The whole process of buying a new home can be daunting; not only may you need to sell your current home and buy a new home, but you may also need to make changes to your Mortgage. The information below will help you through your options, the types of Mortgages available, how to apply for a Mortgage and the best part – moving in!
Arranging a Mortgage can seem very complicated and expensive. If you need help and advice we would be only too happy to sit and explain the process your options, what to expect, timescales and costs involved with buying a property or moving home.
If you are moving home and already have a Mortgage with a lender you may have early repayment charges attached to that Mortgage.
You may be able to port your existing Mortgage balance to your new home, any additional borrowing would be either on the same rate as your existing Mortgage or go onto another product with your existing Mortgage lender depending on the terms and conditions of your existing Mortgage, porting would be subject to you still fitting your existing mortgage lenders criteria at the time of the move.
Once again we would be only too happy to look at these and other options to see what would be best for your own circumstances and needs at the time of moving home.
Buying property can be expensive, time consuming, and can be your biggest financial purchase.
There are a number of items to take into consideration when budgeting and looking to purchase a property, these can include:
• Valuation Fee
• Mortgage Product Arrangement/Booking Fees
• Solicitor legal fees which may include Stamp Duty (depending on the purchase price)
• Movings costs
Once you become the owner of a property as well as any mortgage payments you may have regular bills such as:
• Local Authority council tax
• Utility bills
• Property insurance
• Mortgage related protection insurance
• Property maintenance and decoration costs
When thinking about getting a new Mortgage, the first step is to get a good idea of how much you could borrow from a Bank or Building Society, as all lenders have their own individual affordability calculators and some may lend you more than others subject to your status.
It’s worth getting advice from a Mortgage Adviser/Broker who has access to all the different lenders and their online affordability calculators. As part of the advice process your adviser will help you assess your affordability with different lenders before making a recommendation to you.
How much a lender is willing to lend to you depends on your personal circumstances. Even if you’re porting your existing Mortgage, they would need to check if your borrowing is appropriate for your changing circumstances.
Lenders make our decision based on factors such as your income, your outgoings and what they think you’ll be able to afford both now and into the future. Although you’re ultimately responsible for paying your Mortgage back, they are responsible for checking you can afford to repay the loan and making sure you’re not over-stretching your finances.
Not only do you have to work out which Mortgage will be the cheapest for you, which means looking at interest rates and fees, but there are also different types of product available.
So should you go for a fixed or variable rate deal? And what about off-sets?
Here we explain the differences in order to help you work out which is the right type of Mortgage for you.
The interest rate remains the same throughout the period of the deal – typically one to five years, though it is possible to get ten year fixed rates. If you opt for a fixed-rate, you’ll have the security of knowing exactly how much your Mortgage will cost you for a set period of time.
The interest rate on a Tracker Mortgage is linked to the Bank of England base rate. So if the base rate changes, your Mortgage rate will change.
If the base rate was 0.50%, and you took a Tracker Mortgage with a rate that is 2% above the base rate you’d pay an interest rate of 2.50% . If the Bank of England put the base rate up to 1%, your Mortgage rate would increase to 3.50%. This would increase your monthly mortgage payment.
As with fixed rate Mortgages, trackers are available over different terms: most commonly two or five years. With these deals, you’ll be charged a penalty if you want to get out of the Mortgage during the term.
You can also get lifetime, or term, trackers and these are often completely penalty free so they are very flexible and can be a great option if you don’t want to be tied into your mortgage.
Trackers aren’t the only type of variable Mortgage – Discounts are another.
However, unlike trackers the interest rate isn’t linked to the Bank of England base rate. Instead, it is linked to the lender’s standard variable rate (SVR) and this is a significant difference because lenders can change their SVR even if there has been no change in the base rate.
Discount Mortgages are available over different terms – typically one to five years – and as with trackers and fixed rate deals you will probably be charged a penalty if you wish to get out of the deal during the term.
This is normally only available to existing borrowers with a lender. It is the rate you normally revert to once your initial interest rate term expire. Just like Tracker and Discounted mortgages, if the Bank of England increase the bank base rate then lenders normally increase their Standard variable rate, but do not have to pass this on. If the base rate decreases the Mortgage lender controls this type of product and can increase or decrease the rate of interest they charge at any time.
All lenders have their own rate of standard variable rates some have higher rates than others.
• Sell first: You will be in a stronger negotiating position when you buy, since you’ll be chain free and clearer about what price you can offer. However, you might need to rent while you’re looking for a place to buy. You’d also need to move twice and might have to pay storage charges. House prices could change before you buy – if they go down you’ll be in a better position to buy, but if they go up you may not be able to afford what you could have when you sold.
• Buy first: We will need to be sure you can afford the expense of having two homes at once. And you won’t be able to take your existing mortgage product with you to your new home.
Beneficial Joint Tenants: Joint tenants have equal rights to the whole property and the property automatically goes to the other owners if you die. You can’t pass on your ownership of the property in your will.
Tenants in common: This means you jointly own your new home and a share of its value – the property doesn’t pass automatically to the other owners if you die. You can pass your share of the property in your will.
With this product typically lenders offer only existing borrowers once their initial product interest expires.
Each lender has their own SVR some are higher pay rates than others, with this type of rate, your payments should rise and fall in line with the Bank of England base rate changes, but not necessarily at the same time.
Fixed rates give you the security of knowing that your monthly payments will always be the same. With this type of mortgage, you pay a fixed rate of interest for a set period typically over two, three or five years but many lenders offer longer term fixed rate terms.
Tracker variable rates are usually linked to the Bank of England’s base rate, which means the variable interest rate will move in line with any change in the Bank of England’s base rate.
With a capped rate Mortgage, you will know the maximum you will pay for a set period of time. This type of Mortgage offers you the option of knowing the maximum monthly repayments you would have to make during a set period of, typically, two or three years.
Allows you to benefit from a discount on the lender’s standard variable rate. If the lender’s standard variable rate (SVR) increases or decreases, so does the discounted rate. Typically, the shorter the discounted period the larger the discount.
Typically, a current account, savings account, or both, are linked to your Mortgage and, each month, the amount in these accounts is then offset against your outstanding Mortgage. You are unlikely to earn interest on your savings which are offset.
You can vary the amount you pay each month and take payment holidays in some circumstances. It may help to reduce your mortgage with lump sum payments without incurring an early repayment charge.
If you would like some quality advice that’s best for your own personal needs and requirements and a helping hand from start to finish whether just buying a home, or selling and buying please get in touch we would be only too happy to help you with what can seem daunting, time consuming, expensive and stressful time of your life, over the years I have helping thousands of clients purchase property and move home.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
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