You Asked & We Answered

First time Buyer Questions:

Affordability

The minimum deposit that lenders will generally accept is 5% of the property value. These are known as 95% mortgages and if you are looking for one of these, your options will be limited. Most lenders prefer to ask for at least 10% of the property value as a deposit. The more you are able to save up means you will be able to choose from better mortgage deals with a lower interest rate. For example, the average deposit for a first time buyer is 18% of the value of the property. So, if you can save from 15% to 18% of the value of the property you will be in a better position and be able to benefit from lower interest rate mortgages. For example, if you want to buy a home costing £150,000, you’ll need to save at least £7,500 (5%).

Lets talk about the true cost of buying a house. When buying a house you want to be fully aware of all costs to ensure you avoid any nasty surprises. Costs can vary considerably from about £1,330 to £6,140. This list gives you an overview of the estimated extra costs involved:

Mortgage fees and charges – More than half of mortgages come with arrangements fees and other costs = £0-1,500

Valuation fees– when you apply for a mortgage, the lender will carry out a valuation to check the property is worth what you are planning to purchase it for = £0- £700

Property survey costs- Your lender’s valuation only looks at how much the property is worth. It does not check for structural issues and will not flag any problems with the property. To protect yourself from buying a house with a defect you should always have an independent survey. They vary in price depending on how detailed they are = £400-£1500

Conveyancing fees- You will need a property solicitor or licensed conveyancer to handle all the legal aspects. They may charge you a flat fee or a percentage of the value of the property = £780-£940

Stamp Duty- This is a tiered tax on property and land transactions, but not everyone has to pay it. First time buyers purchasing properties costing up to £300.000 do not have to pay stamp duty. Thereafter, it ranges from 2%-12% of the value of the property. 

Removal costs- vary depending on how much furniture you have and the distance you need to move = £50-£1500

Mortgage Process

An agreement in principle/decision in principle, also known as a mortgage promise, is a certificate or statement from a lender stating they will lend you a fixed sum of money to purchase a property. To obtain one you will need to approach a mortgage lender or a mortgage broker. At this point you will not need to complete a full mortgage application as this comes later once your offer on the property is accepted.

You will need to provide your name, DOB, three years of address history and of course proof or your income and expenditure. Estate agents will often want to check you are able to get a mortgage on a property, so it’s helpful to have an agreement in place so you can move quickly and put in an offer on the house you like.

Remember a mortgage is the biggest loan you will ever take out so it’s vital that you know how much you can afford to borrow. Lenders typically state that they will lend you four times your income. If you have a joint income then the combined income will be used to calculate your mortgage amount. As I have already said in previous posts the bigger your deposit the better the mortgage deal you are likely to get.

Step 1 contact a mortgage broker who will have access to the whole mortgage market rather than just going to a your high street banks. Your lending potential will be assessed, including carrying out a credit record check.

Step 2 if all is well then you will receive your lender agreement/decision in principle, also known as your mortgage promise.

Step 3 if your offer is accepted on the property the lender instructs a valuation on the property to ensure it’s worth what you have offered. 

Step 4 you will need to submit all the documentation and evidence required so your mortgage can be approved. This will include three months bank statements and payslips or 2-3 years accounts if you are self-employed, your ID and proof or your address.

If everything is on order then you will receive your mortgage offer. Once you have accepted the offer you then need to instruct a solicitor to start the conveyancing process.

Before applying for a mortgage it is a good idea to contact a one of the main credit reference agencies (Like Equifax or Experian) and order your credit report. Make sure there is no incorrect information about you and your credit history on the report. Start collating the documents you will need to support your application. For example, your last 3 months payslips and bank statements, utility bills, passport and P60. If you are self-employed you will need a set of two to three years company accounts from your accountant and your tax return SA302 submissions.

Then speak to a mortgage advisor who can help you find the right mortgage for your background and needs. Once you have chosen your mortgage and your adviser has obtained a lender agreement/decision in principle a full application can be submitted.

You will then go through the underwriting process and once this has completed successfully you will receive your mortgage offer.  Remember you will need to show proof of your deposit for the house you are purchasing and may need to submit further documentation, such as proof of additional income, such as bonuses, commission and overtime, maintenance, tax credits and child benefit throughout the underwriting process.

Mostly individuals will instruct a solicitor to start the conveyancing process once they have a mortgage agreed in principle so that solicitors are working on the legal aspects while the offer is being processed.

It is a good idea to start collating the documents you require in advance of speaking to an adviser to help support your mortgage application.

You will likely need your:

  • Last 3 months payslips
  • Last 3 months bank statements
  • Proof of your address, such as a utility bill, council tax bill or bank statements (they must be dated within the last 3 months)  
  • Passport or Photocard Driving licence
  • P60 tax statement
  • If you are self-employed you will need a statement of two to three company accounts from your accountant and/or your tax return form SA302
  • Proof of your deposit (usually on a bank statement)

As well as knowledge of your income, your lender will also need information of your outgoing expenses before approving your application. This is because regular payments, such as loan and credit card payments, school fees and regular payments may have an impact on what you can afford to repay monthly. You may be asked for proof of additional income. For example, bonuses, commission, overtime, maintenance, tax credits and child benefit.

valuation is mainly for a mortgage lender’s benefit.

survey, is considered a health-check on a property, and provides you with a report of its condition and highlight any potential problems.

Once instructed, a qualified surveyor inspects the property you are considering purchasing and tells you if there are structural problems or subsidence. The survey report will highlight any major repairs needed, such as repairs to a roof. 

If you’re wondering whether a survey is compulsory, the answer is no. It is optional, but they help you avoid expensive and unwanted surprises. It costs a few hundred pounds and offers you peace of mind given the overall cost of buying property. The survey information can also be used to help renegotiate the price of the property. For example, if you find it needs £15,000 of roof repairs you can ask for a reduction in price or insist the repairs are carried out before you buy. It is particularly recommended to conduct a survey if you have a worry about any part of a property or its condition or it is an old or a listed building or there is a thatched or timber frame.

So what kind of survey should you get? There are a number of different types of survey. What you choose depends on the depth of survey you want and your budget.

A condition report survey is the most basic survey and costs about £350 and compliments the mortgage valuation and provides a ‘traffic light’ indicator. Green means it’s okay, amber means some cause for concern and red means serious repairs are vital. It is suitable if you are buying a standard property that is in good condition. 

HomeBuyer Report this is a more detailed survey and the most popular option and costs start around £450. The inspection is non-intrusive meaning the surveyor will look for obvious signs but not move furniture or lift up floorboards.

Building Surveyor Report also known a structural survey. Costs start from around £650. This is the most through survey you can get. It provides an in-depth look at the condition of the property with advice on defects and repairs. The surveyor will check the loft and under floorboards. This survey is suitable for large properties, those more than 50 years old, unusual properties and renovation projects. 

The cost of a survey will significantly vary depending on the location, size and type of property. Surveyors will also charge varying prices so I would strongly suggest getting a few quotes.

After your Chartered Surveyor has finished surveying the property, they will produce a report detailing the condition the house is in.

Some of the most common problems revealed by a house survey are damp, damage to structural wood, Japanese knotwood, subsidence and electrical issues. Make sure you look for any issues related to asbestos, woodworm, dry rot, faulty drainpipes and insulation and roof issues. The first thing to do is try not to panic and make sure you understand the issues and their implications. Most surveyors are happy to chat so ensure you fully understand the problems and their implications. Remember you will need this information so you can make an informed choice of what to do next. You now have three choices:

Pull out of the sale

You are usually not legally bound to buying the house, remember your offer is Subject to Contract. Therefore, if the issues are going to be long term and costly you can consider pulling out of the purchase.

Renegotiate the price of the property

One of the best things about a survey is that it gives you bargaining power. You have written evidence from an independent specialist that there are issues with the property. You can now go back to the estate agent and seller and negotiate a reduction in price. This also means you can arrange the necessary repairs to the standard you want.

Ask the seller to fix the problems 

You can talk to the estate agent and seller and ask if they are prepared to fix the problems before you exchange contracts. They may been keen to do this to keep the sale going forward.  It is vital however to ensure the work is completed before you exchange contracts.

So you are ready to settle down and put those days of renting a property behind you. You have managed to scrape together a deposit to put down on a new home and completed your mortgage application. To be honest you need a medal for getting this far as it’s a tall order getting together that deposit but then to find out your application is declined can be devastating. Just try to remember a quarter of all 24-25 year-olds have had a mortgage application rejected. So let’s take a look at why lenders reject applications.

  • Poor credit history- ideally you should check your credit score and credit history before applying for your mortgage. If you were rejected due to a low credit score you may need to focus on spending time in building up your credit score instead of submitting another mortgage application which may also fail. In addition, remember each application, which is declined could show up on your credit file and effect your credit score.
  • Payday loans- if you have taken a payday loan in the last 6 years it will be listed on your file, even if you paid it off on time. The impact of the loan can vary from lender to lender but some view this as a sign that a borrower is not financially responsible.
  • Having too many credit applications- try to avoid applying for new credit at least 12 months before your mortgage application. The problem is most credit searches are recorded and applying for too much credit may look like you have money problems.
  • Not being registered to vote – you need to be on the electoral register at your current address so lenders can conform where you live.
  • You don’t earn enough- you could ask for a smaller mortgage or consider a shared ownership.
  • Your job- it may be because lenders feel you have not been in your job long enough or that you are self-employed. In this instance it’s worth shopping around and using an independent mortgage advisor who is likely to know the type of lenders you are better off using. 
  • Administration errors- lenders input your data on their computer systems and could have entered it in error. Therefore, if it has been rejected due to your credit file it’s worth finding out why.

Yes, you can apply for a guarantor mortgage even if you have no deposit or a bad credit score. It maybe you have a low salary or have just started a new job. This type of mortgage means that someone (usually your parents, a relative or close friend) will cover your mortgage payments if you don’t pay them. It uses the chosen person’s home as security and the lender can forcibly sell this property if mortgage payments are not made.

Some guarantors use cash, which they deposit into a special savings account to hold as security against the mortgage. The guarantor’s name is added to the legal documents. The risks associated with this type of mortgage are that the guarantor is legally responsible and could be at risk of losing their home if mortgage payments are not paid. In addition, interest rates for this type of mortgage tend to be high, credit ratings can be affected if you don’t make mortgage payments and it could cause unnecessary strain on the relationship you have with the guarantor. 

There are numerous fees, charges and taxes you have to pay before you get your keys to your new home.

Mortgage fees- are paid to your lender and often these are called a lender arrangement fee.  Things to be careful of are that often low interest mortgages may have a high arrangement fee. Be savvy and always look at the mortgage fee charges, as they can be as much as £2,000. Lenders offer you the option of paying the fee upfront or adding the fee to your mortgage, which results in you paying additional interest. The disadvantage of paying up front fees is that if the sale falls through you may lose your fee. 

Valuation fee- valuations are what lenders use to ensure the property you are buying is worth what you intend to pay for itIt offers the lender security just in case they need to repossess the home so they can sell it for a decent amount. Some mortgages have a free valuation fee whilst others can range from £200 to £800 and usually depend on the value of the property.

Survey fee- This fee is paid to the surveyor  and it’s an optional survey. The survey is a more detailed inspection of a property’s condition. The surveyor inspects the property and tells you if there are structural problems and will highlight any major repairs needed. You can chose from a basic survey to a in-depth survey.

Broker fee- If you are using a broker to find you a mortgage there may be a fee paid directly to the broker. Ask the broker what they charge before starting an application with them.

Stamp Duty- Stamp duty is the tax you pay to the Government when you buy a property. You need to pay your stamp duty to your solicitor, who will then pay it to HM Revenue & Customs on completion. Stamp Duty is dependant on the value of the property and can be a substantial cost.

Conveyancing fee– you will need to pay your property solicitor or licensed conveyancer who handles all the legal aspects. They may charge you a flat fee or a percentage of the value of the property.

Land registry fee- the Land Registry charges a fee to transfer their register entry for your property into your name from the previous owner.

Estate agent fee- paid by you if you are also selling a home, it is negotiated when you put your home on the market.

Electronic transfer fee- it covers the lenders cost of transferring the mortgage money from the lender to the solicitor.

It is important to factor in all fees, charges and taxes to ensure you are fully aware of all the costs involved of purchasing a house.

Legal

Choosing a solicitor or conveyancer is an important decision and a decision that should not be made purely based on price.  The solicitor will manage the sale process, provide legal advice, deal with land registry and collect monies from the lender and pay the sellers.

Most solicitors are qualified to do conveyancing but not all will have the experience and specialist knowledge. Don’t be afraid to ask the solicitor what experience they have and qualifications in conveyancing.  Also, don’t just go with the estate agents’ in-house service or the companies they recommend.

Make sure that you appoint a solicitor that is on your mortgage lenders approved panel as this can lead to unnecessary complications and even refusal.

You can also ask family and friends for recommendations. You can also ask your lender and mortgage broker to recommend a solicitor.  Solicitors fees can vary considerably so find out how their fee structure operates, some will charge a percentage of the property and others have fixed fees. A reputable solicitor will always provide a breakdown of costs in their initial quote. Ultimately, you need a well-qualified, communicative and informed solicitor who can relieve you of any additional stress that comes along with buying a property.

You may just think this is technical language but in reality it’s the difference between you owning your home outright or having a landlord. Estates agents tend to gloss it over because freehold is always the preferred option.

Freehold means you own the building and the land it stands on. Whole houses are usually freehold, although there is an increasing trend for new build homes to be leasehold, so make sure you check. If you buy a leasehold property you will have the right to live in the home for a set amount of years as specified in the lease. The lease is often 90 years or 120 years and as high as 999 years but sometimes it can be short as 40 years. 

Flats/apartments are most commonly owned on a leasehold basis, while houses are normally sold as freehold properties. For example, you as the leaseholder will have a contract with the freeholder who is also known as the landlord. The landlord (freeholder) is responsible for maintaining the common parts of the building, such as the entrance hall and staircase and the exterior walls and roof. As the leaseholder you will have to pay ground rent, maintenance fees and service charges. You may have to get permission for any major works and there may be restrictions on owning pets and subletting. There can often be disputes between the leaseholder and the landlord (freeholder). Leaseholders often feel they are overcharged as annual charges can amount to well over £1,000 a year. In addition, leaseholders often complain the building and communal areas are not maintained to a high standard.

Remember the shorter the lease the less the property is worth and when the term of the lease goes to zero the property goes back the landlord (freeholder). Therefore, leases of less than 90 years can be problematic and are mostly avoided. If you do buy a leasehold property you need to have a full and detailed understanding of the contract and what this means for you. Leases can be renewed and extended.

Homebuyers are often confused by these two terms. In simple terms exchange of contracts is the point at which a property transaction becomes legally binding. It means both parties are contractually bound to finalise the sale/ purchase on the agreed completion date.

At the point of exchange:

  • Both parties’ solicitors must be in possession of the signed contracts
  • The sellers’ solicitor must hold the signed transfer deed (TR1 form)
  • The buyers’ solicitor is in possession of cleared deposit funds, a mortgage offer and confirmation of building insurance
  • A completion date has been agreed
  • Both solicitors confirm with each other they hold all the required legal documents for the transition to complete. This usually happens over the telephone and is legally binding
  • Once the exchange of contacts happens, if either party pulls out there will often be penalties and a deposit can be lost

Completion is when a property transaction is legally finished and the new owners receive the key to their new home. It takes place on the date specified in the exchange of contracts.

Completion is:

  • The final stage of the property sale/purchase transaction
  • It takes place when the sellers’ solicitor confirms receipt of all monies
  • Ownership is transferred from the seller to the buyer, which includes dating the title deeds
  • A time is agreed to vacate the property and to gain possession of property
  • Buyers are given the keys and are free to move in
  • The completion date is usually about two to four weeks after the exchange of contracts and both parties must agree on the completion date. Completion signifies that ownership and responsibility for the property has transferred from the seller to the buyer.

A property chain is a line of buyers and sellers linked together because each is selling and buying a property from one of the others and each depends upon the other for their transaction to be successful. The chain begins with someone who is only buying, not selling, and ends with a person who is only selling, not buying. The links in the chain are the people in between who need to both sell and buy a property.

Property chains are ultimately about buyers and sellers but in reality there are many parties involved. For example, each link will have an estate agent, surveyor, legal firm and mortgage lender involved. So just think about the impact of one person forgetting to sign a document or dragging their heels and the chain reaction of that. The chain will progress at the pace of the slowest link and the hardest thing to work out who is slowing the whole process down.

Let’s consider how you can avoid a chain. If you are selling and have multiple offers consider choosing someone who is not in a chain, for example, a first time buyer. If you have the time and are not in a rush look to buy a property where the upward chain is short or there is not one, for example, the previous owner has passed away. New builds obviously have no upwards chains. You could also get the vendor of the property to agree on a date they will move out, as some vendors will agree to move into rented accommodation or in with a relative.

Let’s looks at some of reasons property chains fail. One of the most common reasons is that a buyer or seller changes their mind or their financial or personal circumstances change, for example, a separation or a job loss. Other common reasons are a buyer cannot get a mortgage loan to match the offer they made or a survey reveals problems with the property.

If you’re selling a property, make sure you discuss with the estate agent, of the persons who have made offers, which one is most likely to have the least complications and see the purchase through to the end.

You have to pay Stamp Duty Land Tax (SDLT) to the UK government when you buy houses, flats and other land and buildings over a certain price in the UK.

The rate of Stamp Duty ranges from 2% to 12% of the purchase price, depending upon the value of the property bought, the purchase date and whether you own other property.

When do you have to the pay Stamp Duty?

Stamp Duty is typically applied to any transaction that involves an exchange of property. This includes transactions such as:

  • buying a freehold property
  • buying a new, or existing leasehold property
  • buying a share of a property through a shared ownership scheme
  • buying any commercial property
  • buying a buy-to-let property

You may be entitled to certain concessions, for instance if you’re a first-time buyer.

Your solicitor or conveyancer will assist in sending your stamp duty funds for you and you have 14 days after you complete the purchase of your property but they will usually help file a return to Her Majesty’s Revenue and Customs (HMRC) on the completion date.

Usual Stamp Duty Rates:

First Time Buyers for the purchase of a main residence:

  • Up to £300,000: 0%
  • Between £300,001 and £500,000: 5%

Home Movers for the purchase of a main residence:

  • Between £40,001 and £125,000: 0%
  • Between £125,001 and £250,000: 2%
  • Between £250,001 and £925,000: 5%
  • Between £925,001 and £1.5 million: 10%
  • Over £1.5 million: 12%

For the purchase of ‘additional’ property:

  • Between £40,001 and £125,000: 3%
  • Between £125,001 and £250,000: 5%
  • Between £250,001 and £925,000: 8%
  • Between £925,001 and £1.5 million: 13%
  • Over £1.5 million: 15%

(Taken from www.helptobuy.gov.uk)

If you’re a first-time buyer in England, you can apply for a Help to Buy: Equity Loan.

This is a loan from the government that you put towards the cost of buying a newly built home.

You can borrow a minimum of 5% and up to a maximum of 20% (40% in London) of the full purchase price of a new-build home.

You must buy your home from a homebuilder registered for Help to Buy: Equity Loan.

The amount you pay for a home depends on where in England you buy it.

Help to Buy: Equity Loan price caps – April 2021 to March 2023

RegionMaximum property
price
North East£186,100
North West£224,400
Yorkshire and
the Humber
£228,100
East Midlands£261,900
West Midlands£255,600
East of England£407,400
London£600,000
South East£437,600
South West£349,000

The equity loan, the deposit you have saved, and your repayment mortgage cover the total cost of buying your newly built home.

The percentage you borrow is based on the market value of your home when you buy it.

You do not pay interest on the equity loan for the first 5 years. You start to pay interest in year 6, on the equity loan amount you borrowed.

The equity loan payments are interest only, so you do not reduce the amount you owe.

You can repay all or part of your equity loan at any time. A part payment must be at least 10% of what your home is worth at the time of repayment.

Example: for a home with a £200,000 price tag

75% mortgage = £150k, government 20% loan = £40k, buyer's 5% deposit = £10k 

Paying back the equity loan

When deciding if an equity loan is right for you, it’s important to consider the full cost of your borrowing:

For the first five 5 years:

  • the equity loan is interest free
  • you pay a £1 monthly management fee by Direct Debit

 From year 6:

  • pay the £1 monthly management fee
  • pay monthly interest fee of 1.75% of the equity loan
  • interest rate will rise each year in April by the Consumer Price Index (CPI), plus 2%
  • continue to pay interest until you repay your loan in full

When you take out your equity loan, you agree to repay it in full, plus interest and management fees.

You must repay your equity loan in full:

  • at the end of the equity loan term
  • when you pay off your repayment mortgage
  • when you sell your home
  • if you do not follow the terms set out in the equity loan contract and we ask you to repay the loan in full

The amount you pay back is worked out as a percentage of the market value at the time you choose to repay.

If the market value of your home rises, so does the amount you owe on your equity loan. And if the value of your home falls, the amount you owe on your equity loan falls too.

Home Mover Questions:

Mortgage

Here are the key steps in getting a good mortgage deal:

Step 1: Work out how much you can afford

Calculate what your income is and your outgoings and then workout what your maximum budget is for your monthly mortgage payment. This will give you an idea of how much you can afford now and if rates change in the future. 

Step 2: Shop around

There are thousands of mortgages on the market, each with differing rates and fees, so it’s important you don’t settle for the first one you find. Often individuals will go to their existing bank for a mortgage without shopping around and this will always result in a lack of choice and comparison.

Step 3. Use a Mortgage Broker

Choosing a mortgage is complex, so it can be useful to use a mortgage adviser (or ‘broker’), who can advise you on the best deal for your circumstances.  If you want to make sure you’re really getting the best deal, it’s advisable to use a ‘whole-of-market’ broker who will be able to look at every mortgage on the market and recommend the right option for you.


Lenders will assess how much you can borrow on the following factors:

  • Your income
  • Your outgoing expenses
  • Your surplus income after outgoings
  • Whether you can afford an increase in mortgage payments if interest rates increase

In the past, mortgage lenders based the amount you could borrow mainly on a multiple of your income. That multiple usually ranges from 3 to 5 times your annual income.

For example, if your annual income was £40,000, you might have been able to borrow three to five times this amount, giving you a mortgage of up to £200,000.

When assessing your income the lender may include the following types of income:

  • Basic Salary
  • Pension or investments
  • Any other forms of income such as child maintenance and financial support from ex-spouses
  • overtime, commission or bonus payments or a second job or freelance work.

You will need to provide pay slips and bank statements as evidence of any declared income for it to be included in the affordability assessment.

If you’re self-employed you’ll need to provide:

  • bank statements
  • business accounts
  • SA302 details of the income tax you’ve paid.

For outgoings the lender will consider:

  • credit card repayments
  • maintenance payments
  • insurance – building, contents, travel, pet, life, etc
  • any other loans or credit agreements you might have
  • bills such as water, gas, electricity, phone, broadband.

The lender might ask for estimates of your living costs such as spending on clothes, basic recreation and childcare.

Once all of the information and evidence has been collected by your lender this is usually passed on to an underwriter working at the lender who will confirm whether they feel that you can afford the loan amount you are seeking.

Porting is described as taking your mortgage with you when you move when actually it entails repaying your existing mortgage on the sale of your current property, and resuming the mortgage on the same terms with your new property.

Many borrowers will find that even though they can port their mortgage, the rates on offer won’t be that attractive. If that’s the case, it could be worth seeing if it makes financial sense to pay the penalty for leaving your existing lender and getting a new mortgage

If you want to buy a more expensive property and need to borrow more money, porting a mortgage can be difficult and costly. You will need to pass your lender’s affordability checks and you may have to pay a fee to increase your loan or take on another mortgage product at a different rate. You’ll usually have to pay a valuation fee so your lender can check that the new property is worth roughly what you’re planning to pay for it. There could also be an arrangement fee if you have to take out an additional product. Before asking to port your mortgage check with a Mortgage Broker to see if you can get a better deal.

There are several ways you can aim to keep your mortgage costs down:

Don’t stay on a standard variable rate (SVR) mortgage

One mistake that some mortgage borrowers make is staying on the standard variable rate (SVR) mortgage after their introductory rate (whether tracker or fixed) has expired. With SVR mortgages, the provider effectively decides its own interest rates, and they are invariably high.

In effect, the homeowners who have SVR mortgages are paying more than they need to each month it is better to shop around every few years to get the best deal. The only way to stop subsidising other homeowners is either to get one of those rare life-long deals, or to shop around regularly for mortgage best buys. Connect with a Mortgage Broker and get quotes whenever your mortgage deal is up for renewal.

Pay more than your mortgage repayments whenever you can (if you have no penalties)

Interest rates are at a historic low, which means there will never be a better time to get your mortgage down by paying more than your scheduled monthly payments by as much as you can afford to. By paying off more of your mortgage now, you will be in a better position when interest rates do start to rise, and the monthly payments start to hurt.

Low interest rates mean both that your monthly mortgage interest payments are less, leaving you with more flexibility to pay off the capital, and that interest rates on savings accounts are pathetically low. Also, you pay tax on interest earned on your savings, while your mortgage payments must be paid out of post-tax income, making it an even better deal to pay off the mortgage rather than save.

Check with your lender first that there aren’t any penalties to overpaying. Make sure there aren’t any other expensive loans or credit cards that need dealing with first, and once you have a rainy day fund for any problems, you can start using spare income to pay off your mortgage.

Get a deal with daily interest calculation

If the interest on your mortgage is calculated annually, you could still be paying interest on the parts of the loan you have paid off for almost a year after you have repaid it. Getting customers to pay interest on loans they have repaid is an outrageous practice and should be stopped – but some mortgage lenders still practice it.

With daily interest calculation, every payment of capital you make will almost immediately start to reduce the interest payments you have to make. Over the term of a mortgage, mortgages with daily interest calculation will cost you thousands of pounds less than those with annual interest calculation.

Mortgage lenders are likely to be rather coy about calculating interest on an annual basis, so you will probably have to ask them outright.

Increase the period for paying back the loan

This will reduce the monthly payments for all but interest-only mortgages. The downside is that, it does mean you pay more interest in the long run. However you can still overpay if you are ever able to and potentially pay the whole thing back over the original time period. If you do need to take more time, or spend a few months paying a bit less, it won’t be a problem for your lender.

Switch to a cheaper mortgage provider

Is your lender offering the cheapest rate? You may have to pay your existing lender administration fees and any early redemption penalties may apply, but you could still save money by switching mortgage providers. Taking out a mortgage is one time when it really is worth while spending extra effort shopping around as much as possible – there are thousands of deals out there which change all the time, and you may easily be able to save a hundred or two hundred pounds each month. Connect with a Mortgage Broker.

It is a good idea to start the mortgage process as soon as you consider buying as you put yourself in a stronger position with sellers if you have a mortgage agreed in principle.

You could even kick off the process of applying for a mortgage before you even start seriously looking for somewhere to buy. Applying early gives you the knowledge of how much you can afford. This is particularly important if you’re in a more complex financial position, such as being self-employed, or having just started up a company. Many homebuyers end up losing a property because they couldn’t borrow as much as they thought

By applying early, you can also ensure that the home-buying process isn’t derailed by delays and problems with the mortgage. The secret to smooth home-buying is to reduce the surprises as much as possible.

Shopping around for a mortgage will help you get the best deal by comparing whats out there but where do you start?

Decide if you want a fixed or variable rate mortgage.

A fixed-rate mortgage means paying off a set fee each month. A variable rate mortgage means payment rates aren’t set and the amount you need to pay can change.

Compare more than just the rate.

It’s not just about the rate. There are other factors to consider when choosing a mortgage. Make sure you shop around for a deal which works for you and that you can afford. For example, if you’re willing to pay an upfront arrangement fee, you can often get a lower interest rate. If you go for a fee-free mortgage, you’ll probably have to pay a higher rate.

Using mortgage comparison websites

Comparison websites can be a good starting point for anyone trying to find a mortgage tailored to their needs. They have several limitations in fully understanding your situation and you may see a rate that you are not eligible for.

Use a Mortgage Broker

A mortgage broker acts as a middleman between you and potential lenders. The broker’s job is to compare mortgage lenders on your behalf and find interest rates that fit your needs. Mortgage brokers have stables of lenders they work with, which can make your life easier.

 

 

 

Remortgage Questions:

Remortgaging is when you change the mortgage you have currently on your property, either by switching it to a new lender, or by moving to a different lender on a different deal with your existing lender. It can be a good way to find lower interest rates and better mortgage terms.

Look to remortgage when introductory mortgage rate is close to ending, but not before.

Most mortgages have a headline offer that usually lasts for the first two to five years of your mortgage – but this period can be longer, shorter or somewhere in between. Once that offer ends your mortgage rate will revert to the lender’s standard variable rate, which will almost always be higher than what you were paying.

Remortgaging deals also have these headline introductory offers to entice customers to switch from their current provider. Therefore remortgaging can be a great way to potentially save you from paying hundreds of pounds extra in interest each month over the next two years or five years.

However, there are some drawbacks and potentially large fees to pay, which could end up making the remortgage a waste of time and money.

You should generally start looking for a remortgage deal around three months before your current one ends. This will give you enough time to do your research and complete the application process in time to make sure your remortgage deal begins just as your last deal ends.

If your current mortgage is on a fixed rate deal you will want to make sure that your lender’s standard variable rate won’t be a shock to your finances.

If the Bank of England’s interest rate (which heavily influences lenders’ standard variable rates) has dropped since you took out your fixed rate, then you may not want to remortgage, unless you can still get a great variable rate or tracker deal elsewhere.

However, if the bank rate has risen during your fixed rate period, then you will likely want to get another fixed rate deal on a remortgage, which might keep you going on a similarly low rate.

If you are on a discounted variable rate and the rates have risen dramatically, you probably won’t feel the shock as your rate will have risen over that time too. However, you will probably want to move to a fixed rate deal.

Remortgaging essentially is an opportunity to keep paying your mortgage at the introductory rate on a new mortgage deal, ie for longer.

There can be a number of fees that come with remortgaging but lenders will often give incentives such as a free valuation and free legal fees to entice you from your current lender. It is important to determine if the money you will save will outweigh the costs. A lower monthly payment may seem attractive, but it could cost you dearly if you haven’t factored in the costs of remortgaging. 

Do You have Early Repayment Charges?

You may have to pay early repayment charges to your current lender if you choose to leave your existing mortgage deal before it is up – always check. It is important you determine how big this fee may be as it may completely eclipse any savings you may make with a new mortgage.

Repayment charges vary depending on the type of mortgage you are currently on and how long you have been on it. Generally speaking, the early repayment charge reduces with the length of time on the mortgage.

For example, with a five-year tracker, the early repayment charge could be 5% (of the outstanding mortgage debt) in the first year, decreasing by 1% each year of the deal.

If the sums are a little complicated for you to work out, speak to your mortgage broker who will be able to talk you through all the numbers in a way that is easy to understand.

Deeds Release /Exit Fee

The Deeds Release/Exit Fee is paid to your existing lender.  Not all lenders will charge a Deeds Release/Exit Fee.

Arrangement Fees

The arrangement fee is charged by your new lender to set up the new mortgage and is non-refundable if something goes wrong. This fee will vary between lenders and could be a fixed fee or a percentage of the loan amount.

You can pay the arrangement fee upfront to your new lender or you can add it the cost of your mortgage. It should be noted that if you add the fee onto your mortgage, you will be paying interest on it for the entire mortgage term. So, if you can pay it upfront, you will save yourself money in the long run.  Some lenders have fee free products.

Booking Fee
Also non-refundable, a booking fee is charged by some lenders to secure a good rate on your chosen remortgaging deal. This will be paid up-front to your new lender and is usually between £100 and £200.

Conveyancing Fee

Paid to your solicitor, the conveyancing fee covers the legal work required to transfer your mortgage from your old lender to your new lender. Your solicitor will also handle the payment of the outstanding debt to your existing lender.

Some remortgaging deals will include a free legal package, but in these cases, the lender chooses the solicitor and therefore you will not be guaranteed a swift and efficient service. The conveyancing fee usually comes in at around £300.

There may be additional conveyancing fees to be paid to your solicitor if you are remortgaging to buy out a partner or to add someone to the mortgage. Make sure you tell your solicitor this before they go ahead with the paperwork.

Valuation Fee

A valuation is required by a lender for security purposes so that they know that they can recoup their losses following repossession if you don’t keep up with the mortgage repayments. Most lenders cover this cost for remortgages but check with your Broker.

 

With interest rates at ultra-low levels, many people are again seeing remortgaging as a cheap form of borrowing – and indeed, adding £2,000 to a mortgage over 20 years at 3% will cost just £11 a month. However, releasing equity from your home in this way can come with pitfalls.

When interest rates are low, Remortgaging to repay expensive debt such as credit cards and personal loans could be sensible. But if you are converting short-term debt to long-term, you need to think carefully, as you could end up paying back more in the long run.

Adding £10,000 to a mortgage at 3% over 20 years will see your monthly payments go up by about £55, which is much cheaper than the £186 a month it costs for a personal loan for the same amount, assuming a rate of 4.5% APR, paid back over five years .

But the total interest bill for each option shows that remortgaging would cost £6,000 in interest over 20 years and the personal loan £1,161 over five years – £4,839 less.

Having adverse credit history can make getting a remortgage challenging by limiting the number of lenders available to you if you are looking to raise capital.

However, there are lenders who will consider most remortgage applications – get a credit report and contact a mortgage broker to go through your options.

Your deal is about to end.

Many of the best mortgages only last a short time – often two to five years – the typical length of time offered on a fixed rate, tracker or discount mortgage.

When it comes to an end, your lender will put you on its bog standard variable rate (SVR). It’s likely to be higher than your old interest rate and higher than the best buys available. If so, you want to be ready to remortgage to a cheaper rate. Start looking around 14 weeks before your rate ends.

You want a better rate.

If you are tied into an initial deal then you might have to pay an early repayment charge which can be huge, often 2-5% of your outstanding loan. Plus, there is usually a small exit fee (it might call it an ‘admin fee’ or a ‘deeds release fee’) when you repay any mortgage.

This doesn’t mean you shouldn’t consider it as the savings can be huge (especially if you have a large amount of mortgage debt). You just need to do your sums before taking the plunge.

Your home’s value has gone up…a lot.

If the value of the property has risen rapidly since you took out your mortgage, you may find you’re in a lower loan-to-value band, and therefore eligible for much lower rates. Again, you need to do your sums but it’s definitely worth a look.

You’re worried about interest rates going up.

Whoa there! Before you panic, you need to check what is meant by rates going up. If it’s the Bank of England base rate that is predicted to go up (currently the rate’s only 0.1%), this may affect your mortgage payments directly, depending on the type of mortgage you have. If it’s the rates that new customers are being offered, then this doesn’t automatically mean yours will be affected.

You want to overpay & your lender won’t let you.

Perhaps you’ve had a pay rise or maybe you’ve inherited some money. You now want to pay extra but your current deal won’t let you or it will only let you make a small overpayment.

A remortgage will allow you to reduce the loan size and potentially get a cheaper rate as a result. But watch out for any early repayment charges or exit fees you face, and compare this to how much you’d save with the new, lower mortgage.

You want to borrow more.

Perhaps your current lender has said no to lending you extra money or the terms it’s offering aren’t very good. Remortgaging to a new lender might enable you to raise money cheaply on low rates. But remember to take all the fees into account to see if it really is cheaper than other forms of borrowing.

The new lender will ask you what the extra money is for. Surprisingly, it is likely to be more comfortable with you borrowing the money for a new car than for business purposes. Not so surprisingly, it won’t want to lend you money to start a new business….

The most commonly acceptable reasons to raise money are for home improvements and paying off other debts. Just be prepared for your lender to ask for evidence if you are borrowing a large amount, e.g. builder quotes, or proof that you have paid off the debts.

There are a few scenarios where remortgaging can result in big savings, provided you act in good time and get the right deal: 

  • If your Fixed rate is coming to an end, by switching to a new deal you potentially can save thousands.
  • When any mortgage deal comes to an end (fixed or tracker) you will usually revert to a lenders Standard Variable Rate (SVR) which is nearly aways higher than what would be available to you on the open market.
  • If your property has gone up in value you may qualify for a better rate as your Loan To Value (LTV) puts you in a better interest banding.

 

If you have been paying your mortgage on time it is rare for a lender to refuse your remortgage however in certain circumstances they may refuse such as:

  • You’ve missed payments recently
  • You’ve had a default or a CCJ since the mortgage started
  • You’ve taken on lots of credit in a short space of time
  • The lender has calculated you will no longer be able to make the repayments
  • You have become self-employed or are a contract worker now and can’t prove you have consistent income

You won’t always need a conveyancing solicitor if you remortgage. If you’re just getting an advance (i.e. borrowing more on your existing mortgage deal with your existing lender) then there are no legal charges involved in the transaction, only charges associated with increasing the loan and repayments.

If you remortgage with your current lender, by simply moving to a new rate or deal, it’s considered a “product transfer” and requires no additional legal work.

Otherwise, yes, a remortgage will require you to have a solicitor or conveyancer to help with the legal side of things.

Approach your current lender who will assess your current affordability and equity available in your property.

If you have no joy there, contact a broker who may be able to help you with a different lender.

Major home improvements, such as an extension or loft conversion, can add significant value to your property. This kind of renovation work is traditionally paid for through savings or a personal loan but you can add debt to your mortgage instead.

In the grand scheme of things, an extra £50 or £100 a month might not seem like a huge amount, but remember that this is being added to the total cost of your mortgage, which you could be paying for 25 years or more and the overall interest you pay could be significantly higher.

With a mortgage product transfer you’re able to change your current mortgage product to a new one with the same lender. You may choose to do this when your current mortgage deal is coming to an end or if you’re looking to lend more money using your house as security.

Some people do this if they’re looking to extend or refurbish their house. You may also wish to move from a Standard Variable Rate mortgage to Fixed Rate, Tracker or Discounted Rate mortgage if interest rates have increased.

When transferring your mortgage product, you can look to take out more than your current mortgage balance or original loan. If this is the case, your lender will need to ensure the additional lending is affordable for you, and may take into consideration several eligibility factors before guaranteeing to lend you more money. These include but are not limited to:

  • Employment status
  • Income & expenditures
  • Age
  • The amount of equity you have in your home

Benefits of a Mortgage Product Transfer

Both a mortgage product transfer and remortgaging offer their own advantages and disadvantages. However, in comparison to remortgaging, a mortgage product transfer usually means there is:

  • Less paperwork than a remortgage
  • Few to no fees
  • No need for a new property valuation
  • No legal work so no solicitor costs

In addition, some lenders  acknowledge loyalty of existing customers and offer preferential rates to those looking to transfer to a new mortgage product.

Changing to a new mortgage deal can sometimes result in an early repayment charge (ERC) from your lender. This happens if you want to remortgage before the early repayment period has elapsed. It may reduce or even eliminate the savings you could make by remortgaging, so it’s important to know what ERCs might apply to your mortgage if you want to switch deals.

What is an early repayment charge?

An early repayment charge (ERC) is a penalty your provider may charge if you overpay on your mortgage by more than they allow, or pay off the whole loan too early. Many deals have a tie-in period, which is often longer than the deal period itself. For example, a two-year fixed rate mortgage might charge you an ERC if you try to remortgage within three years. This might require you to spend at least a year on the lender’s standard variable rate (SVR) unless you are willing to pay the charge.

If you are willing to pay the ERC, you may be able to choose whether to pay it up front or add it to your new mortgage if you are remortgaging. Bear in mind that you’d then pay interest on the ERC.

Your mortgage illustration will tell you whether your mortgage has an ERC attached and how much it would be. 

What is a typical amount for an early repayment charge?

An ERC is usually a percentage of the outstanding mortgage and typically between 1 per cent and 5 per cent. Although just 1 per cent might not look like a huge penalty, it is still a lot if your outstanding balance is high (for example, 1 per cent on a £200,000 loan is £2,000).

Sometimes the percentage reduces the longer you’ve had your deal, which is often the case for big high-street lenders like NatWest, Nationwide, Halifax, HSBC and Lloyds Bank.

Can I get a mortgage without an ERC?

There are some types of mortgage that don’t carry an ERC – they’re usually tracker or standard variable rate (SVR) deals. However, your mortgage normally automatically switches to an SVR once your initial deal ends – remortgaging is often about avoiding the SVR, which can be a lot more expensive.

When you are on an SVR, the amount of interest you pay depends on the bank’s own rate, meaning the amount you pay each month can go up or down. Tracker mortgages work in a similar way, but move up and down in response to changes in the Bank of England’s base rate.

A mortgage broker can help you find the more attractive mortgage deals out there that have no (or low) ERCs.

How can I avoid paying the ERC when I remortgage or move house?

You can’t avoid paying the ERC unless you wait until your mortgage deal ends and no fee applies. However, if you’re switching mortgage to get a much better deal, you may find that over time the lower interest rate outweighs the cost of the ERC. Therefore it’s worth doing some sums to work out how much you’d save over the total deal period of your new mortgage, to see if it outweighs the cost of the ERC.

In most cases, the lowest cost option is simply to wait until the early repayment period expires, even if this means spending a short time on an SVR mortgage. Another option is to find a mortgage where the ERC only applies up to the end of the deal period (so you never have to go onto SVR). If you are remortgaging, make sure your new deal doesn’t start until the end of your current deal’s tie-in period, otherwise you will be charged.

When you divorce or dissolve your civil partnership, there are several options you have about what you do with the family home.

You might decide to:

  1. Sell the home and both of you move out. You could use the money you’ve raised to put towards buying another home for each of you, if you can afford to do this.
  2. Arrange for one of you to buy the other out.
  3. Keep the home and not change who owns it. One partner could continue to live in it, perhaps until your children are 18 or leave school.
  4. Transfer part of the value of the property from one partner to the other as part of the financial settlement. The partner who gave up a share of their ownership rights would keep a stake or ‘interest’ in the home. This means that when it is sold he or she will receive a percentage of its value.

Dividing the home in England or Wales

In addition to the options outlined above, a court in England or Wales can defer the sale of the home through what’s called a ‘Mesher’ order.

This can put off the sale of the home until a specific event triggers the sale – for example, the youngest child turns 17 or 18.

The net sale proceeds are then divided in accordance with the court order.

A court can also use a ‘Martin’ order to defer the sale of the house, but importantly it gives one person an entitlement to occupy the property for life or until remarriage.

This is most often used where the couple don’t have children and the other person does not immediately need the money to put towards their own needs.

Prioritising the needs of your children

Although most couples who divorce or dissolve their civil partnership don’t go to a full court hearing to settle financial disputes, it’s a good idea to have an understanding of what the courts would decide in respect of the family home.

If you have children, especially if they are young, the court will take into account the fact that they need somewhere suitable to live with each parent.

The approach taken by the court does vary slightly around the UK and the eventual outcome will also depend upon your own individual circumstances.

As parents, it’s important to keep the needs of your children uppermost in your minds at all times during a divorce or dissolution.

This includes trying to disrupt them as little as possible.

However, many families will experience some “downsizing” as a result of a divorce or dissolution.

Sorting out a joint mortgage

Many couples who have a joint mortgage and who divorce or dissolve their civil partnership try and sort out the mortgage so that only one partner has their name on it.

Whether this is possible will depend on the couple’s financial circumstances.

The advantages of doing this are:

The person whose name is taken off the mortgage should be able to borrow more to buy themselves a home than if their name was still on their ex-partner’s mortgage.
The person who stays in the house doesn’t have to rely on their ex-partner for their mortgage.
Both partners might be able to break the link that ties their credit files together. If you have a joint debt with your ex-partner (such as a mortgage or a loan), your credit files are connected. That means how you manage your debts will affect your ex-partner if he or she applies for credit, and vice versa.

Talking to your mortgage lender

If you want to take over the mortgage in your name alone, the lender will want to make sure that you can afford the payments.

Under Financial Conduct Authority (FCA) rules, lenders must ask in-depth questions and carry out more checks to make sure that you can afford a mortgage.

Options if you can’t afford the mortgage on your own

If you can’t afford to take over the mortgage, you might be able to get a ‘guarantor mortgage’.

This is a mortgage where a close relative (or your ex-partner) agrees to guarantee the mortgage payments if you can’t.

Becoming a guarantor is a serious legal step as it means you are responsible for paying the whole mortgage if the mortgage borrower cannot.

Make sure the would-be guarantor takes independent legal advice and talks to a mortgage broker before they agree to anything.

Source: moneyadviceservice.org.uk

Second charge mortgages are a secured loan, which means they use the borrower’s home as security. Many people use them to raise money instead of remortgaging, but there are some things you need to be aware of before you apply. 

How does getting a second mortgage work?Wondering if you can get a second mortgage? Well, you’re only eligible for one if you’re already a homeowner.

That said, you do not necessarily need to live in the property.

A second charge mortgage can be a loan of anything from £1,000 upwards.

Just like with any mortgage, failing to repay it could mean you’ll lose your home.

How much can I borrow on a second mortgage?
A second charge mortgage allows you to use any equity you have in your home as security against another loan.

It means you will have two mortgages on your home.

Equity is the percentage of your property owned outright by you, which is the value of the home minus any mortgage owed on it.

For example, if your home is worth £250,000 and you have £150,000 left to pay on your mortgage, you have £100,000 in equity.

That means £100,000 is the maximum sum you can borrow.

Can I get a second mortgage?
Lenders now have to comply with stricter UK and EU rules, governing:

mortgage advice
affordable lending
sealing with payment difficulties.
This means that lenders now have to make the same affordability checks and ‘stress test’ the borrower’s financial circumstances as an applicant for a main or first charge residential mortgage.

Borrowers will now have to provide evidence that they can afford to pay back this loan.

Why take out a second mortgage?

There are several reasons why a second charge mortgage might be worth considering:

  • if you’re struggling to get some form of unsecured borrowing, such as a personal loan, perhaps because you’re self-employed
  • if your credit rating has gone down since taking out your first mortgage, remortgaging could mean you end up paying more interest on your entire mortgage. A second mortgage means extra interest just on the new amount you want to borrow
  • if your mortgage has a high early repayment charge, it might be cheaper for you to take out a second charge mortgage rather than to remortgage.

What if you move house?

If you sell your home, you will need to pay off your second charge mortgage or transfer it to a new mortgage.

When not to use a second mortgage

Although second mortgages can be useful, taking one out is a big step and you need to weigh up the pros and cons. Don’t get a second charge mortgage:

  • if you’re already only just managing to repay your mortgage. You could lose your home if you cannot keep up repayments on either your mortgage or the second charge mortgage
  • if you want to consolidate debts. Using a second charge mortgage – which can run for up to 25 years – to pay off smaller debts, such as credit cards or small unsecured loans, will mean you might end up paying more interest in the long term. You are also converting unsecured credit into secured credit, which could increase the risks of having your property repossessed.

Some things to consider before taking out a second mortgage

Before you take out a second charge mortgage, it’s a good idea to get advice from a suitably qualified advisor.

They will be able to help you find the loan that best meets your needs and financial situation.

They will have to follow the rules as set out by the FCA when dealing with you. These rules are designed to protect you.

If you choose not to get formal advice, you run the risk of taking a loan that isn’t suitable for you.

If this happens, you might find it difficult to raise a successful complaint.

When you’re looking into a second charge mortgage, make sure you:

  • approach your existing lender and ask them what they would charge for an additional loan
  • shop around – make sure you get the best rate by comparing lenders’ APRC (annual percentage rate of charge), the duration of the loan and the total amount you’d have to pay back
  • Find out the exact mortgage terms, fees, early repayment charges and rates of interest.

(source: www.moneyadviceserve.org.uk)

Buy to Let Questions:

The property market has ups and downs so it is possible to lose money if property value goes down, your outgoings exceed rental yield, or if the property is vacant for a period of time. So being a landlord is a medium to long term investment risk.

Expenses
Fees associated with property purchase:

Stamp duty
Valuation
Property survey
Legal costs
Mortgage arrangement fees (If you already have a property with a standard mortgage you will need to seek your Lender’s permission to rent it out)
Income tax is payable on your rental income, minus day to day running costs. There are specific rules for overseas landlords
If renting your property counts as running a business then you will need to pay Class 2 National Insurance
Day to day costs
It is important to factor in the day to day running costs of a property into your calculations for rental yield.

Here is a list of some of the main costs:

Letting agent’s fees
Mortgage interest
Redecorating
Landlord’s insurance
Annual safety checks (on the boiler, etc.)
Rent insurance (designed to protect you against having tenants in arrears or failing to vacate your property)
General building maintenance

The return on your buy-to-let property is called the rental yield and is dependant on a number of factors – type of property, location, market conditions and conditions of the property.

Gross Yield

The annual rent divided by the purchase price, expressed as a percentage.

Net Yield

The net yield is the annual rental income on your buy-to-let property, less costs such as repair costs, fees and void periods and some mortgage costs, divded by the purchase price, expressed as a percentage. The net yield can be a lot less if your costs are high. Cheaper buy-to-let properties provide provide a better annual yield and it is often recommended to look for a rental yield in the region of 130-150% of your mortgage payments.

If you want to let out a property to tenants, you usually need a special buy-to-let mortgage. If you are a homeowner, the terms of your mortgage may not allow you to rent out your home unless you obtain something called consent to let. Letting out a room without the permission of your lender is classed as mortgage fraud, even if you are in the process of switching to a buy to let mortgage.

However, you don’t necessarily need to remortgage if you want to let out your home – particularly if this is only for a short period of time. Here you can find out more about consent to let and when you might need to switch to a buy-to-let mortgage.

Renting out your home for a short period

There are a lot of reasons you may want to rent out your house, or let just one or two rooms in your home. You may be in the process of switching to a buy to let mortgage, or helping a friend out for a few months. Alternatively, you might be working abroad for a few months, and want to let out your home temporarily in the meantime.

However temporary or minor the letting arrangement may be, you will still need the consent of your lender if you want to avoid breaking the law.

Renting a house without a buy to let mortgage

Remember, if you don’t have your lender’s written consent to let, you can’t let out your home without a buy-to-let mortgage. Most residential mortgages include a clause about this in the agreement. If you violate that agreement, you will open yourself up to extra charges or raised rates, and may even be asked to pay of your entire mortgage immediately. And since it will now be much harder to remortgage (because you’ve blighted your credit record by violating your mortgage agreement), you may have to sell your home. In short, don’t!

The good news is that it’s fairly easy to get consent to let to cover you for a short time, such as during the changeover period to a buy to let mortgage or move to a new house. Most lenders will be happy to give you temporary permission to take on tenants while still under the terms of your normal mortgage.

What is consent to let?

A consent to let agreement (also known as a ‘lease permission period’) allows you to alter the conditions of your residential mortgage agreement for a short period of time and rent out some or all your home. Many lenders offer this, but there are usually a few conditions to be met. Firstly, you need to be fully up to date with your normal mortgage payments. Secondly, you need to show that you plan to rent out your home using a legally acceptable tenancy agreement, such as an assured shorthold tenancy.

It’s important to remember that consent to let is a short-term arrangement. It does not grant you lease permission over the long term, and is not a permanent change to your residential mortgage. Instead, most lenders see it as a way of helping you deal with big changes that might mean you have to move out for a few months (e.g. work, travel, caring for family members, preparing to move abroad and so on). If your aim is long-term renting, you can use your consent to let while converting your residential mortgage to a buy-to-let – but don’t delay in getting this process started.

When should I seek consent to let?

There are many reasons why you might want consent to let, and your lender should be happy to help you benefit from renting in the right circumstances. For example:

  • You have to live further afield for work and want to take on a tenant to cover the costs of renting a new property.
  • You want to move in with your partner and would like to let out your existing property while you’re waiting to sell it.
  • You need to move in with a friend or family member to provide care.
  • You are a member of the armed forces and have been redeployed to another area.

If you want to rent out your home and have no plans to live there yourself for the foreseeable future, you need to get started on switching to a buy to let mortgage. But if you want to start letting the property before the new mortgage takes effect, you’ll need consent to let.

What are the benefits of consent to let?

Consent to let obviously guards you against committing mortgage fraud. But as a bridging mechanism while you change your mortgage, it has important benefits:

  • It reduces stress in times of upheaval. Having to relocate for any reason is a major undertaking, and changing your mortgage at the same time is an additional burden. Consent to let gives you more time and space to arrange this.
  • With consent to let, you can try out letting your home without fulling committing yourself to it. Then you can easily change your mind if things don’t work out.
  • It’s quick and straightforward to arrange, so much easier than remortgaging (though you will have to do this soon).

The location of the property you go for is key to attracting the right kind of tenant. Bear in mind the distance to schools, supermarkets and shops, public transport links, and even the local GP, as being closer to these things is likely to raise your property’s appeal. If you want to let out to students, being nearby their university is important to consider

Experienced landlords will focus on areas where the rental yields are highest and the top 25 Buy-to-let areas in 2019-2020 that are delivering the best yields are listed below. The highest is Liverpool, where landlords can enjoy 10% yields. Coming a close second and third are Falkirk (9.51%) and Glasgow (8.71%). With two of these being renowned university cities, the consistent flow of potential tenants puts landlords in a healthy position.

Even the postcodes at the lower end of the top 25, such as Sunderland and Lancaster, are returning yields of around 7%.

(Source: totallymoney.com)

RankPostcodePostcode TownProperties for RentMedian Rental ValueProperties for SaleMedian Asking PriceYield
1L1Liverpool187£750368£90,00010.00%
2FK3Falkirk30£49539£62,4509.51%
3G52Glasgow46£59566£82,0008.71%
4L11Liverpool55£65031£90,0008.67%
5TS1Cleveland65£42534£60,0008.50%
6KA1Kilmarnock68£45075£64,9958.31%
7L6Liverpool153£57559£85,0008.12%
8LE1Leicester176£667116£100,0008.00%
9LS2Leeds111£82532£125,0007.92%
10S1Sheffield219£75068£115,0007.83%
11CF43Cardiff36£42535£67,0007.61%
12TS3Cleveland60£47563£74,9757.60%
13L2Liverpool115£850106£135,0007.56%
14PA3Paisley42£42543£68,5007.45%
15L3Liverpool282£740360£119,9507.40%
16SR8Sunderland85£450143£73,7257.32%
17G51Glasgow74£59531£97,5007.32%
18NE8Gateshead148£57575£94,9507.27%
19AB11Aberdeen173£60045£99,9957.20%
20G67Glasgow57£45065£75,0007.20%
21G32Glasgow46£47576£79,9957.13%
22L4Liverpool136£47594£80,0007.13%
23G21Glasgow30£55031£92,9957.10%
24LA14Lancaster50£500128£85,0007.06%
25SR5Sunderland46£49540£84,9506.99%

Renting out your property comes with a great deal of responsibility to ensure the safety of your tenants as well as protect your rental property. Therefore, if you’re a buy-to-let landlord, you should consider purchasing a specific landlord insurance policy rather than a standard home insurance policy. While it’s not a legal requirement to have this insurance, it provides peace of mind that if something was to go wrong you have protected your property investment.

The types of insurance available to landlords:

Landlord buildings and content cover – to protect your assets

Buildings cover and contents cover should be at the core of your insurance policy, which could cover you in the event that your property is damaged or your contents are damaged or stolen. If you have added extra buildings to your property, such as a conservatory or shed, get in touch with your insurance company to make sure that your property is covered for the correct amount and you have declared any structures of non-standard construction.

You may also need to increase the sum insured on your insurance policy if you install additional fixtures at your property such as solar panels.

Loss of rent cover – covers lost income if your property is uninhabitable after damage

Loss of rent cover is designed to cover your income if your property becomes uninhabitable for your tenants because of unexpected disasters, such as a fire, a flood or storm damage. There are also options available for covering you for theft or malicious damage by tenants, which may cause you to lose out on rental income.

Property owners’ liability – for injured tenants or damage to their property

Property owners’ liability is a cover that can give financial protection in the event that there is a large compensation claim against you following an injury on your premises that is deemed to be your fault.

An example of this would be if a slate tile fell off the roof and hit your tenant’s car, you could be liable to pay for the damage, which could be substantial.

Commercial legal protection – to protect your rental property if you take legal action

Legal protection is an insurance cover that will help you to cover the costs of legal action, whether this is because someone is taking action against you, or you are defending yourself. Unfortunately, there is little that can be done if a tenant doesn’t pay you rent or decides to destroy your property outside of taking them to court, which can be an expensive process.

 

 

Stamp duty rates have temporarily been cut but generally the table below shows the usual buy-to-let stamp duty rates in England and Northern Ireland:

  • £0 to £40,000*: 0%
  • £0 to £125000**: 3%
  • £125,001 to £250,000: 5%
  • £250,001 to £925,000: 8%
  • £925,001 – £1.5m: 13%
  • £1.5m+: 15%

Rates also apply to second homes and holiday homes. *If total property price is £40,000 or less. **If total property price is more than £40,000.

When you’re buying a property you don’t intend to live in for most or all of the time – e.g. a buy-to-let property or holiday/second home – you’ll have to pay 3% extra in stamp duty.

The main exception to this is people who’ve never owned a property before and are investing in buy-to-let property as first-time buyers, who will pay standard home mover rates. Second home and buy-to-let stamp duty rates are tiered, like residential stamp duty rates and income tax. 

  • Announced in the Summer Budget of 2015, and introduced on 6th April 2017, Section 24 is an amendment to UK Tax Law. It means the amount of income tax relief landlords receive for residential property finance costs will be restricted to the basic rate of tax. The changes will be introduced in a phased approach with the elimination of tax relief on mortgage interest payments taking place as follows:
    • Landlords currently can offset 75% of their mortgage interest vs. rental income
    • From April 2018, this will fall to 50%
    • In April 2019, this will fall again to 25%
    • In April 2020, it will be reduced to 0% and will be replaced by tax credit of 20%, limiting the short-term impact
  • Section 24 applies to:
    • Landlords who are UK residents with residential rental properties, regardless of location
    • Non-UK resident landlord with residential rentals based in the UK
    • Partnerships and Trusts with residential rental properties
  • The perceived Government objective of Section 24, otherwise known as the ‘Tenant Tax’, is to reduce the number of ‘accidental’ landlords operating in the market. Encouraging landlords to become professional property businesses is expected to improve the stability and profitability of the sector to the benefit of landlords and tenants alike.
  • The revised relief will be incorporated as part of 2017 tax returns, due to be filed by 31st January 2018.

Impact

  • According to figures released in March, approximately 8.2 million people in England alone will be affected by the changes
  • There are concerns that a number of landlords plan to leave – or have already left – the market. According to research conducted by Simple Landlords in July:
    • The elimination of tax relief is landlords biggest concern, with 25% of all landlords deeming it the no.1 market issue, including 28% of single property owners
    • 47% of our customers surveyed said that the Government’s tax policy had forced them to change their investment strategy. 6% of landlords we spoke to plan to exit the market as a result of the changes.
  • If landlords do exit the market, it could lead to a shortage of rental properties, which could increase rents and drive rates of homelessness higher.
  • Experts say higher and additional rate taxpayers will be hit hardest by the changes
    • Buy-to-let landlords in the 40-45% tax bracket will pay more tax
    • Landlords in the 20% bracket could pay more if their gross income exceeds £45k. This could also impact child tax credits and student loan repayments.
    • In April, the National Landlords Association estimated that in 2017 alone 440,000 landlords would be pushed into a higher tax bracket by either moving basic-rate tax payers into a higher rate tax bracket, or higher-rate tax payers moving to an advanced rate, as a result of the changes.
  • The combined effect of reduced cash flow when making payments on account and new restrictions to borrowing as a result of new Prudential Regulation Authority (PRA) regulations could result in a ‘double whammy’ for landlords, which will also impact their borrowing.

The bottom line

  • Tax will be calculated on rental profits after costs (including property maintenance) have been deducted. However, interest and other finance charges will be excluded from any tax savings.
  • Once tax has been calculated landlords will be able to offset 20 per cent of finance charges against the tax due.

Example:

A landlord with a annual salary of £35,000 collects £12,000 in rent annually from a property. This includes costs (£2,000) and mortgage interest (£5,000).

Total taxable income is £40,000, currently below the threshold for the higher rate in income tax.

According to the current regime, the landlord would pay tax of £1,000 on his property income annually.

In first year of the changes, a quarter of the landlord’s interest payments are taxed at the basic rate, which has no ultimate impact on his/her tax bracket. In the second year, however, with only 50% of his mortgage interest charged the basic rate, it results in paying higher-rate tax on £35 of his/her income.

By 2020/21, 100% of mortgage interest is charged at the basic rate, but 20% of it is relieved. This results in an increased tax burden of £1,507, or £507 more than in 2017/18.

Paying tax on a greater percentage of mortgage interest, combined with other sources of income, pushes the landlords into a higher tax bracket.

How to manage Section 24

There are several options for landlords to negate the impact of Section 24, which include trimming expenses in other areas, or changing the way their businesses are run – and therefore taxed. Each option will depend up on a landlord’s personal circumstances, but they include:

  • Incorporate and become a limited company – which is exempt from Section 24. However, landlords should take time to consider their options, and should bear in mind that transferring properties to a limited company is likely to incur stamp duty and capital gains tax – as well as remortgage fees and early repayment penalties from lenders. And then in addition to paying corporation tax on profits, landlords will be taxed when they withdraw money from the company.
  • Investing in commercial property is another means of avoiding section 24, so diversifying the portfolio as always remains a good option.
  • Place the portfolio in a Beneficial Interest Company Trust This entails transferring interest, but does not require re-mortgaging. It also involves switching from income to corporation tax. However, this will incur professional fees which may prove prohibitive.
  • For those in a partnership business, where one of the partners occupies the lower 20% tax rate, switch the division of profits to reduce the tax payment. Bringing an unemployed partner or spouse into the business will achieve the same benefit.
  • Re-mortgaging it allows the landlord to capitalise on historically low interest rates, particularly for those with significant equity. Lower monthly repayments will offset any increased tax burden.
  • Avoid the higher tax bracket. This can include making higher pension contributions or more gift donations.
  • Increase Rent to offset the loss but without straying into a higher tax bracket.
  • Shrink or diversify the portfolio, especially if some of the properties are underperforming. This could include adding commercial properties, which will not incur the tax relief penalties as residential properties.
  • Develop a business plan This is a requirement for the new Prudential Regulation Authority (PRA) lending regulations, but in any case makes good business sense to ensure investment is being maximised and profitability managed.

(Source: www.simplelandlordinsurance.com)

As a landlord, you could invest in buy to let (BTL) properties through a limited company instead of in your own name. Here’s how to find out if this could help you save money and pay less tax.

What is a limited company buy to let?

It is a mortgage you can use to buy investment properties through a limited company instead of in your own name.

Buying a property through a limited company is now cheaper for some landlords, as the laws on buy to let taxation have made investing in property more expensive.

Where can you find a limited company BTL mortgage?

Contact a mortgage broker for quotes on Limited Company buy-to-lets.

How does it work?

When you invest in property, the buy to let mortgage is usually in your own name.

One alternative is to buy investment properties through a limited company.

Technically, the company owns the properties, and the mortgage is taken out in the company’s name.

You do this by setting up a special purpose vehicle (SPV) limited company, which is technically a small business set up in your name.

You pay money into the company, which is used as the deposit when you purchase properties. A limited company buy to let mortgage covers the rest of the property’s price.

You need to set up the company before the mortgage begins. But you can apply for the mortgage before this, and there is no minimum time your limited company has to be trading for.

Are they better than standard BTL mortgages?

Pros

  • Could save you money in tax
  • Keep your own finances separate
  • Claim mortgage interest as a business expense

Cons

  • Initial setup costs
  • Extra paperwork and admin
  • Limited company BTL mortgages can be more expensive

Normal buy to let mortgages are taxed as part of your own personal income. This means you pay capital gains tax (CGT), and tax on the income you make from rent.

The advantage of a limited company buy to let is that you pay corporation tax instead, which can work out cheaper for some investors.

Corporation tax is charged at 18%, and companies can claim mortgage interest as a business expense. You still usually have to pay stamp duty on a limited company buy to let.

(Source: www.money.co.uk)

If you’ve decided to set up a limited company to manage your buy-to-let business, there are two avenues you can pursue.

One is to set up a trading company, which operates in the same way as any other business. And the other is to set up a ‘Special Purpose Vehicle’, or SPV. Here is  why you might want to consider the SPV route when setting up a limited company.

When it comes to getting a mortgage on a buy-to-let property, it can be easier for the mortgage provider to underwrite the application from an SPV than from a normal trading company. As a result, more mortgage products are available to SPVs than other limited companies.

This is because all of the SPV’s income and liabilities are tied to the property, making it simpler to assess whether the SPV can cover the mortgage repayments and management fees.

You can still get a buy-to-let mortgage if you register as a trading company rather than an SPV; you’ll just have less choice about the mortgage providers (and mortgage products) that you can use. Trading companies’ multiple income streams and multiple liabilities make them a bigger risk for mortgage providers.

How do you set up an SPV?

You can ask your accountant to do it, or you can do it online yourself. It costs less than £20.

You’ll need to identify a five-digit ‘SIC’ code that applies to your business. This official code is used to classify your business, and every business has one. You can view the full list online, but many buy-to-let landlords find their activities fall under SIC code 68209.

You’ll need:

  • A company name. You’ll need to choose something that nobody else has – and you can search the existing register to see if someone else has used your idea before.
  • A company address. This must be a physical address in the UK; you can use your own home address, but be aware this will be visible on the Companies House register. If you have an office, consider using that instead.
  • At least one director. They need to be at least 16 years old.
  • Details for the shareholders. The shareholders are the owners of the business, and can be the same as the directors. You need at least one, but can have as many as you like.

You also need:

  • A memorandum and articles of association. These record the shareholders’ agreement to form the company, and the written rules. There are templates available from GOV.UK.
  • Details of anyone with significant control. This includes anyone with 25% of more of the shares.

25%

 
The minimum deposit for a buy-to-let mortgage is usually 25% of the property’s value (although it can vary between 20-40%). Most BTL mortgages are interest-only. This means you pay the interest each month, but not the capital amount. At the end of the mortgage term, you repay the original loan in full.

Getting on to the property ladder has become difficult in recent times. Purchasing a buy to let as your first property can be even more of a struggle. The main reason why buy to let mortgages for first-time buyers can be difficult is that lenders often see first-time buyers as high risk.

That said, lenders do provide buy to let mortgages for first-time buyers under certain circumstances. Trying to find suitable lenders can also prove difficult. If you approach an unsuitable lender, it can result in you being declined. Not only is this a waste of your time and money, but it can also damage your credit score.

It’s usually the norm for first time buyers to purchase their own home before becoming a landlord. Once you’ve got your first mortgage, securing a buy to let mortgage can become easier. This is because lenders can assess your mortgage conduct and whether or not payments have been made on time.

Purchasing a buy to let property can be a great investment, but being a landlord entails a lot of responsibility. Having the experience of being a homeowner can provide you with an invaluable insight into what you may encounter as a landlord.

On the other hand, you might not need a mortgage for a home, as you perhaps live with parents or a partner. You may have inherited a property that you let to tenants and now want to add to your portfolio. No matter what the reason, investing in a buy to let property can generate you a monthly income.

You can also reverse the roles, as being a landlord before you purchase your first home can give you an insight and experience in property. The income generated from your buy to let can also be used to help purchase your first home.

You may want to purchase a buy to let and move into the property yourself after a few years. You can switch a buy to let mortgage to a residential mortgage. It’s also possible to switch a residential mortgage to a buy to let mortgage. Often enough, your current lender may be happy to do this, depending on your mortgage conduct.

Buy to let mortgage rates for first-time buyers

The majority of buy to let mortgage lenders require borrowers to have at least a 20-25% deposit. As a first time buyer applying for a buy to let mortgage, the deposit amount is likely to be higher, but not in every case.

Loan to value ratios (LTV) for first-time buyer mortgages are a lot lower when compared to buy to let mortgages. For instance, it’s possible to secure a residential mortgage on a 95% LTV, whereas buy to let mortgages usually start from 75% LTV. This is another major reason why becoming a homeowner can be easier than becoming a landlord.

Landlords usually choose interest-only mortgages as opposed to repayment mortgages. Interest-only mortgages allow landlords an increased profit on rental income each month. This is because landlords are simply paying interest on the mortgage and not repaying any of the actual loan back. The drawback is that at the end of the mortgage term, you wouldn’t own the property.

The main advantage of having a repayment mortgage is that you’d own the property outright once the mortgage has been fully repaid. The drawback of this is that monthly mortgage payments are higher, limiting your rental profits.

If you want a buy to let mortgage as a first-time buyer, be sure to consider the differences in costs and how each mortgage is structured. Securing an interest-only mortgage on a residential property is currently not possible.

Can I use a guarantor for a buy to let?

Using a guarantor for a mortgage is more commonly used for residential purposes rather than property investment. That said, some lenders may consider the use of a guarantor, especially if your assessment falls just short of approval.

It’s important to understand that every lender has a unique mortgage assessment. One lender may approve a buy to let mortgage with a guarantor, whereas another lender may not require a guarantor. This is why having an advisor on board can be so valuable.

It’s also important to note that lenders assess buy to let mortgage affordability in a completely different manner to residential mortgages. Underwriters are highly focused on the rental income that a buy to let property can achieve. This is normally at the forefront of whether or not a buy to let mortgage is approved. There are of course other factors, such as your credit score, however, potential rental income is a huge factor when it comes to getting approved.

Broker Questions:

A mortgage broker specialises in finding lenders who will meet your needs for a mortgage. They do this by providing you with advice and recommending the mortgages most suitable for you. They will then manage completing your mortgage application. Mortgage brokers are regulated by the Financial Conduct Authority (FCA) and need to achieve specific qualifications to be a mortgage broker.

Mortgage Brokers will complete an assessment of your current situation and ensure that you are getting the right mortgage deal for your needs. 

The main role of the Broker is to try an save you money by recommending mortgages within your best interests and because they have access to a number of lenders and broker-only offers they should be able to save you money by shopping around for you.

Mortgage brokers can save you A WHOLE LOT OF TIME.

Your broker should:

  • Use their experience and qualifications to assess your needs and choose the right products
  • Conduct detailed research in the mortgage market to find the right lender and products that best match your needs
  • Complete and agreement in principal and the full application for you
  • Track and progress your application and keep you updated from start to finish

Using a broker can save you hours and hours of time.

A mortgage broker will only recommend mortgages that are most relevant to your requirements and they must be qualified to give mortgage advice to you. They will also be able to access mortgage deals not available directly to the public and will have an intimate knowledge of which lenders are most likely to accept your mortgage application. Mortgage brokers remove a lot of the paperwork and hassle of getting a mortgage and if you find at a later date that the advice you have received is not correct, you may be able to claim against them.

There are a few different types of mortgage brokers.

Tied or multi-tied mortgage brokers

A tied or multi-tied mortgage broker is tied either directly to one lender or a group of lenders, meaning they’re much more limited in the type of mortgage that they can recommend. However, their close relationship with lenders often means they can offer you exclusive deals and incentives.

But just like how Tesco can’t lower the price of their milk just because you found it cheaper at Sainsbury’s, these mortgage brokers may not be able to offer you the same options as elsewhere, even if they’re better. They’re tied and limited to a select range of lenders.

‘Whole of market’ mortgage brokers

Like the name suggests, a “whole of market” mortgage broker can cover much more of the market. They don’t have to use a specific mortgage lender, meaning you’re not limiting yourself to a single or small group of lenders that a ‘tied’ broker works with. Basically, you’ll have a much broader range of mortgage options to choose from.

That said, you should take ‘whole of market’ with a pinch of salt. some of these brokers don’t literally cover every single option available. But to get the name ‘whole of market’, they have to cover enough options to be representative of the mortgage market as a whole, so you’ll still have plenty to choose from. But because this kind of broker is free of ties to any lenders, they can offer you impartial advice without the constraints of obvious vested interests – a huge plus.

If you are confident you’ve done your research, know the market, and feel you’ve found the best deal at the best time, then yes, you can consider getting your mortgage directly from a lender. 

If you’re lacking the experience required to make a well-informed decision that won’t come back to bite you, we’d strongly recommend not going it alone.

Remember, the advice you get from lenders will only refer to their own products rather than an unbiased view of the market as a whole. And going direct means you won’t gain access to any broker-only deals. There is no harm in talking to a mortgage broker, even if you decide to go direct further down the line. 

The Financial Conduct Authority regulates mortgage advisors and lenders and sets out detailed rules about the advice that must be provided in relation to mortgages. However, in many cases, financial advisors, lenders, and brokers have failed to provide proper advice leading to individuals being left with mortgages they cannot afford to pay. We can provide specialist advice in relation to the mis-selling of mortgages.

Examples of mortgage mis-selling

You may have been advised:

  • to borrow money without proving your income (known as self-certification) or were advised to overstate your income;
  • to take out a mortgage that ended beyond your retirement age date;
  • to switch lenders but weren’t told about fees and penalties;
  • to switch mortgage but not told about commission payments being paid to an advisor by the lender; or
  • to take out an interest-only mortgage without proper consideration being given by your financial advisor to the repayment of capital.

Common problems arising from mis-sold mortgages

If you were mis-sold a mortgage, you may have experienced some of the following problems:

  • Inappropriate interest rates;
  • Negative equity;
  • High fees; and
  • Inability to pay the mortgage.

How do I know if I have been mis-sold a mortgage?

You may have been mis-sold a mortgage product if at the time you took out your mortgage your lender, financial advisor or broker failed to:

  • Properly assess your individual circumstances;
  • Failed to provide you with information about the options available to you; or
  • Failed to provide you with a recommendation that reflects your personal circumstances.

Are there time limits for making a claim?

If you think you have a claim, you need to act quickly as there are statutory deadlines known as limitation periods that apply to mis-selling claims. If your mortgage product was taken out over six years ago, then we may be unable to assist you no matter how strong the claim is. A claim may be considered outside of the six-year deadline if you have persuasive evidence that you only became aware of the potential mis-sale within the last 3 years.

Mortgage brokers have to be qualified to help you find a mortgage and give you financial advice. They are also have a duty of care to give you the best advice they can, rather than just push the option that will give them the most commission.

Check that your adviser has their CeMAP qualification and has experience of advising on mortgages.

All mortgage brokers that operate in the UK must either be regulated by the FCA (Financial Conduct Authority) or be the agent of a regulated firm. This not only ensures you will receive a certain quality of advice, but it will guarantee that you have access to FCA and FOS complaints and compensation procedures should there be any problems.  You can check whether a broker is regulated by using the FCA register on the FCA website.

A ‘whole of market‘ broker covers much more of the market than a specific lender or tied adviser. They are usually independent mortgage advisors with no links to any specific mortgage lender. This means that you are not limiting yourself to a single lender or group of lenders that a ‘tied’ broker works with

An Independent Mortgage Adviser is exactly that – independent and not tied to any networks, panels or banks.

What they can offer you is interest rates and products from the Whole of the Market. You can confirm this by asking for the adviser’s IDD (Initial Disclosure Document), Terms of Business and Key Facts. 

Independent advisers are unbiased and can recommend exclusive products and rates that fit your circumstances. They act on your behalf to find the best lender and insurer to suit your needs, whether it is based on the most suitable interest rate for a purchase or remortgage, which lender is offering a large cashback, free survey, free solicitors or who is purely willing to lend the amount of money that you need to borrow to buy your dream home.

Your Broker must adhere to a privacy policy

Data Protection

The Data Protection Act requires companies and individuals who process and retain information on their customers to inform the customer how the information will be used and to what purpose it will be put. The Data Protection Act applies to not only computer records but also to paper records on filing systems. The following describes how your information will be processed.

Mortgage Broker

When you apply for a loan or mortgage your mortgage broker will use the information to generate quotes and complete the application for underwriting and processing of your application. To undertake searches at the credit reference agency or agencies. These searches and any other search made in connection with an application made by yourself and any other member of your household will also be shown. The search may reveal multiple searches which may adversely affect your credit profile and result in difficulty in obtaining credit. The credit reference agency may already hold information which links you to another party. i.e. your spouse or another member of your family. Where linked information is revealed the loan or mortgage application will be assessed taking all linked information into account. Where you have declared that you are linked to another person(s) you are confirming that you are entitled to disclose information about that person(s) and/or any one else referred to by you. Furthermore that you authorise the broker and any Lender which is party to the application to search, link and or record at the credit reference agency about you and or other parties referred to by you.

How your information will be used

To offer you a range of products that are available a Broker may pass your information on to a lender(s) to assess whether they would be willing to advance funds. They may also pass your details onto a credit reference agency or agencies to review your application for finance. And could write to you in the future to offer products that we believe would be of interest to you.

Be cautious and shop around

Estate agents are often overly keen to get you to use their in-house mortgage broker because they may have targets to introduce a minimum number of customers to them each month. They may also earn some commission.

That said, most in-house brokers will still give you mortgage advice based on your personal needs and should recommend the right mortgage for you having looked at a whole range of lenders. 

Assess the Mortgage Broker fee – if it is high, the Estate Agent may be getting a cut. 

Reach out to the Broker and your lender

The first step is to send your complaint to the lender or mortgage intermediary (broker) in writing. 

Financial Conduct Authority (FCA) rules require your lender to send a written acknowledgement of your complaint within five business days.

Your lender should investigate your complaint thoroughly and make enquiries as appropriate. 

If you make your complaint in person or by telephone, note down the name of the person you speak to, as well as the date and time of your call or consultation.

If you don’t hear back within three weeks, follow up your phone call or consultation with a letter detailing your complaint. 

Make sure you keep copies of the complaint letters that you send for future reference.

Contact the Financial Ombudsman Service FOS

If the lender or broker cannot make a final decision on your complaint after a month, they must keep you informed. 

If you’re not happy with the final response from them, you can refer your complaint to the Financial Ombudsman Service (FOS).

FOS provides a free and independent advice service for consumers who would like to make a complaint. 

Once the FOS has received your referral, it will take over the running of your claim on your behalf. 

Wait for the FOS ruling

You won’t need to do anything else unless the FOS requests further information.

It’s important to note that the FOS has an extremely heavy caseload and as a result, your claim may take a substantial length of time to complete. 

Although the exact timeframe will depend on the complexity of your case, and how quickly the financial services provider responds to the FOS, it’s not unusual for cases to take a year or more.

The guidance and/or advice contained within this website is subject to the UK regulatory regime and primarily targeted at consumers based in the UK.

City Mortgages is a trading style of Yorkshire Financial Consultancy Limited which is an Appointed Representative of PRIMIS Mortgage Network. PRIMIS Mortgage Network is a trading name of First Complete Limited which is authorised and regulated by the Financial Conduct Authority for mortgages, protection insurance and general insurance products.

In general, Buy to Let mortgages are not regulated by the Financial Conduct Authority.

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

You will pay no fee for our services