Planning Your Mortgage
Am I prepared?
Before you apply for a mortgage there are a few thing you need to be aware of which the Experienced team at RFS can help you with.
It is always best to be well prepared before you make BIG decisions so contact us sooner rather than later to make sure you are ready and on the right path to get the best mortgage option for you.
There are many different things taken into account when applying for a mortgage such as your credit score and affordability assessment, age, income and current debts. Mortgage lenders want to make sure you can, not only afford the mortgage but can regularly meet the monthly repayments.
Our mortgage brokers at RFS will help with your ‘affordability assessment’. You can show us in confidence, all your financial outgoings and expenses. We will then discuss with you the next steps to put you in the best position before you apply.
Do not give up if you have bad credit or a low score. RFS have specialists in this field that can look at the best options for you tailored to your individual needs and circumstances. Speak to us today, were here to help.
What is a Mortgage?
Do you have a large pot of money to buy a property outright? If No like the majority of people then you will need a mortgage which is a large loan in order for you to buy it and pay it back over a period of time and by keeping up monthly payments.
Many Banks and building societies are the lenders that will lend you the money subject to your individual circumstances so you can achieve this goal and at RFS we have access to a Full range of comprehensive lenders to suit your needs.
The mortgage will be paid back over a period of time to suit your needs and circumstances and you will then own the property as long as you keep up the repayments or clear the loan.
You may be thinking well how much can I borrow? How much will it cost me? How long can I borrow it for? This is why you need to speak to one of our specialist team who can hand hold you through the whole process and guide you to the right option for you.
Do I need a deposit and how much?
Before you can get a mortgage, you will need to have an amount of money that you can use to make an initial payment up front before the mortgage starts. This is what is known as a deposit and it often needs to be at least 5% of what you are paying for the property and this is subject to your individual credit score in some cases.
Our Mortgage Brokers will be able to give you a detailed breakdown of what you need and an idea of what you can borrow. This will then give you a good starting position to plan your next steps moving forward.
What types of mortgages are there?
Fixed rate mortgages
With a fixed rate your payments will stay the same throughout the length of the deal no matter what happens to interest rates.
You’ll see them advertised as ‘two-year fixed rates’ or ‘five-year fixed rates’, for example, along with the interest rate charged for that period.
Advantages
- Peace of mind that your monthly payments will stay the same, helping you to budget
Disadvantages
- If interest rates fall, you won’t benefit from a lower rate.
- Early repayment charges could be applicable if you want to leave the deal early.
Variable rate mortgages
With variable rate mortgages, the interest rate can change at any time.
Variable rate mortgages come in various forms:
Standard variable rate (SVR)
This is the normal interest rate your mortgage lender charges homebuyers and it will last as long as your mortgage or until you take out another mortgage deal.
Changes in the interest rate might occur after a rise or fall in the base rate set by the Bank of England.
Advantages
- Freedom – you can overpay or leave at any time
Disadvantages
- Your rate can be changed at any time during the loan
Tracker mortgages
Tracker mortgages move directly in line with another interest rate – normally the Bank of England’s base rate plus a few percent.
So if the base rate goes up by 0.5%, your rate will go up by the same amount.
Usually they have a short life, typically two to five years, though some lenders offer trackers which last for the life of your mortgage or until you switch to another deal.
Advantages
- If the rate it is tracking falls, so will your mortgage payments
Disadvantages
- If the rate it is tracking increases, so will your mortgage payments
Offset mortgages
These work by linking your savings and current account to your mortgage so that you only pay interest on the difference.
You still repay your mortgage every month as usual, but your savings act as an overpayment which helps to clear your mortgage early.
Interest Only Mortgage
With interest-only mortgages you only pay the interest due on the amount you borrowed each month.
So while your monthly payments will be less than with an equivalent sized repayment mortgage, you’ll still owe the amount you originally borrowed when you reach the end of the mortgage term.
Just like repayment mortgages, you can fix the interest over time or it can be paid back at a variable rate.
Paying back the capital
Lenders will make sure you have a repayment strategy in place, so that you’ll have money to pay off the capital at the end of the mortgage.
Lenders have different criteria, but a suitable repayment plan is likely to mean paying regularly into savings or investments and could include pensions and other properties.
If you use an investment plan, it’s your responsibility to be sure it is on track to pay off the capital at the end of the mortgage, but your lender will also review the amount at least once during the mortgage term.
If it’s not on track you will find it difficult to remortgage or switch to another lender.
Some lenders might ask for a larger deposit if you have an interest-only mortgage.
Combined repayment and interest-only mortgages (Part & Part)
Some lenders offer mortgages on a part-repayment and part-interest-only basis.
This option means that at the end of the term some of the mortgage capital will still be owed and will need to be repaid.
Each lender will have different rules about this so speak to us for more information.
Buy to Let
Do you ever watch a lot of house programs on TV and think? Hmm that's a good idea, I could do that? Not earning as much interest on your cash in the bank as you would like too? Well property is a great way to invest if done properly. Whether you're a new or an experienced investor we will be able to help you find the most suitable mortgage for you.
Also if you already own a property then re-mortgaging this could be the perfect way to release equity and enable you to start or increase your own property portfolio?
Costs to be aware of when buying a property?
Solicitors and what do they do?
The solicitor will handle the legal work around the property and make sure it is all done correctly and compliantly in the background for your purchase of the property.
Your solicitor submits searches to the local council to check whether there are any planning or local issues that might affect the property’s value.
Your solicitor will tell you how much you can expect to pay and might ask for a deposit upfront – this is typically 10% of their fee to start any work carried out. Speak to us for more details and for a solicitors quote.
Stamp duty and what is it?
If you’re buying a home in England or Northern Ireland then you may have to pay Stamp Duty Land Tax (SDLT) on your purchase. This tax applies to both freehold and leasehold properties – whether you’re buying outright or with a mortgage.
Stamp Duty on second homes
Buyers of additional residential properties, such as second homes and buy-to-let properties, may have to pay an extra Stamp Duty percentage on top of current rates for each band. It doesn’t apply to caravans, mobile homes or houseboats.
If you buy a new main residence but there’s a delay in selling your previous main residence, you’ll have to pay the higher Stamp Duty rates as you’ll now own two properties.
However, if you sell or give away your previous main home within 3 years of buying your new home you can apply for a refund of the higher SDLT rate part of your Stamp Duty bill. This can change so make sure you speak to a solicitor to confirm your own situation.
You can request a refund for the amount above the normal Stamp Duty rates if:
- you sell your previous main residence within three years, and
- you claim the refund within three months of the sale of your previous main residence, or within 12 months of the filing date of your SDLT tax return, whichever comes later.
This can change depending on the government’s rulings at anytime so make sure to speak to a solicitor to confirm the current situation which relates to your position.
What is Freehold?
The freeholder of a property owns it outright, including the land it’s built on.
If you buy a freehold, you’re responsible for maintaining your property and land, so you’ll need to budget for these costs.
Most houses are freehold but some might be leasehold – usually through shared-ownership schemes.
What is Leasehold?
With a leasehold, you own the property (subject to the terms of the leasehold) for the length of your lease agreement with the freeholder.
When the lease ends, ownership returns to the freeholder, unless you can extend the lease.
Most flats and maisonettes are owned leasehold, so while you own your property in the building, you have no stake in the building it is in.
Some houses are sold as leaseholds. If this is the case, you own the property, but not the land it sits on.
Also with some lenders there needs to be a minimum lease term on the property for it to be mortgageable Speak to us for more details.
What is a Survey?
Mortgage valuation survey
The sole aim of the mortgage valuation is to satisfy the lender that your desired property is worth the price you’re paying – or at least the amount it’s lending, before they approve your mortgage.
A valuation is just that and nothing more so it won’t point out repairs or structural problems that you will have to pay to fix.
Generally, you will pay for the lender’s survey. The cost is based on the value and size of the property and is typically £150 to £1,500.
Sometimes lenders offer mortgages with free valuation surveys which we have access to so speak to us for more information.
RICS HomeBuyer Report
A HomeBuyer Report is a survey suitable for conventional properties in reasonable condition.
This will help you find out if there are any structural problems, such as subsidence or damp, as well as any other unwelcome hidden issues inside and outside.
The HomeBuyer Report doesn’t look beyond the floorboards or behind the walls.
RICS Building Survey
The RICS Building Survey provides the same level of in-depth inspection as a building survey, but uses a simple a clear presentation style and a 1, 2, 3 rating system to ensure that you can easily identify the most serious issues. . This is mainly aimed at larger or older properties, or if you’re planning major works.
A detailed report provides you with an in-depth analysis of the property’s condition highlighting a range of issues which includes advice on defects, repairs and maintenance options. Included with the RICS Building Survey are advice sheets on how to deal with some of the more common problems that have been found at the property including an outline of repair options and the consequences of not dealing with any potential issues highlighted within the report.
Building or full structural survey
This is the most comprehensive survey and is suitable for all residential properties. It’s particularly good for older homes or homes that might need repairs. This type of survey typically costs upwards of £600 and provides detailed advice on repairs.
It’s very extensive and in some circumstances worth the extra money but it does not usually include a valuation. Although this survey can’t look under floorboards or behind walls it should include the surveyor’s opinion on the potential for hidden defects in this area.
Where to find a surveyor?
Speak to us today and we can recommend a Surveyor for you that can give you a quote and guide you through the next steps.
Contact Our Mortgage Advisers Today
Contact RFS in Rayleigh today to receive our expert guidance and mortgage advice. Our specialist mortgage brokers are on hand to make finding the right mortgage for you efficient, quick, and stress-free.