 |
10 Tips for First Time Buyers
Buying a home is the biggest financial commitment you will ever make.
Sadly, most first time buyers don’t know where to start when considering
their first mortgage.
This is where we believe we can help. We are dedicated to helping First
Time Buyers, by explaining step by step exactly what you need to know,
before you choose your first mortgage.
We’re here to guide you and answer any questions you might have. As a
starting point, use this article as a guide. It contains 10 critical
things we believe you must know before you choose your first mortgage.
If, at any time, you have any concerns or questions, please feel free to contact us immediately. We’re here to help you!
Email: propertyportal@pinkdotmortgages.co.uk |
Factsheets
If this article helps you, download it from our documents library and forward it to family and friends.
Available factsheets:
First Time Buyers
Mortgage Jargon
Home Movers
Home Buying Process
Remortgaging
Types of Mortgage Schemes
New Property Investors
Top Tips
1. Don’t just dive in
Take your time to understand how mortgages work and consider all of your
options. Just taking the time to read this article should significantly
improve your knowledge and help you on your way.
2. Understand what type of mortgage you want
There are two types of mortgages;
Repayment mortgage - first of all, you choose over how many years
you would like to repay your mortgage. Most people choose to repay
their first mortgage over a 25 year term. However, 30 year or even 35
year mortgages are becoming more popular. Your monthly repayments are
made up of the interest charged and a portion of the capital to repay
the mortgage itself. Over your chosen term, you gradually pay off the
entire amount borrowed. Providing you maintain your repayments correctly
you can see your loan getting smaller and you will repay your mortgage
at the end of the chosen term.
Health Warning! – the longer your term, the more interest you pay. In
the early years, your payments will be mainly interest so, if you want
to repay the mortgage or move house in the early years, you'll find that
the amount you owe won't have gone down by very much.
Interest only mortgage - your monthly repayments consist of
repaying the interest only (hence the name!). You do not repay the
amount you borrowed and this remains a lump sum which is payable back to
the Lender at a future date. Because you're only paying off the
interest, and not the loan itself, your monthly payments will be lower.
Generally, you also make payments into a separate savings plan, with the
aim of this producing enough savings to repay the amount you borrowed,
although this is not something that your chosen Lender will ask you do.
Health Warning! – with an interest only mortgage, you have no
guarantee that your mortgage will be repaid when you want it to. It’s
totally dependent on the returns of your saving plans. Play safe – our
advice is where ever possible, opt for a repayment based mortgage
(although there will always be some genuine exceptions).
3. Understand what type of interest rate schemes there are
There are a number of different schemes offered by lenders: You need to
understand how each one works, before you are in a position to choose a
scheme which is suitable for you.
Variable rate - your monthly payment fluctuates in line with the lenders standard variable mortgage rate.
Tracker rate – your monthly payment fluctuates, usually, in line
with the Bank of England Base Rate, often referred to as a "Base Rate
Tracker".
Discounted - the Lender offers an initial discount, usually
against their normal standard variable rate for a given period. Your
monthly payment fluctuates in line with the lenders standard variable
mortgage rate, but at the agreed discount. At the end of the discount
period, the interest rate usually reverts to the lenders standard
variable rate.
Fixed rate - your monthly payment is fixed over an agreed period
and will remain the same regardless of whether interest rates rise or
fall. At the end of the fixed rate term the interest rate usually
reverts to the lenders standard variable rate.
Capped - the interest rate is guaranteed not to go above a
certain level throughout the given capped rate period, but you will
benefit from any reduction in interest rates. Your monthly repayment
cannot therefore go above the “capped” level.
Flexible mortgages - these schemes allow you to overpay, underpay
or even take a payment holiday. Any unpaid interest as a result of an
underpayment or payment holiday will be added to the outstanding
mortgage. Any overpayment will reduce the outstanding mortgage. Some
have the facility to drawdown additional funds to a pre agreed limit.
Offset Mortgages – these schemes allow you to link your current,
savings or deposit accounts to the mortgage, so that the positive
account balances are offset against the mortgage resulting in a reduced
interest payment.
Cashback - some lenders offer a cashback payment on completion of
the mortgage. In some cases, if the mortgage is paid back early, a
proportion of this may have to be repaid to the lender.
4. Choosing the right mortgage scheme
As you have just seen there are a number of different rates to choose
from. The key thing to remember is that a “fixed rate” is the only way
of knowing exactly what your repayments are going to be over a given
period of time. With any other type, your monthly repayments will go up
and down as interest rates change.
5. Choosing the right mortgage scheme period
Mortgage schemes run for a specific period and have nothing to do with
the actual term over which you have chosen to repay your mortgage. You
can choose a 1 year deal, 2 year, 5 year (etc). It’s all a matter of
getting the right balance and one that suits you.
Health Warning! - Be very careful! Always check whether the scheme
you are considering has any early repayment charges. If you
wanted/needed to change your mortgage within the scheme period, this is a
fee you would have to pay to buy yourself out of your chosen scheme. In
some cases this can be a significant amount, linked to the amount that
you borrow.
6. Don’t forget the costs and fees you’ll incur in buying your first home
When you buy your first home, you’re going to incur a number of
different fees. Always make sure you get written quotations before
committing to anything.
Valuation fee – There are three types of valuation. The fee must
normally be enclosed with your application. The type of valuation you
choose will depend on the age and condition of the property. Each is
more expensive than the previous.
Basic mortgage valuation - This is for the lender's own purpose.
They will appoint a surveyor and the fee you pay will be based on a
sliding property valuation scale.
Homebuyer report - This provides you with information in a
standard format. The report will include comments on the state of repair
and condition of the property along with any general defects.
Full structural survey - This provides you with a structural
report based on a detailed examination of the property. Any areas of
concern that you might have about the property will be investigated.
Arrangement/Booking Fee – this is a fee payable to the Lender.
Where applicable, this will be payable either in advance (with the
valuation fee) or added to your mortgage balance on completion of the
mortgage. If the fee is added to the loan, you will pay interest on it,
over the mortgage term. The fee will be specified in your mortgage
quotation.
Legal costs and fees – you’ll need to appoint a solicitor (or
conveyancer) to act on your behalf. Always check to ensure that the fee
they quote you includes the fees to cover the transfer of ownership of
land, the costs of legal registrations and miscellaneous costs (known as
disbursements).
Stamp Duty Costs – Stamp duty is a 'purchase tax' and is
generally payable where the purchase price of the property is more than
£125,000. The current charge is 1% of the purchase price of the
property. This increases to 3% if the price is more than £250,000 and
to 4% if the price exceeds £500,000.
First Time Buyers are currently except from paying stamp duty on
purchases up to £250,000. This, however, is currently a temporary
measure and only applies on purchase between 25 March 2010 to 24 March
2012 inclusive.
Higher Lending Charge - This is sometimes required where you have
a low deposit towards the property. It is an insurance policy that the
Lender asks you to pay (one single payment), but is used to protect them
against a loss should the property have to be repossessed and
subsequently sold (this would happen if you did not keep up your
mortgage payments). Should a loss be incurred on repossession, you (the
borrower) would remain responsible for the shortfall, even though they
may have paid the insurance premium. The cost of the insurance can
usually be added to the value of the mortgage you are applying for.
Buildings and contents insurance - All lenders require that you
fully insure the property for the total cost or rebuilding of it. It is
also strongly recommended that you take out contents insurance. It is
your responsibility to ensure that you have adequate cover.
Mortgage protection - It is recommended that you protect your
mortgage and associated payments in the event of death, being unable to
work as a result of an accident, disability, sickness or unemployment.
It is your responsibility to ensure that you are able to meet your
mortgage payments when they fall due and you should therefore consider
whether you would be in a position to do so, in the event of the above
mentioned events.
7. How much can you borrow?
There are a whole host of ways in which Lenders now assess how much they
will lend you. The main factors being, your annual income (less any
regular commitments you already have, such as credit cards, loans),
whether you have a good credit rating, size of your deposit.
Whilst it is sometimes possible to achieve 4 or even 5 times your income, you must remember one very important point;
- what you can borrow is sometimes a lot more than you can actually afford.
8. A deposit always helps!
Put simply, the bigger the deposit, the better the deals you’ll get. To
access the mortgage markets you will need a minimum deposit of 10%.
9. How to save on costs and fees!
First Time Buyer incentive packages – many Lenders will offer these and
typically you could save on the need to pay for a valuation fee or
higher lending charge insurance premium.
10. How long does it take to organise a mortgage?
The arranging of a mortgage typically takes 2 to 3 weeks. However don’t
confuse this with the time it takes to get hold of the keys to the
property and the date you can move in. This very much depends on the
number of people in the property chain. Your Solicitor and Estate Agent
will be able to guide you as to the length of time it will take.
When its time to organise your next mortgage
Email: propertyportal@pinkdotmortgages.co.uk
Important info:
The explanations contained in this article are the most commonly
understood and are only a brief summary. Various Lenders can impose
different meanings and apply various conditions. If you choose Pink Dot
Mortgages to act as your mortgage broker, we will undertake a full
appraisal of your needs and financial circumstances and match these with
the appropriate Lenders, before making any personal recommendations as
to the schemes available and suitable for you. As such, none of the
above explanations are intended as advice.
This article is provided by PropertyPortal.com Ltd in collaboration
with Pink Dot Mortgages Ltd. Pink Dot Mortgages is authorised and
regulated by the Financial Services Authority (no. 465258).
Not all services are regulated.
Registered company no: 6132484 – Swatton Barn, Badbury, Wilts, SN4 0EU,
registered in England & Wales.
Your home may be repossessed if you do not keep up repayments on your
mortgage.
© 2011-Pink Dot Mortgages Ltd |
 |
10 Tips for Remortgaging
There are many factors to consider when re-mortgaging. Failing to think
ahead or research the mortgage markets correctly means that many
individuals get it wrong!
This is where we believe we can help. We are dedicated to helping
individuals who are looking to re-mortgage their own property, by
explaining step by step, exactly what you need to know before you
re-mortgage.
We’re here to guide you and answer any questions you might have. As a
starting point, use this article as a guide. It contains 10 critical
things we believe you must know, before you re-mortgage.
If at any time, you have any concerns or questions, please feel free to contact us immediately. We’re here to help you!
Email: propertyportal@pinkdotmortgages.co.uk |
Factsheets
If this article helps you, download it from our documents library and forward it to family and friends.
Available factsheets:
First Time Buyers
Mortgage Jargon
Home Movers
Home Buying Process
Remortgaging
Types of Mortgage Schemes
New Property Investors
Top Tips
1. Don’t just dive in!
The cheapest re-mortgage rates aren’t always the best deals. Look at the small print!
2. Understand why are you re-mortgaging
This question isn’t as daft as it may sound! When re-mortgaging you need
to think ahead, as this will dictate the type of scheme you are looking
for. For many people it’s not just about reducing their monthly
repayments now.
The key question to ask yourself is, “how much flexibility will I need going forward?” Then take heed from tip number 3.
3. Beware of early repayment charges!
If you haven’t really stopped to consider tip 2, you’re likely to come unstuck here, as many people do!
If you’re considering a discounted, tracker or fixed rate, it’s common
that these schemes will lock you in for the duration of the scheme
period (2 years, 5 years etc). As we’ve already said, consider how much
flexibility you’ll need!
If you do opt for a scheme that locks you in, check whether:
- you have the flexibility to make overpayments (there is no common rule, Lenders act differently)
- the mortgage comes with a “portability” option. ie, if you
decide to move within the scheme period, you can take your current
mortgage with you.
Avoid schemes which lock you in beyond the scheme period. These are
known as “overhang periods” (for example; 2 year fixed rate with a 3
year tie in, meaning you have no option but to pay the Lenders Standard
Variable Rate in year 3; this could be high!).
4. Repayment Methods
If you have an interest only mortgage, should you be considering
switching to a repayment based mortgage? At the very least, get some
quotes and compare your options.
Health Warning! – with an interest only mortgage, you have no
guarantee that your mortgage will be repaid when you want it to! It’s
totally dependent on the returns of your saving plans. Play safe – our
advice is where ever possible, opt for a repayment based mortgage
(although there will always be some genuine exceptions!).
5. Mortgage Term
A re-mortgage doesn’t have to be like for like. Consider the outstanding
term of your mortgage! Can you afford to reduce it (even by one year!).
6. Understand what type of interest rate scheme you want
As you can see, there are a number to choose from! The key thing to
remember is that a “fixed rate” is the only way of knowing exactly what
your repayments will be over your chosen term. With any other your
monthly repayments will go up and down as interest rates change.
Variable rate - your monthly payment fluctuates in line with the
lenders standard variable mortgage rate. This can cause budgeting
problems in times of increasing interest rates.
Tracker rate – your monthly payment fluctuates in line with the Bank of England Base Rate, often referred to as a "Base Rate Tracker".
Discounted - the Lender offers an initial discount on their
normal standard variable rate for a given period. Your monthly payment
fluctuates in line with the lenders standard variable mortgage rate but
at the agreed discount. At the end of the discount period, the interest
rate usually reverts to the lenders standard variable rate.
Fixed rate - your monthly payment is fixed over an agreed period
and will remain the same regardless of whether interest rates rise or
fall. At the end of the fixed rate term the interest rate usually
reverts to the lenders standard variable rate.
Capped - the interest rate is guaranteed not to go above a
certain level throughout the capped rate period, which can be from one
to ten years, but you will benefit from any reduction in interest rates.
Your monthly payment cannot therefore go above the “capped” level.
Flexible mortgages - these schemes allow you to overpay, underpay
or even take a payment holiday. Any unpaid interest as a result of an
underpayment or payment holiday will be added to the outstanding
mortgage. Any overpayment will reduce the outstanding mortgage. Some
have the facility to drawdown additional funds to a pre agreed limit.
Offset Mortgages – these schemes allow you to link your current,
savings or deposit accounts to the mortgage, so that the positive
account balances are offset against the mortgage resulting in a reduced
interest payment.
Cashback - some lenders offer a cashback payment on completion of
the mortgage. In some cases, if the mortgage is paid back early, a
proportion of this, may have to be repaid to the lender.
7. Choosing the right mortgage scheme
As you have just seen there are a number of different rates to choose
from. The key thing to remember is that a “fixed rate”, is the only way
of knowing exactly what your repayments are going to be over a given
period of time. With any other type, your monthly repayments will go up
and down as interest rates change. Think about what you will be able to
afford.
8. Costs and fees you’ll incur
Most Lenders offer re-mortgage incentives. They want your business!
Generally, the incentives cover the cost of a property revaluation and
standard legal fees.
In order to secure the deal you want, you will generally have to pay a
one off arrangement fee/booking fee to the Lender. This fee can
sometimes be added to the mortgage itself so that, upfront, there is no
cost.
Health Warning! – if you add fees to the mortgage you will pay interest on it.
9. How much can you borrow?
There are a whole host of ways in which Lenders now assess how much they
will lend you. The main factors being, your annual income (less any
regular commitments you already have, such as credit cards, loans),
whether you have a good credit rating, size of your deposit.
Whilst it is sometimes possible to achieve 4 or even 5 times your income, you must remember one very important point;
- what you can borrow is sometimes a lot more than you can actually
afford!
10. How long does it take to organise a re-mortgage?
To switch from one lender to another typically takes between 4 and 6 weeks.
When its time to organise your next mortgage
Email: propertyportal@pinkdotmortgages.co.uk
Important info:
The explanations contained in this article are the most commonly
understood and are only a brief summary. Various Lenders can impose
different meanings and apply various conditions. If you choose Pink Dot
Mortgages to act as your mortgage broker, we will undertake a full
appraisal of your needs and financial circumstances and match these with
the appropriate Lenders, before making any personal recommendations as
to the schemes available and suitable for you. As such, none of the
above explanations are intended as advice.
This article is provided by PropertyPortal.com Ltd in collaboration
with Pink Dot Mortgages Ltd. Pink Dot Mortgages is authorised and
regulated by the Financial Services Authority (no. 465258).
Not all services are regulated.
Registered company no: 6132484 – Swatton Barn, Badbury, Wilts, SN4 0EU,
registered in England & Wales.
Your home may be repossessed if you do not keep up repayments on your
mortgage.
© 2011-Pink Dot Mortgages Ltd |
 |
10 Tips for Home Movers
There are many factors to consider when planning your next mortgage.
Failing to think ahead or research the mortgage markets correctly means
that many individuals get it wrong!
This is where we believe we can help. We are dedicated to helping people
looking to move home by explaining, step by step, exactly what you need
to know before choosing your next mortgage.
We’re here to guide you and answer any questions you might have. As a
starting point, use this article as a guide. It contains 10 critical
things we believe you must know before you select your next mortgage.
If at any time you have any concerns or questions, please feel free to contact us immediately. We’re here to help you!
Email: propertyportal@pinkdotmortgages.co.uk |
Factsheets
If this article helps you, download it from our documents library and forward it to family and friends.
Available factsheets:
First Time Buyers
Mortgage Jargon
Home Movers
Home Buying Process
Remortgaging
Types of Mortgage Schemes
New Property Investors
Top Tips
1. Don’t just dive in
The cheapest mortgage rates aren’t always the best deals. Look at the small print!
2. Understand what you need
This question isn’t as daft as it may sound! You need to think ahead, as
this will dictate the type of scheme you are looking for. For many
people it’s not just about their monthly repayments now.
The key question to ask yourself is, “how much flexibility will I
need?”. Then take heed from tip number 3.
3. Beware of early repayment charges
If you haven’t really stopped to consider tip 2, you’re likely to come unstuck here, as many people do!
If you’re considering a discounted, tracker or fixed rate, it’s common
that these schemes will lock you in for the duration of the scheme
period (2 years, 5 years etc). As we’ve already said, consider how much
flexibility you’ll need!
If you do opt for a scheme that locks you in, check whether:
- you have the flexibility to make overpayments (there is no common rule, lenders act differently).
- the mortgage comes with a “portability” option. ie, if you move
within the scheme period, you can take your current mortgage with you
(just in case you move again soon – some people do!).
Avoid schemes which lock you in beyond the scheme period. These are
known as “overhang periods” (for example; 2 year fixed rate with a 3
year tie in, meaning you have no option but to pay the Lenders Standard
Variable Rate in year 3; this could be high!).
4. Repayment Methods
If you have an interest only mortgage, should you be considering
switching to a repayment based mortgage? At the very least, get some
quotes and compare your options.
Health Warning!! – with an interest only mortgage, you have no
guarantee that your mortgage will be repaid when you want it to! It’s
totally dependent on the returns of your saving plans. Play safe – our
advice is where ever possible, opt for a repayment based mortgage
(although there will always be some genuine exceptions!).
5. Mortgage Term?
Your new mortgage doesn’t have to be like for like. Consider the
outstanding term. Do you need to increase it (especially if you’re
taking on a bigger mortgage) or can you afford to reduce it (even by one
year!).
6. Understand what type of interest rate scheme you want
As you can see, there are a number to choose from. The key thing to
remember is that a “fixed rate” is the only way of knowing exactly what
your repayments will be over your chosen term. With any other, your
monthly repayments will go up and down as interest rates change.
Variable rate - your monthly payment fluctuates in line with the
lenders standard variable mortgage rate. This can cause budgeting
problems in times of increasing interest rates.
Tracker rate - your monthly payment fluctuates in line with the Bank of England Base Rate, often referred to as a "Base Rate Tracker".
Discounted - the Lender offers an initial discount on their
normal standard variable rate for a given period. Your monthly payment
fluctuates in line with the lenders standard variable mortgage rate but
at the agreed discount. At the end of the discount period, the interest
rate usually reverts to the lenders standard variable rate.
Fixed rate - your monthly payment is fixed over an agreed period
and will remain the same regardless of whether interest rates rise or
fall. At the end of the fixed rate term the interest rate usually
reverts to the lenders standard variable rate.
Capped - the interest rate is guaranteed not to go above a
certain level throughout the given capped rate period, but you will
benefit from any reduction in interest rates. Your monthly repayment
cannot therefore go above the “capped” level.
Flexible mortgages - these schemes allow you to overpay, underpay
or even take a payment holiday. Any unpaid interest as a result of an
underpayment or payment holiday will be added to the outstanding
mortgage. Any overpayment will reduce the outstanding mortgage. Some
have the facility to drawdown additional funds to a pre agreed limit.
Offset Mortgages – these schemes allow you to link your current,
savings or deposit accounts to the mortgage, so that the positive
account balances are offset against the mortgage resulting in a reduced
interest payment.
Cashback - some lenders offer a cashback payment on completion of
the mortgage. In some cases, if the mortgage is paid back early, a
proportion of this, may have to be repaid to the lender.
7. Choose the right mortgage scheme
As you have just seen there are a number of different rates to choose
from. The key thing to remember is that a “fixed rate” is the only way
of knowing exactly what your repayments are going to be over a given
period of time. With any other type, your monthly repayments will go up
and down as interest rates change. Think about what you will be able to
afford.
8. Don’t forget the costs and fees you’ll incur in buying your next house
When you buy your next home, you’re going to incur a number of different
fees. Always make sure you get written quotations before committing to
anything.
Valuation fee – There are three types of valuation. The fee must
normally be enclosed with your application. The type of valuation you
choose will depend on the age and condition of the property.
Basic mortgage valuation - This is for the lender's own purpose.
They will appoint a surveyor and the fee you pay will be based on a
sliding property valuation scale.
Homebuyer report - This provides you with information in a
standard format. The report will include comments on the state of repair
and condition of the property along with general defects.
Full structural survey - This provides you with a structural
report based on a detailed examination of the property. Any areas of
concern that you might have about the property will be investigated.
Arrangement/Booking Fee – this is a fee payable to the Lender.
Where applicable, this will be payable either in advance (with the
valuation fee) or added to your mortgage balance on completion of the
mortgage. The fee will be specified in your mortgage quotation.
Legal costs and fees – you’ll need to appoint a solicitor (or
conveyancer) to act on your behalf. The fee they quote you will also
include the fees to cover the transfer of ownership of land, the costs
of legal registrations and miscellaneous costs (known as disbursements).
Stamp Duty Costs – Stamp duty is a 'purchase tax' and is
generally payable where the purchase price of the property is more than
£125,000. The current charge is 1% of the purchase price of the
property. This increases to 3% if the price is more than £250,000 and
to 4% if the price exceeds £500,000.
Higher Lending Charge - This is sometimes required where you have
a low deposit towards the property. It is an insurance policy that the
Lender asks you to pay (one single payment), but is used to protect them
against a loss should the property have to be repossessed and
subsequently sold (this would happen if you did not keep up your
mortgage payments). Should a loss be incurred on repossession, you (the
borrower) would remain responsible for the shortfall, even though they
may have paid the insurance premium. The cost of the insurance can
usually be added to the value of the mortgage you are applying for.
Buildings and contents insurance - All lenders require that you
fully insure the property for the total cost or rebuilding of it. It is
also strongly recommended that you take out contents insurance. It is
your responsibility to ensure that you have adequate cover.
Mortgage protection - It is recommended that you protect your
mortgage and associated payments in the event of death, being unable to
work as a result of an accident, disability, sickness or unemployment.
It is your responsibility to ensure that you have adequate cover.
9. How much can you borrow?
There are a whole host of ways in which Lenders now assess how much they
will lend you. The main factors being, your annual income (less any
regular commitments you already have, such as credit cards, loans),
whether you have a good credit rating, size of your deposit.
Whilst it is sometimes possible to achieve 4 or even 5 times your
income, you must remember one very important point;
- what you can borrow is sometimes a lot more than you can actually
afford!
10. How long does it take to organise a new mortgage?
The arranging of a mortgage typically takes 2 to 3 weeks. However don’t
confuse this with the time it takes to get hold of the keys to the
property and the date you can move in. This very much depends on the
number of people in the property chain. Your Solicitor and Estate Agent
will be able to guide you as to the length of time it will take.
When its time to organise your next mortgage
Email: propertyportal@pinkdotmortgages.co.uk
Important info:
The explanations contained in this article are the most commonly
understood and are only a brief summary. Various Lenders can impose
different meanings and apply various conditions. If you choose Pink Dot
Mortgages to act as your mortgage broker, we will undertake a full
appraisal of your needs and financial circumstances and match these with
the appropriate Lenders, before making any personal recommendations as
to the schemes available and suitable for you. As such, none of the
above explanations are intended as advice.
This article is provided by PropertyPortal.com Ltd in collaboration
with Pink Dot Mortgages Ltd. Pink Dot Mortgages is authorised and
regulated by the Financial Services Authority (no. 465258).
Not all services are regulated.
Registered company no: 6132484 – Swatton Barn, Badbury, Wilts, SN4 0EU,
registered in England & Wales.
Your home may be repossessed if you do not keep up repayments on your
mortgage.
© 2011-Pink Dot Mortgages Ltd |
|