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Purchase Mortgage

A loan to purchase a property for your own residential use. The type of scheme you choose will depend on your circumstances but special schemes are often available for first time buyers and those purchasing their council house. The amount you can borrow will depend on income and existing credit commitments as well as the size of the deposit you can put down. The latter is commonly translated into the loan-to-value ratio (LTV) which is simply the loan expressed as a percentage of the purchase price, i.e. putting down a £10,000 deposit on a £100,000 purchase requires a loan of £90,000 which is 90% of the purchase price so you could not choose a scheme which had a maximum of LTV of 75%. Often as the loan-to-value reduces, the more you will be able to borrow as this represents less risk to the lender.

Remortgages

Changing your lender without moving house. Usually done to obtain a discount to reduce monthly costs or to change scheme type e.g. from a variable to a fixed rate. Remortgaging is often the best way to release equity to fund home improvements, clear other debts or provide a deposit for a second purchase such as a buy-to-let property. In the case of separation or divorce a remortgage can be carried out in conjunction with a 'transfer of equity' which is the procedure of removing (or adding) a party to a mortgage. In many cases funds are raised at the same time in order to meet the financial settlement of the separation agreement.

Buy to let

Buying a property to rent out is done using a mortgage that is dependant on the rental income the property is capable of generating. Normally a minimum deposit of 15% is needed and the monthly rent will need to be around 125% of the monthly mortgage interest payment, calculated at the lenders base rate. The lender will want to see you have a minimum level of personal income so that you could meet the mortgage payments at times when your property may not be generating any rental income. You can have numerous buy to let mortgages and special schemes are available to portfolio borrowers.

Equity release & home reversions

True equity release schemes are designed to provide funds from the equity built up in properties which have been owned for a number of years and which have either very little or no mortgage (unencumbered) on them at present. The term is also often used to when securing more funds against a current property, i.e. via a further advance from your current lender or during a remortgage. There are numerous variants designed to meet individual circumstances but most are either for releasing capital or generating income. The common theme behind all the schemes is the option to either make payments, normally of interest, or to have the interest rolled up and added to the balance. The final debt outstanding is usually cleared upon the demise of the borrower following the sale of the property. Such schemes are ideal if you do not have descendants to pass on your estate to. If you do wish to pass on your estate to family or friends when you die, then it would be better to opt for a scheme in which you will be making payments to cover the interest on your loan thus maintaining the original mortgage balance throughout the term. The best schemes will usually have a negative equity guarantee to ensure the amount owed will never be more than the property value at any given time. The amounts that can be raised using equity release mortgages depend on your age and loans are often restricted to relatively low loan-to-value ratios. Home Reversions involves selling part of your property to a lender in exchange for a cash sum which will normally be around 50% of the value of the portion sold. Interest and capital will then be rolled up and the debt cleared on sale at a later date. You should not enter into a home reversion equity release scheme without taking legal advice as such schemes are not regulated by the FSA and therefore you will have limited consumer protection. A retired persons mortgage may be a better option and will certainly be less complicated.

Council right to buy

If you live in a council owned property you may have the right to buy it from the council and you may also be entitled to a discount depending on the number of years you have been a tenant. The first step you should take is to enquire at the Council's Housing Office to see if you are eligible and if you are they will arrange to value your property and present you with your Right to Buy papers. These will state the value they have placed on the property and the price you can buy it for. Once you have this information you should submit your enquiry to us and we will sort everything from there on. The discount takes the place of the deposit and you can usually borrow the full amount required. You may be able to borrow more than the right-to-buy price but only if these funds are to be used for home improvements. Normally, council valuations are relatively conservative and the discounts can be very substantial making the purchase of your council home very lucrative. You should be aware that the discount will be secured on the property for three years following the purchase and if you sell during this time a portion of the discount will be repayable to the council.

Self-build mortgages

Self-Build mortgages are for those people who intend to build their own house or have a house built for them to a design of their choice. The project normally starts with the purchase of a plot for which a 20% deposit is normally required. Future funds are released in stage payments at the standard build stages, subject to regular revaluations and a maximum loan-to-value of 80%. If you already own the plot you can borrow up to 80% of its value in order to raise money to fund the building work.

Further advances

A further advance is the name given to the extra borrowing you take on with your current lender. As long as you have sufficient equity and income to cover the extra monthly cost most lenders will grant a further advance. The rate applied to the extra borrowing however, is normally the lenders standard variable rate which means if the advance is sizable it could be relatively expensive compared with the alternative which would be to remortgage the entire borrowing onto a cheaper rate with a new lender. You should make sure you are not in a redemption penalty period with your current lender before taking the remortgage route. If you are not sure which works our best simply submit your enquiry and we will do the calculations for you.

Repayment methods

The majority of new mortgages today are taken on a repayment basis whereas in the past it has been popular to have an investment backed mortgage using one, or a combination of, endowment, pension, PEP or ISA. If you have an endowment or similar supporting your mortgage we recommend that you stay with this method. However, it is essential that you review the process of your investment vehicle at regular intervals as it may be necessary to convert part of your mortgage to repayment in order to compensate for any projected shortfall in the plans maturity proceeds.

Endowment shortfalls

At the end of the 80's the Government instigated an 'endowment review' which was carried out by all those insurance companies who had previously sold such policies. At the time of applying for an endowment the insurance companies were provided with estimated figures for future investment growth to enable them to calculate the premium you would need to pay to reach a particular maturity value. The review involved insurance companies recalculating every policy holders estimated maturity proceeds using significantly lower growth rates. As the premium was to remain the same the lower rates would clearly lead to lower estimated maturity values and hence the term 'endowment shortfall' became popular. You should bear in mind that this was a Government initiative and nowhere in the calculations is your providers actual investment growth rate used, i.e. their investment returns could be better or worse than the figures quoted in the review letters many have received. There are several ways to deal with possible shortfalls and they will differ in each case. Our recommendations are to act sooner rather than later if you have been presented with a shortfall letter and secondly do not cancel any endowment or other policy used to support your mortgage until you have submitted your enquiry to us to examine further. Finally, do not panic, in our experience most cases are easily sorted.

Home insurance

We recommend all homeowners affect a quality buildings and contents insurance policy to protect their home and possessions. You should ensure you have cover for accidental damage and personal possessions away from the home. Up to five years no claims discount is available and we are able to obtain 2 years complimentary no claims discount with certain providers for first time buyers. Various terms and conditions may apply.

Landlords insurance

This type of policy is designed to cover properties which are let to tenants. Such policies cover landlord's fixtures and fittings as well as loss of rent which are not part of standard domestic home insurance policies. Various terms and conditions may apply.

Mortgage protection

We recommend clients affect a suitable life policy to cover their mortgage debt in the event of death, critical illness or permanent disability. If you are taking out a buy-to-let mortgage life cover is normally compulsory and a condition of the mortgage offer. On the other hand, those with no dependents may wish to affect only critical illness and disability cover. Various terms and conditions may apply.

Payment protection

We recommend all clients ensure they will be able to meet their mortgage commitments should they be made redundant or unable to work due to accident or sickness. You can choose between two types of policies; the first are short term providing a monthly benefit for 12 - 24 months starting immediately following an accident or sickness which prevents you from working, or your involuntary unemployment. The other type is designed to come into effect after a waiting period of between one and six months and will normally pay out the monthly benefit, in the event of you being unable to work due to sickness or accident, for as long as it takes you to recover or until your mortgage ends, whichever comes first. This cover is ideally suited to those who may have some income protection already, such as from their employer, and who wish to extend it to cover their full mortgage term. Various terms and conditions may apply.

Conveyancing

This is the term for the legal work involved in buying and selling property or when changing your mortgage lender. There is clearly more work to be done when buying a new property especially if you also have a property to sell at the same time. The work carried out by solicitors includes preparing contracts of sale and purchase, negotiating with solicitors acting for other involved parties and administering the movement of mortgage funds between the parties concerned. They also check the ownership and title of the property at the Land Registry to ensure you are buying what you think you are buying and that the vendor is entitled to sell it to you and whether there are any debts secured on the property and what restrictions may be attached to the property such as listing, rights of way and restrictions on use. The conveyancing carried out during a remortgage consists mainly of checking the title at the Land Registry, carrying out a Local Authority search and administering mortgage funds, hence many lenders will cover the cost of the legal work on their remortgage schemes as an incentive to borrowers.

Surveys & valuations

There are three main types of survey;

Full Structural Survey; this is carried out by a qualified structural engineer and will examine in detail all aspects of the structural integrity of a property. This type of survey is a must for those buying properties of unusual construction or situated in unusual locations. The cost will be dependant on property type and location but expect to pay in excess of £1,000.

Homebuyers Report; this goes into more detail than a basic valuation and contains information concerning energy conservation. They tend not to be a popular choice and they cost around £650 depending on property size and location.

Basic Valuation; this is the valuation that will be instructed by the lender should you not wish a more detailed survey to be carried out. It should highlight most problems commonly found in average properties and if needed the valuer will recommend further, more detailed, surveys be carried out prior to release of funds. Typically this may be for damp, wood rot, electrical circuits, drains, etc. This is the most common survey carried out when purchasing a property. If conditions requiring more serious investigation are uncovered during the standard survey then you can instruct a structural engineer to carry out a 'condition specific' report e.g. if the property roof is found to have a sag in it. This will look at just the highlighted query and often comprises cause, remedy and estimates of repair costs. For most properties this route will be more cost effective than a full structural survey on the entire property. If you submit an enquiry we will be happy to discuss which type of survey may be most appropriate for your situation.