MORTGAGES

Whether you're buying your first house, remortgaging, moving to a new house or investing in a buy-to-let property, we'll be able to find the right mortgage for you and assist you on your next step on the property ladder.

Our whole of market advisers will help you understand and guide you through the world of mortgages. With our knowledge, we can provide you with expert advice and identify the most competitive deal tailored to your needs. We will be able to provide you with expert tips, from how to improve your credit score, to understanding the buying process.

What is a mortgage?

A mortgage is a loan that allows you to purchase property or land if you cannot purchase a house outright i.e. solely with cash.

The mortgage is secured against your home therefore your home may be repossessed if you don’t keep up with the mortgage repayments.

Like a loan, you will need to make monthly payments. This will be over a predetermined period of time, usually referred to as the ‘term’.

How much deposit will I need?

You will need a deposit, and generally the more deposit you have, the better terms and rates you receive. The minimum deposit a lender will consider is 5% of the property purchase price, this means you will have a mortgage of 95%.

For example: A property of £200,000 will require a minimum 5% deposit of £10,000, and a mortgage of £190,000.

What types of mortgages are there?

There are two types of mortgages, repayment and Interest only.

Repayment mortgages: This involves repaying both the capital and interest together over the term. Initially the repayments are mostly interest, however as the term of the mortgage progresses, the proportion of capital repaid each month increases. The aim of this type of mortgage is your entire mortgage will be repaid at the end of the term.

Interest only mortgages: As the name would suggest, with an interest only mortgage your monthly repayments only pay the interest on the loan, and none of the capital. Whilst your repayments will be less in comparison to a repayment mortgage, at the end of the term you still owe the original amount that you borrowed. To repay this outstanding capital, you may have an investment or other asset that you will use to repay the outstanding balance.

How will my interest be set?

There are different types of interest rates, and we will work with you to determine what will suit you best. There are two main categories; fixed-rate and variable. 

Fixed-rate mortgages: The interest rate of a fixed-rate mortgage stays the same throughout the predetermined promotional period, so the borrower knows exactly how much their repayments will be every month, which is ideal for budgeting and for those that like financial stability.

Variable rate mortgages: The interest rate of variable rate mortgages can change at any time. The standard variable rate (SVR) of a lender is their “default” interest rate that borrowers go to when their promotional period ends, and this normally rises and falls in line with changes to the Bank of England base rate (although it is ultimately up to the lender how they set their SVR). There are also other variable rate “deal” products that lenders can offer, such as tracker rate mortgages (that track the BoE base rate), capped rate mortgages (that are variable but employ an upper limit on the rate of interest that can apply), and discounted rate mortgages (similar to an SVR mortgage, but with a percentage discount to the interest rate for a fixed term).

Most promotional rate mortgages (whether fixed or variable) feature early repayment charges that apply if you transfer or fully repay your mortgage before the deal period ends.

What is the process? Where do I start?

The process of applying for a mortgage can be simple or complicated, depending on individual circumstances. Our advisers can help you navigate through this process, but if you want to learn what is involved before meeting with us, we have a guide to the house buying process.

Remortgaging

When your promotional period comes to an end, remortgaging allows you to switch from the standard variable rate to a new deal, saving you money. Or, if your current mortgage does not allow for overpayments, payment holidays, etc, or if you wish to borrow more money for refurbishment or extensions, remortgaging will allow you to do this. Mortgages with a lower loan-to-value (LTV) generally have access to better mortgage deals than those with a higher LTV. Our advisers can assess whether a remortgage is right for you and can help you find the best deals available that suit you.

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.

Buy-to-Let

Buy-to-let mortgages are for those that wish to purchase an additional property and rent it out. There are different rules and features that apply to mortgages for rental properties, so expert advice is required throughout the process, both from mortgage advisers and independent financial advisers. Unlike residential mortgages, most buy-to-let mortgages are not regulated by the Financial Conduct Authority.

Generally, the fees, interest rates and minimum deposits for buy-to-let properties are usually higher. Although repayment options are available, most buy-to-let mortgages are interest only. Borrowers can expect to lend an amount linked to the rental income they are likely to receive (with rental income about 25-30% higher than the monthly mortgage payment).

There are tax implications of buying, selling and letting property. The rent a landlord receives is subject to income tax, and if they sell the property there may be capital gains tax to pay.

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.

Help to Buy

In 2013 the government introduced several Help to Buy schemes to assist people with purchasing their first property.

Help to Buy Equity Loan: This scheme is only available for first-time buyers of new build homes and can help with affordability during mortgage application and for the first five years of owning the house. Different regions of the UK have slightly different scheme criteria, but most will lend up to 20% of the cost of a new home, with the borrower contributing a 5% deposit. This means that you only need a Help to Buy mortgage of 75% of the property value. The equity loan (the 20% offered by the government) is interest-free for the first five years and you do not need to make any repayments in this period either. As the loan is for 20% of the equity, this means that if the value of the house increases or decreases, so too does the amount repayable to the government.

Help to Buy Shared Ownership: If a borrower is unable to afford the costs of buying a home, the Help to Buy Shared Ownership scheme allows them to purchase a portion of the house, normally between 25% and 75% of the property value. A deposit of at least 5% is required on the amount borrowed. As an occupier, they then pay rent on the portion they do not own. Over time they can “staircase” their ownership by buying more of the house as their affordability improves.

Help to Buy ISA: Help to Buy ISAs are individual savings accounts that are tailored towards saving for a house deposit. In addition to the money you contribute to the ISA (up to £1,000 at the start plus a maximum of £200 per month) and the investment growth/interest earned, when it comes to purchasing the property the government will add a 25% bonus to your total (up to £3,000). The Help to Buy ISA scheme will close to new savers on 30th November 2019, after which new applicants can open a Lifetime ISA, which increases the amount they can save from £200 per month to £4,000 per year. With a Lifetime ISA, the 25% bonus is paid monthly, so can benefit from compounding. For joint first time buyers, two Help to Buy or Lifetime ISAs can be used together to double the potential bonus received. Lifetime ISAs also allow you to access the bonus for properties of a higher value (£450,000 rather than £250,000 outside London) and can also be used to save for retirement.

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.

Equity Release

If you're a UK homeowner aged 55 or over, then you could release a lump sum from your property using a product known as equity release.

If you are facing a pension shortfall or simply want to enjoy your retirement by being able to afford to go on holiday, equity release could be an option for you. Equity release could allow you to tap into the money tied up in your home known as equity.

There are two types of equity release available, which are summarised below:

Lifetime Mortgage

A lifetime mortgage is a long-term loan that’s secured against your property. The amount that’s available to you will depend on your age and property value, as well as other factors like health or lifestyle. Any UK homeowner aged 55 and over may be eligible for a lifetime mortgage.

You can choose to take one lump sum of money or an initial advance of money with the remainder of the pre-approved amount as a cash facility that you can draw down as and when required.

You can choose if you want to pay the interest each month; or the interest that becomes due each month can be added to the amount you owe. This is sometimes referred to as ‘roll up’ or accumulated interest.

Lifetime mortgages may not be right for everyone. It may affect your entitlement to state benefits and will reduce the value of your estate.

We recommend that you talk to one of our professional advisers before making any decisions.

When you take out a lifetime mortgage you still own your own home. You can stay living in your home for the rest of your life or move if you wish to. Most lifetime mortgages have a no negative equity guarantee which means that you will never owe more than the value of your home. It means that you never need to be worried about passing debt on to your family.

Home Reversion Plan

Home reversion involves selling part or all of your home to a home reversion plan provider in return for a cash lump sum. This is usually higher than the sum you can raise from a lifetime mortgage. While all or part of your home will belong to someone else, you can remain living there for the rest of your life rent-free.

Home reversion plans are not loans, so there's no interest to pay. However, if your property increases in value, you will only benefit from the increase in value of the proportion you still own (if applicable).

Home reversion plans may not be right for everyone. It may affect your entitlement to state benefits and will reduce the value of your estate.

We recommend that you talk to one of our professional advisers before making any decisions.

This is a home reversion scheme. To understand the features and risks, ask for a personalised illustration

The key differences between lifetime mortgages and home reversion plans

The fundamental difference between the two forms of equity release is that when you take out a lifetime mortgage, you still own your own home. With home reversion plans, you sell a share of, or all of your home in exchange for a lump sum of money or a lifetime of regular income.

The other difference is that with a lifetime mortgage, interest is due and if you choose not to make monthly payments, the interest charges build over the years and the amount you owe increases. With home reversion plans, there is no interest building up. The price that you’re offered for the percentage of the property you’re selling is in line with how long the reversion company expects the plan to run.

Taking advice from a professional is essential when considering what type of equity release is right for you. If you have any questions about whether equity release is right for you, please contact us to book an appointment with one of our advisers. This is a lifetime mortgage/ home reversion scheme. To understand the features and risks, ask for a personalised illustration.

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