Welcome to the brokers blog; where we discuss the latest developments, common queries, spurious sources and the sublime, ridiculous and esoteric aspects of the mortgage industry.
Question; What’s the difference between life insurance and life assurance?
Assurance is cover for an inevitable event, so in the case of life assurance, the policy always pays out unless cancelled; it will run for the whole of your life and inevitably pay out when you pass away.
Life Assurance is, therefore, an investment.
Life insurance will run for a specific term and only pay out if you die within the term, or in the case of many policies, are diagnosed with a terminal illness before the final year of cover.
Should you survive the term, there would be no return on the premiums. But this also means that life insurance would generally be considerably cheaper than life insurance.
The Woolwich has announced a new tracker at 1.48% above the base rate for the first year, reverting to 2.49% above the 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 a maximum of £500,000, so it is restrictive; early repayment charges are 2% until 31/01/2013, meaning it does tie you into the rate for a prolonged period.
The product has a £999 arrangement fee; based on a loan of £200,000 at 60%, a valuation fee of £415, a lender Conveyancing fee of £126, a land registry fee of £280 and a completion fee of £35, while APR is 3.0%.
The big 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 recommend 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.
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: 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 five-year fixed rate at 85% loan to value won’t have Mortgage Brokers dancing in the streets, but it is a small step in the right direction.
It now has a five-year fixed rate of 6.89%, 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; APR at 4.6% and a reversion rate currently at 2.5%.
As usual, refer to the Key Facts Illustration before deciding 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 may pay up to 1.5% of the loan amount. Some buy-to-let and commercial loans, are not regulated by the Financial Services Authority.
In Q&A, we take a 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 a permanent right to reside in the UK and to have been resident and working in the UK for a minimum period, often a year or perhaps up to three years.
There are exceptions to this; some private banks may be able to lend from the moment you arrive regardless of whether you have a permanent right to reside. These arrangements may be restricted to people with higher incomes (for example, £50K a year) or high levels of existing assets.
There are also a small number of lenders able to consider applicants without permanent rights to reside, i.e. those on visas. Again several will still require six to thirty-six months of residency history, but a small number can consider applications from day one.
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.
The Bank of England announced yesterday that the bank base rate will remain static at 0.5% for another month, which is 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 and Lloyds Group announced large rate cuts in the lower loan-to-value range last week, and over the past few days, several lenders have announced 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 here too. Perhaps for remortgages in the first instance, but potentially for new purchases also.
Whilst it’s unlikely we will see any products at 95% for new purchase soon, things appear to be moving in the right direction, which can only be good news for homeowners and the economy at large.
