Four BIG reasons to save for a BIGGER house deposit

1. Cheaper monthly repayments – the bigger your mortgage deposit, the smaller your loan will be. The smaller your loan is, the cheaper your monthly repayments will be.

2. Better mortgage deals – a larger deposit will also make you less risky for mortgage lenders and they’ll generally offer you lower interest rates.

3. Improved chance of being accepted – lenders calculate if you can afford the mortgage repayments. If you put down a big deposit it’s more likely you will pass as the monthly repayment will be affordable.

4. Less risk –if you own more of your home you are less likely to fall into ‘negative equity’. Being in negative equity can make moving or remortgaging very difficult.

Watch out for our “Tips for saving a deposit” blog coming soon!

Posted in First Time Buyers, Guides, Mortgages, Next Time Buyers, Remortgaging

Our A-Z of Mortgage Jargon

The language of the property industry is filled with acronyms and terms that both seasoned property owners and first time buyers may not be familiar with.  With new government schemes and lender promotions the vernacular often changes, with this guide we focus on mortgage jargon and aim to keep our clients up to date with the current terminology.

Arrangement Fee

A set-up fee. Most lenders will allow customers to add this fee to the loan, but the customer will pay interest on it for the whole term.

Arrears

This means a borrower has ‘defaulted’ at least once on their mortgage repayments, ie you have missed a month’s payment.

Capped rate

If a mortgage deal has a capped rate, the interest rate charged will never exceed the upper ‘capped’ limit, regardless of increases to the Bank of England base rate.

Cashback mortgage

The lender gives the borrower an amount of cash on completion. The cashback should be factored this into the total cost of your mortgage over the contract term to decide whether it’s a good deal.

County Court Judgement (CCJ)

These are made against a person for non-payment of debt, and could make it harder to get a mortgage.

Collar

If a mortgage deal has a collar, the interest rate will not fall any lower than the specified amount. e.g. if rates drop to 3% and your deal is collared at 4%, you’ll miss out.

Current account mortgage

A mortgage, credit card and loan debts and your current and savings account balances are combined into one. The credit balances offset the debts, so you interest is paid on the difference.

Discounted-rate mortgage

The interest rate charged is a set amount less than the mortgage lender’s standard variable rate (SVR). e.g., if the lender has an SVR of 5.5% and the discount is 1%, you will pay 4.5%.

Equity release scheme

Allows older homeowners to release cash tied up in their property. There are two types: lifetime mortgages & home-reversion. They should only be taken out after getting independent advice.

Fixed-rate mortgage

The mortgage interest rate stays the same for the initial period of the deal, can be from 1 to 10 years. Customers will know exactly what they will be paying out every month, the rate won’t change with the Bank of England base rate.

Flexible mortgage

Allows the customer to overpay, underpay or even take a payment holiday from your mortgage. This can help pay off your mortgage early and save money on interest, but flexible mortgages are usually more expensive than conventional ones.

Freehold (v Leasehold)

Freehold means a person owns the building and the land it stands on. Leasehold means a person owns the building or part of the building (flat) but not the land it stands on for a certain period of time.

Guarantor Mortgage

A home loan where a family member takes on some of the risk by acting as a guarantor. This may involve offering their home or savings as security against the loan, and agreeing to cover the mortgage payments if the homeowner defaults.

Help to buy Isa

A tax-free savings account, the government pays first time buyers a cash bonus towards the purchase of a property. For every £200 saved, the government will deposit an additional £50, up to a maximum of £3000.

Interest-only mortgage

Customers only pay the interest on your mortgage each month, without repaying any of the capital loan. The idea is that you build up enough money to be able to pay off the mortgage at the end of the term in other ways.

Joint mortgage

A mortgage taken out by two or more people. This might be used if you buy a house with a partner or friend, and can also be used by parents who want to help their children buy a property.

Land Registry

The official body responsible for maintaining details of property ownership.

Leasehold (v Freehold)

Leasehold means a person owns the building or part of the building (flat) but not the land it stands on for a certain period of time. Freehold means a person owns the building and the land it stands on.

Mortgage term

The amount of time someone takes out the mortgage out for e.g. 25 years.

Negative equity

When the value of a property falls to a level that is below the amount remaining on the mortgage.

Offset mortgage

An offset mortgage links the mortgage with savings and, sometimes, a current account. The credit balances are offset against the mortgage debt so interest is only paid on the difference, while also paying off the capital.

Peppercorn rent

A nominal amount of rent e.g. a peppercorn. In order to enforce the terms of a lease a ground rent must be set, but in the past many leases had tiny ground rents so in some cases freeholders stipulated that the rent should be a peppercorn to save them the trouble of collecting the money. 

Rebuild cost

For insurance purposes this is the cost of rebuilding a property if it is destroyed. Borrowers will be required by a lender to have buildings insurance.

Repayment vehicle

Required by lenders with an interest-only mortgage, the means by which the borrower intends to pay off the mortgage debt at the end of the term – e.g. another property, or stocks & shares portfolio.

Right to Buy scheme

Originally intended to enable tenants of council houses to buy the homes they lived in, this is now being opened up to housing association tenants too.

Service charge

The fee paid to a managing agent for the ongoing maintenance of a leasehold property.

Shared ownership

The buyer purchases a share of a property (usually between 25% and 75%) and pays rent on the remaining share, which is owned by the local housing association.

Stamp duty

Stamp duty land tax is payable when purchasing a property for more than £125,000 (or £40,000 if it’s a buy-to-let property or second home). You can calculate stamp duty by following this link https://www.tax.service.gov.uk/calculate-stamp-duty-land-tax//intro

Standard variable rate (SVR)

The default mortgage interest rate that a lender will charge after the initial mortgage deal period ends. This could be higher or lower than the original rate.

Tie-in period

This is the period during which a borrower is ‘locked in’ to a mortgage deal. To leave the mortgage during this period the borrower will have to pay an early repayment charge.

Tracker mortgage

The interest rate on a mortgage tracks the Bank of England base rate at a set margin above or below it.

Valuation survey

Lenders carry out a valuation survey to check whether the property is worth roughly the amount being paid. Buyers should have an additional survey done too, to check for structural problems.

Variable rate mortgage

The interest rate on a variable rate mortgage can go up or down according to your lender’s standard variable rate

We have attempted to be as comprehensive as possible with this guide, however if you couldn’t find a mortgage term definition please do get in touch and we will help. Limetreefs.co.uk/contact or email admin@limetreefs.co.uk

Posted in First Time Buyers, Guides, Mortgages, Next Time Buyers, Remortgaging, Uncategorized

Five tips to help secure the best mortgage for you.

As experienced mortgage brokers we’ve spoken with many people with very different financial situations. There are five things that everyone should do, regardless of how deep your pockets are, to maximise your chances at getting the best mortgage.

  1. Save the biggest deposit you can: Mortgage lenders reserve the best rates for people who can deposit the largest amount.  The loan-to-value is the proportion of the property’s value that you are borrowing. Mortgages are priced by the loan-to-value – the higher this figure is, the more expensive the mortgage will be. E.g. If you can put down a 15% deposit, instead of a 10% deposit you may be rewarded with a lower mortgage interest rate. To get the most competitive mortgage deals on the market, you will usually need a deposit of 25% upwards.
  2. Know your credit score: When you make an application for a mortgage, lenders will refer to your credit score. This is to help them decide if they think you’re a risk worth taking – as a borrower, they need to assess as a borrower you will be a responsible and reliable and likely to repay the debt. Usually, a higher score means you’re seen as lower risk – the more points you score, the more chance you have of being accepted for a mortgage, and at better rates. If you have a low credit score there are things you can do to improve it, we can advise and guide you to get your score back up to where it needs to be.
  3. Pay off unsecured debt and closed unused accounts: If you’re not using an account or credit card it is worth closing it. Lenders will look at the total amount of current and available debt and deduct any credit you have open – even if you aren’t using it.  Because you have the potential to use the credit or an overdraft facility they have to take this into account and this could reduce the amount they will lend you for your property purchase. Additionally leaving open old accounts that you aren’t monitoring could mean that you be a fraud risk, and could also mean some of your details may be out of date which can affect your credit score.
  4. Get on the electoral roll: Lenders need to identify you.  The easiest and more reliable way they can do that is by checking the electoral roll. Your mortgage application may well be refused if you are not registered on the electoral roll at your current address. This is easily remedied. Contact your Local Authority and ask for a registration form or sign up online.
  5. Be prepared with all your documents: A mortgage lender will also require further identification to prove who you are, so make sure you have a current passport and that the address on your driving licence is correct. Other documents you will need to provide include payslips and bank statements for the last three months. You will also need P60s for the last two years, and for employees who receive a bonus must provide evidence of this too. If you receive any other income, such as benefits or maintenance payments, you’ll also need documents to prove this.  If you bring these documents (or send secure copies) to your meeting it means we are armed with all the information we will need to move forward quickly with finding you the best mortgage.

We hope you found those tips useful, if you have any questions or want more information contact us directly or visit the website.

James Hammond

Managing Director

Limetree Financial Services

01223 266140

jhammond@limetreefs.co.uk

Posted in First Time Buyers, Mortgages, Next Time Buyers, Remortgaging, Uncategorized

Dispelling the “Help to Buy” Myths

Many people are confused or uncertain about the basics concepts around the government’s Help to Buy (HTB) scheme.  In our experience, HTB presents a fantastic opportunity for home buyers to take their first step or move up a rung on the housing ladder.

As mortgage brokers we are asked a lot of questions about HTB and our attitude is –  there are no silly questions about mortgages.  Buying a property is a major commitment, you should always feel confident that you know as much as you can and that you don’t have unanswered questions around finances.

Here are just a few of the common myths and questions that we often hear or asked by clients. And of course our responses, we want to help clear up any confusion you may have about HIB. 

  1. Is HTB just for first time buyers?         

Help to Buy is NOT just for first time buyers. However, there are some other restriction you must be aware of: it is exclusive to new-build properties and on completion of your purchase it must be the only property you own. 

  • I think I earn too much to qualify for HTB.         

There is no limit on income. There is a simple affordability calculator which assesses income,  property purchases can be no more than 4.5 x income up to a maximum purchase price of £600,000.

  • Is Help to Buy to stop at the end of the decade?        

No, it has been extended until 2023.  However property purchases after 2021 will only be first time buyers and for homes with a set price cap based on the region you buy in.

  • Am I only able to put a 5% deposit down on HTB?         

5% in the minimum deposit. You are able to put down a bigger deposit to qualify for potentially cheaper mortgage rates.

  • I am not a British citizen so assume I cannot use the HTB scheme.        

It doesn’t matter if you are a UK national or foreign national, as long as you have a UK Visa you can consider using the HTB scheme. 

We hope this article was useful and you feel more informed about HTB.  We aim to support home buyers as best as we can, we will be publishing a Jargon Buster aimed at First Time Home Buyers soon. In the meantime if you would like to know more about the Help to Buy scheme and how it could benefit you in your next house purchase please contact Limetree Financial Services.

Michael Taylor-Brown

Director

01223 266140

mtaylor-brown@limetreefs.co.uk

Posted in First Time Buyers, Next Time Buyers

Get Ready to Beat the Rate Hikes

Last month Mark Carney warned that a base rate increase is likely towards the end of this year or very early in 2016. Although it’s expected to be a minor increase, it’s the general trend that home owners need to prepare for – it may be worth taking steps soon to get ahead of the game.

With lenders also expected to up interest rates on mortgages, making monthly mortgage payments more expensive, it makes sense to start looking for new fixed-rate deals before banks and building societies take action.

Read more

Posted in First Time Buyers, Mortgages, Next Time Buyers, Remortgaging