Once you have gotten your home buying journey underway and saved up a suitable deposit, it’s time for the next step; Getting prepared for your mortgage!
Below we have compiled a comprehensive list of some helpful advice that first time buyers in Liverpool may find useful, in order to help you ensure that you are ‘mortgage ready’.
Prior to getting in touch with a mortgage broker in Liverpool, before anything else, you should always make sure you get an up-to-date credit report.
We would recommend that you pay off any payments that you have left outstanding, even if you’re withholding those payments due to a conflict of principles.
You’ll be in a much better place for obtaining a mortgage, due to the fact that you’ll have a lot less going against you financially. This will be appealing to a mortgage lender.
We would also definitely suggest making sure that you are on the voters roll. Though it may not seem like much, it seems to have a largely positive effect on your credit score. You should also close down old, unused credit cards, as this seems to help as well.
Your mortgage advisor in Liverpool will be able to go through your credit report early on in your mortgage journey. You’ll receive expert mortgage advice on how they feel would be the best ways to further improve your credit score.
Early on in your home buying process, you’ll be asked to provide us with some ID that has a photo on it. Usually we see that our customers will give us their driving license or passport.
Your driving license can also be used as a means of proving your address, though you are only allowed to use this for either your photo ID or your address, not for both.
This means that if you are looking to use it for photo ID, you’ll need another document to detail proof of address. Any non-UK nationals now residing in the UK will also need to show us a copy of their Visa.
You’ll also need some documents to prove to the lender where you live. We normally find that customers send in utility bills or original bank statements that are dated within the last 3 months.
Alternatively, as touched upon previously, if you are opting to use a passport for photo ID, you will be able to use your driving license as proof of address.
Your bank statements should be able to display a list of your income and regular expenditures. We would highly suggest customers refrain from any gambling on the build up to this, as the lenders can hold this against you during your mortgage application.
Also make sure that you don’t go past any overdraft limits and let any direct debits you have bounce. It’s very important that you prepare yourself in plenty of time.
You will find that most mortgage lenders will ask to see your bank statements, as they like to be absolutely certain that you are completely able to keep up your monthly mortgage repayments.
The bank statements that will needed are usually the ones that will be documenting bills going in and out of your bank account.
As a first time buyer in Liverpool, you will have to be able to prove to the mortgage lender that you definitely have the means to afford an initial deposit, maintain your payments and be able to evidence that you can do this for anti-money laundering purposes.
Audit trails can be a little difficult to prove, especially if the money has been moved between accounts quite a bit. With this in mind we would highly recommend that this is kept to an absolute minimum.
Lenders would much rather prefer to see you building up your savings over time, so if you have any large amounts going in, make sure you are able to account for those with receipts to evidence the trail.
Nowadays, we find that a lot of times our customers deposits are actually gifted by family members and are the most popular choice for first time buyers in Liverpool to take that primary step onto the property ladder and into the mortgage world.
Gifted deposits will always need to be evidenced , with the “donor” (person who gifted you the deposit) being required to sign a letter confirming it’s not a loan that they are expecting you to pay back.
The thing you should always put a focus on when it comes to mortgage affordability is being able to prove to the lender where your income comes from.
If you’re a regularly employed applicant then this will generally come from your last 3 months of payslips, with a portion of mortgage lenders out there needing to see your most recent P60.
Lenders may also bear in mind any regular overtime, shift allowance, bonuses and commission that you have. If you have more than one employer (perhaps you are working a part-time job or are self employed with contracts in place), lenders will sometimes accept earnings from those as well.
We find that a large amount applicants who are self employed tend to call up seeking mortgage advice in Liverpool. If you are self employed in Liverpool and looking to apply for a mortgage, you will need help from your accountant to request your last 2-3 years’ proof of earnings from the revenue.
Our trusted and experienced mortgage advisors in Liverpool are able to have a discussion with you, instructing on how to navigate the online government gateway portal if required to do so.
It’s always within your best interests to do your homework ahead of time and write down an estimate of what you think your outgoings could possibly be once you have moved out of your current home and are living in your new home.
This will help you work out costs such as council tax and utility bills, as well as anything you regularly spend your money on, such as your food and drinks shop.
It will also help to give you a generalised estimate of how much disposable income you’ll have available in order to pay your monthly mortgage payments. Prior to our initial appointment, we’ll send you a copy of our budget planner, which hopefully will be able to help you out with your preparations.
As you can see from all of the points we have mentioned in this article, getting prepared for a mortgage can be quite complicated, although with the help of a dedicated mortgage advice team in Liverpool, you’ll still be readily prepared to move forward with your mortgage journey.
Putting in the effort from the start, staying patient and being careful will hopefully increase the likelihood of you walking out of the mortgage process with your dream property to show for it.
If you’re heading towards the culmination of your mortgage term and have opted to remain within your current property, as opposed to moving, then you should definitely start looking at your options for a potential remortgage in Liverpool.
For those who are unsure of what remortgages are, this is where you switch to a better rate on your existing deal. As an experienced mortgage advisor in Liverpool, this is something we have worked with a lot and are usually able to help with.
The high street bank or mortgage lenders tend to rely on their customers sticking with what they’re comfortable with and not looking at their options elsewhere. It’s not unheard of for there to be cheaper offers available to you elsewhere, all you have to do is check out a price comparison website or contact a mortgage broker in Liverpool to compare the various deals for you.
If you’ve had your mortgage for a number of years, it’s possible that you could be on a low Bank of England tracker deal. You may even be paying an amount that is less than 1%. If this sounds like your mortgage situation, you might be thinking about leaving that mortgage as it is for now. Bear in mind though, that if the Bank of England base rate rises, your mortgage amount will too.
Subject to the typical affordability checks and assuming that there is existing equity within your property, then the possibility of increasing your mortgage for any plans for home improvements that you have, may be an option available to you.
This can be a very intelligent investment if you are good with your money. We regularly see that customers do this to do something like covering the costs of building an extension or converting their loft into an additional room.
You can borrow extra funds for most legal purposes, examples of this would be:
Remember by increasing your mortgage you will end up paying back more interest, so you need to be certain you are doing this for the right reasons.
It is not recommended that you start adding debt onto your mortgage, as over time you will end up paying back more interest overall, though by extending the length of your term, you will be paying less back per month.
You will also taking that debt and securing it against an asset, your home. Because of your secured loan, you would be at risk of repossession if you fail to meet your monthly repayments.
If you have any debt that you can afford to pay off or have credit cards that are at 0% interest, it is absolutely not recommended that you remortgage for debt consolidation.
That being said, if you need to reduce your monthly outgoings to avoid missing payments, (which could damage your credit rating), then it might be a something at least worth looking into.
We often find that generally your current lender will offer you a new deal to remain with them, calling this a “product transfer” or “retention” product. This isn’t always guaranteed and sometimes you have to get in touch with your lender directly, in order to see if this is available to you.
Some lenders allow you to make a product switch online without taking any of their mortgage advice or being required to submit any further information to them.
Whilst it may seem to be a much easier option in staying with the same provider and switching products, rather than put forward a new application to a lender that is different to the one you are with, it’s entirely possible that you could save a lot of money in doing so.
In the long run, you will likely find your mortgage journey to be a fruitful and rewarding endeavour. Whilst during this process there will inevitably be some positives and negatives, ultimately the final result will see you end up with one of the following; You’ll possibly be living in your dream home, with the potential to start a family.
Alternatively, you could find yourself with stepping stone property, getting your foot on the property ladder. Finally, you might end up with an investment property to provide you with an income boost as a new or continuing landlord.
Regardless of which of those mortgage paths you went down, you’ll eventually reach the end of your mortgage term and need to start looking at a new plan of action for the future. In some cases, people choose to simply sell their home, scouting the market for either a bigger or smaller next home.
If you are a landlord in Liverpool, you could possibly be in the market for selling your portfolio to the tenant(s) or another buyer, with your eye on financial adventures outside of the housing market. Despite these however, we often hear that the most popular option towards the end of a mortgage term is a Remortgage.
A Remortgage is the process of using the money gathered from taking out a new mortgage to pay off an existing mortgage. There are lots of different options that could be at your disposal when taking out a Remortgage, each of these ranging from small ones to slightly bigger ones.
By collaborating with Liverpoolmoneyman’s resident “Moneyman” Malcolm Davidson (host of our YouTube channel MoneymanTV) and utilising his over 20 years of experience in the mortgage industry, we put together a helpful guide for those looking at what to do next, when their mortgage term is about to finish.
At the start of your process, you’ll likely be taking out a mortgage deal that will normally last somewhere within the realm of 2-5 years, featuring lower fixed rates or with rates that are possibly discounted. Depending on the circumstances, your lender may even look at putting you on something like a tracker mortgage, wherein your mortgage would follow the Bank of England’s base rate.
Once your mortgage term is at its end, it is likely that you will be placed on the lenders Standard Variable Rate (you may see this just called an SVR). The purpose of which an SVR serves, is that the mortgages interest rates can either increase or decrease, a process entirely dependent on what the lender wishes to charge you.
Standard Variable Rates do not follow the Bank of England’s base rate like tracker mortgages would. Because of this, they’re seen as a little more risky, due to the fact that the lender is not legally obligated to charge the amount that might typically be recommended for a mortgage.
Generally speaking, SVR’s are more expensive mortgage routes to take, leaving many with a preference of Remortgaging for better rates. By Remortgaging for better rates, this would hopefully save the homeowner a little bit of money on their monthly mortgage repayments.
The majority of your term may be firmly behind you, but you still may feel like something isn’t quite right, like a change needs to be made for it to truly be called home. It could be that you need to create the space for an extra room or would like a larger living space for your kids or belongings.
We’ve also heard of cases, when speaking to Remortgage customers, of people doing this for a new kitchen, a new office, or even a loft conversion (a popular these days). Rather than just moving into a newer, bigger house, many instead look at their options of releasing the equity in their home with a Remortgage.
This type of venture is used to cover the costs of any potential improvements, alterations or modifications made to the property in question.
Whilst obtaining planning permission from a local authority sounds like quite a large and scary task, especially when tied to both funding and managing your own project, many homeowners would argue it’s a lot less stressful and more rewarding than house hunting, selling your home and moving out.
As time goes on, this may prove even more to be a smart investment choice, as creating more space and having good quality craftsmanship can possibly increase the value of your home down the line, which comes in handy if you ever decide to sell up or rent your home out to a potential buyer.
In some cases, some homeowners may prefer simply to Remortgage in Liverpool with a goal of finding themselves a better mortgage term. This could be by reducing the length of the term in question or even by switching to a product that is a lot more flexible.
Doing this will mean you will shorten the length of time that you will be paying back your mortgage over, so you won’t be tied down for a large amount of years. Something of note to remember though, is that this route will also mean that your monthly repayments will be higher than you’ve might’ve expected. The general rule of thumb is that the longer your term, the lower your monthly mortgage repayments will be over the duration.
Many choose for their mortgage term to be a little more flexible when they look to take out a remortgage. This is because of the benefits provided by this mortgage option, which tend to sway homeowners more towards that route. Through taking out a more flexible mortgage, you may gain the ability to overpay your mortgage.
Overpaying gives you the ability to pay your mortgage off quicker, as well as being able to carry the same mortgage and rates over to another property of your choosing, for in the event you want to find a new property at any point down the line.
Though a flexible mortgage might sound like a more than ideal option, they will usually come in the form of a tracker mortgage. As mentioned previously, these types of mortgages will follow the Bank of England base rate, meaning that your monthly mortgage repayments could fluctuate based on interest. This can make them a little unreliable when it comes to managing finances.
Every homeowner will have an amount of equity in their property. The amount that is there entirely depends on certain factors. You can work out the amount by calculating the difference between the remaining mortgage balance and the current amount your property is valued at.
As touched upon earlier in this article, the equity in your home can be used for home improvements, though that’s not all you’re limited to when it comes to what you can use your equity for.
Some use their released equity to cover long-term care costs, to provide an additional boost to their income, to have themselves a nice holiday, to pay off an interest-only mortgage or to give themselves extra money to spend freely on whatever they wish.
Sometimes we find that Buy-to-Let landlords will use a remortgage to release equity as a means of covering their deposit for additional purchases towards their property portfolio.
Equity Release in Liverpool is something that homeowners who are over the age of 55, with a home that is worth at least £70,000, may be able to use. Take a look at your options by getting in touch with an expert later life mortgage advisor who can help you better understand equity release.
Another option that is widely popular and works in tandem with Equity Release, is the process of releasing funds to pay off any unsecured debts that you may have built up over time.
Though it can seem straightforward, Debt Consolidation not only bases the amount on how much you’re owed and the value of the property, but it also factors in the current position of your credit rating.
What this means is that whilst you may be able to use some money to cover these costs, you’re limited from the offset in terms of the amount that they’ll even let you borrow.
On top of this, to pay off your previous mortgage and your debts, you will need to borrow more than the mortgage amount that you have left on your balance. Because of this, you are almost guaranteed that your monthly repayments will be higher than they were before.
Though not an ideal situation to find yourself in, you at least have the comfort of knowing that should you find yourself in need of a back-up plan, you do have some mortgage options to choose from.
If you happen to have a damaged credit rating, you may still be able to obtain a mortgage, though it is not an easy process and does require Specialist Remortgage Advice in Liverpool before you can even go forward with it.
Even with a professional by your side, you must remember that there are still no guarantees that you will walk away at the end of this with a mortgage.
We recommend that you always seek mortgage advice prior to consolidating and securing any debts against your home.
If you are nearing the end of your term and are looking at your home owning and remortgage options may be, please do Get in Touch with a trusted mortgage broker in Liverpool today and we’ll see what we can do to help you out.
Your dedicated mortgage advisor in Liverpool will discuss your circumstances and plans for the future, in order to determine the course of action to take on the next leg of your mortgage journey. It is our goal as a mortgage broker to ensure your mortgage process is quicker and easier than when you took out your mortgage the first time around.
Every homeowner, whether a First Time Buyer in Liverpool, Home Mover in Liverpool or going for a Remortgage in Liverpool, should know that overpaying your mortgage can make a significant difference in what you have to pay each month. The earlier you start overpaying, the quicker you can take advantage of it’s benefits.
Homeowners may not always be able to afford such an option. Sometimes life gets in the way. In hindsight overpaying is a great thing to start doing, however, we always find something ‘better’ to spend our money on.
A lot of the time it might just be as simple as remembering to overpay your mortgage. After all, it’s not something that immediately comes to mind when buying a home.
So, if you’re in this situation and are looking to overpay, what should you do? We’d recommend setting up a standing order that is payable to your lender each month. Have it go out alongside all your other payments, so it’s easier to manage.
For example, say your monthly mortgage payment is £450 per month and goes out on the 2nd of each month. You are able to afford an extra £85 per month and are keen to put that towards your mortgage payments. Set up a standing order of £85 to go out to your lender on the 2nd of each month too.
A great benefit here, is your mortgage payments will then total at £535 and because it’s going out as a regular payment, this will become a part of your monthly routine.
Another perk is that whereas a direct debit is controlled by the receiver, standing orders are controlled by the payer. Struggling for funds this month and can’t afford to overpay? Just cancel the direct debit.
Whilst it would be a shame to have to stop overpaying, you at least have the benefits you’ve gained so far. Depending on the lender, you may even be allowed to arrange reduced payments or take a “payment holiday” if you’ve been overpaying over a long period of time. It’s important to check with lenders though if you’re looking to do this, otherwise it could have an adverse affect on your credit report.
Overpaying is a great habit to have but it’s not something you have to do. If you don’t feel the need to, you don’t have to. That being said, knocking off a year or two from your mortgage term will be something definitely worth the effort.
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 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 to 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 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 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.