Guides

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.

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.

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 […]

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.

Freehold

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

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.

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 […]

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 […]

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.