liverpool and Home Movers in Liverpool will have full access to and be able to utilise the 95% Mortgages scheme. This is not just a scheme for New Builds and can be used by anyone.
The new government 95% Mortgage scheme will be available from April 2021 and continue to run until December 2022. According to Chancellor Rishi Sunak, many credible and well-known lenders have already shown their support for the 95% Mortgage scheme.
As a well-known and experienced Mortgage Broker in Liverpool with many years of experience in the industry, we are glad to hear this news and are excited to see which direction the market heads in next.
We didn’t just hear about 95% mortgages making their way back into the market, as it was announced that the Stamp duty holiday has been extended until 31st June 2021.
Back in 2020 when the Stamp Duty Holiday was first presented to the nation, a lot of us didn’t think much to COVID and thought life would carry on as it always had. It would seem that things didn’t quite work out that way. Solicitors have been struggling to keep up with the pressures of their profession and if lots of chains had closed down, then it would have partly defeated the objective of trying to encourage people to undertake Moving Home journeys.
To keep the property market on its feet, and to carry on the process of home purchases, the Government have chosen to extend the current Stamp Duty Holiday. Property purchases up to £500,000 will continue to stay tax-free until 30th June 2021 and property purchases up to £250,000 will also stay tax-free until September 30th 2021.
Now that the market is rising once again and 95% mortgages are going to be making their big return, we’re hoping that this is the sign that we needed that normality is not too far ahead. Of course, it will still be a while before things will truly be normal again, but this is a good place to start for the property market. The Government certainly sees the importance of the property sector, one that can surely play a huge part in our economic recovery.
The government are really pushing for people to transition back into buying over renting, which can be seen by their introduction of the new “mortgage guarantee” scheme. Seeing this news as a dedicated Mortgage Broker in Liverpool creates optimism amongst our workforce and others involved in the sector.
We remain open and here to help with all your mortgage & protection needs. Our open & honest team of mortgage advisors in Liverpool are available from 8am – 10pm, 7 days a week, so Get in Touch and we’ll get the ball rolling on your mortgage journey.
We regularly receive questions from private tenants buying from landlords, often due to some landlords offering first refusal (the opportunity to buy before it hits the open market) to existing tenants. Even if you don’t have this privilege, it might still be an option and it is always worth asking your landlord if they would be willing to offer this to you in the event of a sale.
The government decided to crack down on tax relief previously available on Buy to Let Mortgages. The changes were brought in over a 4-year period and it is only now this has taken effect that they are starting to see the impact of these changes as they receive their tax bills.
Property has been a solid means of income and a worthy investment for landlords over the years. Some landlords opted to ride out the tax changes because they are in it for the long haul, with a lengthy career as a landlord in mind.
However, some landlords were tempted to sell up and move on. There are lots of advantages on their part to selling you the property you currently reside in, which is why many of them took that route. Here are some of those:
There are also advantages for the sitting tenants buying from Landlords in these kind of circumstances. Some are these are:
When you are at the point of being ready to make an offer on a property, it’s important that you put your circumstances across to the seller or estate agent in such a way that gives you the best chance of having your offer accepted. Whether you are a First Time Buyer or Moving Home in Liverpool, it’s always key that you know how to make an offer on a property.
A cash buyer will always have the advantage, though if you have a mortgage agreement in principle in place you will definitely be in a better position than other potential buyers who have yet to get in touch with a Mortgage Broker in Liverpool and get this sorted.
Buying a property is a negotiation process, and so if the seller rejects your initial offer you will be asked whether you want to increase your offer. So don’t be afraid to offer less in the first instance than you are willing to pay for the property you’re interested in.
If your increased offer is also rejected sometimes it just boils down to whether you are willing to pay the asking price, especially if the property in question has just been placed on the market, or whether you are prepared to walk away and find another property to live in.
As part of our dedicated mortgage advice service, we offer you a free initial mortgage consultation. So, please feel free to give us a call if you want to speak to an expert Mortgage Advisor in Liverpool. They will try their best to attend to all of your mortgage needs.
The Buy to Let market is an enigma in the world of mortgages. Constantly fluctuating, growing, and changing. At times it has lost a bit of lustre, but it always seems to pick itself up and shine brightly again.
If done correctly, Buy to Let can be a long and fruitful endeavour, leading to a comfortable and constant income with the potential for high reward. Take it from Liverpoolmoneyman’s own Buy to Let Mortgage Expert, Nathan Moore, who had this to say about the benefits of this kind of investment:
“Many landlords, who have managed to find the right property(ies) and tenant(s), have found this style of investment an enjoyable and rewarding venture. Either as a main/secondary income or for retirement.”
Nathan Moore – Buy to Let Mortgage Advisor
Liverpool is no stranger to the world of Buy to Let, with its L1 postcode being a prime location for investors and budding landlords. Liverpool as a whole is a worthy city for investment, being a prominent spot for business opportunities however part of its charm comes from it’s incredible private housing sector.
Statistically, Liverpool has one of the lowest average house prices in the United Kingdom, with an average price paid of £173,533 according to Zoopla. A lot of investors favour Buy to Let due to the low interest rates over recent years and affordable mortgage options. Coupled with the low house prices and potential for property value increase, it’s no wonder why people take this route!
Interest rates and property values are always changing and there is a chance your investment could go down and interest rates can go up. Nothing is guaranteed in the world of Buy to Let and investments always come with risks, but with enough knowledge and preparation you may be a step ahead of other budding investors.
Here we are going to look at what you need to be prepared for a Buy to Let investment.
First things first, you need to understand the market you are getting involved with. Are you familiar with exactly what a Buy to Let & Buy to Let Mortgage is? Is this the right investment for you? These are all valid questions that you need to make sure you have covered. You can read more about the workings of a Buy to Let Mortgage here.
To go over it briefly though, a Buy to Let is what it says on the tin; you buy a house and let it out. Letting is another term used for Renting, meaning you become the landlord, and someone pays you to live in your house.
To determine whether or not this type of investment is the right path for you, you would be better off speaking with a financial planner or one of our mortgage advisors in Liverpool. You may end up finding that you would benefit from a much different route, depending on affordability, credit score and other factors.
You will need to consider is the type of landlord you’d like to be. Would you be hands on, fixing repairs and dealing with your tenant direct, or will you hire the services of an estate agent to help with that? The latter may make things easier but comes with its own costs, whereas being hands on retains the most profit but also requires extra hard work on your part.
You’ll need to take a look at the area you’re interested in buying a property in. What are the property prices like in that area for the type of property you’re looking to buy? Say you’ve bought a detached house in an area and the average rental amount is around £800 per month. Do you have the same number of bedrooms or do you have less? Maybe you have a slightly bigger kitchen or living area that could add a little more value. In that case you could justify an increase to say £850 per month.
It’s also worth noting that buying a property in an area you’re unfamiliar with may benefit you more than buying in an area you know and love. That way you will only be following the average prices of that area and not valuing it based on local bias.
Thanks in part to the fact you won’t need to sell a property to buy another, you will be favoured by the Estate Agent and be seen as less risk as there isn’t a chain. Your process should go similarly to that of a First-Time Buyer, without the additional hassle that Moving Home in Liverpool can bring.
With this in mind, you should also be in a better place to negotiate on the purchase price of the property. You need to make sure you don’t overpay and that your offers are relatively low, but not too low that the seller feels completely insulted. Be reasonable but be smart.
Find out why someone is selling the property you’re interested in. Is there something wrong with it or are they just ready to move on? How long have they owned the property, and have they kept up maintenance? These are all things to consider when negotiating as any additional work required may eat into your budget, justifying a potential lower offer.
Sometimes a landlord may simply be cashing in on their capital gains, often resulting in an openness for a quick sale and lower cost if offered. Alternatively, a landlord might have a family and is wanting to move home, meaning they want a quick sale but aren’t so willing to budge on price.
Speaking of the local area, you need to really focus on the appeal of your surrounding area. You may want to invest in a property close to home, but is it a smart choice? The area you live in may be home to you but may not be a popular choice for others to live. As such, it may be worth your time looking out of your home area and somewhere with more potential.
You want to keep an eye out for things like the accessibility to that area, is it an easy commute, nearby jobs, schools or universities for families or students. All these and more will draw someone to an area, they want to know everything they need is not too far away.
With that in mind, it may be worth your time hiring an outside agent to cover you in this endeavour. As mentioned before, this can obviously provide a financial hurdle due to the costs, but this is something you may need if you’re out of the area. That way, the potential tenant will have someone local to rely on in helping with maintenance of the property when required as well as looking for tenants if someone moves out.
Renovation can often improve the value of the property you’re letting out and is something that should be added prior to searching for a tenant. Renovations can not only improve the value of your property, which in turn can allow for a higher rental amount, but also appeal to more potential tenants, especially if you allow for more space.
Another important thing to remember is that your Mortgage Advisor will want a stress test on your rental amount, to see if you are suitable for a mortgage. How this works, is say for example you were borrowing £52,000, on the basis that the interest rate is a hypothetical 5.5%, you could afford to put your monthly rent at £238.
However, the lender needs to be sure you can afford additional costs on top of what you’re already paying, so may need it to be worth 125% of this figure. This means the minimum you could put your rent is £300 per month.
One of the main things to take into account when looking at a Buy to Let, is can you afford to let it sit empty for a few months and still pay off your mortgage. At the end of the day, your lender won’t care if it’s occupied or not, they just care that you pay it back. Realistically you could be waiting 2 months or so for someone to move in, in which case you need to make sure you have the funds readily available to cover yourself, just in case.
Once you’ve worked out your rental costs, it’s time to find out what mortgage deals are available to you. A lot of the stress and hurdles can be taken away with the assistance of an experienced Mortgage Broker in Liverpool like ourselves.
We have Buy to Let Mortgage experts working here at Liverpoolmoneyman, who have a reputation for building relationships with landlords and having a large knowledge and understanding of lender criteria.
Generally, Buy to Let Mortgages are done as Interest-Only, but capital and interest is readily available also. Our dedicated mortgage advisors in Liverpool will go through your options, obtaining you an Agreement in Principle and determining whether or not you’re best suited for a tracker or fixed-rate mortgage.
Our team are available from 8am until 10pm, Monday through Sunday, to answer any Buy to Let Mortgage questions you have. Please get in touch if you require further assistance on this.
You’ll need to decide on the type of tenant you would like to occupy your property. Some opt for student accommodation or house shares, also known as Houses in Multiple Occupation. These types of rental properties can be easy to fill and can require minimal work, depending on the tenant you have. Most student tenants prefer easy living, something to keep them comfortable in between lectures and their busy schedules. As such it would be beneficial for you to keep the property furnished with very simplistic décor and plain walls.
Potential downsides to this are that it wouldn’t be a consistent income as students would be moving in and out, as well as the risk of the property requiring maintenance or care after they leave due to the often stereotyped but likely recklessness of some students.
Alternatively, if it is a family you are looking to have as tenants, you might be better leaving it with plain walls and no furnishings. This way a family can visualise what their life might look like in your property for years to come, seeing a chance to raise a family there.
You’ve got to remember to respect your tenant too, no matter which one you opt to go with. If you agree to carry out their repairs, you need to make sure you keep up with that and get them done as soon as you possibly can. This will build up a trusting relationship with your tenant, allowing for a potential for recurring tenancy over the years and a steady income.
There may come a time when you need to increase the rent to accommodate changes in interest rates. You must remember to be fair to your tenant, respecting the trust they have in you, but also being realistic and making sure you can afford to keep running the property. Make sure to keep an eye on your Rental Yield, a percentage of what you paid for the property, against the rent you’re charging and the additional money you’ve put into it per year on things like repairs.
It’s important to keep an eye on whether or not the investment is still worth it, for both yourself and the tenant. You can’t keep on with a property that makes no money, and your tenant can’t risk losing their family home either due to either repossession or someone taking over and evicting them.
We have a truly dedicated and experienced team with many years of mortgage industry work under their belt, including Buy to Let Mortgage Experts. If this is an option you are seriously looking at getting into, having a Mortgage Advisor in Liverpool will be a great benefit to you and take a lot of the stress away.
With countless customer reviews that shout about our open & honest service, you can rest assured that you will be taken care of and well informed during this important part of your Buy to Let investment process.
Please Get in Touch using our contact form or give us a call, and take advantage of our Free Initial Mortgage Consultation, offered to all who get in touch. Undertaking such a large financial commitment can be daunting, but we’ll have your back all throughout and beyond.
Gone are the days of someone leaving school at 18 and working for one employer all the way through to their eventual retirement. The rise in new engineering and digital occupations has, in particular, allowed for the popularity of self employed roles. But the uncertain nature of this type of work can make banks nervous Self Employed Mortgage Advice here.
If you are Self-Employed, it’s not impossible to get a mortgage, though it certainly is considered a specialist area. So we will take the opportunity to help you get prepared if you’re thinking of buying a house whilst working as Self-Employed.
Most lenders will only require a minimum of one year’s trading, with some lenders having stricter rules and wanting a minimum of two. The reason for this is that so many businesses fail within their first year and it’s a lot of risk that the banks aren’t willing to take.
Generally speaking, lenders will take the average of your last 2 years’ earning, however, there are some who go off the latest year. This could be very good news for you if your profits are on the increase.
This is a little trickier to answer. Technically yes, you are employed, however, unless you own less than 25% of the shares, the lender will not recognise you as an employee of the business. Most lenders add your salary to your declared dividend to calculate your annual earnings, with the occasional lender using net profit, something which can be good if your business retains some profit.
This is a question we hear regularly, but unfortunately there’s not a lot we can do. Your mortgage application is assessed on the income that has been declared (net profit or salary/dividend) to the revenue. If you want to get a mortgage then you will have to have paid at least some tax.
No matter whether you’re a self-employed applicant or a standard employed applicant, this remains the same. You will need a minimum of 5% although it may be more than that if you only have one year’s accounts.
Putting down more deposit will likely open you up to a better deal than you otherwise would’ve had to choose from, and you will have a wider choice of lenders too. That being said, it doesn’t make any difference to the amount of mortgage you would be granted to borrow.
Admittedly, leenders do seem to like contractors a little more at certain times, especially if you’ve built up a good track record. With that, the lenders can consider taking your “daily rate” and applying a multiplier to this rather than your net profit. There have been lenders in the past who have offered bigger mortgages to contractor applicants using this method, especially for IT contractors.
Unfortunately, “self-certs” were widely abused by applicants in the pre-credit crunch days and there is no sign of this type of mortgage ever returning.
Taking out a mortgage for the self employed can certainly be more complicated than it would be for an standard employee, though some lenders may be more flexible than others when it comes to this.
That’s why It’s a good idea to speak with an experienced Mortgage Broker in Liverpool early on in the process. You’ll have realistic aspirations right from the start.
Long gone are the days when your bank manager could “take a view” on your circumstances just because you are a loyal customer. The lenders lean increasingly upon their computerised credit scoring systems and like lots of things, it’s just knowing where to look.
When your initial mortgage deal reaches the end of it’s term, your mortgage lender may offer you a new deal to stay with them. This process is known as a product transfer.
Unfortunately, lenders do not always reward customers for their loyalty over the years, and the offer they make may not be as competitive as deals you could have access to if you go elsewhere. They are more likely to reward a First Time Buyer in Liverpool than they are someone looking to Remortgage in Liverpool.
Whilst the concept of swapping to a new deal with your current lender may seem like an easy process online, it is always in your interest to see what other deals you may have access to. Lenders will also try to tempt you towards a new deal without actually taking mortgage advice.
This can be really dangerous because if you undertake this process without professional mortgage advice you are waving goodbye to all the valuable consumer protection you would otherwise have benefitted from by speaking with a Mortgage Advisor in Liverpool.
We have seen many examples of customers affecting these “follow-on” deals and locking themselves into a deal that doesn’t benefit them and isn’t appropriate to their personal circumstances. Because you opted out of advice, you then give up your right to making a complaint if you don’t like something.
We had a case in the past where a customer who was pregnant did this and was declined for a small further advance to fund some necessary home improvements down the line. She then had to pay a large early repayment charge to swap to a new lender who would grant her further funding.
If we think a product transfer is the most suitable deal for you we will recommend that as a course of action for you and if we arrange the mortgage for you as a Mortgage Broker in Liverpool then all the regulation and consumer protection will apply.
A second opinion costs nothing, and making a mistake when taking a new product can be costly. We will do our best to ensure you take the right path with your mortgage.
The Remortgage Market in Liverpool is highly competitive and savings can generally be made by searching the market for a new deal.
An Agreement in Principle (also referred to as an AIP), is a piece of documentation you are given once you pass the lenders credit score. You will need one of these if you wish to qualify for a mortgage. Having an Agreement in Principle allows you to make an offer on a property you are interested in, as well as assisting when you want to negotiate on price, as it shows the seller you’re serious about your offer as a First Time Buyer in Liverpool.
The effects of an Agreement in Principle on your credit score, completely depend on whether the lender takes a hard credit search or a soft credit search. What are the differences between these? Below we’ll answer this.
Hard credit searches:
Hard searches are more in-depth than soft searches. The main difference between hard and soft searches is that hard searches leave a footprint, which can negatively affect your credit score if you fail it too many times. If you have a good credit score however, you shouldn’t need to worry going into this as a First Time Buyer in Liverpool.
Soft credit searches:
The option you’re more likely to come across these days is that a lenders soft search. These are to hard searches, what a lite phone model is to the main release, usually requiring less information and in the majority cases leaving your credit score unaffected, even in the event of not passing.
Although an Agreement in Principle can be a massive help, it doesn’t always guarantee that you will successfully obtain a mortgage. The lender will still need you to provide them with documents in order for the underwriter to make their final decision.
You can usually find small print included on Agreements in Principle that may easily be missed. We find in some cases, when customers reach out for help about their Agreement in Principle, they’ve been turned away at full mortgage application stage.
The documents you will be required to provide can include; personal ID, payslips, bank statements and things of that ilk. As your dedicated Mortgage Broker in Liverpool, we take pride in helping our customers, whether Moving Home in Liverpool or Self Employed in Liverpool, get prepared for a mortgage.
You may be able to get away with this, however, most credible estate agents will want evidence that you are able to proceed with the purchase in question.
Your Agreement in Principle will usually need renewing after around 30-90 days, though this isn’t something you should worry about. The main reason we recommend getting one so early is to avoid being told the property you’re interested in is no longer available for purchase.
Getting your Agreement in Principle sorted also means you don’t just need to jump in and buy the first house you see. It’s a fairly easy process, so if it expires, we can quite easily help you get another one.
The purpose of a mortgage agreement in principle (AIP) document is to prove that you do have a mortgage in place. To the estate agent, it proves you have good enough credit to proceed, as you have passed the lenders credit scoring system. That being said, getting a mortgage can never be guaranteed, as a full application will still require further background checks.
Now you have your mortgage agreement in principle, what do you do with it? Well, having your mortgage agreed at the outset can help you negotiate on asking price with the owner of the property. It is relatively easy to obtain and is something we can arrange for all of our clients. Almost all lenders offer an Agreement in Principle.
To proceed further with a mortgage application, you will require further background checks to cover things like evidence of income, as well as a satisfactory valuation of the property itself.
Getting one in advance can really put you in a better position for negotiating, can help you avoid disappointment and allows you to figure out your limits.
When you reach the point of being ready to make a formal offer on a new home, the majority of estate agents will undertake due diligence and ask you to prove that you can in fact afford to complete the purchase. Sufficient evidence of this include bank statements and also an agreement in principle certificate, which our team can provide for you. Once you have provided them with all this documentation, the estate agent will usually cease marketing the property and put a “sold” or “sale agreed” board up to let people know a deal is currently being processed.
If you already have a mortgage agreed before you make an offer, you are instantly more appealing to a seller as this proves you are not making this choice lightly and you’ve thought about how you’re going to afford the purchase. This might persuade a seller to accept an offer you put forward on their property that may be underneath their initial asking price.
When it comes to buying a house some customers go full steam ahead and make an offer on a property without first checking that they have the means to proceed with the purchase. This can understandably leave people feeling very disappointed if this doesn’t quite work out how they’d hoped.
By that point they may have already got their heart set on their new potential family home. By getting in touch with us early on, this disappointment can be avoided. Sometimes there are things that are causing a mortgage to decline that can be overcome over time.
For example, there may be a small issue on your credit report that is proving to be a nuisance, perhaps a disputed mobile phone bill which can be easily fixed. Maybe you thought you were on the voters roll and you’re not, something that over time can be solved. In any case, it’s better than you know ahead of time, rather than mess people about. Our team will be able to tell you what you need to do to improve your credit score for the future.
Ok, so you know you’ve got a good credit rating because you’ve never been turned down for credit, you’re registered on the voters roll and you’ve always made your credit card payments on time – so what can go wrong?
Well, you could approach 10 different lenders these days and get 10 different maximum mortgage amounts! They all calculate affordability in their own unique ways. If you’re self-employed it really is a minefield: some lenders take your net profit, others your salary and divided. Some use your latest year, others an average over 3 years.
Knowing your borrowing limits is important as then you know for sure what your price range is. We’ll be able to advise you of the maximum mortgage available to you. Also, more importantly, together we’ll work out how much you can afford to pay back each month.
At the start of your mortgage process, you will soon realise that there are many different options available. If you are First Time Buyer in Liverpool, you are probably thinking “How could there be so many different types of mortgage?”
In this article we will provide a list of the most popular types of mortgages available on the market and hopefully answer any questions you have about them.
A fixed-rate mortgage means that your mortgage payments are not going to change for the length of your term. You are able to choose the length of this yourself, with common choices being 2, 3 or 5 years or longer. Regardless of what happens to inflation, interest rates or the economy, you have the security of knowing that your mortgage, likely your biggest outgoing payment each month, will remain the same.
A tracker mortgage means that your interest rate will track the base rate set by the Bank of England. What this means is, the lender that you are with does not actually choose the rate that will be applied, and you will be paying a percentage above the Bank of England base rate. In an example, if the base rate is 1% and you are tracking at 1% above base rate, you will be paying a rate of 2%.
When you take out a repayment mortgage this means that each month you are paying back a combination of both interest and capital. Providing that you keep your payments going for the full length of the mortgage term, you are almost guaranteed to have fully paid off the mortgage by the end of your term, resulting in the property becoming solely yours.
This is probably the most risk-free way to pay your capital back to the lender. Early on into your mortgage term, it is mainly the interest that you are paying and your balance will go down at a rather slow rate, especially if you have taken out a 25, 30 or 35-year term. The benefits of this arise in the last ten years or so of your mortgage, where your payments are covering more capital than interest and the balance will go down at a much quicker pace.
Whilst many Buy to Let Mortgages are set up on an interest-only basis, it is much harder task to get a residential property on that same basis.
The likelihood for lenders to offer an interest-only product now is a lot less than it was. That being said, there are certain circumstances where this can be a viable option, including things like downsizing later on in life, or having other investments what you will use to pay the capital back. Lenders have stricter rules when it comes to offering these products now and the loan to values are a lot lower than they used to be.
With an offset mortgage, the lender will set you up a savings account to work alongside your mortgage account. How this works is that, for example, if you have a mortgage balance of £100,000 and £20,000 is deposited into your savings account, you would only be paying interest on the difference, which in this case would be £80,000. This can be a much more efficient way of managing your money, especially if you pay a higher rate of tax.