What is a first time buyer?
A First Time Buyer is someone who is looking to buy their first home which will be used as their main residence. In recent years it has been difficult for First Time Buyers to get onto the property ladder due to rising house prices and the need for higher deposit amounts. It is therefore important for first time buyers to prepare in advance of their application and make sure that they get the right advice from a professional mortgage advisor. This can be instrumental in ensuring you are able to move into your dream home.
When should I get an Agreement In Principle:
An agreement in principle alternatively known as a decision in principle, is confirmation from a mortgage lender that subject to the information being provided being correct they are provisionally happy to lend you a specified amount. This is the first step in the property buying ladder and enables you move forwards in the house buying process with confidence. There is no need to have an agreement in principle in place to view a property but it can help to show the property sellers that you are a serious buyer and are in a position to proceed.
Generally First Time Buyers are in strong buying position because they are not relying on the sale of a property and thus are not extending the chain when making an offer on a property. By having your Agreement in Principle in place this should ensure any offer made by a First Time Buyer stands out from other buyers.
How Much Can I Borrow as First Time Buyer?
Being a First Time Buyer won’t determine how much a mortgage lender will be willing to lend you. Your loan amount is calculated based upon your financial circumstances including committed outgoings and your credit score. How much a mortgage lender is willing to lend to you will vary this is the main benefit of using a mortgage broker as we will do the hard work for you to ensure you are aware of the amount you will be able to borrow.
How Much Deposit Will I Need?
Some lenders may ask for a higher deposit from a First Time Buyer. However, subject to credit score most mortgage lenders will ask for a minimum of 5% deposit. As a rule the higher deposit amount you have available the lower the interest rate you will need to pay to the mortgage lender.
What is a remortgage?
A remortgage is where you look to take a new mortgage on a property which you already own. Normally this will be to replace an existing mortgage you already have in place against the property.
I am on my lenders variable rate should I look to remortgage?
As a rule it is better to remortgage than to remain on your lenders Standard Variable Rate(SVR) as the SVR rate will often be higher than the interest rate on a fixed rate mortgage. If you are on your lenders SVR you could potentially save hundreds of pounds a month. Speaking to a mortgage broker before your deal ends with your current lender will normally mean significant savings for you.
When should I look at my remortgage?
If you deal is coming to an end within the next six months you should be preparing to look into ensuring you get a new remortgage deal in place. This will help to ensure that you don’t move onto your lenders SVR rate and will help to save you money.
I have early repayment charges payable should I remortgage?
In most circumstance the answer to this questions is no. However, it will be dependent on your personal circumstances and how high any early repayment charges are. If you are looking to move mortgage lenders for a cheaper interest rate you will need to ensure that the cheaper rate saves you enough money to make it worth paying the early repayment charges.
Can I borrow extra money when I remortgage?
Potentially subject to mortgage lenders affordability calculations you may be able to borrow additional money when you remortgage. However, you need to make sure that this is the best thing for you to do by speaking to a mortgage broker. Debt consolidating and adding unsecured debts to your mortgage may not be in your best interest for example. Whereas if you are looking to complete home improvements to your property which will raise the value of your property this could be a good reason to look to borrow additional funds.
Can I remortgage if I have had credit issues?
This will depend on the level of credit issues you have had and how recent they have been. Here at PAB Wealth management our mortgage brokers are specialists in helping clients who have had adverse credit and we will do everything we can to assist you with your remortgage.
How much will it cost to remortgage?
This will depend on a number factors. You may find that some lenders may charge product fees, valuation fees and possibly even conveyancing fees. As well as taking into account an mortgage advice fees. However, you will usually find that when remortgaging lenders won’t charge valuation or conveyancing fees.
Can I remortgage my interest only mortgage to a repayment mortgage?
You may be able to remortgage your interest only mortgage and change it to a repayment mortgage to enable you to ensure that the mortgage balance will be repaid at the end of your mortgage term. This will be dependent on your current circumstances as any new mortgage lender will need to ensure that the new mortgage is affordable for you.
What is a Buy to Let Mortgage?
A buy to let mortgage is when you are purchasing a property with the intention of renting it out. If you are purchasing a residential property with the intention of renting it out for profit you will need to apply for a Buy to Let mortgage. Having a Buy to Let mortgage means that you will not personally be able to live in the property as your main residence.
How much deposit will I need for a Buy to Let Mortgage?
To purchase a property with a Buy to Let mortgage you will generally need to – Own your own home which you are living in, you may be required to be earning a certain annual salary and most Buy to Let mortgage lenders will require you to have a minimum of a 20% deposit.
Is a Buy to Let Mortgage different from a normal mortgage?
Buy to Let mortgages differ from normal residential mortgages in a number of ways. As well as needing a higher deposit you will often be required to pay higher initial set up fees and a higher rate of interest to the mortgage lender. Most Buy to Let mortgages are taken out on an interest only basis and as such the owner does not repay the capital of the original loan but will only service the interest on the loan on a monthly basis.
This will mean that the initial amount of the loan that was borrowed will still be owed to the lender at the end of the mortgage term. The amount that you can borrow is also calculated in a different way and will normally be based on the amount of monthly rent that the property is expected to achieve rather than being based on your personal salary.
Do I need to pay taxes when I own a Buy to Let property?
There are also taxation implications which you will need to take into account when you own a Buy to Let property. You will normally have to pay a 3% stamp duty surcharge when you purchase a Buy to Let property.
Income tax will be payable on the monthly rental you receive in relation to the property and capital gains tax will be payable on any profit you make when you look to sell the property. We would always recommend speaking to a qualified taxation expert when you are looking to purchase a Buy to Let property.
How do Limited Company Buy to Let Mortgages work?
Some landlords may wish to purchase their Buy to Let properties via a limited company. To do this generally you will need to set up a special purpose vehicle which is a limited company that has been set up specifically to purchase buy to let properties. There can be several benefits and drawbacks to owning a property via a limited company. The benefits include lower stress tests in relation to the rental income of your property. No limits on the number of properties owned which enables portfolio landlords to continue to expand their property portfolio. In addition to this there may be certain tax advantages which are not available to landlords who own their properties in personal names.
Here at PAB Wealth Management our mortgage brokers are experts in relation to Buy to Let mortgages. The process of arranging a Buy to Let mortgage can be more complex than a standard residential mortgage especially for first time landlords and portfolio landlords. Our qualified and professional mortgage brokers will help you with every step along the way when it comes to getting the right mortgage in place for your needs.
An applicant who already has an existing property and plans to move house is known as a home mover. When you move home if you are currently in a fixed rate period with your current lender, you don’t necessarily have to change mortgages, it’s may be possible to remain with the same lender on using your current mortgage and benefiting from the interest rate you currently have. This type of application is known as ‘Porting’.
When you choose to port your mortgage your lender will class this as a whole new application and as such you may be required to pay new application and valuation fees to your existing lender. If the property value of your new property is higher than the sale price of your current property your mortgage lender may need you to take additional borrowing. This could be more expensive than your initial borrowing at PAB Wealth
Management your mortgage broker will compare the market to ensure that you are getting the best deal by staying with your current lender.
Porting your mortgage is not a guaranteed right and is subject to a new application and meeting the affordability calculations as well as the current criteria of your lender at the time of the move. By discussing this with a Mortgage Broker such as ourselves you will be able to establish whether porting or a moving to a new lender is most cost effective in your circumstances and to help facilitate any porting or new lender application required.
It may not be cost effective or even possible to complete a porting application of your current mortgage with your existing lender. The next option may be to search the whole marketplace to find a new lender who is willing to lend you the required amount for your new purchase. When considering this though it is important to factor in any early repayment charges that may be payable if you are exiting your current mortgage deal early. By speaking to a professional qualified mortgage broker at PAB Wealth Management we will be able to tell you if this is the best thing for you to do.
If you are not currently in a fixed rate mortgage with your current lender you may not have early repayment charges payable to leave your lender and will be able to scope the whole market for the best deal based on your individual circumstances. It may also be possible to borrow more with a new lender than you can with your current lender which could enable you to put down a lower deposit when buying your new property. If for example you are intending to renovate the new property.
Mortgage brokers and mortgage lenders are prone to using jargon which most laymen won’t have heard of before. Check out our hand jargon buster below to help you understand more about mortgages.
What are Fixed Rate Mortgages?
A fixed rate mortgage is where your mortgage lender guarantees your mortgage payments will remain the same for a specified period of time. This is usually for 2, 3 or 5 years however some mortgage lenders will allow you to fix your mortgage for up to 40 years.
What are Variable Rate Mortgages?
Variable-rate mortgages are where the interest rate on your mortgage will move up and down in line with your mortgage lenders Standard Variable Rate. This types of rates are often higher than you will receive on a fixed rate mortgage. However, variable rate mortgages do offer some flexibility as there will be no penalties if you wish to pay the mortgage off or if you wish to transfer to another lender.
What are Tracker Rate Mortgages?
Tracker rate mortgages tend to be linked to the Bank of England base rate. Therefore if the Bank of England base rate increases the interest rate you will pay will increase. Conversely if the Bank of England base rate decreases the interest rate you will pay will decrease.
What are Discounted Rate Mortgages?
Discounted rate mortgages are similar to tracker rate mortgages. But, they will give you a discount of the mortgage lenders Standard Variable. For example the Standard Variable Rate with the lender could be 5% and they may offer a discount of 3% off their Standard Variable Rate meaning the rate you will pay is 2%. Again if the Standard Variable Rate increases or decreases your payments could go up or down.
What are Offset Mortgages?
An offset mortgage is suitable for people who savings and also a mortgage. Your mortgage lender will use the savings to offset the mortgage interest you will pay. For example if you have a mortgage balance of £100,000 and £40,000 in a savings account your lender will only charge you interest on £60,000 of your mortgage. This will enable you either benefit by reducing your monthly mortgage payments or keeping your mortgage payments at the same level and repaying your mortgage quicker.
What is Repayment Mortgage?
A repayment mortgage is where each monthly payment will pay off an amount of the capital which you original borrowed as well as the interest that has accrued. When you reach the end of your mortgage term as long as you have made all mortgage payments on time you will not owe any money to your lender.
What is an Interest Only Mortgage?
An interest only mortgage is where each monthly payment only pays the interest that has been accrued on the mortgage balance. At the end of your mortgage term this will mean you still have to repay the whole of the original mortgage balance.
What is Porting?
Porting your mortgage is when you take the mortgage you have with your current lender and move it to a new property instead of coming out of your current mortgage deal and paying early repayment charges when you move property during a fixed rate period.
Your home/property may be repossessed if you do not keep up repayments on your mortgage