The Mortgage Brokers Blog | A guide to the UK mortgage, finance and housing markets from independent mortgage brokers Rightmortgageadvice.co.uk including product news and reviews, hints, tips, questions and answers

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

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.

Tags: Affordability, Benefits, Income Multiples
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Mortgage Broker Q & A – Life Insurance or Assurance?

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.

Tags: Life Assurance, Life Insurance
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Woolwich announce their lowest ever flexible mortgage rate

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.

Tags: Flexible Mortgage, Mortgage Products, Mortgage Rates, Woolwich
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New rates announced by Cheltenham & Gloucester

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.

Tags: Fixed Rate Mortgage, Mortgage Rates, New rates
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Mortgage Broker Q & A – Letting part of a property

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.

Tags: Buy to Let, Letting, Mortgage Contract, Sub Letting
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Mortgage Broker Q & A – Moving from abroad

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.

Tags: Emigrating, Moving from abroad, New to UK
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Bank base rate holds as mortgage rates begin to fall

September 11th, 2009

The Bank of England announced yesterday that bank base rate will remain static at 0.5% for another month which is more good news for the housing market, prospective borrowers and mortgage brokers.

In conjunction with massive falls in the London Interbank Offered rate recently, and small falls in Swap rates the stage looks set for continued reduction in mortgage interest rates over the coming months.

HSBC’s and Lloyd’s Group announced large rate cuts in the lower loan to value range last week and over the past few days several lenders have announced small changes to rates and criteria higher up the loan to value range.

While there has been little change in higher loan to value rates in the 80% and upwards category there is a feeling among the mortgage advice community that things will now start to ease in this category too perhaps for remortgages in the first instance but potentially for new purchase as well.

Whilst it’s unlikely we will see any products at 95% for new purchase soon things definitely appear to be moving in the right direction which can only be good news for homeowners and the economy at large.

Tags: Bank Base Rate, Interest Rates
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Woolwich have more good news for Mortgage Brokers

September 10th, 2009

Woolwich have announced changes to their 4.19% fixed rate until 31/10/2011 Mortgage product at 70% Loan to value.

The product was previously restricted to a maximum borrowing of £200,000 and a minimum borrowing of £100,000. The amendments now allow maximum borrowing of £1 million and minimum borrowing of £50,000 opening the product up to a much wider audience to the delight of Mortgage Brokers and borrowers alike.

The product remains the same otherwise with a £499 arrangement fee. The APR is 2.5% and reversion rate currently 1.99%. Based on a loan of £100,000 other applicable fee’s are a valuation fee of £295, land registry fee of £200, lender Conveyancing fee of £126 and a £35 completion fee. Early repayment charges are 3% of the outstanding loan if the mortgage is repaid before 31/10/2011.

As usual consult a mortgage advisor or mortgage broker and request a Key Facts Illustration about the mortgage prior to making a decision.

Tags: Fixed Rate Mortgage, Maximum Loan, Mortgage Criteria
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Mortgage Calculators for maximum loans are a waste of time

July 31st, 2009

The next part of my why you should use a mortgage broker theme of the week is the humble affordability calculator.

We do a little pay per click advertising on the various search engines, this is no secret. But it surprised me to see so many hits coming through the somewhat spurious term “mortgage calculator” and it occurred to me that rather than this being people searching to find out what their monthly payment would be (as pretty much everyone has one of these calculators) it is probably people looking to see how much they can borrow.

If this is the case and you are reading this article because you were looking to find that out let me explain something, calculators that purport to tell you what the maximum you can borrow is are a waste of your time. Plain and simple.

The reason is this, every lender will take a multiple of your income and your partners if applicable or a percentage of your gross or net income and the sum will be different with ever lender. They may then deduct your loans and other credit commitments (but the way they do this will also be different with every lender). They may deduct a figure for each dependent child you have, and they may use their standard variable as a basis for affordability or the product rate you will be borrowing if they use a rate to calculate it at all.

Clearly a calculator cannot be set up to work out the maximum based on all the different methods of assessment used, so they use a “best case” method to give you a rough idea. This might seem useful but if the best case happens to be a bit optimistic it could cause you some big headaches and if it is woefully underestimated then you might miss your dream home based on poor information. The only calculators that are reliable are those on lenders websites, but they only work for that lender and will often be based around your credit score anyway which you cannot predict.

Affordability assessment is very complex and is an ever changing landscape, so if you want to know what the maximum you can borrow is speak to a mortgage advisor as that’s what we’re here for.
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Tags: Maximum Borrowing, Maximum Lending, Maximum Loan, Mortgage Advice, Mortgage Calculators
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Mortgage Advice VS Comparison Sites

July 30th, 2009

There’s some big shifts in the market at the moment which are affecting all mortgage advisors quite a bit, and one of the biggest trends is the growing movement towards self execution facilitated by comparison websites.

Now I am a fan of the internet and I even support the comparison websites as they do have a valid role to play. But Financial Advice and Mortgage Advice are not defunct because of them and I want to give you some points to consider in my posts this week.

I had a scenario recently of someone looking to buy a second property as an investment and repay a mortgage over a very short term perhaps 10 years. The client was self employed and wanted a product without any tie in.

Now in this scenario he would have very high monthly payments, and it is a tricky market for affordability at the moment. The best rate product for his requirements also had an offset facility so I suggested he could increase the term of the mortgage reducing the payments he had to make and make the loan look more affordable. However as it was offset he could pay as much as he liked extra and this would then reduce the mortgage term back in line with his requirements.

This meant that he wouldn’t have to make the high payments but could do so if he wished, and for a businessman in the credit crunch that is a very useful option to have.

I think this is a prime example of how mortgage advice plays a very different role to a comparison site. In this case it wasn’t about getting a lower cost, but using a products features to improve his chances of getting the loan, and to reduce the financial risk to him and his business without increasing the cost. That’s why a Mortgage Broker is well worth speaking to regardless of how much experience you have of mortgages.

Tags: Comparison Sites, Lowest Cost, Mortgage Advice, Mortgage Brokers, Offset Mortgage
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