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.
Today we live in an uncertain economic environment. Yet, in a world full of opportunities, therefore we like to be prepared, and when it comes to our finances, there is one thing we all desire: being well informed.
As a group of experts, we believe that there are some excellent reasons to use a mortgage broker in Liverpool, so here we will talk about both methods’ positives and negatives so that you can make the best well-informed decision.
We know that there are many mortgages options out there, for example, you can still go directly to the lender, whether via a branch or online. However, we discovered that most people still use a mortgage broker in Liverpool due to the benefits it brings.
You may not have much experience, but one thing is for sure: We all like to save some money. So, when we think of mortgage advice, one of the options that first comes to mind is to go directly to a Bank or Building Society, so that you won’t have to pay a broker fee. However, that option became unattractive when credit scores came in a few years ago, and people started looking for other alternatives.
Another of the mortgage products on the market are those offered by lenders that are only available directly. This strategy gets implemented to attract a fair business distribution from consumers and brokers alike. By being exclusive, they can turn on and off these products when they deem it necessary, this method often confuses the market and consumers.
However, from 2014 onwards, lenders were no longer allowed to sell mortgages without professional advice. Many consumers felt that non-advisors had been trying to push solid advice on them, and they weren’t able to benefit from some of the consumer protection. A benefit that accompanies sales conducted by professionally trained mortgage advisors is why most people still use this service.
Because of this, in late 2014, it was not unusual to have to wait more than a month just for an appointment, and it still happens today. Not the best scenario when you’ve just had your offer accepted on the house. So, many began to make their applications through mortgage agents, who assure you professionalism and a mortgage service the same day, like ourselves.
Another important point when applying for a mortgage is affordability, no matter how good the deal is if it is not enough money. That is why we believe that a broker is a perfect option. With our mortgage advice in Liverpool.
We can assure you of the best deal and our service when you need it, in a professional and personalized way. When you call us, we try and put you through with a qualified mortgage advisor either immediately or at the very least, within the same day (unless requested otherwise).
Applying for a mortgage can sometimes be difficult. Each case is unique, and many reasons can complicate an application. Some examples are:
• Poor credit history.
• Self-employed income.
• Mixed source of deposit (savings/gift).
• Let to Buy (keep your current home and buy another).
• Contract workers / zero-hour contracts.
In previous years, lenders could stand out from the competition by merely offering a similar deal but better than another lender. In modern times this is very different, with lending criteria being what separates one lender from another.
However, as we mentioned before, when we talk about our well-being and finances, we like to be well informed and consult with experts on the subject. Your situation is unique, and what you need is not a better loan than someone else’s, but a better one for you and one that suits your situation.
That’s why we think that seeking professional mortgage advice in Liverpool is the best alternative. When you explain your position to an experienced mortgage broker in Liverpool, there is a chance they have come across something a little similar in the past, allowing them to personalize their service and help you through.
With a little luck, professionalism, and much work, your mortgage advisor will be able to recommend the most suitable mortgage for you at the lowest possible rate.
More than that, though, it’s not just about getting the mortgage. Even if the application itself is straightforward, our clients trust our experience and knowledge for more than that. For example, we will discuss how much they will offer for the property they are buying.
Our team of mortgage brokers in Liverpool can recommend other professional services such as solicitors and explain the different types of surveys and protection available to them.
Another significant advantage of using a mortgage broker is that they tend to be much more responsive than lenders might be. It’s not been unheard of for our team to work late at night, out of hours, working hard on client cases at full speed to ensure service is prompt, but also efficient. Our team is committed to offering our assistance when you need it and how you need it.
Another point that gets overlooked when looking at why clients may prefer a broker is that everyone is very busy. You may be self-employed in Liverpool, a full-time worker, a working mom and you need a mortgage but do not have time to do it, that is where your advisor can take the burden off for you.
Professional applicants especially see the benefits of these as they have clients of their own to charge for their services and appreciate the benefits of having an expert on board.
Technology is taking over, and the future of the mortgage market is no different. Perhaps in the future, we will see lenders who want to compete with the broker’s business. If this happens, they are unlikely to staff-up their branch networks.
Technology is excellent, and it is a service particular for customers who are happy to do business that way, especially for straightforward cases. However, for most people, there is an element of “reality,” a “human touch,” that you can’t get anywhere other than talking to a mortgage counsellor yourself.
The mortgage broker becomes your ally and can provide you with a satisfying experience, a complete service with all the benefits that the client requires and attention that technology cannot offer.
Having said all this, the reasons for hiring a mortgage broker in Liverpool are vast and if you want to ask any questions related to mortgages. Seek or obtain this service from the hand of a professional team adapted to your needs, get in touch, and we’ll put you through with a mortgage advisor in Liverpool as soon as possible.
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:
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.
An Agreement in Principle (also referred to as an AIP), is a piece of documentation you are given once you pass the lenders credit score. You will need one of these if you wish to qualify for a mortgage. Having an Agreement in Principle allows you to make an offer on a property you are interested in, as well as assisting when you want to negotiate on price, as it shows the seller you’re serious about your offer as a First Time Buyer in Liverpool.
The effects of an Agreement in Principle on your credit score, completely depend on whether the lender takes a hard credit search or a soft credit search. What are the differences between these? Below we’ll answer this.
Hard credit searches:
Hard searches are more in-depth than soft searches. The main difference between hard and soft searches is that hard searches leave a footprint, which can negatively affect your credit score if you fail it too many times. If you have a good credit score however, you shouldn’t need to worry going into this as a First Time Buyer in Liverpool.
Soft credit searches:
The option you’re more likely to come across these days is that a lenders soft search. These are to hard searches, what a lite phone model is to the main release, usually requiring less information and in the majority cases leaving your credit score unaffected, even in the event of not passing.
Although an Agreement in Principle can be a massive help, it doesn’t always guarantee that you will successfully obtain a mortgage. The lender will still need you to provide them with documents in order for the underwriter to make their final decision.
You can usually find small print included on Agreements in Principle that may easily be missed. We find in some cases, when customers reach out for help about their Agreement in Principle, they’ve been turned away at full mortgage application stage.
The documents you will be required to provide can include; personal ID, payslips, bank statements and things of that ilk. As your dedicated Mortgage Broker in Liverpool, we take pride in helping our customers, whether Moving Home in Liverpool or Self Employed in Liverpool, get prepared for a mortgage.
You may be able to get away with this, however, most credible estate agents will want evidence that you are able to proceed with the purchase in question.
Your Agreement in Principle will usually need renewing after around 30-90 days, though this isn’t something you should worry about. The main reason we recommend getting one so early is to avoid being told the property you’re interested in is no longer available for purchase.
Getting your Agreement in Principle sorted also means you don’t just need to jump in and buy the first house you see. It’s a fairly easy process, so if it expires, we can quite easily help you get another one.
The purpose of a mortgage agreement in principle (AIP) document is to prove that you do have a mortgage in place. To the estate agent, it proves you have good enough credit to proceed, as you have passed the lenders credit scoring system. That being said, getting a mortgage can never be guaranteed, as a full application will still require further background checks.
Now you have your mortgage agreement in principle, what do you do with it? Well, having your mortgage agreed at the outset can help you negotiate on asking price with the owner of the property. It is relatively easy to obtain and is something we can arrange for all of our clients. Almost all lenders offer an Agreement in Principle.
To proceed further with a mortgage application, you will require further background checks to cover things like evidence of income, as well as a satisfactory valuation of the property itself.
Getting one in advance can really put you in a better position for negotiating, can help you avoid disappointment and allows you to figure out your limits.
When you reach the point of being ready to make a formal offer on a new home, the majority of estate agents will undertake due diligence and ask you to prove that you can in fact afford to complete the purchase. Sufficient evidence of this include bank statements and also an agreement in principle certificate, which our team can provide for you. Once you have provided them with all this documentation, the estate agent will usually cease marketing the property and put a “sold” or “sale agreed” board up to let people know a deal is currently being processed.
If you already have a mortgage agreed before you make an offer, you are instantly more appealing to a seller as this proves you are not making this choice lightly and you’ve thought about how you’re going to afford the purchase. This might persuade a seller to accept an offer you put forward on their property that may be underneath their initial asking price.
When it comes to buying a house some customers go full steam ahead and make an offer on a property without first checking that they have the means to proceed with the purchase. This can understandably leave people feeling very disappointed if this doesn’t quite work out how they’d hoped.
By that point they may have already got their heart set on their new potential family home. By getting in touch with us early on, this disappointment can be avoided. Sometimes there are things that are causing a mortgage to decline that can be overcome over time.
For example, there may be a small issue on your credit report that is proving to be a nuisance, perhaps a disputed mobile phone bill which can be easily fixed. Maybe you thought you were on the voters roll and you’re not, something that over time can be solved. In any case, it’s better than you know ahead of time, rather than mess people about. Our team will be able to tell you what you need to do to improve your credit score for the future.
Ok, so you know you’ve got a good credit rating because you’ve never been turned down for credit, you’re registered on the voters roll and you’ve always made your credit card payments on time – so what can go wrong?
Well, you could approach 10 different lenders these days and get 10 different maximum mortgage amounts! They all calculate affordability in their own unique ways. If you’re self-employed it really is a minefield: some lenders take your net profit, others your salary and divided. Some use your latest year, others an average over 3 years.
Knowing your borrowing limits is important as then you know for sure what your price range is. We’ll be able to advise you of the maximum mortgage available to you. Also, more importantly, together we’ll work out how much you can afford to pay back each month.
At the start of your mortgage process, you will soon realise that there are many different options available. If you are First Time Buyer in Liverpool, you are probably thinking “How could there be so many different types of mortgage?”
In this article we will provide a list of the most popular types of mortgages available on the market and hopefully answer any questions you have about them.
A fixed-rate mortgage means that your mortgage payments are not going to change for the length of your term. You are able to choose the length of this yourself, with common choices being 2, 3 or 5 years or longer. Regardless of what happens to inflation, interest rates or the economy, you have the security of knowing that your mortgage, likely your biggest outgoing payment each month, will remain the same.
A tracker mortgage means that your interest rate will track the base rate set by the Bank of England. What this means is, the lender that you are with does not actually choose the rate that will be applied, and you will be paying a percentage above the Bank of England base rate. In an example, if the base rate is 1% and you are tracking at 1% above base rate, you will be paying a rate of 2%.
When you take out a repayment mortgage this means that each month you are paying back a combination of both interest and capital. Providing that you keep your payments going for the full length of the mortgage term, you are almost guaranteed to have fully paid off the mortgage by the end of your term, resulting in the property becoming solely yours.
This is probably the most risk-free way to pay your capital back to the lender. Early on into your mortgage term, it is mainly the interest that you are paying and your balance will go down at a rather slow rate, especially if you have taken out a 25, 30 or 35-year term. The benefits of this arise in the last ten years or so of your mortgage, where your payments are covering more capital than interest and the balance will go down at a much quicker pace.
Whilst many Buy to Let Mortgages are set up on an interest-only basis, it is much harder task to get a residential property on that same basis.
The likelihood for lenders to offer an interest-only product now is a lot less than it was. That being said, there are certain circumstances where this can be a viable option, including things like downsizing later on in life, or having other investments what you will use to pay the capital back. Lenders have stricter rules when it comes to offering these products now and the loan to values are a lot lower than they used to be.
With an offset mortgage, the lender will set you up a savings account to work alongside your mortgage account. How this works is that, for example, if you have a mortgage balance of £100,000 and £20,000 is deposited into your savings account, you would only be paying interest on the difference, which in this case would be £80,000. This can be a much more efficient way of managing your money, especially if you pay a higher rate of tax.
When lenders ask for your bank statements, you can expect them to look for a wide range of things. However, their main goal is to assess whether you are the kind of person who handles money responsibly and is likely to keep up to date with their mortgage payments.
In recent months one question is being asked by applicants speaking with one of our Mortgage Advisors in Liverpool: “do gambling transactions look terrible on my bank statements”.
Whether you have an annual bet on the grand national or regularly use the internet betting sites. Clearly there is nothing illegal about properly licensed gambling.
Many people can see gambling as a mainstream hobby or pastime similar to many others. Still, it shouldn’t get forgotten that even the gambling advertisers urge customers to “please gamble responsibly” and this is the key to bear in mind when applying for a mortgage.
Consequently, whilst it is not a lender’s job to tell you how to live your life, how to spend your money or indeed to moralise on the ethical rights and wrongs of gambling, they do have a duty (underscored by mortgage regulation) to lend responsibly.
Suppose lenders need to prove to the regulators that they are making sensible lending decisions. In that case, it isn’t entirely unfair of them; therefore, to expect the people to whom they lend to adopt a similar approach when it comes to their finances.
Think about it. If you were lending your own money. Would you lend it to the applicant who gambles or the one who doesn’t?
As mentioned above, it is not illegal to gamble so just because you have the odd gambling transaction on your bank statements it doesn’t automatically mean you will get declined for a mortgage.
However, the lender will consider whether these transactions are reasonable and responsible. Thus they will mainly look at the frequency of these transactions, the size of the transactions about the person’s income, and the impact upon the account balance.
If these transactions are infrequent small amounts that make no significant impact on a regular credit bank balance, then they are not likely to be regarded as necessary.
However, if you bet most weeks or you get overdrawn the lender continuously, therefore, expected to see that as being irresponsible and decline your application.
As we’ve seen, essentially lenders are looking at your bank statements to show how you manage your money and to help them establish whether this gives them either the confidence that you are financially sensible or the evidence that you are not.
Remember, lenders are financial institutions that, either directly or as part of a wider group, often sell current accounts, overdraft facilities credit cards and personal loans, so understand that these things can all play a considerable role in prudent financial planning.
The key for a mortgage applicant is how these facilities get managed. For example, having an overdraft facility and occasionally using it, is not inherently a bad thing; regularly exceeding the overdraft limit – not so good.
Consequently, lenders will look for excess overdraft fees or returned direct debits because these would generally show that the account is not being well conducted
Other things to look out for include credit transactions from payday loan companies; “undisclosed” loan repayments (i.e. if you said on the application that you have no other loans but there appear to be regular loan payments, this could be a problem).
They would look out for any missed payments; finally, they might also consider how much of a typical month get spent overdrawn – namely if you only go into credit on payday and for the rest of the month are exaggerated, how sustainable is this mortgage?
The simple answer is – be sensible and, if possible, plan. Typically, a bank would ask for up to three months of your most recent bank statements.
These will show your salary credits and all your regular bill payments. Thus, if you know you’re likely to want to apply for a mortgage in the not-too-distant future. Try to make sure that you avoid any of the above pitfalls.
Take a break from gambling for a short while. Then work on presenting your bank account in the best possible light.
Your mortgage broker can help you as some lenders may ask for fewer bank statements than others. Or indeed some may not even ask for them at all.
However, even these lenders would reserve the right to request bank statements in certain circumstances. So your best bet is to be as prudent as possible in the run-up to any mortgage application.
Remember, if you do gamble, please gamble responsibly!
If you are a first-time buyer in Liverpool who doesn’t know a lot about mortgages. You should get some specialist mortgage advice from a Mortgage Advisor in Liverpool.
We can guide you through the whole mortgage process and help you with your application. To get you on track so that lenders will be impressed.
As an experienced Mortgage Broker in Liverpool. We have worked with various Buy to Let landlords across Liverpool and helped them secure competitive Buy to Let mortgage deals.
Our customers who already have an existing property portfolio always ask whether it’s possible to transfer ownership from your name(s), into the name of your limited company.
Firstly, it is essential to know how a mortgage lender will approach purchases from Limited Companies. There are not many lenders that will accept Ltd Company applications through anything other than an SPV (Special Purpose Vehicle) Company.
An example of this is a company set up expressly to invest in properties like this. When registering your company, your registration will include a SIC (Standard Industrial Classification) Code. You need to be aware of how mortgage lenders approach limited company purchases.
There aren’t many mortgage lenders that accept limited company applications through anything other than an SPV (Special Purpose Vehicle) Company, i.e. a company set up expressly to invest in this type of property.
When you register a company, your registration includes a SIC (Standard Industrial Classification) Code that sets out the business type(s) in which the company will participate. The mortgage lender doesn’t usually accept applications from general trading companies that can trade in other areas.
The SIC codes typically accepted are 68100, 68201, 68209, 68320 but it can vary from lender to lender. To find out more information about SIC Codes, consult the Government website.
Purchasing a Buy to Let property under a limited company comes with both advantages and disadvantages. So for instance, not every mortgage lender will consider applications from an SPV. Preferring to limit their lending to individuals/couples in their name(s).
Therefore, individuals tend to have a wider choice of lenders and products than SPVs. Of those lenders that will lend to an SPV. The mortgage rates offered would typically be higher than those provided to individuals.
On the plus side, in recent years, changes to the way rental income gets taxed have meant that. For many people, the tax advantages generated by SPV make up for any extra interest charges or lack of choice.
The first thing our Buy to Let Mortgage Advisors in Liverpool recommending you is when considering whether to buy your property portfolio under the auspices of an SPV is that you get advice from a specialist tax advisor.
They will evaluate how factors, such as your other income sources, and the rate of personal income tax you pay will affect your overall tax status and establish whether individual or SPV ownership is better for you.
As we mentioned before, the main factor in deciding whether to buy under an SPV is your tax position. It is complicated further when determining whether to transfer properties you already own as an individual into company ownership.
There is a slight problem, though, this sort of transaction is not a simple transfer; it’s a change of legal ownership.
The limited company is a separate corporate identity, so the transaction is essentially a purchase by the SPV from you selling as an individual, so you’ll have to account for stamp duty charges, legal costs, and new mortgage valuation charges.
Additionally, you will need to remember that limited companies have running expenses and legal obligations. However, these may get offset by the potential upside of some tax-deductible costs or long-term tax benefits.
Where Landlords are looking to increase their property portfolio, it often works out that they continue to hold existing properties in their sole name(s) but purchase any new additions under the company name, thus avoiding all the on-costs of switching.
Having said that, no case is the same, and there may be some circumstances where the switch would be beneficial in the long run, even considering the costs of switching.
Contact us if you are thinking of going down this route, our team of Specialist Mortgage Advisors in Liverpool is here to help you with all of the arrangements, providing you with top quality service.
Are you a budding First Time Buyer in Liverpool? Maybe you haven’t thought about Moving House for quite a while? In either of these cases you are probably asking yourself one of, or both of the following questions; “Can I get a mortgage in my situation?” and “How much can I borrow?”. These are two questions we hear regularly when providing mortgage advice in Liverpool. In this article, we explain the latter, something that over the last 10 years has changed quite a bit.
If we look back at the ’80s and ’90s, most mortgage applications were underwritten manually. This means there was lots of “human intervention” in the mortgage application approving process. You’d make an appointment with your local building society manager, and he or she would interview you about your circumstances.
They would encourage you to save with them for a while until you prove yourself to be good enough to handle credit. The manager would then grant you what was the equivalent of today’s Agreement in Principle. Following this you would receive mortgage advice and an estimation of how much they would be able to lend you.
At face value, this sounds very much like a highly personalised process with a common-sense approach. That being said, it could often lead to inconsistent decision-making. The manager had the discretion to interpret the lending manual as they saw fit. What this means is that you could possibly approach the same Building Society in a different town or city and the result would come out different.
To make sure things like this stopped happening and more importantly, to cut costs, lenders moved to automated affordability calculations. “Caps” were applied so they would lend you more than, say, 3 or 4 times your standard household income.
As the 2000s went onwards, lenders were becoming more and more generous in the amount they would lend customers. Some lenders would even offer self-certified mortgages, meaning no background checks were taken so they were taking the applicants word on how much they were earning!
Such practices of course failed, and the market crashed. 2008-2010 were very difficult years if you were trying to get on the property ladder, as the market was in a poor state. Lenders stopped lending for the time being and created a very cautious (over-corrected) lending environment.
The market eventually (and thankfully) recovered, and in 2014 the regulator launched the Mortgage Market Review (MMR). This was a brand new set of rules for lenders to follow. The old-style income multipliers which took little account of household expenditure were now gone.
Before 2014, two applicants earning the same could borrow roughly the same as each other, regardless of the little details and differences, including how much they spent each month. Then came brand new affordability models. These took a much more forensic view of how mortgage applicants managed their money on a monthly basis.
There is still a “cap” in place (most lenders will not go past 4.75 times your annual income) but your spending habits are also analysed more harshly. So, for example, if you have high childcare costs, lots of credit commitments and a student loan, it is likely you will be offered less than your work-colleague who doesn’t have any of these things to pay for.
We still find ourselves regularly surprised by the large variances lender to lender in how much or little they will lend customers. Some lenders seem to penalise low-earners (they may only want one type of applicant) and some take pension contributions as a fixed outgoing, so would often lend the likes public sector worker with a big pension deduction less than a private sector.
If you need to maximise your borrowing capacity to obtain the home you need to buy then you’ll need the help of a trusted and experienced Mortgage Broker in Liverpool on your side. Our advisors are able to research the market on your behalf to see if anyone will lend you the amount you need.
Before you take out a mortgage you should sit down with a Mortgage Advisor in Liverpool and work out your finances together to ensure that the repayments are to the level you were expecting.
Here at Liverpoolmoneyman, we offer a free initial mortgage consultation for all customers. Contact us and we’ll get you booked in as soon as possible.