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The Mortgage Brokers Blog; news, views and insights

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.

Latest Posts:

If you have an interest-only mortgage now could be the time to consider switching products before the window closes.

In the last two weeks, both Natwest and Coventry Building Society ceased offering interest-only mortgages for residential property following Nationwide’s decision to do the same some time ago.

Add to this the vast number of lenders who have restricted interest-only borrowing to less than 75%, 66% or even 50% of the property value and the market for these mortgages is now stricter than ever.

Borrowers on interest-only mortgages currently sitting on their lender’s variable rate should consider changing their mortgage to a new product now before the market contracts further.

With the FSA’s announcement that interest-only lending would become part of the mortgage market review following the credit crunch, many lenders have reacted in a kneejerk fashion, and Eliminated the option for customers with a suitable repayment strategy to refinance their loan regardless of the plausibility of their circumstances.

This is already creating a large number of mortgage “refugees” unable, simply due to the lender’s criteria to arrange a new mortgage and who then become trapped on a variable rate without the option to move.

Whilst this may not be the end of the world whilst the Bank of England Base Rate is low it could result in thousands more repossessions in the event of the collapse of the Euro.

This scenario would almost certainly see wholesale increases in lenders’ standard variable rates which many borrowers might find too large to handle.

For those in the last years of an interest-only mortgage or even halfway through with borrowing of more than 50% of their property value, waiting too long to consider a move to a new product could see them shut out of the market in the long term.

Of course, for those borrowers without a suitable strategy for repaying an interest-only loan, then this is the right time to think about switching either to a full repayment mortgage or alternatively, if investments such as endowments are not performing and are predicted to fall short of requirements, a part repayment and a part interest-only loan might be suitable.

For more information contact one of our whole of market advisors on 0845 4594490.

Buying a Property at Auction & Need a Mortgage? – Read our Do’s & Dont’s for Auction Finance

Do:

Your research…

Go to at least one property auction before you intend to purchase, just to see how they work.

Go and view the property you’d like to buy, at least once.

Compare the price and condition of the property to others that are similar that have recently sold or are currently on sale in the street/area. This will help you determine what you think the true market value of the property is and how much you are prepared to bid for it. Websites like Zoopla offer lots of information on previous purchase prices and average prices in the area.

Get a survey/valuation of the property in advance of the sale if this is possible.

Get hold of the Legal Pack and get a solicitor to check it prior to the auction. This pack contains all the information that your solicitor would normally check if you were buying a property in the more conventional way and usually includes key information such as special conditions of sale, title deeds, searches, leases and any legal issues.

Take advice from a mortgage broker or adviser on the suitability of the property for raising a mortgage.

If you can get a mortgage approved on the property prior to the auction or if not get a Mortgage Decision in Principle and an application near ready to submit, before you go into the auction room as you will usually need to complete within 28 days or forfeit your deposit.

Get initial quotes for remedial work if the property needs considerable work. You might be surprised at how much these jobs will cost – better to know up front than after you’ve made your purchase.

Ensure you have sufficient funds available for costs and remedial work if considerable as your mortgage lender will very likely retain part of the mortgage amount until these works are completed.

Have your deposit ready for payment on the day – usually 10% of the hammer price.

Don’t:

Bid on a property at auction that you haven’t seen and looks to be a real bargain in the auction room – there’s probably a reason why no-one else is bidding on it.

Get carried away in the auction room – know your maximum bid before you arrive and don’t get into a bidding war that pushes you beyond this maximum – be prepared to walk away.

Presume you’ll be able to get a mortgage after the event – you may need to shop around or get independent advice. If you can’t pay the balance within 28 days of the auction you will pay hefty interest and possibly forfeit your deposit.

For mortgage advice on short term finance for property auctions visit us here rightmortgageadvice.co.uk

Shorter Mortgage Term vs Making Overpayments – The Smart Way to Reduce Costs

Most of us would like to keep the term (length) of our mortgage as short as possible – no-one wants to think of paying a debt up until our old age. Financially it makes good sense to keep the mortgage term as short as possible – the sooner the mortgage is paid off the less interest payable.

However, there are several things to consider before formally committing to the limit of your budget for the sole purpose of keeping the term as short as possible.

The down side to putting everything you have into paying off your mortgage is that it can be difficult to access these funds once paid in and the exercise is often timely and costly as it may involve re-mortgaging.

There are other ways to shorten the term allowing more flexibility that you may wish to consider…

Most mortgage products have overpayment facilities that allow you to make regular overpayments that will in effect reduce the term of the mortgage. There can be several benefits to this kind of arrangement.

Providing the chosen mortgage product has a regular overpayment facility then you can make overpayments that will in effect reduce the term of the mortgage and the amount you will pay in interest but if you find yourself short of money you aren’t obliged to make the higher payment.

If the product has the added benefit of a draw-down, you may also be able to draw from these overpaid funds if you find yourself in need of a cash injection. An offset facility could be a good alternative as well with the same kind of benefits.

Making regular overpayments is key to ensuring that the term is reduced. If you are not good at managing your money then perhaps this route is not the best for you.

Rather than committing all of your savings to reduce the term of your mortgage, it is good financial practice to keep a ‘rainy day’ fund that you can draw from if the worst happens, without affecting your mortgage payments and ultimately risking your home.

So in today’s unpredictable climate thinking outside the box can give you exactly the same effect as paying as much off your mortgage as possible without the risk of finding the barrel empty if the unexpected happens.

For more advice on mortgages or to speak to an adviser you can contact us on 0845 4594490.

Q&A; how offset mortgages work; the basics of offsetting explained

An offset mortgage has a linked savings or current account, and rather than receiving interest on money paid into that account; you don’t pay interest on the same balance of your mortgage.

You can typically set an offset facility to work in one of two ways. It can either; act as an overpayment facility reducing your mortgage term or reducing your monthly payment.

The main benefit of using an offset account against overpaying your mortgage is that you can readily access the funds in the future without having to refinance; although this would affect your payments or term.

You can also use it to borrow money in advance and only pay for it when you take it out of the offset account; however, you must consider how borrowing extra money will affect interest rates, loan-to-value and arrangement fees.

Offset isn’t technically a type of product, so you can still get all the usual types of rates with an offset facility such as fixed, discount and tracker deals, for example.

The main thing with any mortgage is to make sure any additional cost you pay to get this option justifies the benefits you receive. That’s something we can consider for you in the advice process. You can get more information or to get expert advice on offset here.

Q&A; Mortgages with older and elderly or retired applicants over the age of 70

Can someone over the age of 75 go on a mortgage?

Occasionally we are asked if we can arrange mortgages for elderly, or retired people of age 70, 75, 80 or even 90.

That will depend on the circumstances: whether the mortgage is for a buy-to-let or Residential property, if it is a joint application and if the income of the older applicant is necessary for affordability.

Most lenders for buy-to-let mortgages will have a maximum age of up to 80, but some have no maximum.

For Residential mortgages, where the income of the older applicant is required in the application, most lenders will not go beyond the age of 75-80. Many may be even more restrictive.

If it is a joint application with a younger applicant who can afford the mortgage in their own right, then some lenders will ignore the age of the other applicant entirely.

Other products available to seniors, such as ‘Lifetime Mortgages’ and ‘Home Reversion Plans’, may be more suitable, which work in very different ways to traditional mortgages and require specialist advice.

It is important to remember that all applicants on a mortgage would be responsible for the payments regardless of whether their income is used in assessing the case.

Therefore, as part of the advice process, we would consider arranging protection in case of death, illness or injury to either party.

To get expert advice, call 0345 4594490 or fill in our short enquiry form.

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 TYPICALLY CHARGE AN ADVICE FEE OF £299 PAID UPON FULL MORTGAGE OFFER. SOME BUY TO LET AND COMMERCIAL LOANS ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY
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RIGHTMORTGAGEADVICE.CO.UK IS AN APPOINTED REPRESENTATIVE OF JULIAN HARRIS MORTGAGES LTD, AUTHORISED AND REGULATED BY THE FINANCIAL CONDUCT AUTHORITY. FSA NO 304155
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