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What’s more important to you? Getting on to the property ladder or telling people that you are on the property ladder?
If the latter fits, then a standard residential mortgage isn’t for you.
Social media can be deceiving and make one extremely anxious, cut corners and end up in debt or an uncomfortable situation for the sake of reputation, likes and pride – Property and debt is not a game, think about the long term…
All the other mortgage schemes will get you on the property ladder a lot quicker and give you bragging rights, but is it worth it?
Today we’ll be speaking about the standard residential mortgage.
If you read last weeks post, you should be full of knowledge and understanding regarding the Help to Buy: Shared Ownership scheme.
The difference between a standard residential mortgage and the various schemes is: You own the property, there’s no second charge or interest from the government. The property is 100% yours and with planning permission, you are free to extend and edit your property as you wish. Leasehold properties are slightly different to freehold properties as you pay a ground rent and service charge for the communal areas etc but there’s still an element of freedom you wouldn’t otherwise have with your remortgage and maintenance options via a scheme.
- A Conversation
Whether you pop in to a bank or speak to a broker, a conversation needs to take place so that both parties are aware of the needs and objectives.
2. Documents and facts
This is where you prove the above. You’ve said your salary is £75,000 per annum, this is where you prove that. Provide your latest 3 months payslips, latest 3 months bank statements that evidence the salary credit/general expenditure and contract if you’ve been in the role less than a year.
Do you have any debt? Loans, lease agreements, credit card balances, overdrafts, defaults, CCJ’s, maintenance payments? Now is the time to disclose these so that an accurate potential borrowing amount can be calculated.
If you hold back on any of the above debts, later on in the mortgage process, your application can be declined as the lender will do various credit checks on you. Any extra commitment or debt may be out of the banks lending appetite and your overall affordability
3. Deposit – Where is this coming from? Savings? Gift? Oversees?
Majority of lenders do not accept funds that are not in GBP. If you suddenly received a £50,000 deposit in to your account a week ago, the bank will want to know where this money has come from and evidence of it’s trail. Funds that were given to you in the last 6 months – a year are still counted as a gift. You will need your friend/relative to provide a gifted deposit letter which evidences that these funds are a gift, which they do not expect you to repay and that they will have no interest in your property.
Savings, stocks, shares and the like are accepted. A statement that evidences your bonds maturity date or current market value of your shares is acceptable.
***Make sure you have enough funds outside of the deposit to pay for legal fees, stamp duty, general expense of moving and miscellaneous money for unforeseeable expenses.
4. Product – LTV
In-order to submit a mortgage application, a product with a lender will have to be chosen.
Example of a Mortgage product:
2 year fixed 1.89% 90% LTV first time buyers only – This means that the 1.89% interest rate is fixed for 2 years, after the 2 years, you are free to remortgage and go to another lender/switch products or you go on the variable rate which sometimes has an interest rate as high as 3%. Your monthly mortgage payments will increase considerably by £200-£300. (Some products also come with a free valuation, free legal representation, cash back etc.)
LTV is an abbreviation of the term, “Loan to Value”. To make it quite simple, lets say you’re purchasing a £290,000 house and have a £29,000 deposit, this would be a product with a 90% loan to value. The higher the LTV, the more you borrow, the more interest you pay and the higher your monthly Mortgage payments.
5. The Application
Whether you are a first time buyer, home mover or simply remortgaging, in order for your application to be as accurate as possible, you need to provide all requested information to the bank/broker. The more transparent a Mortgage Application, the quicker a Mortgage Offer is released.
A valuation is carried out to ensure that the lender is lending on a property that is worth that level of risk.
Once the supporting documents have been signed off/accepted and the valuation report is back, the application will either go straight to Offer or products, deposits and loan amounts may need to be revisited if the property is down valued.
6. Mortgage Offer
Once your Mortgage Offer is released, the ball is now in your Solicitors court. This is where you need to run a tight ship and make regular contact with your solicitor.
Be courteous, leave your bank/broker some feedback, after all, they did just help you secure your first home, second home or saved you some money by helping you with your Remortgage.
Do you have a question or want a particular part of the process to be explained in more detail?
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