Archive for September, 2009

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Mortgage Broker Q & A - Mortgage on a freehold flat

Wednesday, September 30th, 2009

In Q & A we take a look at some of the questions mortgage advisors answer on a regular basis.

Question; I have been told it’s difficult to arrange a mortgage on a freehold flat, why is this?

In a freehold you are responsible for the maintenance and insurance of the building and own the land on which it is built, which in the case of a normal house is a good thing.

However in the case of a flat this means that there is no clear definition around who is responsible for which parts of the building. Your roof is your neighbour’s floor and your floor is someone else’s roof.

Imagine then that your upstairs neighbour leaves his bath running and your roof collapses, whose responsibility is this now? If your neighbour has no insurance then it could get pretty messy and that’s why as a mortgage lender it’s a bit of a no go area.

This problem can also occur with what’s known as a flying freehold, this is a maisonette or house where some of the property extends over or under another property on a freehold tenure.

If you are in need of a mortgage on such a property they may be steps you can take to go about getting one so call 0845 4594490 to speak to a mortgage advisor for specific advice on the area.

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House Price rises driven by larger properties

Tuesday, September 29th, 2009

Findaproperty.com’s new house price index suggests that house prices have remained stagnant at the bottom end of the market while strong rises in higher value properties are propping up the major indices.

Their figures collated from average asking prices on the website over the past month show high value properties climbing at 6.6% annually against a monthly rise of o.3% for first time buyer properties leaving them still down -4.6% year on year. This would appear to suggest that the difficult lending conditions for first time buyers are continuing to drag down property prices as second times buyers struggle to find a purchaser who can afford their property in the current market.

However there is good news in the bag too with average first time buyer affordability improving dramatically fuelled by the price reduction. Their figures for affordability gap or the average deposit required show a drop to £55,700 or 1.74 times gross household income against £71,000 or 2.8 times gross household income in January 2008.

Overall the indices showed a 0.2% rise on August figures leaving the average national asking price at £218,134.

You can see their results and the rest of the overview here Find a property.com’s September House Price Indices

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Mortgage Broker Q & A – What’s an Offset Mortgage?

Thursday, September 24th, 2009

In Q & A we look at some of the questions mortgage advisers answer on a day to day basis.

Question; Whats an Offset Mortgage and how can they save me money?

Offset Mortgages have lessened in number thanks to the credit crunch but for some people they could still represent a very effective way to save money on mortgage repayments.

In an offset mortgage a savings account is held with the lender and any balance held in the savings account will be offset against the outstanding loan amount and no interest is paid on the equivalent balance of the loan. The benefit of this is that Mortgage Interest rates are generally above savings interest rates as this difference is the premium or margin the lender will make on the loan.

You are also taxed at either 20% or 40% on your savings interest (unless you don’t pay tax but let’s assume you do if you have a mortgage). This means that if you could get a savings rate of 3.5% gross and your mortgage was 4.5% for example then the real return on your savings would be either 2.8% or 2.1% after tax. That would mean that for every £1000 in the offset account you would be better off by either £17 or £24 a year in this scenario and your mortgage payments could be reduced by £45 per £1000.

But it doesn’t end there, you can usually either use the offset to reduce the term of your mortgage or your monthly repayments. If you reduce the payments but deposit the savings into the offset the balance will increase accelerating the reduction of your interest payments and increasing savings month on month but it also can be used as a way of effectively paying lump sums off a mortgage with the added benefit that these can be easily accessed should you have a rainy day!

For more information on Offset Mortgages call a mortgage advisor on 0845 4594490 for advice.

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Alliance & Leicester reduce 3 year fixed remortgage rates

Tuesday, September 22nd, 2009

Alliance & Leicester have announced a reduction to 4.88% for their 3 year fixed rates up to 70% loan to value with either a 1% or £995 arrangement fee. The rate then reverts to 4.99% currently giving an APR of 5.2%.

Valuation fee’s are refunded on completion up to a property value of £1 Million and would be £280 based on borrowing of £100k at 70% LTV. Applicable fee’s are lenders Conveyancing fee of £189, Telegraphic transfer fee of £30 and early repayment charges of 3% of loan to be paid until 30/11/2012.

Whilst this brings them into line with offerings from Abbey it is still some .4% off the current products on offer from the Woolwich.

As usual always consult a Key Facts Illustration before making a decision about a mortgage. For further information on this product or any others please contact us on 0845 4594490 to speak to a mortgage broker.

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it. We do not usually charge a fee for mortgage advice although you do have the option to pay up to 1.5% of the loan amount. Some buy to let and commercial loans are not regulated by the Financial Services Authority.

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Mortgage Broker Q & A – Do benefits count as income?

Monday, September 21st, 2009

In Mortgage Adviser Q & A we look at some the common questions answered by mortgage brokers on a day to day basis.

Question; Will lenders consider my benefits as income when assessing affordability?

Most lenders will consider some types of benefits as income and this varies from lender to lender. For example it is quite common for child tax credits to be considered as income but child benefit not to be, it is also quite common for other income such as regularly received child maintenance payments to be considered. Again though how much is applied will be specific to each individual lender.

Most lenders will however require you to have some form of income apart from benefits as well, this is because year by year benefits will be changed in the budget and your entitlement to a benefit cannot be guaranteed in the long term.

For information about which benefits are considered as income with different lenders seek independent mortgage advice.

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Mortgage Broker Q & A – Life Insurance or Assurance?

Friday, September 18th, 2009

Question; What’s the difference between life insurance and life assurance?

Assurance refers to cover for an event that will definitely happen or that is inevitable, so in the case of life assurance this means that the policy will always pay out if payments are continued because it will run for the whole of your life and inevitably will therefore pay out when you pass away.

Life Assurance is therefore an investment, whereas life insurance will run for a specific term and will only pay out in the event that you pass away within the term. Should you survive the term there will be no return on the premiums however this will obviously be reflected in the price.

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Woolwich announce their lowest ever flexible mortgage rate

Thursday, September 17th, 2009

The Woolwich have announced a new tracker at 1.48% above base rate for the first year then reverting to 2.49% above base rate for life giving their lowest ever headline mortgage rate of 1.98% currently. The product has a minimum loan of £200,000 and maximum of £500,000 so it is quite restrictive, early repayment charges are 2% until the 31/01/2013 meaning it does tie you into the rate for some time as well.

The product has a £999 arrangement fee, and based on a loan of £200,000 at 60% a valuation fee of £415, lender Conveyancing fee of £126, land registry fee of £280 and completion fee of £35 while APR is 3.0%.

The biggest caveat to this product is that the option to switch to a Woolwich fixed rate without penalty during the early repayment charge period which Woolwich call “drop lock” does NOT apply to this product, so while its headline rate may be very tempting if there are significant rises in interest rates particularly in the second and subsequent years of the mortgage it could become very costly indeed particularly as early repayment charges on a minimum loan of 200K would amount to four thousand pounds as well!

For this reason I would thoroughly recommend speaking to a mortgage advisor or seeking mortgage advice about the suitability of this product if it has your interest, and as usual read the Key Facts Illustration prior to making any decision on a mortgage product.

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it. There may be a fee for mortgage advice. The amount will depend upon your circumstances but it is typically £200 or up to a maximum of 1.5% of the loan value. Some buy to let and commercial loans are not regulated by the Financial Services Authority.

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New rates announced by Cheltenham & Gloucester

Wednesday, September 16th, 2009

Further to last week’s post Cheltenham & Gloucester have announced a new product at 90% Loan to Value and a reduction in their five year fixed rates at 85% loan to value.

The new 5 Year fixed rate at 7.19% doesn’t look particularly appetising on paper with a £995 arrangement fee, Early repayment charges staggered at 5% in the first two years and then 4,3 & 2% consecutively for the remaining years, a valuation fee of £300 based on a loan of £100K, with APR at 4.8% and a reversion rate currently at 2.5% but it does reflect the general easing of criteria and willingness to lend at higher loan to value.

Again the reduction of .1% on their existing five year fixed rate at 85% loan to value won’t have Mortgage Brokers dancing in the streets but is a very small step in the right direction. It now has a five year fixed rate of 6.89%, £995 arrangement fee, Early repayment charges staggered at 5% in the first two years and then 4,3 & 2% consecutively for the remaining years, a valuation fee of £300 based on a loan of £100K, with APR at 4.6% and a reversion rate currently at 2.5%.

As usual refer to the Key Facts Illustration before making a decision on a Mortgage and seek independent Mortgage Advice to ensure the product is suitable.

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it. We do not usually charge a fee for mortgage advice although you do have the option to pay up to 1.5% of the loan amount. Some buy to let and commercial loans are not regulated by the Financial Services Authority.

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Mortgage Broker Q & A – Letting part of a property

Tuesday, September 15th, 2009

Question; I want to buy a property and let a room or rooms out, is this a Buy to Let?

In short probably not if you or one of your direct family members occupy 40% or more of the property this will be classed legally as a residential mortgage.

The exception would be where you are buying a block of flats or converting a property to flats and your personal flat is less than 40% of the buildings total floorspace.

If they aren’t flats then you will occupy the public rooms too so unless your property has a very large number of bedrooms it would usually mean you occupy more than 40%.

If you are thinking of doing this however it is common for sub letting to be disallowed as a condition on a residential mortgage contract so always consult a mortgage advisor about the legal implications.

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Mortgage Broker Q & A – Moving from abroad

Monday, September 14th, 2009

In Q & A we take at look at some of the common questions faced by mortgage brokers currently.

Question; I recently moved to the UK from abroad, when can I buy a property?

High street lenders will usually require you to have full permanent right to reside in the UK and to have been resident and working in the UK for a minimum period of time often a year or perhaps up to three years.

However there are exceptions to this and some private banking arms of major banks may be prepared to lend to you from the moment of your arrival in the UK regardless of whether you have permanent right to reside or not.

These arrangements though may be restricted to people with higher incomes (for example £50K a year) or high levels of existing assets.

For that reason there isn’t a black and white answer to this question so it’s usually best to seek professional mortgage advice, so if you would like to know call us on 08454594490 and speak to a mortgage advisor.

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