Finding the best mortgage for you
You'll find plenty of interesting information about mortgages here,
and you can use the following calculators to assist in your mortgage
research, but please note that these calculators are supplied for
general guidance only.
Personal or Corporate mortgages
Most of the information on this page is for individuals buying or
re-mortgaging a house for their own use or for investment purposes.
We also advise on Corporate borrowing and have expert staff available
to help you put your proposition together and to introduce you to
the best lenders for your needs.
Mortgages tailored to your needs
• Thinking about moving, or making some home improvements?
• Do you want to see how much you could save by re-mortgaging?
• Looking for more payment flexibility or to take a payment
holiday?
• Want the reassurance of a fixed rate mortgage?
• Do you plan to raise money by increasing your mortgage?
• Having difficulties obtaining a mortgage, because of County
Court Judgments, defaults, or arrears?
Your mortgage is probably the largest financial transaction and
commitment you are likely to undertake. Surely then you should seek
mortgage advice which is totally independent and individually tailored
to your needs and requirements?
We are not tied to any particular lender and use the latest computer
based sourcing program, which means that we have the ability to
act on your behalf, representing your best interests, in order to
establish the most appropriate mortgage solution for you. We also
regularly have access to exclusive products not available on the
High Street.
Gone are the days when a borrower was grateful to the lender for
providing them with a mortgage facility. In today's marketplace,
lenders are in competition with each other for your valuable business.
They are therefore willing to offer incentives to entice you. But
beware, you don't want them to ensnare you!
There are so many types of mortgage available that it is hard to
compare them all, possibly opting for the product offering the lowest
headline rate of interest. But when booking and arrangement fees,
conditional insurances, mortgage indemnity guarantee premiums, lock-ins
and early redemption penalties are taken into account, the products
may not be as attractive as you might have first thought.
Based on the information you provide in your Mortgage Information
Form (it is essential that you provide truthful and up to date information),
we will search the UK mortgage market of over 300 lenders, some
of which offer exclusive products to brokers such as ourselves,
to determine which lender will offer you the most attractive mortgage
options, suited to your particular requirements.
One of our mortgage experts will then contact you to discuss your
enquiry, source the products on your behalf, answer any queries
you may have and provide you with any further information you may
require.
Interest rate choices
One of the first things you have to decide is what type of interest rate you want. We think it is important that any early redemption penalties do not apply after the period of any reduced interest rate. This gives you complete flexibility to re-mortgage for a better deal before you go back to the lender’s standard variable rate.
Standard variable rate
Interest on variable rate mortgages moves up and down in line with
the standard variable rate set by the lender. A variable interest
rate allows you to benefit from periods of low interest, but does
not offer protection from periods of high interest. If you start
off on a reduced interest, you will normally revert to a standard
variable rate after the agreed period of time.
Fixed rate
A fixed interest rate allows you to budget for the exact monthly
cost of your mortgage over a pre defined term. Fixed rate terms
are available from one year through to twenty-five years. Normally
the lower the term chosen to fix the rate, the lower the actual
rate of interest charged. You will normally revert to a standard
variable rate after the agreed period of time.
Discounted rate
A discounted rate works in exactly the same way as a variable rate,
however during the initial period, or in some instances throughout
the lifetime of the mortgage, the lender will offer you a discount
off the standard variable rate.
Normally the lower the term chosen to enjoy the discount, the higher
the discount granted. You will normally revert to a standard variable
rate after the agreed period of time.
Base Rate Tracker
A base rate tracker works in exactly the same way as a variable
rate, however rather than paying the rate set by the lender, you
pay the base rate set by the Bank of England.
Lenders offer to link your payments to the Bank of England base
rate for a set period of time. You will normally revert to a standard
variable rate after the agreed period of time.
Capped Rate
Similar to fixed rates, a capped interest rate provides an upper
limit through which the lender cannot increase the interest rate.
However a capped rate allows you to benefit from low periods of
interest, because unlike fixed rates, a capped rate can fall if
lending institutions lower their variable interest rates below the
level of the cap set.
Again, normally the lower the term chosen to cap the interest rate,
the lower the actual upper limit or cap the lender will offer.
Deferred Interest
A deferred interest rate mortgage allows you to make lower repayments
than the actual rate of interest charged for an agreed period of
time.
The difference between what you would have paid normally and the
amount you actually paid, is then added to the capital sum of your
mortgage.
This can be a very expensive way of arranging your loan as interest
is charged on the deferred amount of interest in addition to the
original capital borrowed.
Flexible Mortgages
Also known as daily interest mortgages, a flexible mortgage allows
you to make regular or ad-hoc overpayments in addition to your normal
monthly repayment.
This provides you with the benefit of repaying your mortgage over
a shorter period of time as the actual level of interest charged
is re calculated immediately each time an overpayment is made.
In addition flexible mortgages allow you to borrow back any over
payments made at any time in the future. This can be taken back
as a lump sum or gradually by reducing your normal monthly repayment.
Offset Mortgages
Very similar to flexible mortgages but with the added benefit that
if you have money saved or in a bank account with the lender they
will offset the amount in the bank accounts from the amount of your
mortgage and only charge interest on the balance.
This tends to give a higher rate of interest on the savings but
is also very tax efficient as savings and bank account interest
is taxable whereas by paying a lower amount of interest on your
offset mortgage, you avoid that tax.
If you keep your mortgage payments at the full amount, this will
accelerate the benefit of repaying your mortgage over a shorter
period of time.
Know your mortgage
Re-mortgaging
If you have had your mortgage for a few years, you are probably
paying your lender’s “standard variable interest rate”.
You are now free to ask us to look around and see if a different
mortgage would save you money on your monthly payments. Whilst many
people take the opportunity to release some of the value in their
house by increasing their mortgage at the same time, most people
do not but simply re-mortgage to reduce their costs.
There are some costs linked to re-mortgaging, mainly solicitor,
survey and arrangement fees . However, a large number of lenders
will pay the solicitor and survey fees to attract your business.
There is no reason why you should not re-mortgage every few years
when your special introductory terms have run out. Provided there
are no early redemption penalties (see below), regularly re-mortgaging
can save you a lot of money.
Early repayment charges
Lenders often give special introductory interest rates (see “interest
rate choices” above) to attract your business. They charge
a lower interest rate than they normally would and so to allow them
to cover their costs, they want to hold on to your mortgage for
as long as they can. To discourage you from switching your mortgage
in the first few years, they charge early repayment charges (sometimes
called early redemption penalties). It is important to take these
into account when deciding how attractive an offer is. Charges payable
after the period of the special terms are generally to be avoided
as they stop you re-mortgaging again when the introductory period
is over.
Buy to let
Property can be a profitable long-term investment. Buying to let
can supply you with a regular income in the form of rent and a large
asset with the potential to increase in value. Buy to let mortgages
allow you to buy properties for investment purposes.
With a buy to let mortgage you can use the income received from
rent to help pay the mortgage repayments. Once you have paid the
mortgage in full you are left with full ownership of a property.
You can then continue to receive rental income or you could sell
up and receive a large cash lump sum. There are taxation issues
you need to consider and we can help with those. This can be an
ideal supplement to a pension as it can be used as a retirement
income by continuing to let out the property.
A buy to let mortgage is similar to a regular homeowners mortgage
but there are some differences. Always remember lending money is
based on risk assessment. A lender will consider all the risks involved
in lending you money. The advantage of a buy to let mortgage is
that the mortgage lender will consider your rental income when calculating
your ability to repay the loan. So you may be able to borrow more
money based on the fact that your income will increase after you
have secured the mortgage. This means that your potential rental
income will be a factor in the lenders risk assessment.
Buying to let is not an easy road to success, it can take careful
planning. Taking professional mortgage advice will ensure you get
the best mortgage deal for your circumstances.
Self certificate mortgage
Normally when a borrower applies for a mortgage he or she will be
asked to provide pay slips or company accounts to prove their income.
If it is difficult or extremely inconvenient for you to provide
this documentation, you can choose to self-certify your income.
This involves signing a declaration which states your income sources
and amounts. Lenders will charge you higher rates than average and
offer you a more limited range of mortgages if you choose to self-certify
your income, so it's not a good idea to self-certify just to avoid
some paperwork.
Maximum loan to value
Lenders are taking a risk when they lend you money that you will
pay the interest they charge and that you will repay the loan. To
limit their risk, they place a limit on the amount they lend relative
to the value of the property. This is normally 95% of the lower
of the purchase price or the value of the property. It is possible
to borrow up to 100% of the lower of value or purchase price but
the interest rate tends to be higher and it is mostly available
to first time buyers. For some types of mortgages such as self certificate,
the loan to value may be restricted to 85% or less.
Affordability
Lenders will take account of your income and that of your spouse or
partner when deciding the maximum amount they will lend to you. In the
past, they used to base lending limits on multiples of your income but
increasingly, they will carry out an individual affordability
assessment. They now take into account how much of your income is
committed to current outgoings and the cost of repaying the proposed
mortgage. This helps them to arrive at a loan amount based on your
individual circumstances. With today's low level of interest rates,
this tends to be a higher amount than they would lend in the past.
Please contact us for advice on how much you can borrow.
Credit scoring & adverse credit mortgages
When you apply for a mortgage, your lender will check your credit
history. If there has been an adverse history, they may refuse to
lend. However, that is not the end of the road as there are lenders
who specialise in “adverse credit mortgages”.
Adverse credit mortgages are for people who have an adverse credit
history. An adverse credit history could include:
• County Court Judgements (CCJ's)
• Mortgage or rent arrears
• Self employed - Although you can apply for a self certificate
mortgage
• Decrees (Scotland)
• Bankruptcy
• I.V.A
• Trust deeds
Mortgage lenders may also turn you down if you have changed address
many times or if you are an entrepreneur without 3 years worth of
audited accounts. Self-employed borrowers may have to apply for
a mortgage via sub prime lenders but may also apply for self-certificate
mortgages, meaning they declare their earnings without having a
set guaranteed salary.
It is estimated that one in four British people would not qualify
for a standard mortgage from a high street lender. This means they
require sub prime lenders in order to acquire a mortgage loan. Fortunately
there are many sub prime lenders across the UK an also some mainstream
lenders who consider lending to people with an adverse credit history.
Interest rates for adverse credit mortgages tend to be higher than
normal which means you may have to pay higher interest rates on
your mortgage. On the positive side you get a home to live in that
belongs to you, and if you repay your mortgage back as required
by the lender, after three years your credit history will have benefited
considerably. You would then almost certainly be able to re-mortgage
for a normal loan at lower interest rates.
Ways to repay your mortgage
There are various ways to repay your mortgage. Here is a brief outline
of the more popular repayment methods, and their advantages and
disadvantages.
REPAYMENT MORTGAGE
How does it work?
You borrow a lump sum over a fixed period of time (usually 25 years,
but it can be less). You pay the interest and some of the capital
on a monthly basis to the lender. If you have dependents, you will
normally effect a life assurance policy with critical illness insurance
included to repay the loan in the event of your death or on the
diagnosis of a critical illness.
Advantages: The only way you can be 100% certain
the loan will be repaid (provided you keep up with the repayments.)
Disadvantages: Only a small amount of capital is
paid off in the early years.
INTEREST-ONLY MORTGAGE
How does it work?
Your monthly payments represent only the interest due to the lender,
and does not include repayment of capital. Your total loan must
be repaid at the end of the mortgage term. You may therefore need
to arrange additional investments which will generate sufficient
capital to repay the loan.
Advantages: You can choose from a variety of investments,
some of which have tax advantages. Should you move or arrange a
re-mortgage, your investment can usually be reallocated to the new
mortgage.
Disadvantages: Unlike a repayment mortgage, the
amount of debt outstanding does not reduce over time, and there
is no guarantee that the investments chosen will grow sufficiently
to repay your loan. Also, investment-linked interest-only mortgages
can be slightly more expensive than repayment mortgages.
Three well known types of investment for use with interest-only
mortgages are:
Endowment Assurance
How does it work?
You make two payments per month. One to the lender to repay the
interest on the amount borrowed, the other to an insurance company
for an endowment contract. There are mainly two types of endowment:
unit linked or with profits. Both invest in a broad range of assets
including stocks and shares. The capital in the endowment builds
up over the term of the mortgage to repay the outstanding capital.
The policy will include life assurance and may also include critical
illness cover. However, endowments are not risk-free as there is
some investment in the stock market and they are not guaranteed
to repay the loan at the end of the term.
Pension Mortgage
How does it work?
You make two payments per month. One to the lender to repay the
interest on your borrowings and another into a personal pension
plan. The aim is to build up your pension fund sufficiently to repay
the loan and to provide you with a retirement income.
This has tax advantages, as the contributions you make to the pension
plan attract tax relief at the highest rate of tax you pay. However,
you must ensure your pension is well funded to ensure you have sufficient
to repay your loan and provide for your retirement. The tax free
lump sum which is paid on retirement is used to repay the mortgage
loan, but there is no guarantee that there will be sufficient funds
to do so.
Individual Savings Account (ISA)
How does it work?
You make a monthly payment to the lender to repay the interest on
the amount borrowed, and start to invest into an ISA plan. The capital
in the plan builds up over the term of the mortgage to repay the
outstanding capital. ISAs allow you to invest in cash, life assurance,
stocks and shares, and work in much the same way as the endowment
method.
Your money could grow faster within an ISA fund than an endowment
because of tax advantages and because ISAs invest most of your money
into stocks and shares. This means they can grow very quickly if
the stock market performs well. On the other hand, if there's a
stock market slump, there's a risk that you may not be able to pay
off your loan at the end of its term. ISA’s do not have any
restrictions on the ability to cash them in or stop contributions
and if they are cashed in early or contributions are stopped, there
is unlikely to be enough in them to repay your loan.
For all interest only mortgages, regular reviews should be carried
out to ensure you have sufficient funds to repay your mortgage loan
at maturity.
Your home may be repossessed if you do not
keep up repayments on your mortgage.
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