Our mortgage guides can provide you with an in-depth understanding of the different mortgages available. So, whether you’re a first time buyer or looking to remortgage your house, our guides can help. Read through our mortgage FAQs and learn everything you need to know to ensure you experience a smooth process.

Questions to ask when buying a house

You will face many choices when taking out a mortgage and it is best to prepare as much as you can before hand. Below are a few questions you should consider before committing to a mortgage. How much can I afford to pay each month? It is essential that you only borrow the amount that you can attainably pay back each month for the period of your mortgage. A mortgage is a long-term commitment and therefore you will be making monthly repayments for many years, depending on your circumstances. When considering your monthly budget, allow a buffer for things like […]

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Can I get a mortgage?

Can I get a mortgage with bad credit? Lenders are reluctant to offer mortgages to those with poor credit score as they would not want to be portrayed as encouraging you to take on more debt where there is potential of repayments not being made on time.  It may be an idea to improve your credit score before applying for a mortgage. This can be done using a “credit builder” credit card in which you pay off the full amount owed each month to show you can manage your debts responsibly. However, these cards often how low credit limits and […]

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How to get a mortgage

The first step in getting a mortgage would be to sit down with us and discuss your circumstances and what type of mortgage you are looking for. There are several types of mortgages, each suiting different people’s circumstances. Fixed Rate Mortgage With fixed rate mortgages, your interest rate and monthly repayments will be fixed for a certain amount of time. This will mean you will know exactly how much you are paying each month for the term of the fixed rate. This would mean however, that your interest rate will stay the same even if other rates go down. Also, […]

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Is it better to rent or buy?

Many people believe that renting is ‘throwing money at the wall’ and would rather buy but buying is not the best option for everyone; The pros of buying You are investing in an asset which may increase over time You have the security of living in the property for as long as you want You can change and decorate the property as you like   The cons of buying You are committed to a mortgage payment which is a big responsibility There are potentially more costs to arrange a mortgage such as stamp duty and solicitor’s costs The property may […]

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Different Types of Mortgages

Mortgage Types explained Different types of mortgage include the following: Repayment Mortgages Interest-Only Mortgages Fixed Rate Mortgage Variable Rate Mortgage Tracker Mortgage Discounted Rate Mortgage Capped Rate Mortgage Cashback Mortgages Offset Mortgages Flexible Mortgages 95% Mortgages Buy to Let Mortgages First Time Buyer Mortgages   Repayment Mortgages  This is the most common way of repaying back a mortgage. Each month you will pay back some of the capital and some of the interest that you owe. At the end of the mortgage term, you will have paid back the full mortgage amount and thus, will own your house outright. Interest-Only […]

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What do I need to apply for a mortgage?

For any type of mortgage, there are specific documents that will need to be readily available. We will ask for these before we submit the full application to the lender.  The specifics will be dependent on your circumstances and the lender of which you are applying to. A great place to start would be getting a copy of your credit report. Ensure you are registered on the electoral roll at your current address Ensure your address history is accurate Avoid payday loans and overdrafts where possible Different lenders will look at your credit report differently, however we are able to […]

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How long does it take to get a mortgage?

The amount of time it takes to get a mortgage depends on a variety of different factors including: The type of mortgage being applied for i.e. a remortgage or a purchase The time it you takes to gather the necessary documentation for the application The turn-around time of the mortgage lender The turn-around time of your conveyancer The complexity of the mortgage application   Typically, the process begins by getting a Mortgage Agreement In Principle. The mortgage lender will perform a credit search and agree a figure that they would be willing to lend you for mortgage purposes. However, this […]

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What is a mortgage decision in principle and how long does one last?

A mortgage in principle is an agreed figure from the lender that they would be willing to lend you. In order to do so they will gather basic information and perform a background credit search. A mortgage in principle is not a guarantee and a full application and assessment will have to be made before the lender can issue you with a mortgage offer. A mortgage in principle can last between 60-90 days depending on the lender. Because a credit search is needed, multiple decision in principles could have a negative effect on your credit score.

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Mortgage in Principle & Mortgage Offers

A mortgage in principle is an agreed figure from the lender that they would be willing to lend you. In order to do so they will gather basic information and perform a background credit search. A mortgage in principle is not a guarantee and a full application and assessment will have to be made before the lender can issue you with a mortgage offer. A mortgage in principle can last between 60-90 days depending on the lender. Because a credit search is needed, multiple decision in principles could have a negative effect on your credit score.   A mortgage offer […]

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What is a mortgage offer and how long does one last?

A mortgage offer is confirmation that the lender will provide you with a mortgage. This will be after fully assessing your circumstances and a full application is made alongside a valuation of the property. The amount of time it takes to get to this stage depends on the overall complexity of the application. In general, it will take between 18-40 days for the processing of the mortgage  application and an offer to be produced. Mortgage offers can last between 3-6 months, depending on the lender. Some will be valid starting from the date of application whilst others start from the […]

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What are the different types of house survey?

Basic Valuation This is a valuation for the lenders benefit. In some cases you may not even see a copy of the report and is designed to establish whether the property is deemed as good collateral to lend against. If there any issues the lender may recommend a further survey or inspections before they can proceed with a mortgage. In some cases the lender may charge a fee for this survey but this will vary depending on the lender.   Homebuyers Report This type of valuation is for the benefit of the buyer. The report will inform you of any […]

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Stamp duty explained

If the property you are buying is worth more than £125,000 then you will have to pay Stamp Duty Land Tax (SDLT).   What is stamp duty? Stamp duty is payable on both freehold and leasehold properties costing in excess of £125,000. Stamp duty for first time buyers is the same as any other transaction (there was an exemption in 2010 but this was removed in 2012). Stamp duty for new build properties is also the same but some builders may offer you an incentive by contribution toward the cost. Stamp duty on shared ownership properties can vary; you can […]

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What does remortgage mean?

A remortgage is the process of switching your existing deal to a new deal and potentially a new provider. You’re not moving house and the mortgage is still secured against the same property. You can remortgage to get a better rate or to raise capital.   What is remortgaging? Here are some reasons that you may decide to remortgage; To take advantage of a new, lower rate To consolidate debts To fix and reduce your monthly outgoings To raise capital for home improvements or property investment Taking a new deal can potentially save you money, depending on the new deal. […]

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Should I remortgage?

Should I remortgage? The main reason to remortgage is to reduce your monthly repayments. Reason why you shouldn’t include an increase in interest rates or having to pay an Early Repayment Charge (ERC). Why do people remortgage? There can be various reasons to remortgage but usually it is to get yourself a better deal such as a lower interest rate or a mortgage that suits your situation better like fixing the interest rate for a certain amount of time. It may be that you wish to take out some of the equity in your property for other purposes such as […]

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How much does it cost to remortgage?

When considering a remortgage, you should take into account the monthly repayments as well as any associated fees and early repayment charges that may apply. This will help you work out exactly how much you will be saving by remortgaging. Below are some of the fees that may apply: Remortgage Arrangement fees Many lenders charge an arrangement fee to set up a new mortgage. The amount charged varies depending on the lender – with some not charging a fee at all. Some will be a fixed amount whereas some will be charged on a percentage of the overall loan. You […]

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What information do I need for my remortgage?

What information do I need for my remortgage? Existing Mortgage Details This includes your outstanding balance, term of your mortgage and the monthly repayments. We will also need to know of any early repayment charges that may be payable. Income details This can be provided via 3 months payslips or the last 2 years SA302s if you are self-employed. If you are to use any tax credits, pensions or other benefits we will need the latest years award letter for each. Current outgoings In order to check whether a new mortgage will be affordable, ourselves and the lender will need […]

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Questions to ask when remortgaging

What is a remortgage? Remortgaging means moving your current mortgage to a new lender whilst you remain in the same property. The main reason to remortgage is to ensure you are not paying more than you need to. Moving to a new lender with different interest rates could save you a lot of money in the long run so it is worth considering. You could remortgage to fixed your monthly repayments for a certain period of time – this will ensure your monthly repayments will remain the same during this time. Many people also remortgage to raise capital to pay […]

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How does remortgaging work?

How does remortgaging work? Remortgaging is usually simpler than buying a new house and the chain of events is often shorter. It will often start by discussing what it is you would like to remortgage for whether it be to secure a lower interest rate or raise capital for home improvements or to consolidate unsecured debt. How long does it take to remortgage? Once we have discussed your circumstances, we will then go away and research the whole of the market and get a decision in principle for a deal that is best suited to your needs. Once we have […]

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How do I remortgage my home?

How do I remortgage my home? You may want to remortgage for a variety of reasons including securing a lower interest rate, consolidating debt or raising capital for home improvements. There are several stages in getting a new mortgage however we are here to help every step of the way.  Below are briefly the main points of how to go about remortgaging your property. Firstly, a discussion around how much you can afford to pay each month should take place – including considering how much you could potentially afford if the repayments were to increase.  You may not necessarily be […]

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Can I remortgage my home?

Can I remortgage if I own my house outright? Yes – however the mortgage rates available to you will depend on the loan to value ratio (the percentage of how much you want to borrow against the current property value of your home).  Some lenders may not offer you deals from their remortgage range but instead from their purchase range which could workout being a better rate for you. You will need to meet the lender’s criteria and prove that you can afford the monthly repayments of the new mortgage. Can I remortgage when I’m over 60 or retired? It […]

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When is the best time to remortgage?

You can remortgage at any time but it is not worth doing just to switch lender. There are certain times which could be more advantageous when it comes to remortgaging such as the following: Low interest rates At the end of your current term When you have built up a certain amount of equity in your property When remortgaging and the costs of doing so still work out less expensive than your current mortgage Low interest rates Mortgage lenders are always providing new deals and mortgage rates. If you have had your mortgage for a long period of time, it […]

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Finding the best buy to let mortgage

The buy-to-let mortgage market is a specialised one. In April 2014 the mortgage industry implemented the changes that came from the Financial Conduct Authority’s (FCA) Mortgage Market Review (MMR). The MMR changed the face of mortgage lending, forcing lenders to pay much more attention to affordability and expenditure rather than simply assessing gross rental income. Lenders view buy-to-let mortgages as higher risk than residential mortgages because they know that many landlords rely on rental income to make the mortgage repayments and if the property is vacant for a period there is no income. Because of this perceived risk, interest rates […]

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Niche Mortgage Products

Sub Prime Products Sub prime products are for people who do not fit high street lender’s lending criteria. This tends to be due to past credit problems such as missed payments, county court judgements or bankruptcy, which makes the borrower ineligible for standard mortgage deals. Sub prime products tend to have higher interest rates as the borrower is considered a higher risk.   Self-build Products Self-build products are for people building their own property or renovation projects. Lenders usually release the money in stages as they assess the building progress throughout. Some will ask that you have the plot of […]

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The buy to let market

The introduction of assured shorthold tenancies in 1997, which made the rights of tenants and landlords more equal, created the buy-to-let market that exists today. Some say buy-to-let has forced up property prices but there is no doubt it has a part to play as first time buyers are getting older and younger people are renting. The whole point of buying-to-let is for its investment potential – both capital growth on the value of the property and the income it generates in rent. Buy-to-let lending is to support investment, not home ownership. It is important to note that lenders carry […]

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Choosing the right buy to let property

When choosing a property to let, your main considerations are different to those you might apply when choosing a house in which to live. For example, you might not choose to live in an area heavily populated by students, but when looking for rental potential that same area may be exactly what you’re looking for. Choosing the right property with the right rental yields is important. This is true not just for your income but also because you want the rent to more than cover the cost of your buy-to-let mortgage. The Association of Residential Letting Agents produces a booklet […]

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New Build Mortgages

It is vital to get your timing right when it comes to new build properties and related mortgages as it is unlikely that you will be moving in straight away. You need to bear in mind that you will need a mortgage before you exchange contracts. It may be worth starting to plan your mortgage even before you find a property. The mortgage lender will need to be made aware that it is a new build property as there could be delays between exchanging contracts and completion.  Without doing so, your mortgage offer could expire and the whole process will […]

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Shared ownership mortgages and schemes.

Shared ownership means you will own a certain percentage of your property with the other share being owned by a housing association.  It will be a leasehold property for this reason. How does shared ownership work? When you first purchase the property, you would chose how much of a percentage you would like to buy – this is usually between 25% and 50%, although you can also purchase 75% if affordable. You would mortgage the share you would like to buy whilst paying rent to the housing association for the remainder that they own. Not all lenders will offer a […]

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What is an offset mortgage?

Offset mortgages are linked to saving accounts. You will pay interest on the different between the outstanding mortgage balance and the amount of savings in your account. For example, if you owe £200,000 in total and you have £50,000 in savings, your interest rate for that month will be calculated on £150,000. You are usually able to decide whether to keep the monthly repayments the same each month or to reduce them when the amount of offset savings increase. You are still able to access and use your savings however the more to offset, the faster the mortgage will be […]

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Help to Buy Schemes

There are various initiatives, detailed below, which form the government’s “Help to Buy” scheme. The aim of which is to aid people with the build-up of deposit in order to buy a new home.   Help to Buy ISA The Help to Buy Individual Savings Account(ISA) scheme involves receiving a government bonus on top of your own savings. This account is offered from a variety of banks and building societies across the UK to first time buyers on their first home A starting deposit of anywhere up to £1,200 can be made followed by a maximum monthly amount of £200. […]

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What is a tracker mortgage?

A tracker mortgage is dependent on the Bank of England Base Rate, meaning when this fluctuates, your monthly repayments will also change accordingly. The interest payable on a tracker mortgage is usually a certain margin above the Bank of England Base Rate – for example the Base Rate plus 1.00% with some trackers having a “floor” of which the rate will not fall below. Lifetime trackers track the Base Rate for the full life of the mortgage. They tend to be at a higher rate than other trackers however due to not having to switch lenders or products every couple […]

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What information do I need for my life insurance application?

In order for us to submit your life insurance application we will need the following information from you: Your height and weight GP details – including name and address Your medical history including details of any current or previous illnesses Details of any current medication or previous medication taken in the last 5 years Details of any family history of serious illnesses Your existing policy information – including provider, sum assured, term of the policy and policy number. Bank Account Details – for the account you wish the monthly premiums to be taken from. Once your application has been submitted […]

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What is a variable rate mortgage?

The interest on a variable rate rises and falls as changes in interest rates occur. There are different kinds of variable rates offered by lenders including a standard variable rate, a tracker rate or a discounted rate mortgage. Your monthly mortgage repayments are most likely to fluctuate whilst being on a variable rate unlike those on a fixed rate for example meaning your mortgage repayments could be different each month. The rate you will pay is entirely dependent on your mortgage lender, with changes to it not necessarily being affected by the Bank of England Base Rate. Standard variable rate […]

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Accident, Sickness and Unemployment cover

This is a yearly renewable cover that provides payment for a short period of time if accident, sickness or unemployment occurs. Often there is a deferred period after the point of claim (e.g. six weeks), and it is after this point that benefits are then paid. Benefits are normally only paid for periods of up to two years. Be aware that premiums will vary at renewal each year. ‘This Payment Protection Insurance is optional. There are other providers of Payment Protection Insurance and other products designed to protect you against the loss of income. For impartial information about insurance, please […]

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Affordability

At the moment it is easy to lull yourself into believing you can afford the mortgage you need – mortgage rates are at all-time lows and feel easily affordable. However, you need to ask yourself not only can you afford it today but can you afford it in the future when mortgage rates return to more normal levels. Let’s say you manage to find a buy-to-let mortgage with an interest rate of three percent, fixed for three years. That’s a great rate. After three years you find interest rates have gone up and the best deal you can now get […]

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Annual Percentage Rate of charge (APR)

This is the interest rate that takes into account the total charge for lending you the money each year. It includes the added costs of the loan (such as arrangement fees), as well as factoring in the frequency that interest is charged (daily, monthly, quarterly or annually). This results in a figure that shows the equivalent rate on an annual basis. While this is a good initial benchmark for comparison, it should not be looked at in isolation as the only way to choose your mortgage.

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Builders incentives – new-build ‘off plan’ offers

These may be attractive to the price you pay for the property. Be aware that some lenders may restrict the amount they lend in relation to these types of contracts. This helps protect them against market sentiment and may mean you have to invest more of your own deposit.

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Buildings insurance

This is insurance that protects the property, fixtures and fittings. It can protect against fire, flood, subsidence and accidental damage. A key point to note is that the amount of cover chosen is to cover the rebuilding cost of the property, which is often different to its market value. The amount you have to pay towards any claim is called an excess, and can vary depending on what is being covered (e.g. subsidence, fire).

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Completion

The stage in England and Wales where the property ownership finally changes for a purchase. Your conveyancer arranges for your deposit and lender monies to be paid to the person selling and completes the legal documentation.

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Contents insurance

This insurance protects items that can easily be removed from a property. Cover can be for risks such as fire, theft or accidental damage. The amount you have to pay towards any claim is called an excess, and can vary depending on the item covered and what it is being insured against (e.g. accidental damage, theft).

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Conveyancer

The job of a conveyancer (or solicitor) for a purchase is to help: Carry out a search of local planning information for items that may impact the value (e.g. upcoming land developments, new roads) Prepare a fixtures, fittings and contents list – this makes it clear what you are buying (e.g. kitchen appliances, lights, carpets) Confirm from the vendor whether they are aware of any material, structural or other defects to the property that you should know about Obtain proof that the property legally belongs to the person you are buying it from Research and find the property’s legal boundaries […]

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Credit reference agencies

These agencies hold information on most UK adults. That data helps lenders assess the risk of lending to a specific person. There are a number of agencies in the UK, the main ones being Experian,

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Credit score

To help a lender assess your application, it is usual that they will use a form of scoring system to decide whether to accept your application. Different lenders give different levels of importance to your circumstances, and some set a higher pass mark than others. It is normally based on three core areas: Public record information (e.g. the electoral roll), Credit account information (e.g. records of amounts of loans and your payment history), and Search information (e.g. the number of applications you have made for credit). This means that care is required to ensure you approach the most suitable lenders, […]

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Critical illness cover

This is insurance that pays out when a defined medical event occurs. For example, following a heart attack, stroke, cancer or some other specifically defined critical illness. Cover is for a set term, which may be equal to a mortgage term, for when children have grown up, until retirement or another life stage milestone. It may be worth considering having one policy for a set term to cover the mortgage, and another that will provide money to help provide for your different lifestyle if a serious illness happens. Most people choose a lump sum to be paid out. There is […]

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Deposit

Lenders are no longer happy to take all the risk of buying your next property, and so do not lend 100% of the value of the property. If you are unable, in the future, to pay your mortgage, the lender needs reassurance that it can take your home and cover the loan by selling it. Less risk taking means lower loan-to value (LTV) ratios, and personal deposits need to be larger than in the recent past. The source of the deposit may come from your current property, savings, inheritance or a gift. Be aware that deposit loans from family and […]

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Disclosure

It is a legal requirement that you disclose your circumstances fully and accurately. Also, non-disclosure of credit commitments, missed payments, County Court Judgements (CCJs), accurate address history, and number of dependents will have a big impact on your application now and also on any future application for financial services (as evidence of this may be loaded onto fraud databases). Disclosing any issues to a lender does not automatically mean the application will be declined – indeed many lenders have provision for this type of business. You may wish to consider obtaining a credit report to identify any historical or current […]

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Drawdown

During the completion stage, this is when funds are released from your lender to be used for the property purchase.

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Early repayment charge

This is normally shown as a percentage of the loan but can also be a fixed fee. They apply if you repay your loan during any special incentive periods (e.g. discount). Some products extend that time beyond the initial period so be aware. Part payments can also sometimes trigger this, although most lenders allow a small percentage a year to be repaid without this happening.

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Exchange

In England and Wales, this is the stage after which you are legally committed to purchase the new property. Usually deposits will be moved to the vendor’s conveyancer, so if you withdraw from the process you will lose the deposit. Insurance and protection should be in place at this point.

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Equifax, Callcredit and Checkmyfile

You can request a copy of your credit file from them, which is very worthwhile. You may be charged for this and some also have a monthly fee, so take care to check their terms and conditions.

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Equity

The difference between the value of your home and your outstanding mortgage is known as equity. You could use the equity in your home as your deposit for your new mortgage. Less risk-taking by lenders means lower LTV ratios, so the more equity the better. If you get into trouble making your mortgage repayments your lender needs to be sure it can cover the outstanding mortgage by taking your home and selling it. The lower the LTV the more chance your lender has of achieving this. To get the best deals on interest rates you’ll need around 20% equity. As […]

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Family Income Benefit

This cover will pay out if death occurs, and provides an income per year for the term remaining on the policy. For example, for a 20 year term, where the claim occurred after five years, there would be 15 annual payments made in total. The income is not normally subject to income tax but may impact some state benefits.

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Freehold

If you own the freehold of a property, it means that you own the building and the land it stands on.

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Furnished / unfurnished?

Most lenders calculations are based on unfurnished rental agreements, irrespective of how you intend to let out the property. This can give lower rental and lower yields while lowering the amount you can borrow against your expectations. The cost of fittings also needs to be considered, as well as budgeting for their maintenance.

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Gazumping

This is where the seller decides to take a higher offer, even after initially accepting yours. This could leave you out of pocket on expenses like the legal costs and survey fee. In England and Wales, the sale is secured by law only when contracts have been signed and exchanged. Under the Scottish system, the seller confirms his acceptance of the offer. If the seller then gets a better offer and wants to change his mind, his solicitor will refuse to act for him on the new transaction – as doing so would leave him open to charges of professional […]

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Guarantor

A guarantor doesn’t have to be a parent but usually is. A guarantor takes on some of the risk of you being unable to meet your repayments. The lender will normally require your guarantors to offer their property as security against the guaranteed part of the mortgage. Technically they become immediately liable to repay the outstanding loan if you are no longer able to make your payments. In reality what usually happens is an agreement is made between the lender and the guarantor, so they maintain payments until you are able to do so. The amount of lenders willing to […]

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Higher lending charge

This was previously known as a mortgage indemnity guarantee (MIG). It is where high LTV lending happens and an insurance policy is taken out by the lender to protect itself – should you default and property values decline. This cost is passed on to you through this charge. Not all lenders charge this as high loan-to-value loans are rare for buy-to-lets.

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House in Multiple Occupation (HMO)

If your property will have multiple occupants, you must check to see whether you require a license (www. propertylicence.gov.uk). You will find that this will limit the number of lenders willing to consider your application.

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Interest only mortgage

With an interest only mortgage, your payments to the lender cover only the interest on the loan (i.e. they do not repay any of the capital). The total amount of your debt does not reduce over time and the full amount of the loan still has to be repaid to the lender at the end of the term, so you will need to ensure you have that money ready. So you can make this final payment, you can invest so that you generate enough capital to repay the loan at the end of the term. If you choose to invest, […]

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Leasehold

A leasehold building means you have permission to use the property for a certain term, as agreed with the freeholder who owns the land. Typically this applies to apartments, where the freeholder will be responsible for maintaining the common parts of the building (e.g. entrance hall, staircase, roof), for which the leaseholder pays ground rent.

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Legal fees

When you buy a property there is legal work that needs to be done. You will often hear this called conveyancing. You will probably use a solicitor to do this work for you although you can use a licenced conveyancer. Your legal bill will be the fees for the legal work plus other expenses that your solicitor has paid on your behalf, such as searches and Land Registry fees. You may see these additional expenses described as disbursements. Some remortgage deals may include free conveyancing, otherwise expect to pay around £500 + VAT for the legal work plus the cost […]

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Letting agreement

The type of tenancy agreement will influence the number of lenders who will consider lending to you. A six month assured shorthold tenancy agreement (AST) is acceptable to most providers. Your choice will narrow if you are considering letting to a local authority, a company or housing association.

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Let-to-buy

A variation on a theme, where you let the home you are currently living in, so that you can facilitate the purchase of your new home. You need to obtain permission to let from your current lender, and they may not agree depending on their appetite for risk. They may also alter the interest rate you pay. You may need to review the market for other options. Your let-to-buy is then treated like a traditional buy-to-let application, and your new home purchase would be a related, but isolated, application. The Financial Conduct Authority does not regulate Let to Buy mortgages

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Life cover

This is cover that pays out on death. Some plans pay upon earlier confirmation of a terminal illness where the prognosis is death within 12 months. It can pay out as a lump sum, or as income for a set period. Cover can last for a set term called Term Assurance, or can last throughout life, called Whole of Life. The amount of cover can remain the same or increase / decrease annually. Level term assurance stays the same throughout. Decreasing cover is sometimes used to cover a reducing debt, such as a repayment mortgage and usually assumes a given […]

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Limited company

Whether you choose to buy the property in your own name, or that of a company, will have tax implications for you. You may also find that some lenders will not lend to a company, or still require a personal guarantee. You should seek professional advice from a tax specialist.

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Loan-to-value (LTV)

Compared to residential lending, loan- to-values are typically lower (75%) to accommodate the perceived higher risk, and need budgeting for in your deposit.

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Mortgage arrangement fees

Unless you choose a lender’s standard variable rate mortgage you can expect to pay an arrangement fee for your mortgage. Arrangement fees vary wildly, and may be expressed as a fixed fee or as a percentage of the loan. This means it is difficult to give an accurate estimate but it is not unusual to pay something in the range of £500 – £2,000 or more. You will usually have the choice of paying the arrangement fee up front or adding it to the loan. Adding it to the loan may ease your cash flow but will cost you more […]

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Offer

You will make an offer for the new property and hopefully that will be accepted. Obtaining a legal mortgage offer is the next important part. This is where the lender starts their assessment (underwriting) process of you and the property. A mortgage offer is normally required by your conveyancer before moving to the next stage. Please note, that although extremely rare in reality, a lender reserves the right to withdraw your offer at any point prior to completion.

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One-off costs

When you buy a property you incur certain one-off costs that can add up to a significant amount of money. These include land taxes (stamp duty), legal fees, valuation/survey fees, and mortgage arrangement fees.

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Personal income

Most lenders will first look at the rental income, yield and property value to assess your application. They are also likely to look at your personal income and expenditure to satisfy them that mortgage payments can be met in the event of a rental void.

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Private medical insurance

This is insurance that pays the hospital or Doctor for your treatment. It can include treatment in a private ward, or being seen earlier in an NHS ward. Some plans also allow you to claim if you are not able to be seen by the NHS within a set period. Other plans may charge a little more and don’t have any link to NHS waiting times. You are either medically checked and underwritten at outset (so you know what you’re covered for and what you won’t be), or have no medical checking at outset (but conditions that occurred two years […]

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Property type

Some properties such as flats over commercial properties, studio flats and ex-local authority premises can be viewed as having reduced future attractiveness and as such some lenders may not operate in that market. This may restrict your lending options. Listed buildings (e.g. Grade 1, Grade 2) may have restrictions on how you can maintain or alter the property as well as buildings near to it (e.g. garage). Some unlisted properties can also be subject to similar restrictions (e.g. in an area of outstanding natural beauty).

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Regulation

Buy-to-let mortgages are not regulated. There are best practices that any reputable mortgage adviser or lender will follow and these are based on the practices and processes that apply in the residential mortgage market. The Mortgage Credit Directive (2016) has also included Consumer buy-to-lets as a regulated product. Consumer buy-to-let is defined as a contract which is not entered into by the borrower wholly or predominantly for the purposes of a business carried on, or intended to be carried on, by the borrower. The legislation sets out a series of circumstances that would constitute a buy-to-let customer acting for the […]

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Rental voids

You need to ensure you have enough personal income and resources to maintain payments if your property becomes vacant. This is because your monthly payments to the lender will continue irrespective of your rental situation.

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Rental yields

What may be a suitable return for you, may not be seen the same way by a lender. Typically minimum rental yields are formulaic and driven by two things: the rate used to calculate the mortgage payment a percentage over-ride to allow for any rental void or increases in short-term interest rates which might impact your personal finances (these range between 100 – 130%).

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Rent guarantee insurance

A tenant that falls into arrears can jeopardise your ability to meet your mortgage repayments. If you fall into arrears with your mortgage repayments you risk losing your property. Rent guarantee insurance covers you if tenants default on their rent and protects your ability to pay your mortgage. Some policies also cover any associated legal costs.

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Repayment mortgage

With a repayment mortgage your monthly repayments cover both capital and interest on the loan. As the term continues, the amount outstanding on the loan reduces so the full amount of the loan will have been repaid at the end of the term as long as you have maintained payments. No other repayment vehicle is needed and it avoids the risk of investing (e.g. in the stock market). If you remortgage, you may be tempted to extend the end repayment date in order to lower your monthly payments. However this means that the amount you repay overall increases over time.

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Risks

As with all investments, the value of a property can go down as well as up. Past performance is not a guide for the future. If your mortgage loan exceeds the property value, you will have negative equity. Also factor in the costs of selling, such as using an estate agency, into your net value. However, if you pick the right area, and are realistic about returns, you can reduce the risks. Unforeseen structural problems could prove expensive, so budgeting for regular maintenance is crucial, as is having the right level of buildings insurance. Rental income from buy-to-let properties can […]

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Self-employed

It is more difficult to get a mortgage if you are self-employed, when compared with employees. Self-employed people often have more erratic incomes and find it more difficult to prove their incomes. In the past, self-employed people got round the problem of proving income by using self-certification mortgages, where you would state your income and a lender would take it on trust. However, too many people took out mortgages they couldn’t afford and these loans are no longer allowed. All lenders will want to see proof of your income, often looking to see a track record over three years or […]

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Tax implications

The UK Government in 2015 announced a new way that tax relief on mortgage interest payments and expenses will be treated for buy-to-let investors. This starts in April 2017 and will be phased in. The disposal of a buy-to-let property may be subject to capital gains taxation. You should seek professional specialist tax advice about this.

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Tenants

Not all lenders will allow students or DSS tenants, so consider carefully the type of occupant you wish to attract, as it may limit the number of lenders willing to lend to you.

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Valuation and survey fees

Before a lender will grant you a mortgage it will insist on a valuation to prove the property is worth what you’re paying for it. The size of the valuation fee will vary by lender and property value but for a property costing £200,000 expect to pay around £355 (source: Halifax Building Society June 2015). The basic valuation is for the lender’s benefit so that it feels comfortable lending against the property. If your property is rented out, then a rental assessment will also be required. It may be possible to raise a larger mortgage with one lender compared to […]

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Waiver of premium

This is a feature that can be added to some insurance plans. Should you become disabled, or seriously ill and unable to pay the premiums of a plan, this cover can pay your premiums for you. There is normally a period before this benefit starts where you need to continue paying premiums (a deferred period). Once the deferred period has passed, you will have your premiums paid for you.

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