Should I Use A Broker Or Go Direct?

Taking out a mortgage is a huge financial responsibility and therefore it is a process that should never be rushed. There are so many different types of mortgages and also a range of deals available on the market, so it is important to consider a variety of options to ensure that you do not lose out financially. 

Choosing the wrong mortgage product could end up costing significantly more than an alternative mortgage deal that you were not aware of, so spending time and effort to do some research and get advice is very worthwhile. Many people choose to use a broker to benefit from their insights and expertise of the mortgage industry to help find the right mortgage deal.

What are the different types of mortgage broker?

When you are considering working with a broker, you should understand the different types of brokers, so that you know what type of service you will get by choosing them. The three main types of broker are:

Tied brokers

A tied broker is one that works with just one specific mortgage lender. They will be able to find the most appropriate product available from that lender but will be unable to look at any other deals on the market for you.

Multi-tied brokers

With this type of broker, a restricted panel of mortgage lenders will be reviewed to identify the most suitable one for your circumstances.

Independent brokers (or whole-of-market brokers)

Independent brokers are also referred to as whole-of-market brokers and with this type of broker, every mortgage lender on the market may be available. This means that much better deals can be sourced compared to tied and multi-tied which only use one or a limited number of lenders.

However, be aware that some mortgage brokers may market themselves as ‘Whole of Market’ but not have access to all lenders in the U.K. If their lender panel is representative of most lending options in the market, they are permitted to market themselves as Whole of Market. It is advisable to request a list of the mortgage broker’s lending panel before you proceed with their services to see if they are truly whole of market or not. 

Before starting to work with a broker, it is a good idea to ask them which type of broker they are, so that you are aware of what they can offer to you.

Should I use a broker?

Some people are put off using a broker because they believe that it will cost them money that they could avoid paying if they go directly with a lender. However, it is not quite that straightforward in terms of comparing the cost of using a broker or not using a broker.

While going direct with a lender will avoid paying any broker fees, there are some brokers that do not charge the mortgage applicant any fees, as they receive commission from the lender on completion of the transaction. Those brokers that do charge client fees will also receive that commission from the lender on completion. The additional consideration regarding cost of using broker vs cost of going direct is that a broker could find a significantly better deal, saving you much more money over the term than any broker fee they might charge.

The mortgage industry has gone through numerous legislation changes which have essentially made it harder for some people to get a mortgage. Lending criteria has been tightened, with stricter requirements such as more thorough analysis of income and outstanding debt, as well as other factors. Working with a broker is a good way to access mortgage deals that might not otherwise be available, as some are exclusively arranged through brokers. 

Due to the stricter processes involved in arranging mortgages, brokers complete more thorough checks which means it may be safer to use a broker than to not use one. Brokers that are regulated by the FCA are the safest to use, as you get the additional protection that falls under the regulator.

The other factor to take into consideration when you are deciding whether or not to go with a broker or to go direct with a lender, is that some brokers do not charge a fee at all. So, if the main reason you were hesitant about using a broker was because you do not want to pay the fee, you should reconsider. 

Brokers such as Boon Brokers provide outstanding broker services without charging the mortgage applicant a penny, as they receive commission from the mortgage lender on completion. This way, you can access mortgages from the whole of the market, including exclusive deals, without paying any broker fees.

Can I get a mortgage directly from a lender?

If you have seen a deal with a direct lender that you think is the best out there or is the best option for you, then there is no reason you shouldn’t choose that deal. However, you should do enough research to determine whether it definitely is one of the best deals you would be able to obtain. Some people prefer to go direct to a lender because they don’t want to work with the middleman, or they want to go with the bank that they have a long-term relationship with. Although, borrowers are often shocked by how lenders do not factor in their relationship with the borrower in their lending decisions around criteria policy. If the case does not meet lending policy, it is refused regardless of any prior relationship with the lender.

However, some banks may offer certain discounts or incentives to their account holders to encourage them to take out their mortgage with them, which would not be available if you went through a broker.

Pros of going direct with a lender:

  • You could access preferential rates as an existing customer.
  • Potential to find exclusive direct-only deals.
  • You won’t need to pay any broker fees.
  • You can choose a lender you already know and trust.

Cons of going direct with a lender:

  • Potentially biased advice as they will want you to choose them and won’t tell you about other good deals that are available with other lenders.
  • No access to broker-only deals.
  • You must process the case with the lender directly and go through the leg work that a broker would normally process on your behalf.
  • You will generally be able to find a better deal elsewhere that could save you considerable money.
  • The odds of accessing the most suitable mortgage product by randomly selecting a lender are low.

Pros of choosing to use a broker:

  • Access every mortgage product on the market to find the best deals (when with whole-of-market brokers like Boon Brokers).
  • You can benefit from exclusive broker-only deals.
  • You are getting unbiased advice, so the broker will be finding the best deal for your circumstances.
  • The process will be easier because your broker will guide you through everything and even do some of the admin type of work for you.
  • Will find deals for specific circumstances where it might be more difficult to get a standard mortgage.
  • Saves you the time spent looking through the different deals.

Cons of using a broker:

  • You won’t be able to get direct-only deals.
  • You may need to pay broker fees (unless you use a fee-free broker service such as Boon Brokers).

Other benefits of working with a broker

These pros and cons should give you a good indication of what the right option is for you. Some people make their choice based on financial factors alone, but one point to consider is whether you want to use a broker so that they will make the process a lot more straightforward for you. 

A reliable, trustworthy broker will be able to look out for your best interests on your behalf, using their knowledge and experience of the market to get you the best deal for your circumstances. In addition, the mortgage broker can work with you for your entire mortgage term and ensure that you are always on the best possible interest rate. Otherwise, if you go direct to the lender, you would need to research new mortgage products every time that your existing product expires – which may be every 2 or 5 years.

Researching the market and trying to find deals that will suit your exact financial situation will take time and you also have the issue that if you apply with more than one lender, it can harm your credit score. When you work with a broker, they will use the information that you provide them with regarding your finances, such as any outstanding debt, your income, outgoings etc. and they will then crunch the numbers to find you the most suitable deal.

Some people find it easier to use brokers if they have circumstances such as adverse credit, or if they are self-employed and therefore do not have the payslips to provide proof of income. A mortgage broker will already know which lenders are most likely to accept people with these circumstances, therefore you won’t risk negatively impacting your credit score by making further mortgage applications if your first one is declined.

Many standard direct lenders will decline people with these types of circumstances because they consider them to be high risk borrowers. Their lending criteria will be stricter and this can also apply to the amount of money that they are prepared to loan. So, in cases where some mortgage lenders will not lend the full amount required for the property that the applicant wants to buy, a broker may be able to find a lender that is willing to provide the amount required.

Are brokers potentially risky?

Historically, brokers had a bad reputation for not always putting the interests of their customers first, with some arranging deals that pay higher commission, rather than the deal that is necessarily best for the customer. Since those days, the industry is much better regulated and you can also benefit from being able to see online reviews about brokers and other ways of determining how trustworthy and good value they are.

Websites such as TrustPilot are a great place to find unbiased reviews from customers, so that you can check your broker’s reputation before you agree to go ahead with any deal with them. As long as you do your research to check the reputation of the broker, as well as communicate with them to get an idea of what it feels like to work with them, you should be able to use a broker that you can 100% trust to get the best deal out there for you.

Do fee-free brokers offer the same level of service?

The idea of a service that costs nothing usually seems too good to be true but when it comes to brokers, this is not the case. The quality of a broker is not reflected by whether they charge a fee, or even how much they charge. In fact, some brokers that charge a large fee can actually be some of the worst on the market! 

Similarly, a fee-free broker simply works on a commission basis, so they are still getting paid for their work, just in a different way. You can ask your broker how much commission they get from the lender if you think there is a possibility that they are recommending a specific lender because they are getting a larger commission. However, as we mentioned earlier, the increased amount of regulation regarding broker commissions means that this is not a common issue, certainly not with the reputable brokers like Boon Brokers.

Which is the faster process – going with a broker or going direct?

If time is critical and you want to get your mortgage arranged ASAP, either way could be as quick. If you have a straightforward application, where the lender is happy to provide the loan that you want, it can get processed as quickly as their team is available to do the processing.

However, if there are any types of complications with your application then a broker will speed up the process by making sure that you are using a lender that suits your requirements. They will also be aware of all of the evidence and documentation that the lender will require, so they will be able to tell you what to have prepared in readiness, so that this side of the application does not slow things down.

Conclusion

There are lots of pros and cons for both going direct with a lender and deciding to use a broker but more and more mortgage applicants are seeing the benefits of using a broker, through the savings that can be made through a better mortgage deal. Even if the broker has a fee of around £500, the savings made through a better mortgage deal could be in the thousands, so it can definitely be the better option from a financial perspective. 

Then you also need to take into account whether you want the additional benefits of using a broker, such as letting them do a lot of the legwork for you, saving you the time and often the hassle that is involved in looking for and comparing different mortgage deals, doing the calculations to see which works out better over the long-term.

Mortgage applicants are free to choose whichever option they think is best for them, but it is a good idea to look at what is available when you go direct and also to speak to a broker or two to find out what they can offer. You don’t have to commit to either until you are sure that you have the best deal for your personal requirements.

Mortgage Broker Costs: The 2020 UK Definitive Guide

By choosing to work with a mortgage broker to find your mortgage deal, you can benefit from their in-depth expertise in the market, which can help to find you the best mortgage deal available to suit your specific circumstances. 

Whether you need to use a specialist broker due to having adverse credit or any other circumstances that standard mortgages are not suitable for, or you just want to find the best financial mortgage deal, a broker will help with this.

There are many different brokers available to choose from, but they do not all offer the same level of service and the pricing structures can vary significantly. 

In this guide, we provide a comprehensive review of the mortgage broker costs across the market, answering some of the most frequent questions about the subject of mortgage brokers. 

After reading this guide, you should be able to decide which type of mortgage broker is more suitable for your budget and to match you with the right deal for your requirements.

What fees do mortgage brokers charge? 

The pricing models from one broker to the next can be very different, so you should ask about, or research, the costs before you agree to use your mortgage broker and you should ask for their prices in writing. 

These are the different pricing models that brokers operate with:

Fee-free

Some mortgage brokers do not charge any fees at all to the mortgage applicants, as they make their money from charging commission to the mortgage lenders instead. This means that you get their service without any cost to yourself, which will be very welcome when you are paying fees for solicitors and other costs associated with buying a property and moving house.

Hourly rate 

There are also some brokers that will charge by the hour, where costs can quickly escalate if there are any complications that they need to spend more time on. You should try to get an estimate of how many hours they are going to charge you for, as this should be fairly standard.

Fixed charge

Brokers with a fixed charge provide a more transparent approach to their fees but you will still need to make sure that there are not going to be any further costs that are not included in the initial quote. Typically, a fixed fee mortgage broker cost will range between £300-£600, with the average cost in the UK currently sitting at £500, according to the Money Advice Service. This fee may be charged upfront or on completion of the mortgage transaction.

Percentage

With this model, the broker charges a percentage of the mortgage that the applicant is taking out. Therefore, with higher value properties you could end up paying a lot more than the average mortgage broker fee. For example, if you are taking out a mortgage for £250,000 and they are charging 1%, you will be paying them £2,500, which is significantly higher than the average mortgage broker cost.

Combination

There are also a number of brokers who will use a combination of these models, for example, they might charge you an hourly rate and then also get commission from the lender. However, it is worth noting that all mortgage brokers receive the commission from the lender. This means that any client fee charged will be in additional income for the broker. 

Mortgage broker fees or commission – which is better?

There is not a simple yes or no answer to this question, as it all depends on the quality of your mortgage broker. 

According to our recent research, 59% of mortgage brokers across the UK charge fees, therefore most mortgage brokers do charge fees for advice. 

However, the price that each mortgage broker charges does not always correlate to the level of service that you will receive. 

There are some excellent mortgage brokers that will charge fixed client fees, just like there are some exceptional brokers that operate by not charging the client a penny. 

To keep your costs down, the ideal option is to find a reputable broker that will not charge you any costs for their services. At Boon Brokers, we’re proud to offer an exceptional service without any cost to the mortgage applicant. 

A good way of finding out whether your mortgage broker is of high quality is to research any feedback and reviews provided by previous clients through a third-party review site such as Trust Pilot.

Sometimes the best approach to deciding on your mortgage broker is to talk to the advisor that you will be working with to see whether you get on with them and trust them to provide you with the best advice. 

You don’t want to appoint someone and then feel that they are difficult to work with or are not putting your best interests first. Your gut feeling might just steer you away from a broker that isn’t going to deliver a good level of service.

You should also make sure that any broker that you select is authorised and regulated by the FCA (Financial Conduct Authority), either through a network or directly, as this will provide you with protection if you are given poor mortgage advice.

Is fee-free mortgage advice too good to be true?

When you are provided with something for free, the natural instinct is to wonder whether it is too good to be true. 

Of course you would prefer to pay no costs but if the reality is that you are using a poor broker, you could end up worse off financially than if you paid a fee and used a better broker.

However, due to the fact that brokers can operate on a commission basis through the lender, mortgage brokers such as Boon Brokers can give you the highest level of service without incurring you any costs. 

Typically, brokers that apply costs will do this because they have large overheads such as employee salaries and office costs to pay for. 

At Boon Brokers, business operation costs are kept to a minimum by utilising cutting edge technology that reduces the cost of running the business. 

There really isn’t a catch when it comes to fee-free brokers, but as we mentioned previously, you really do need to be confident in the quality of the service that the broker will deliver.

When you are looking at the different broker options available to you, you should be looking for brokers that offer whole-of-market access. This means that they have access to every lender on the market, so they can find the best possible deal available to suit your needs. 

You should remember that the financial implication of obtaining a mortgage deal with a better interest rate can be very significant. Over a 25 or 30-year term, even a small percentage of difference could end up costing you thousands of pounds more or less over the full term. 

However, you can move to a new mortgage deal once your fixed rate ends, so this is another factor to consider when you are thinking about whether to go with a fee-free broker or one with a charge. 

If you are paying an additional £500 or more every two or three years when you switch mortgages, you are going to end up paying a huge amount in mortgage broker costs.

This is why it is a good idea to try and find a high-quality fee-free broker that you trust, so you can go back to each time you want to find a new mortgage deal.

How much commission do mortgage brokers receive?

Typically, a broker will be paid around 0.35% of the mortgage loan size as commission from the lender. So, for a £100,000 loan, this would calculate at £350, or for a £200,000 loan, they would be receiving £700. The lender will benefit from providing a larger loan, so it makes sense for them to give the broker a higher fee for the work that they do in arranging the mortgage. 

However, for the mortgage applicant, the mortgage broker will not be doing more work (If any) to find a good deal on a £200,000 loan compared to a £100,000 one for the same applicant. Therefore, they cannot justify charging you a percentage of the loan.

Mortgage commission is a topic that has been heavily scrutinised in the past by regulators, with concerns that high commission fees can lead to brokers recommending specific products that might not offer the best deal to their clients. 

However, if the commission was completely removed then it could lead to brokers charging high fees for their services, so this is another reason to make sure the broker you choose is regulated by the FCA.

Is a mortgage broker fee worth the money?

In many cases, using a broker will enable the mortgage applicant to get a mortgage deal that they couldn’t find on the market themselves. 

With a lower interest rate deal, mortgage applicants can quickly recoup the £500 that they pay on their broker costs. Usually, the deals a broker can find are much better than the ones you will find with a high street lender, so financially, working with a reasonably priced broker can definitely be worth the money.

However, that isn’t taking into consideration that there are numerous brokers who will find you the best mortgage deals on the market, saving you a large amount of money, while providing that service for free.

If you are planning on going with a broker that charges a fee, you need to look at how their fee stacks up against the savings that you will make by using them, to determine whether they are worth the fee or not. 

You should also ask your broker why they apply a charge in addition to the commission, as this will also indicate whether it is worthwhile paying that fee or not.

One broker can go above and beyond what is expected, doing all of the work for you, while other brokers might do the bare minimum of work for their fee. 

You should ask the broker what their fee covers before you agree to work with them, so you will know what you are getting for your money. There is a lot of paperwork and other admin tasks involved in arranging a mortgage deal, which can be really time consuming, so choosing a broker that is going to do a lot of the work for you will definitely be a big advantage.

A good mortgage broker will be able to identify the best mortgage deal to suit your circumstances but they should also be able to make the process much smoother. 

They will know which lenders will provide a loan to you and for how much, by assessing the information that you provide them with. The better knowledge they have of the mortgage market, the quicker and easier the application process should be for the applicant.

A mortgage broker should also be able to advise the applicant on the requirements of the lender, for example, which documentation they will request. 

If they already know what each lender will require from you, before the lender asks for it, this will significantly speed up the process. 

If you want the mortgage application to go through quickly, so that you don’t miss out on a property, then this type of insight will come in very useful.

Your broker should have exclusive access to the best deals on the market, deals that you would not be able to get hold of if you were looking directly for lenders. They might have worked with specific lenders for years and agreed a special type of deal that will save you a large amount of money.

What you want from your broker is vast knowledge about the market, as well as their guidance and support to get your mortgage processed as smoothly as possible. 

Again, taking a look at reviews of each broker you are considering using, will help you to get a better idea of how much work and effort your broker will provide in order to save you a lot of the hard work.

The reviews on sites such as Trust Pilot should also show you how easy it is to get hold of your broker, as this can be a very frustrating part of the mortgage application process; not being able to ask questions when you need to can hold up the application. 

If a client has been unable to contact their broker when they’ve needed to, there is a good chance that they will mention that in their review. You should ask your broker what their working hours are and the best way to contact them.

If you’d like to learn further about choosing the perfect mortgage broker for you, please see our article.

Conclusion

Buying a property is usually the biggest outlay that you will ever have and as well as the price of the property, there are many additional costs such as mortgage arrangement fees, interest fees, solicitors’ fees, valuation fees etc. 

Therefore, you should be as financially savvy as possible and the more expertise and help you have with your mortgage application process, the better chance you will have of getting the right deal for your specific requirements. 

If there are any factors such as poor credit history, or you are self-employed or any other reason that makes it harder to get a standard mortgage, a broker will be the best option for finding deals for your situation.

You shouldn’t get put off with the idea that a free service means is a lower quality service, because brokers like Boon Brokers can give you the best level of service but make their money by charging the lender rather than the mortgage applicant. 

However, you should do enough research about the broker to find out whether they are going to be the best option for you. A broker that has many years of experience working in the industry will be able to save you a considerable amount of money because they will know exactly which deal works out best financially, so you should take your time in selecting one. 

If you want to save yourself some money then you should select a broker that has a fee-free model but make sure you don’t just pick any fee-free broker, find out as much information about them as you can. Recommendations from friends, online reviews and other online research will help you to form an idea of whether a broker has a good reputation, or if you should stay well clear.

 

How To Make Sure Your Mortgage Broker Isn’t Ripping You Off

When people are considering whether to use a mortgage broker, it is understandable to have an element of caution in regard to the possibility of getting ‘ripped off’. Like with many occupations, the majority are trustworthy and do what is best for the customer but there are also a few people that may be dishonest and try to take advantage over their customers’ lack of understanding of how the market works.

Buying a home is usually the biggest financial commitment you will ever make and the difference in overall costs from one mortgage deal to another is significant. Therefore, working with a mortgage broker is not something to rush into and you should always do enough research to be confident that you are choosing a broker that will not cost you more than you should be paying for their services. The average client fee that brokers charge in the UK is £500 (according to the Money Advice Service, 2020). They receive this in addition to a commission paid by the lender. But some brokers, like Boon Brokers, do not charge the client at all and instead only accept a commission from the mortgage lender.

Brokers such as Boon Brokers are able to access the most competitive mortgage deals without charging a fee to clients and they provide an exceptional brokerage service. Boon Brokers operate on a fee-free basis due to an efficiently run business with low overheads due to the use of state-of-the-art technology.

Fee charging brokers will often apply a charge that could be 1% of the loan sum because they have to cover high costs for running the business. On a mortgage of £200,000 that is a staggering £2,000 fee, which does not necessarily reflect the amount of work put into finding a deal. It should be of no surprise that client fees are typically at their highest in London, where overheads and other business costs are also high. You might think that the brokers that are charging these kinds of fees are justified because they are offering a superior level of service to other brokers but this may not be true. If a broker has truly ‘whole of market’ access to all lenders in the UK, and not just a restricted panel of lenders, they can quickly identify your most suitable mortgage product. This is regardless of whether the broker charges a client fee or not.

If you are considering buying a property, a mortgage broker should make the process easier and they should be able to save you a considerable amount of money by finding a better deal than you would have going direct to lenders.

When you are choosing a broker, here are some tips to make sure you do not end up being overcharged for brokerage services:

Get an understanding of how mortgage brokers are paid

If you just go with the first broker you come across, you might think that they always just get paid by charging their clients a fee, and receive no other income stream. However, all brokers also receive a commission from the lender. This commission from the lender varies depending on the loan size but it can often be over £1,000 per case. You should ask your broker if they are receiving a client fee as well as a commission from the lender. If the broker is receiving a sizeable commission from the lender, you are in your right to question why an additional client fee is justified. Regardless of the loan size, Boon Brokers will not charge a client fee at any stage of the mortgage process.

Compare several estimates

Even if you have been recommended a particular broker by your estate agent, this does not mean that you have to go with them. If you were to get a tradesperson to do a big job on your property, you would usually get a few different quotes to compare and you should take the same approach with your mortgage broker.

Rather than simply opting for the recommended broker or getting an estimate from just one broker, try at least two so that you can compare the costs. They should provide you with a full breakdown of the fee that they will apply as part of brokering your mortgage deal, so you can see exactly how much you will be paying them.

Get pre-approved for a mortgage

If you are not too sure how much you can get approved for your mortgage loan, then it is a good idea to get a pre-approved mortgage. This will allow you to have a better idea of the price range of properties that you will be able to look at. There is no point looking at lots of properties and then finding out further down the line that your loan will not be enough to afford the price range that you are going for

.

Additionally, whilst you are doing this initial process with a mortgage advisor, you will be able to decide whether you trust them and how helpful they are. You should certainly ask the broker if they have access to all lenders in the U.K. or just a restricted panel of lenders. Those brokers with truly ‘whole of market’ access are more likely to find the best mortgage product for you. Some brokers may do the bare minimum work, whilst others may go well out of their way to get the best solution for their clients, so you can use these discussions to get an opinion on this.

Provide as much information as possible

When you are providing information like your financial details, such as any debt or your salary/income information, try and be as accurate as you possibly can. If you don’t provide the right information this can add up to a lot of extra work for the mortgage broker. If they find a set of deals based on the information that you provide, then when checks are made, it turns out to have been inaccurate, they may need to then find you a new deal based on the correct information.

Details such as your income and financial commitments will determine the type and amount of loan you are able to get approved and your estimate will be based on this. Inaccurate information could mean that your estimate is well out, leaving your total fees different to what you were estimated too.

Look out for bait and switch!

Bait and switch is where someone sells you something based on one price but then when it is going through, additional costs suddenly appear. They may say that you are able to get a specific deal and give you an estimate for that but then they tell you that the product is no longer available, or you didn’t qualify for it. So, if you are told one fee to start with and costs end up being different, you can challenge this. Also, be careful of brokers using marketing tactics such as ‘No Upfront Fee’. This implies that a client fee is likely to apply on completion of the transaction.

To conclude,

If you are paying between £500 and £2000 to a broker each time you want to arrange a mortgage, it is going to end up costing you many thousands, perhaps tens of thousands of pounds, over the course of your mortgage term. This is because, to ensure that your interest rate is on the best deal, you should aim to use broker services every time that your mortgage product is about to expire. The broker can then arrange the re-mortgage to ensure that your mortgage has the lowest costings available. So, if want to ensure access to the best mortgage deals, without getting ripped off by the broker, go with a broker that charges no (or very low) fees and that has a great reputation.

Trust Pilot is a good place to verify the reputation and customer service levels of a broker and Boon Brokers is proud to boast excellent reviews and 5/5 star ratings on Trust Pilot. If you would like to talk to us about finding the best deal without charging a fee, call or e-mail us today.

How to Buy Property Post-Lockdown

There is no doubt that the Coronavirus pandemic has had a colossal impact on every aspect of our lives. The impact from the global pandemic reaches further than just domestic too as we see the ‘new normal’ scaling across the world in order to get the economy and normal life up and moving once again.

It’s safe to say that the property market has also seen a huge dip in sales, enquiries and contract exchanging too but light is being shone at the end of the tunnel as estate agents across the UK reopened on the 13th May 2020. 

But, how should you be approaching buying a house post lockdown? Here are our top 3 tips…

Show Your Enthusiasm

Although there is a lot of speculation at the minute around the idea that the market is very unsaturated, there is additional evidence that contradict this theory. 

It is very unclear at the minute as to what the property market will be doing in terms of house prices as a result of the global pandemic, however there are a multitude of reasons as to why a decrease in the housing market may not be taking place…

  1. Backlog of buyers due to Brexit
  2. Lockdown proving why certain houses are no longer suitable. 
  3. Break down in relationships/employment 

At the back end of 2019 there was quite a significant decrease in the property market as people held off buying due to the long awaited Brexit. People’s uncertainty of buying a property in the midst of Brexit meant that the market almost hit a halt during the winter months of 2019. 

This first began to become apparent in the autumn of 2018; when Marc Carney said that a no-deal Brexit could result in a huge cut in house prices, by up to a third of their value.

Due to this statement, as well as much more speculation from economy experts, people began holding off on the sale and purchase of property. Now we have left the EU and are slowly but surely coming out of the lockdown period, a huge backlog of these buyers and sellers are now eager and ready to play the property roulette once more!   

The number of people eager to buy and sell will also be topped with those who have struggled in their homes during this lockdown period. If you have found the lockdown a breeze, then you’re probably in a suitable home, in a suitable location with the right company for you. However, a lot of people will not have found it quite as easy. Meaning it is anticipated that an increase in people buying and selling simply as a result of lockdown. 

An alternative way that lockdown will be contributing to increased interest in sales and buying new property, will be due to the increase in unemployment. During the coronavirus outbreak, 600,000 have been taken off payroll in between March and May 2020, this figure would not therefore be taking into consideration those that are self employed. These figures are higher than have been for years, meaning those who have taken on mortgages, may need to reconsider. 

Since China began to loosen their lockdown restrictions at the end of March, the increase in divorce and separation rates have also increased. For the property market this means:

  1. Increase in sales of houses as a separate couple may no longer be able to afford a large mortgage single handedly. 
  2. Increase in buying properties and separated couples seek to find a new home without their spouse.

Therefore there are many reasons as to why, if you are serious about purchasing a property, you need to sell yourself as a serious contender.  

Estate agents may turn a blind eye to you if they feel you are not serious about a sale or purchase as they have to go through a much more lengthy process for those who are potential buyers or sellers. Even arranging a house viewing will be increasingly difficult as the wishes of the vendor and or tenant will need to be matched as well as the social distancing rules that have been sent by the government as we proceed into phase 4 of the easing lockdown rules. 

Therefore it is essential that you are clear about what you’re wanting in a potential property as well as your position. Being straightforward and upfront with the estate agent will put you in a really good position for when you find a property you are interested in.

Acquaint Yourself with the Community

Most people will know that buying a house goes a lot further than brick and mortar, as the community your new purchase will be situated in is just as important for most. 

Before lockdown you could quite easily get the a general understand for a community just by going local venues and speaking with your potential neighbours-to-be.

However, now, it is more difficult than ever to do this as the closure of amenities stay that way for a little while longer. Nevertheless, there are a few other alternative methods you can do in order to get to know the surrounding area, what other people’s opinions are of the area and also form your own opinion. 

Go for a walk and talk to the locals. If you are not a keen walker, then alternatively you can drive, but go out and find a local, get their opinion and find out their experiences on living there. It is essential that you respect the wishes of other people in the area however as some may not feel comfortable talking to you beyond a polite ‘hello’. 

It is also a great time to find out about your neighbours, since everyone is guaranteed to be home anyway. Have a quick knock on their door, ask them what you want to know, but again be respectful as some may be isolation or shielding – a phone call will be just as informative, provided that the person is willing to share their phone number.

What might also be a good idea too, if you yourself do not feel comfortable starting conversation with strangers, is to join online community groups. There has been an array of these spring up all over social media, initially created to make people feel less lonely during the lockdown, however, have blossomed into a lovely virtual community in replacement for all of the prior outdoor social activity one undertook on a daily basis. Instagram has become a good online resource, on there you can follow hashtags to see localities as there has been a recent surge in these types of posts. 

It may also be a good idea to ask locals, estate agents and do some online digging on noise levels near your new home. The coronavirus has seen a decrease in road congestion from 50-70% to just 16% over the last few months in some areas. So, what you may see and hear now, may not be a realistic representation of the real noise pollution in that area. 

Save your Money

Another step that you may have found easier during the lockdown is to save a little spare cash. Pubs and restaurants closed as well as local amenities, meaning that we have had to make do with a board game and home cooked meals! 

Therefore if you have been able to save it is a good idea to increase your house deposit if you are able to do so, for no other reason than some banks are increasing their down payments before accepting your loan. Some banks have even said that down payments need to be as high as 15% in order to be granted the loan. This is particularly common for purchases in cities such as London and Manchester. 

This is especially important if you are a first time buyer or are self-employed as banks are quite reluctant to lend out money due to the current state of the economy to these two categories. You might find that they are asking more questions and taking a little more precaution when investigating your financial state and how the pandemic will have affected you.

So, is it completely legal for a sale to go through now in the UK?

Since lockdown was first officially announced at the end of March 2020, proceeding with the sale of a house became illegal. This was due to a magnitude of reasons such as estate agents were not allowed to work, you couldn’t visit a household or any person that was not within your ‘bubble’, and valuations of properties were brought to an abrupt halt. 

Although guidelines suggested that only urgent transactions (those that, if they didn’t proceed, could potentially make someone homeless) should go ahead.

However, as we move into phase 3 of lifting the lockdown rules, we see more and more restrictions in this area being lifted. 

Buying, selling, renting homes and commercial properties are all legal to go through, under the condition that all of the properties are based in the UK and providing that everyone involved in the transaction is abiding by the social distancing rules set out by the government. 

The relaxation of some lockdown rules also means:

  • Some estate agents will be allowed to reopen for face to face meetings 
  • In person viewings 
  • Remortgaging taking place 
  • All aspects of a physical house move are now taking place 
  • Removal companies are now in full operation 

Depending on the estate agent or buyer or seller of a property, the way in which they conduct viewing etc. will be independent to the individual or the estate agent. Some estate agents may have no problems, however some may only be taking virtual viewing for the first viewing and then if a second viewing is requested, then doing the second viewing in person, this may reduce footfall. 

Alternatively if there is a vulnerable person who is shielding, this may mean that the viewing process is postponed or unable to proceed simply to err on the side of caution.

Remortgaging a property, in some instances, may already have been feasible due to desktop valuations which were taking place throughout the lockdown period. This will now be easier as in person valuations are now going ahead. 

What about Scotland, Wales or Northern ireland?

The governments of Scotland, Wales and northern Ireland have decided not to take lead from Westminster meaning that the temporary freeze on the property market is still in place. Therefore it is unlikely that the sale of properties will be going ahead except for very rare circumstances.  

What about the building of new homes?

The government has issued guidelines in regards to the production of new homes. Once again, builders and construction sites have been given the ‘good to go’ giving that they follow social distancing rules and work remotely. 

In the effort to get the new homes property market moving again, the government has also issued a new ‘safe working charter’ to restart the process in order to mitigate any potential long term damage to the housing market.

Have house prices been affected due to lockdown?

Sellers may still well have a very fixed price in their head of what their house is worth and buyers may have a very fixed price of what they would be willing to spend on a property. That being said, the market is not yet in the same position as what it was before the covid-19 crisis hit and therefore this causes concern for property market experts. 

It has been predicted that people will be more likely to negotiate house prices and try to get more for their money after the lockdown which could lead to a little bit of a stalemate further up the property ladder, as those with a house to sell may be reluctant to accept a low offer if they, in turn can’t get a lower offer accepted on their next property and so on. 

This could mean that house prices will decrease slightly, but the UK will not know officially until the market gets moving once more. 

To conclude,

Although covid-19 and lockdown has changed the way in which house sales are being processed and completed, this does not mean you should be put off buying a home post- lockdown. 

Although previously banks may have been quite reluctant to lend as much money if they were lending money out at all. However, now that the economy has started rolling again, more and more banks will begin lending once again. 

As long as you follow our three tips (as listed above) and also be aware of the changes to the market, you should be well on your way to finding (and moving) into your new home or commercial property. 

How to Build Home Equity

Building equity in your home can result in lucrative financial benefits in the long run. You don’t reap the rewards whilst it’s happening, but it does build wealth since you end up with a significant asset. But what exactly is home equity, and how can you benefit?

What is home equity? 

Home equity is the market value of the homeowner’s burdenless interest they have in that property.

This can be easily calculated by looking at the market price of the property and extracting what the loan is left to pay back on the mortgage.

House

Therefore, the more money you invest into your home equity, the less time you will have to be paying it off.

So, now you know what home equity is we’re now going to expand and give you our best tips for building that equity in an efficient and effective way. 

A large down payment 

If you’re already a home owner and are settled in that property, this may not be as applicable to you as someone on the road to making a property purchase, but it may be helpful when and if you make a new purchase.  

Home-buyers that are taking out a loan to pay for their property, the conventional route, should put down the largest down payment that they can afford.

This will be money that should be seen as investment as you will not have access to this money for years, possibly decades. However, the higher you can make this down payment, the more equity you will have in your home. 

A good down payment would be considered as 20% of the property’s value, however, the larger the down payment the more favourable your position will be.

Renovate your property 

Modernising your property will not only make it aesthetically pleasing but will also increase your home equity, potentially by a significant amount too. This applies to both the interior and exterior of the property. 

This doesn’t necessarily mean that you have to go knocking walls through and converting your garage to a fourth bedroom, this could simply mean a lick of paint in your kitchen, or a new carpet on your stairs.

Renovated Kitchen

Little changes could make all the difference and keep your property modern and up to date will mean its value has the potential to increase, when you come to resell. 

Pay out more than what is asked of you 

We understand that, at times, having a mortgage can put a financial strain on the property owner(s), however to build your home equity we recommend that, if you’ve had a really good month at work, or you’ve saved a little more money then you planned that month to put that money into your property.

With fixed interest rate mortgage products, lenders will typically allow 10% overpayments of the amount outstanding per annum without penalty of early repayment charges. Whereas, with variable interest rates such as Trackers and Discounts, there is often no limit in regards to overpayments.

However, we advise that you check with your mortgage provider to clarify the terms of your overpayment facility

By even slightly increasing your mortgage payments each month you will see a huge difference in your home equity. 

This could knock years from your mortgage repayments if you are consistent so it is definitely worth pushing yourself, if you can afford to do so. 

Focus on paying off your mortgage

Even by just paying your mortgage payments you are increasing your home equity. It is a good idea to find out how much equity you have in your home and how much of your mortgage you have left to pay for you to make reasonable and sensible choices for the future.

If you can stretch for higher amounts to pay your mortgage off each month (see point 3) then that’s great, but if not, just know that you are still increasing your home equity just by paying what is asked of you. 

man writing cheque

By increasing your mortgage payment you could save yourself money in the long run as you will reduce interest over time. It may also be possible, if this is within your budget to pay twice a month towards your mortgage, if you really want to increase your home equity and deduce the period left to pay your mortgage. 

However, always check with your lender, before making any additional payments, that you will not be charged a prepayment penalty. Although most lenders, especially if your loan is FHA, VA, or USDA, will not charge a penalty, it is always best to be 100% certain as you do not want any hidden fees to crop up at a later date. 

Shorter loan terms 

This can be achieved both when you are first applying for your mortgage and if you are already in a fixed mortgage, you can chose to refinance and choose a shorter loan term. 

This will build home equity in a much smaller period of time, all mortgages are different and depending on your financial situation, you may be able to refinance your mortgage to around 15 years.

However, with a shorter time to pay off the same loan, means that the monthly payments will increase to potentially double their previous value. 

It’s also good to consider that this option will not necessarily be available to everyone, you will more than likely have to have good credit, a low debt-to-income ratio and have a home equity over a certain value already.

Therefore it is a good idea to check your credit score ahead of time. You can do this quickly and easily using Experian

If you do qualify however, may we recommend that you stay clear of cash refinancing. You will find this counterproductive as the idea of refinancing is to increase your home equity. If you chose to cash re-finance, you could find that your mortgage will be even bigger than when you first started. 

Wait for your property’s value to rise 

Whilst this point may not apply to all property owners, especially those who are eager to climb up the property ladder, it may be worth considering. 

Like all investments, the market fluctuates on a daily basis, however, history has shown that naturally house prices do increase, and therefore the property owner’s home equity will build if you sit on the property for a while. 

house

Although the market can decline and you could lose money, it is more than likely the value of your property will increase and you would be a few grand better off if you wait for your property’s value to rise before making any moves. 

To conclude,

Let your future self be thankful and begin to build your home equity today. Follow these 6 small steps and see your equity build through the years. Take little steps and we can guarantee that your home equity will grow through the years. 

 

Should You Buy a House During Coronavirus Outbreak?

Despite the UK officially being sent into Lockdown due to the global pandemic of the Covid-19 virus, government guidelines state that there is no need to pull out of transactions despite some people’s concerns around this unprecedented phenomena.

It’s certainly not Business as Usual for real estate agents, however, there are actually some benefits for home buyers.

With that said, it’s important that buyers must be able to accept and adapt to the changes caused by the pandemic and know that the time-frame must be adjusted in line with the social distancing rules which have been introduced as a result of the outbreak.

Social distancing will impact house buying in a variety of different ways, however, let’s begin by explaining some of the key benefits.

Benefit for ‘cash’ buyers

Those who are cash buyers, individuals purchasing a property not reliant on a mortgage, will see huge benefits during the Covid-19 pandemic. They are in the perfect negotiating position to take properties from sellers who are desperate to move.

Cash buyers may be able to whip up properties at a bargain price as people will struggle to get their maximum loan sum, whilst those needing to sell a property will be panic selling, putting cash buyers in the perfect position.

Benefit for first time buyers or people purchasing a new home

A first time buyer or someone purchasing a brand new property reduces the chain significantly and due to the issues that have been raised below, means the less of a chain on a property, the easier it will be to purchase a property during this pandemic.

Property Ladder

If first time buyers can secure a fixed mortgage on the currently very low interest rates, it would mean they are securing a low mortgage repayment cost for the foreseeable future.

So with that in mind, what are some of the disadvantages of buying a home during Covid-19?

House Valuations

House valuations have been put on hold as a result of the Coronavirus. Surveyors, as a result of immediate law enforcement, have halted physical house valuations. Surveyors are at high risk of not just catching the virus but also spreading it through multiple households which are more than likely to be occupied by families.

As physical house valuations have been halted, this has caused a chain of issues for property buyers.

Not only can they not get a surveyor to conduct a property valuation on their potential home, but it is also affecting the chain associated with the home buyer.

If the home buyer is moving up the ladder then they cannot get a surveyor to their house which maybe stunting them from moving out, or additionally, the people in the property to which they are purchasing cannot get a valuation on their next home and so on.

Property valuation is crucial and a necessary for any property owner as a mortgage will not be distributed by a bank or another entity until the valuation has been done. The property valuation is beneficial for the lender and buyer alike as they will determine any issues and risks associated with buying the property as well as estimating what the value of the property is to see if it’s worth the investment of both parties.

Without the property valuation, the buyer cannot complete their property purchase and so it is likely that properties will be unlikely to be completed during the pandemic, but rather than ‘falling through’ you should just see this as a delay.

Signing documents

Unlike most professions, Law is a very traditional sector and it does require a witnessed signature in order to exchange contracts. Although this is good to avoid forgery, it is not ideal during a global pandemic.

lower payments

Many conveyancing solicitors, because of the ‘physical signature’, are either significantly delayed or have stopped working altogether as their job requires physical contact with clients for the completion of documents.

Therefore, regardless of whether a home buyer has a mortgage offer or not, an exchange of contracts is unlikely to go ahead without a minimal delay of 3 months of the expected date.

Other issues that may arise with investment rates…

Base rates

Due to the pandemic, the Bank of England base rates have decreased to a record low and it is now an incredibly good opportunity for investors to capitalise in a property. Unfortunately, however, the banks have also recognised this and are beginning to pull away their ‘Tracker’ interest rate mortgages.

This is something to be aware of which, as a buyer, is a good thing if you can secure a mortgage at such a low rate, especially if you can get it fixed for 2 or possibly even 5 years. However, securing that mortgage maybe more difficult than normal during this period.

Reduced maximum loan sum

Many lenders have reduced their maximum loan sum by a significant amount.

Billions of jobs will be lost and thousands of businesses, small and large, will go bust as a result.

This means that banks and investors will lose a lot of money as a result and so their appetite to lend will diminish.

Investments they have previously made will be at a loss so most will be reluctant to reinvest at this uncertain time.

Those who are in the process of a mortgage application could see their lender being reluctant to lend the amount previously discussed as their affordability changes.

Final words

Although some issues will arise as a result of Coronavirus when it comes to purchasing a home, most issues are mainly due to the ‘social distancing’ rules that have been put in place to stunt the spread of the virus.

This will therefore affect house valuations and witnessed signatures. However, this is more likely to just ‘delay’ a sale, rather than cancel it altogether.

There are benefits to buying during this time such as low interest rates and benefits for cash buyers. Therefore, you should not be put off purchasing a property during the Coronavirus pandemic, rather you should just see it as a delay in the process.

Advantages of Using An Independent Mortgage Broker

A broker acts as an intermediary who connects someone who wants to buy a financial product, such as a mortgage, with an appropriate provider. Mortgage brokers are experts in their field and understand a lot more about the mortgage market than the average homebuyer, so getting their advice can be very beneficial.

There are many reasons that people choose to use a broker, whether they are first time buyers looking to get their first step on the property ladder or landlords with a property portfolio that they are looking to expand. Here are some of the key benefits of using a professional broker service:

 

To get access to the whole of the market

Mortgage applicants will only have access to the standard mortgage lenders, but most brokers have access to the whole of the market. This means that the applicants can use the deals and types of mortgage lenders that they would not usually be able to access or would struggle to find. 

broker with clients

Most good, reputable brokers will have spent years working with a wide range of lenders and have a deep understanding of the different mortgage deals that are available. This enables applicants to get the best type of deal for their circumstances and the broker is able to work quickly to find the right deal for them.

The difference between one mortgage deal that seems like it is a good deal and another that a broker could find you with a slightly better interest rate could save you a significant amount of money over numerous years, so it is worth making sure that every available deal on the market is checked to see which one works out better.

 

Access to specialist lenders

For those mortgage applicants that have special circumstances such as adverse credit or are self-employed, for example, they are more likely to be able to find the relevant lenders by working with a broker. If an applicant has issues on their credit report, this could impact their ability to get a mortgage application accepted, as the lenders would categorize the applicant as a higher risk. 

In these situations, some lenders will still offer a mortgage to the applicant but they will apply a much higher interest rate. This means that the applicant will be paying thousands of pounds more over the length of the mortgage term than if they were able to find a more favorable interest rate with the help of a broker.

mortgage broker

In 2014 there was a Mortgage Market Review that resulted in lenders being required to be stricter with their affordability checks. Since this point, more evidence is required to prove income, for example, and it has become harder for some people to get mortgages for higher values. This also impacted people who were self-employed who were unable to provide six month’s payslips or similar evidence to show their income.

If these applicants with special circumstances were to just apply for mortgages with the standard lenders, then it is likely that their application would be declined. Having a declined mortgage application will further impact an applicant’s credit report, so it should be avoided wherever possible. A broker who understands their client’s financial situation will be able to identify the best lender on the market to be able to provide the applicant with a mortgage deal.

 

Expert Advice

The mortgage market changes quickly, so it takes an expert in the mortgage field to understand what the best current deals are and who is providing them. The key role of the broker is to use all of the specific information related to the applicant and find a deal that is completely tailored around that. So, information such as credit history, income, outgoings, outstanding debts, amount of deposit and employment type are all factored into working out which is the most appropriate lender to give them the best deal.

Due to their strong understanding of the market, a broker can also help applicants to find a lender that matches their priorities. For example, if an applicant needs a house purchase to go through quickly, the broker will be able to advise on which lenders usually offer a speedy service. They can also ensure that the applicant has everything in place that the lender will ask for before they request it, which will further speed up the process.

expert advice from brokers

Brokers must have relevant qualifications such as the CeMAP (Certificate in Mortgage Advice and Practice) which means they have undertaken the relevant training to enable them to provide people with mortgage advice. They are also regulated by the FCA and should be on the FCA register, which is easy to check. 

If someone receives incorrect mortgage advice, they are protected and can raise a complaint to seek compensation, so this is another reason that people choose to work with a broker, for the added protection.

 

Exclusive Deals

Some mortgage deals are only available to brokers, as the lender only operates through a broker. These can often be some of the specialist deals that applicants with certain circumstances can be accepted for when other lenders won’t take them on. 

exclusive deal

Brokers also access some exclusive deals that can save an applicant a lot of money over the course of the mortgage term. Many lenders will only offer exclusive rates to brokers and not directly to borrowers.

 

Convenience

Working with a broker takes a lot of the hassle out of applying for a mortgage. Searching through the different types of mortgage deals and lenders can take up so much time and then there is the financial terminology and calculations that people often struggle to understand. A broker will be able to explain all of the details to applicants and there is less necessity for an applicant to understand it all in-depth, as the broker will advise the best deal based on their expert knowledge. 

broker with clients

A broker knows the application process inside-out, so an applicant does not need to think about what they need to do or research what the process looks like. A broker will walk their clients through the whole end-to-end mortgage application, answering any questions where necessary and acting in the applicant’s best interests. So, the applicant won’t need to worry about when they need to instruct a solicitor, or what documents are required, because the broker usually takes care of that side of the work for them.

 

Conclusion

Using a broker provides mortgage applicants with so many benefits, from saving money over the course of their mortgage to speeding up and taking the complexity and hard work out of the application process. The expertise of a broker will help to identify the most appropriate lender for each specific client and find the best deals that are available on the market.

Talk to Boon Brokers today to see how we can help you to find the right mortgage deal for your circumstances.

 

How to Get a Mortgage with a New Job

Getting a Mortgage with a New Job

When you start a new job, it can be a very exciting time, embarking on a new career and meeting new work colleagues. Whether you are changing career completely, or switched to a similar job with a new company, there are plenty of reasons to look forward to the future. 

However, if you are in the process of applying for a mortgage, or are thinking about doing so in the next few months then starting a new job could impact your application. This information should help you to understand how your mortgage application could be affected by starting a new job and how to work around potential problems so that you can go ahead with purchasing a property.

 

Providing proof of income through payslips

For many lenders, part of the lending criteria is that the applicant will provide payslips for the last three or more months to prove their income. If you have not been in work for a few months and are unable to provide three recent payslips, then this could cause a problem when you are applying for your mortgage. You could wait until you have been in the job for six months, so that you can provide the proof of income through payslips, although some lenders will accept a letter from your employer that confirms your salary instead. 

payslip

Some people choose to delay their mortgage application if they are due to switch jobs or try to get a mortgage agreed before they start the job application process. However, if it is necessary to change jobs and buy a home at the same time, there are still solutions for this.

 

Getting a mortgage when you have just started working

If you have just recently started your new job, then you will not have the payslips to prove your new income. Many mortgage providers will only lend to an applicant that has been in a job for some time, as they see this as a more secure employment and therefore a lower risk of not being able to pay back their mortgage loan. 

When you start applying to standard mortgage lenders, you might find that your application is declined because they are not prepared to lend to you until you have been in your job for longer. Each mortgage lender has different criteria, so it is worth checking with any lender before you start the application process.

If you get a declined mortgage then this could affect your credit report, so only apply for a mortgage if you are confident that the lender will accept you based on the length of time you have been in your role. 

credit score report

Mortgage lenders will also want to know whether your job involves a probationary period, such as where your contract could be terminated after the first six months, for example. Another reason that lenders are less happy to provide mortgage loans to people in new jobs is because when redundancies are made, it is often the case that the newest employees are the ones who will be made redundant first.

A specialist broker should be able to identify the lenders that are most likely to accept your application when you have started a new job, factoring in all of the other relevant information that you provide them with.

 

What if your salary goes down?

Similarly, if your new job means that you are taking a pay cut, you might find that lenders will not lend you as much as they would have been prepared to when you were on a higher salary.

If your new job involves different types of financial incentives like commission, bonuses or any other financial benefits then you should inform your mortgage lender to see if they include those arrangements when they are calculating your affordability.

Whilst some lenders might not count bonuses in your affordability calculations, other lenders will.

Other factors, such as how much deposit you are able to put down for the property will also be taken into account when a lender is deciding how much to lend to you, so saving up a bigger deposit will improve your chances of getting accepted.

 

If your salary has increased

If your new job means that you will be earning more money, then this will increase your affordability calculation, so you could be able to buy a house that is priced higher than you could previously with your lower salary.

People often wait until they start a job where they have a bigger salary before they apply for a mortgage, so that they can afford a more expensive house, or they may need to wait until they earn a certain amount before they are able to afford a property at all.

larger house

When a mortgage lender is calculating your affordability to pay the loan, they will take into account your salary, age, outgoings, outstanding debt and they will also look at your credit history. 

 

Self-employed and applying for a mortgage?

For people that are self-employed, this often means that they need to find a specialist mortgage lender that provides mortgages to self-employed people and will accept evidence other than payslips as proof of income, such as their accounts.

It can be quite difficult for self-employed people to get a mortgage as their income is often harder to prove and does not have payslips to show the monthly salary. Some lenders require several years of accounts as proof of income before they will be prepared to lend to self-employed workers.

self employed man

If you are considering moving from being employed to starting up your own business, then you should consider the impact of doing so on your future mortgage applications. It is sometimes a good idea to take out a mortgage before you become self-employed to make the mortgage application process more straightforward.

However, if you are already self-employed, there are still many lenders that offer mortgages to self-employed people, but you would need to find a good broker such as Boon Brokers to help you to find the best mortgage lender for your situation.

 

Getting a mortgage when you have just gone self-employed

There are certain factors that will impact whether a lender will be prepared to lend to a newly self-employed applicant. As it is difficult to project your potential future earnings, the other details that will usually be taken into account are:

  • Your previous salary when you were employed
  • How long you were employed for previously
  • Whether you are a skilled worker with relevant qualifications/experience
  • Your business strategy i.e. where your earnings will come from
  • How long you have been self-employed for

If you have not been self-employed for long then a standard mortgage lender is more likely to decline your application, so finding a specialist broker is the best option in this situation. A specialist self-employed broker will be able to find the lenders that are more likely to accept you, based on your age, deposit, house value, employment status and credit history.

 

Switching your current mortgage when you change jobs

When you already have a mortgage but you want to change mortgage, either because you want to move home, or because you want to try and arrange a better mortgage deal, your position will change if you start a new job. If you have a different salary, this could affect the value that you can get a mortgage for. An increased salary could allow you to move to a more expensive property.

large house

However, if you have any of the issues above, such as not being able to provide payslips, or changing to be self-employed then you will be in the same position and could find it more difficult to have a new mortgage accepted.

Therefore, it can be better to wait until you are in the new job for longer, or to apply for a mortgage well before you change job/move into self-employment.

 

Conclusion

Starting a new job will always make applying for a mortgage or any other type of credit more complicated. Moving jobs can be seen as a risk for lenders, as they want to see a history of employment and income to assure them that you will be able to repay your mortgage loan for the term that you arrange. 

Whether you are starting a new career, or joining the many other people moving into self-employment, the best way to make sure that your mortgage application is accepted, is to work with a specialist broker.

If you would like to discuss your current job situation and find out how it will impact your ability to get a mortgage deal accepted, you can speak to Boon Brokers, a specialist mortgage broker with years of experience in helping people with new jobs to get the best mortgage deals.

 

All You Need to Know About Buy-to-Let

Although the principle of taking out a mortgage is fairly similar whichever type of mortgage you take out, there are some significant differences between a residential mortgage and a buy-to-let mortgage. From the eligibility criteria, to the different terms on lending, this article should provide you with all of the information you need regarding buy-to-let mortgages.

What is different about a Buy to Let Mortgage?

A buy-to-let mortgage is taken out by a landlord when they buy a property to rent it out to a tenant. Typically, this will be where a landlord buys property in order to make a profit from renting it out. However, there are lots of costs that a landlord is responsible for that must be taken into account if they are considering renting out a property.

The criteria for being accepted for a buy-to-let mortgage is stricter than for a residential mortgage and generally involves higher interest rates and a larger deposit. These are the key differences you will usually find:

  • Higher deposits required for buy-to-let mortgages.

Whilst residential mortgages can be provided with a minimum of 5% deposit, buy-to-let mortgage lenders will usually require at least a 25% deposit. This is because a buy-to-let can be seen as a higher risk to lenders, with issues such as landlords not being paid rent by their tenants, or the property being vacant for times.

  • Interest rates are higher for buy-to-let.

Interest-only mortgages are more common with buy-to-lets but with repayment mortgages, across the market the interest rates are higher than the residential mortgage interest rates. At the time of writing this article, the lowest residential interest rates were coming out at around 1.50% initial rate for fixed mortgages, whilst buy-to-let were around 2% at least.

  • Higher fees for buy-to-let.

People looking at buy-to-let mortgages should also expect to see higher fees for setting up the mortgage, many lenders apply charges of £1,500 to £2,000, whilst residential mortgage fees will usually be half of that.

buy to let differences

What should I consider if taking out a buy-to-let?

There are many costs, risks and responsibilities that a landlord takes on when they decide to rent property out. To start with, there are the tax rules that you must consider, including tax on profits. There will usually be a stamp duty when you purchase a new property, and if/when you sell the property, you will need to pay capital gains tax.

You will also need to decide whether you want to rent the property through a letting agent, or deal with the letting yourself. Agent fees can vary depending on how much they are responsible for, as some will arrange maintenance, some will just find a tenant and then you manage the letting, so you must work out which one is the best option for your circumstances.

Buildings and contents insurance will be required to protect the property, with specific landlords insurance being an option that provides further levels of cover. As a landlord, you are responsible for the costs of repairs to the property and this can be very costly, especially if boilers need replacing or other large outlays. 

You also need to consider whether you can afford to pay the mortgage if your tenant misses payments, or if there are periods of time when there is no tenant in the property. Whenever the property is vacant, you are responsible for paying council tax and any bills that arise in that time.

Buy to let house mortgage

Another consideration is that interest rates can change, as can landlord’s tax responsibilities, so getting tied into a long buy-to-let loan might not be the best option if you want the flexibility of selling the property without an early repayment charge.

Further to this, you have to think about the possibility of not being able to sell the property at the time that you need to or want to. The demand for houses in that area could drop, the housing market could crash etc.

How big can the loan be?

The amount of the loan will depend on a variety of factors but mostly calculated based on the amount of rent that the property will be able to command, which will vary depending on the type of house and the area. The amount of deposit will also be taken into account and mortgage lenders will look at an applicant’s credit report too when deciding how much to lend.

Typically, lenders will require the rental income to be around 20-30% more than the monthly mortgage payment for them to take on the risk of the loan.

Who can get a buy-to-let?

A buy-to-let mortgage will only be available to people that match a certain set of criteria, this generally includes that the applicant:

  • already owns their own home (even if there is an outstanding mortgage)
  • is investing in houses and flats
  • earns over £25,000 per year
  • can afford the risk
  • has a good credit record 
  • is under a certain age i.e. most lenders will not loan to an applicant that will be over 70 when the loan finishes.

When the mortgage lender is looking at whether to accept a buy-to-let mortgage application, they will conduct a thorough check of credit history and affordability. They will usually require some kind of evidence of the amount of rent that the property can expect to receive, through a letter from a surveyor.

Planning ahead

It is really important that anyone considering buying a property to rent out and taking on the commitment of a buy-to-let mortgage is well prepared for the different scenarios that could happen. 

One of the biggest concerns for landlords is when they do not have any rent coming in and needing to find the money to pay for the mortgage, usually on top of their own mortgage if that is outstanding. Therefore, it is advisable to have cash set aside for that type of scenario. 

As well as having the property vacant for periods of time, there is also the possibility that the tenant doesn’t pay their rent. This could be a one-off scenario, or you could even face a tenant not paying for several months and you then need to take legal action to evict them and to try and get your rent payments back.

house for mortgage

You must also plan for events such as big repair costs. As a landlord, you are responsible for paying for repairs to the heating system and other maintenance. A big cost like replacing the boiler, replacing windows or other costs can come along when you least expect it, so again having a pot of money to cover those unexpected issues is a good idea.

Tenants can also cause a lot of wear and tear and damage to your property, which might mean replacing the carpets and decorating is required more often than you would have anticipated. Your tenancy agreement should include tenants paying for any damage to property and you should also obtain a deposit from tenants before they move in, in case they do cause any damage to the property.

Another element of getting a buy-to-let mortgage that requires planning for, is the event that you may not be able to sell the property when the mortgage ends, or you cannot get the value that you want when you sell the property. 

What happens when the mortgage ends?

If you opted for an interest-only mortgage then you will need to pay the outstanding cost of the property from when you bought it. In most cases, landlords will sell the property so that they can pay off the mortgage but there can be problems with this, for example if you cannot sell the property for the cost of the mortgage.

Conclusion

Whilst many landlords are still able to make good profits from renting property out and taking out buy-to-let mortgages, there are a lot more considerations to take into account. Difficult tenants, regular maintenance and repair costs, as well as covering the mortgage payments when no rent is coming in are some of the main problems that landlords face but there are many more.

If you are considering taking out a buy-to-let mortgage to rent property out as a landlord, you should do plenty of research into all of the responsibilities and costs that you are liable for. Taking out the right level of insurance is one way to protect yourself but speaking to a specialist buy-to-let mortgage broker will also help you to decide whether it is the right option for your circumstances. 

A good mortgage broker will be able to find you the best buy-to-let deals and talk through all of the options, discussing the financial factors that you should take into consideration before making your decision. If you would like to speak to a professional broker service with buy-to-let expertise, call Boon Brokers.

How To Choose a Mortgage Broker: The Essential 2020 Guide

There are many different reasons that mortgage applicants can benefit from using a mortgage broker, from saving money to helping them find the right mortgage deal to suit their specific circumstances. In this guide, we take a comprehensive look into the services that mortgage brokers provide, as well as the numerous benefits of choosing to work with a broker.


In this article

What is a mortgage broker?
Why use a mortgage broker?
Why is it a good idea to get advice from a mortgage broker?
Risks of getting no advice
When to see a mortgage broker
What types of mortgage brokers are there
Mortgage broker fees and commissions
Key questions to ask a mortgage broker
How to choose a mortgage broker?
Your rights when using a mortgage broker
What to look for in a mortgage deal
Conclusion
Jargon Buster


What is a mortgage broker?

A mortgage broker is an intermediary that helps to match mortgage applicants to the right type of mortgage lender and deal for their circumstances. The broker will often charge a fee to the applicant, or to the lender, or both to pay for their role in the mortgage arrangement process.

In return for that fee, the broker will provide the mortgage applicant with expert advice, which can be particularly useful if the applicant has special circumstances that require specialist advice that a standard lender would be unable to provide.

A mortgage broker will usually be able to access a larger selection of different mortgage deals than a mortgage borrower would be able to find without their help. The mortgage broker will also have a really in-depth knowledge of the mortgage market, meaning that they can quickly identify suitable deals, saving the applicant a great deal of time trying to research the deals and speak to different lenders.


Mortgage brokers

Why use a mortgage broker?

One of the key reasons for using a mortgage broker is utilising their expert knowledge to find you the most suitable mortgage deal. The difference between taking out one mortgage deal compared to another can be enormous in terms of the overall costs. A mortgage broker will be able to find a mortgage deal that offers the best financial solution for their client, using their knowledge of the market.

Mortgage borrowers who have special circumstances, for example, adverse credit often choose to use a mortgage broker so that they can find a lender that will be suitable for their situation. Instead of approaching standard lenders and having an application declined, the specialist broker will know exactly which lenders will be able to provide them with a mortgage. Because brokers regularly work with a range of lenders, they get to understand the preferences and criteria of each one, which helps in finding the right one for a client’s situation.

Other special circumstances where an applicant might choose a specialist mortgage broker is when they are self-employed and providing payslips to prove income is not an option. There are numerous lenders that specialise in providing mortgage loans to self-employed workers and brokers can link their clients up with them.

handshake mortgage broker

Dealing through a mortgage broker also speeds the process up. Buying a property and all of the work involved in getting a mortgage, working with solicitors etc. can take a long time and if a mortgage takes too long to go through, you could potentially lose out on buying your property. Brokers have software that enables them to quickly find deals that match the borrower’s criteria, this is much quicker than doing other types of searches for mortgage deals. The mortgage broker takes a lot of the hassle out of finding a mortgage, reducing tasks like paperwork and speaking to different lenders, which can be very time-consuming.

Using all of the information that lenders use to determine whether they will lend to a borrower, the mortgage broker will be able to identify the best options and present them to the borrower. A declined mortgage application can affect the applicant’s credit report, so using a broker that will find the right mortgage lender will avoid that possibility. The mortgage broker factors every detail into the search, such as credit report, loan amount, LTV (Loan-to-Value), income, employment, and any other information that lenders use.

The financial aspect of calculating whether one mortgage deal is a better deal than another is not straightforward, so working with a broker to use their expertise can help to ensure that any deal works out financially beneficial compared to others.

calculating mortgage deal

Mortgage brokers should be regulated by the FCA and therefore this protects the borrower by providing an option for them to escalate complaints if something goes wrong. When you are looking for a broker, you can check whether they are authorised by the FCA to ensure you are protected.

Why is it a good idea to get advice from a mortgage broker?

The advice that brokers are able to provide is really valuable in choosing the best mortgage. Most mortgage brokers will have been working in the industry for a long time and will have a team of experienced mortgage advisors that know everything there is to know about the mortgage market.

Every mortgage borrower has a unique set of circumstances which suits a certain type of lender, the job of the broker is to match those unique circumstances to the most appropriate lender. The brokers can explain in detail how a specific lender is the best option, based on the borrower’s finances and situation.

Giving advice mortgage broker

Due to working in the mortgage industry for years, mortgage brokers will have access to a huge selection of lenders and some mortgage brokers offer whole-of-market services, or in other words, access to every single mortgage lender available.

Since the Mortgage Market Review in 2014, the mortgage industry has become more tightly regulated. The affordability checks are now tighter, which means that some borrowers find it harder to get a mortgage deal, or cannot lend as much as they would like to. This is to protect both the borrower and the lender and the broker will be able to conduct a full assessment of your affordability to find out which deals you will be eligible for.

Risks of getting no advice

Mortgages are complex and there are many different factors that influence the type of deal that is best for the borrower. Without the advice of knowledgeable mortgage broker, the borrower is at risk of paying more for a mortgage than they need to. Non-mortgage experts are unable to analyse the options in the detail that a broker is able to, so the borrower could end up paying a higher interest rate, or getting tied into a deal with a high early repayment charge or other disadvantages that could have been avoided.

A mortgage is usually the biggest financial purchase that a person will ever make, so seeking professional advice makes good sense to make sure that your decision on your mortgage deal is an informed one and all of the options have been carefully considered.

Risk of no advice

Another big risk that a borrower will face if they do not work with a broker is not being able to complain that they have been provided with an unsuitable mortgage, as they have selected the mortgage lender themselves without taking any advice.

When to see a mortgage broker?

If you are thinking about taking out a mortgage or looking to remortgage, then a mortgage broker can help you to assess the best options that are available to you. A broker can provide you with expert advice to help you make one of the biggest financial decisions in your life. Instead of doing all of the research yourself, if you talk to a mortgage broker about your requirements and finances, they will be able to advise you on the mortgage or remortgage process and find the best deals.

What types of mortgage brokers are there?

There are three main types of broker, some only offer a limited set of deals, some are tied to specific lenders and others are whole-of-market brokers. There are some brokers that say they are whole-of-market, but they won’t check the deals that are direct only, so it is important to find out which lenders the mortgage brokers will check on your behalf. You may also want to check direct mortgage deals that are missed by brokers.

what types of mortgage brokers

Mortgage broker fees and commissions

The broker may charge you a fee for their services, or they may just apply a fee to the lender.
The average mortgage broker fee will be around £500 but different brokers work in different ways, some will apply a fixed fee, others charge for their time at an hourly rate, there are also brokers that charge based on a percentage of your mortgage.

Brokers such as Boon Brokers do not charge the mortgage borrower and they receive commission from the lender instead. Then you also have brokers that will charge both the lender and the borrower a fee. It is important to find out what charges the broker will apply, if any. The mortgage broker must be clear about their fees to their clients under the requirements of the FCA and borrowers must be aware of unethical mortgage brokers that are not clear about their fees.

Key questions to ask a mortgage broker

When you are choosing a mortgage broker, there are some key questions that will help you to ascertain whether they are the best one to suit your needs. These questions include:

Are you whole-of-market?

If your mortgage broker is whole-of-market they will have access to all of the available mortgage deals on the market, so they are more likely to find you the best deal.

Will you tell me about mortgages that are only available directly from lenders?

If you don’t ask them this question, then they probably won’t tell you whether or not they check the deals that are directly from lenders. So, make sure you ask this question, as you could be missing out on deals that are only offered direct from the lender.

lenders fees

What are your fees and charges?

As explained in the earlier section, mortgage brokers operate differently in regard to their fees. They should tell you exactly what they will charge, whether that is a flat fee, a percentage of your mortgage or whether they charge a commission to the lender. You should be able to find a good, reputable mortgage broker that will not charge you any fees for their service, as they will get paid by the lender instead.

What is included in the service you offer? Will you handle all admin and chase lenders?

One of the main advantages of using a broker is that they will take on the legwork like the admin elements and also do the chasing of lenders on your behalf. When you are deciding which broker to work with, clarify what services they offer and see how much of this work they will be prepared to do for you. Some mortgage brokers only offer the very minimal, whilst others will do as much as they possibly can for you.

When will you be available?

This is another critical question, especially if you want to get your mortgage in place relatively soon. Don’t assume that the broker will be able to start working on your mortgage search straight away, as they could have a lot of other clients that they are working for and therefore you could be waiting some time to get started with finding a mortgage deal.

mortgage broker availability

How to choose a mortgage broker?

The main factors that you should consider are whether they are a whole-of-market broker like Boon Brokers, and also look at details such as whether they charge any fees and what sort of reputation and experience they have. If you ask all of the questions listed above, then this should give you a better idea of the service they will provide.
Some mortgage brokers operate with a web-based service only, so you should also decide whether you are happy to work on that basis, or if you prefer being able to talk to someone face-to-face about your mortgage details.

A good way to see whether a broker provides good service is to check any customer reviews that have been provided. Brokers will probably have testimonials on their websites from happy customers, but this does not give the full picture, as they will cherry-pick the best testimonials to upload onto their website.
reviews
Finding independent reviews on sites like Google will give you a more accurate and unbiased set of reviews that will hopefully reveal what the brokers are like to work with, or what to look out for if someone was disappointed with the service they received from a particular broker.

You should also check what qualifications a mortgage advisor has. In the UK the qualification that is approved by the FCA is the Certificate in Mortgage Advice and Practice (CeMAP). The brokers should also be authorised by the FCA, so you can check that they are by searching on the Financial Services Register.

Your rights when using a mortgage broker

When you work with a mortgage broker, they should complete a detailed review of your circumstances in order to establish the best deals to suit your specific situation. They should also be able to explain in detail the key information such as the different types of mortgages that there are.

Your broker should be able to advise you on the pros and cons of taking on different types of mortgage and advise which one you are better suited to. Their recommendations should be fully justified with a breakdown of the finances of the deal and they should explain why the deal is a better option for your circumstances.

There is a lot of jargon in the financial industry, so if you are not sure what LTV ratio is or why it matters, your mortgage broker should be able to help you to understand it and see the importance of it on getting a good mortgage deal. We have also included a jargon buster section at the end of this guide to help understand some of the terminology.

man and woman advice

What to look for in a mortgage deal

  • APRC

The Annual Percentage Rate of Charge shows you the total cost of a mortgage based over the full term, including all associated fees. By providing you with the APRC for different mortgages, you can see the financial difference from one lender to another over the period of time you choose to take the mortgage over.

  • Deposit size

The higher the amount of deposit that you are able to put down, the better mortgage deals will be available to you. The Loan to Value ratio (how much your mortgage loan is compared to the value of the property) is really significant in accessing different types of deals, as some deals are available for 80% LTV, others are for 70% LTV, etc.

  • The standard rate

If you are choosing a fixed rate for a number of years, it is also important to look at what the standard rate of the deal is when the fixed term comes to an end. Whilst you will usually be in the position to switch mortgage deals at the end of your fixed-rate, you don’t know what will happen to the mortgage market, so it is best to choose a deal with a competitive standard rate if available to you.

  • How often is interest charged

Most lenders charge interest on a monthly basis, calculating the average monthly payment over the term so that all monthly payments are the same. Other mortgages might charge a daily interest, meaning that the monthly payments vary depending on the number of days in the month.
explaining interest rates

  • Flexibility 

If your circumstances change, having flexibility around your mortgage payments can be really important. You may want to take a break from making payments if you need to at some point, or you may want to overpay so that you can pay your mortgage off quicker and reduce the overall interest. Check for any penalties or limits that the lender applies if you want to overpay on your mortgage. You should also check any early repayment charges that apply, to make sure that you don’t end up staying locked into a mortgage deal for longer than you need to be.

  • Length of fixed or variable rate deal 

Deciding on the length of the fixed rate can be a difficult decision, as it is difficult to predict how the interest rates will be affected over a three or five-year period. Some people prefer to lock themselves into a fixed rate for a long period so that they know exactly what their payments will be for that term. However, if circumstances changed, for example the borrower needed to move house, they might be subject to an early repayment charge to get out of the fixed term they agreed.

Your mortgage broker will be able to talk through your possible scenarios to identify more flexible deals if it is likely that you will need flexibility or the peace of mind that you can get out of your mortgage without a high penalty.

Conclusion

There are so many reasons for using a mortgage broker when buying a home but the key argument is that your mortgage is a huge purchase and one mortgage deal varies significantly to the next. Without taking expert advice from a broker, you risk paying thousands of pounds more than you would have if you had been shown a better deal from a broker.

As brokers have access to many more lenders than you would be able to access yourself, it makes sense to use them to access these other lenders that could save you a lot of money. With the majority of brokers not charging mortgage applicants for their services and instead working on commission from the lender, there is usually no additional cost for the applicant. So, you can access better deals, get free professional advice and have a lot of the hard work, such as admin, taken care of by the mortgage broker.

Jargon Buster

Understanding mortgage terminology is not always easy, so here is some of the terminology and jargon that brokers may use in more simple terms:

  • Affordability check

Where the lender checks how much you can afford to borrow based on income and expenditure. The calculations for this can vary from one lender to another.

  • AIP (Agreement in Principle)

A document that confirms the mortgage lender will allow you to borrow a specified amount. An AIP document is often used as evidence to the seller that the potential buyer will be able to afford their property.

  • APRC (Annual Percentage Rate of Charge)

The APRC shows the entire cost of the mortgage and includes all interest and any fees from the lender. The cost is based on paying the mortgage over the term agreed, so can be used to compare deals over the same length of term.

  • Arrangement fee

The fee that the lender charges you for setting up your mortgage. You will usually have the option to pay it upfront or for it to be added onto the loan and paid as part of your monthly payments. When it is added onto your loan, you will be paying the interest on it.

  • Arrears

If you miss any mortgage payments, these are classed as arrears. Your lender will have a set process of actions they take depending on how many payments are missed, which can result in your home being repossessed if payments are not made.

  • Base rate

This is the interest rate that is set by the Bank of England and affects tracker rates and standard variable rates. The base rate sometimes changes, it was as low as 0.25% in 2016 and was as high as 15% in 1989. In recent years it has not been higher than 0.75% but factors such as the inflation rate influence the decision made by the Bank of England’s Monetary Policy Committee on whether to change the base rate.

  • Buildings insurance

The insurance policy that pays for any damage to your property’s structure. A mortgage lender will require you to have taken out buildings insurance to protect their loan.

  • Buy-to-Let

A type of mortgage that is taken out when the property owner is buying the property but letting it out rather than living in it themselves.

  • Capital

This is the overall amount of money you borrow from a lender to buy a property.

  • CCJ (County Court Judgement)

If you have failed to pay an outstanding loan, the lender will usually register a CCJ court order against you. Having CCJs affects your credit profile and can mean that some lenders will not be prepared to provide you with a mortgage.

  • Conveyancing

When you buy a property the legal process involved is called conveyancing.
Deposit
The deposit is the amount of money that you are putting towards the cost of the property. Most lenders will ask for a minimum of 5% deposit before they will provide you with a mortgage loan. To access the more competitive loans with lower interest rates, a larger deposit is required.

  • ERCs (Early Repayment Charges)

If you want to pay off your mortgage early (i.e. when you sell your house or change mortgage deal) then you may need to pay an ERC. Usually ERCs only apply for the fixed rate part of the deal.

  • Equity

The equity is the amount of the property that you actually own. This is calculated by subtracting the amount you have paid (in deposit and repayments) from the mortgage loan.

  • Fixed rate mortgage

This type of mortgage has a fixed interest rate for the amount of time agreed, which will typically be two, three or five years.

  • Freehold

A freehold property is where you own the land rather than a third party that you lease the land from.

  • Gazumping

Where another buyer puts a higher offer in on the property that you have put an offer in for and the buyer accepts their offer.

  • Guarantor

A guarantor can act as a guarantee to the lender that the monthly payments will be made. A parent or guardian is able to act as a guarantor on some types of mortgage.

  • Help to Buy

A government scheme that aims to help more people to afford homes. There are different types of Help to Buy schemes and a Help to Buy Isa.

  • Homebuyer’s Report

This is the survey that is completed before buying a property that will check for any issues such as damp, subsidence, out of date electrics etc.

  • Interest-only mortgage

A mortgage where just the interest is paid and not the capital. This means that at the end of the term of the mortgage, the mortgagee will not own the property and will need to then buy the property.

  • Intermediary

An intermediary is a third party such as a mortgage broker who helps to arrange a mortgage, usually taking commission from the lender for their services.

  • Leasehold

The land that your property is built on is owned by a landlord and you must pay rent for the land, usually once a year.

  • LTV (Loan-to-Value)

The ratio calculated between the property value and the amount of your mortgage. Better deals are available for people with a better LTV ratio (for example, borrowing 60% or less).

  • Mortgage deed

The mortgage deed is the legal document to confirm the mortgage agreement.

  • Mortgage Illustration

The document supplied by the mortgage lender that details the mortgage offer and enables you to compare the product to others.

  • Mortgage term

The length of time that you take the mortgage agreement out over, often 25 or 30 years but this can vary.

  • Negative equity

Where you owe more on your mortgage than your property is worth. This can happen where property values drop.

  • Overpayment

Where you pay more of your mortgage than the amount agreed. Some lenders will penalise for doing this but it generally allows a borrower to pay their mortgage off faster and pay less overall interest.

  • Porting

Where you transfer your mortgage from one property to another, without the need to take out another mortgage agreement.

  • Remortgage

Taking out a new mortgage without moving house. There are different reasons for remortgaging, including moving to a better deal and releasing equity in your property.

  • Repayment mortgage

The standard type of mortgage where you pay both the interest and the capital repayments, as opposed to interest-only where you only pay the interest off.

  • Stamp duty

A tax that is paid when buying a property. This is currently applicable to properties with £125,000 or more.

  • SVR (Standard Variable Rate)

The rate that the mortgage reverts to once the fixed or tracker rate period finishes. People usually look for a new mortgage deal once the deal reverts to the SVR, as it will usually be higher than the interest they can get on a new deal.

  • Title deeds

A document that shows the ownership of the property.

  • Tracker mortgage

A mortgage with a variable rate that tracks the base rate, i.e. if the base rate goes up by 0.25%, so does the monthly mortgage payment.