Mortgage Product Guide

Base/Variable Rate Mortgage

Variable Rate Mortgages use the lender’s basic mortgage rate. It will vary as interest rates change over time.

As the interest rate will fluctuate, this type of mortgage makes it less straight forward for you to budget. While you will benefit if interest rates fall, you will also be worse off should they rise.

Dependent on how low the lenders base/variable rate is calculated and with many other products available, it may be in your interest to move to a mortgage with a special rate, such as a fixed or discounted product to protect against future rises.

Buy To Let Mortgages

Buying or re-mortgaging a property to let and create a long term investment.

Owning a buy to let property is much more complex than they use to be and it is strongly advised that you seek tax advice before starting this journey. Find a reputable accountant (please contact us if you would like pointing in the right direction) that has experience in property tax, as you need to be aware of the implication on your income tax along with all the other taxes that become payable if you buy or sell a second property click here for stamp duty calculator – https://www.moneyadviceservice.org.uk/en/tools/house-buying/stamp-duty-calculator

All lenders have different criteria depending on the rent being received or proposed, the type of property it is, where it is, how many other properties you have, whether you want to obtains the mortgage in personal names to a limited company.

Depending on your background information and income, lenders use different  calculators to check that the rent will cover the loan required and these can be at ratios of up to 145% at 5.5%, we source the lenders to get you the best out come whether that be rate, loan size or best value fees.

And if you own 4 or more mortgaged properties you are classed as a portfolio landlord and lenders require more information on the whole portfolio even if you only intend to re-mortgage one or purchase an additional one.

Cashback Mortgage

Some lenders attract new borrowers by offering a percentage of the overall loan as cash – usually to help with the costs of moving – which is forwarded to you when the mortgage application has completed.

Very often cashback offers are accompanied by redemption penalties which tie you to them for several years. Some lenders do offer small cashbacks to help cover costs and fees, which are usually repayable if you should leave them within the product period, you should check your illustration for penalties

Discount Rate Mortgages

For a fixed term, Discount Rate Mortgages offer a set discount (expressed as a percentage) off the lenders standard variable rate.

Discount terms typically last between 3 months and five years. The level of discount will vary too, usually according to the length of term.

This type of mortgage, especially the shorter term products, are popular with those who move house and want to spend money in the first few months on home improvements. They are also popular with those who want a few months to recover from the expenses incurred when purchasing a new home.

As the discount is usually connected to the lenders variable/base rate, it can go up as well as down and therefore you should be prepared for any movement. After the discount term has ended you will automatically revert to the lender’s standard variable rate.

First Time Buyers

Buying your first property, and obtaining your first mortgage, can be daunting. After all, it is one of the most important financial decisions you will ever take. We have access to a variety of specialist schemes for FTB, please contact us and we can advise on the best deal 4 U.

So what should a first time buyer do? Firstly you should try to save as much deposit as possible, currently lenders will lend upto 95% of the property value, though if you put down more deposit you are likely to get better rates. There are specialist help to buy schemes and shared equity schemes if you qualify – search your local Help To Buy website or local council.

There are other ways of getting onto the property market, i.e. with a family member as a guarantor or a shared mortgagee (you can have upto 4 applicants on one mortgage now), most lenders accept gifted deposits from family members or a lender can take a charge against a family members property if they have enough equity, call us to discuss these option.

Fixed Rate Mortgages

Fixed rate mortgages is self-explanatory. The rate of interest is fixed for a defined term over 2,3,5,10 or even 20 years!  After the end of this term, the mortgage will usually revert to the lenders standard variable rate. Though most lenders will offer you a new fixed rate to stay with them or as a broker we can look at the options your existing will offer you against the pros and cons of moving to a new lender.

The attractions of this are that it makes it easy for you to plan your monthly outgoings, as your mortgage payments will remain constant during the fixed-rate term. Not only that, it also protects you against any rise in interest rates during that time.

On the other hand, you will miss out if interest rates fall. Unfortunately, if this happens then you can’t simply switch to a more favorable rate. Lenders frequently impose penalties on borrowers who change their mortgage before the fixed-rate term has come to an end. Some penalties are more punitive than others, so make sure you check these before committing yourself. Occassionally we also get access to 15/20 year fixed rate mortgages.

Flexible Mortgages

Flexible mortgages are an added benefit of most standard mortgages, where you can overpay your mortgage every month and therefore repay your mortgage early and save on interest.

The main benefit of a flexible mortgage is that you can increase, or decrease, your monthly payments as and when you wish without incurring any penalties. This is particularly attractive if you are in employment where you receive bonuses, or if you are self-employed and your monthly income fluctuates.

Interest is usually calculated on a daily or monthly, rather than yearly, basis, so any overpayment you make immediately reduces your mortgage balance. By regularly overpaying your mortgage it is therefore possible to repay it early, saving you thousands of pounds in interest.

In order to underpay your mortgage, or take a payment holiday, lenders will require you to have built up an equivalent level of credit through overpayment first. You should also be able to borrow back the amount you have overpaid at any time. During in the term of a special rate you may be restricted to 10% overpayments per annum without penalty, terms differ from lender to lender.

Help with Costs

Your monthly mortgage payments are not the only costs you will incur when you obtain a mortgage. You will also have to pay for valuation fees, legal costs including stamp duty if applicable, lenders arrangement fees (which can be added, but you should be aware of the implications of this) plus our fees as detailed below.

As an incentive, some lenders offer to pay for your valuation fees, arrangement fees and legal costs. Sometimes these are refunded, so you have to pay for them in the first place and the lender will forward you the money when your mortgage application has completed. Other times these are actually free, so you do not pay for them at all; the lender takes care of that.

There may be some restrictions, however. Sometimes a lender will insist you use a particular solicitor or surveyor in order to receive a free service, or to obtain a refund. For most people this does not pose a problem, but it is something that you should be aware of. Also be aware of redemption penalties where you have to pay back the free incentives should you leave the lender.

Capital raising/Debt Consolidation

You don’t have to raise capital with your existing lender, though this will always be our first option, other options will be to look at moving to a new lender or looking at 2nd charges.secured loans with other lenders that sit behind your first mortgage.

If you want to raise extra money for any purpose (providing its for a legal reason) you can, this could also mean consolidating all your debts and saving more money monthly but bearing in mind that you will now be spreading the cost over the term of the mortgage and therefore possibly paying more in interest. Again we will advise on the best solution 4 U.

Right To Buy/Right to aquire

This is where as an existing usually long term tenant you can opt purchase your council property or housing association property as discounted price of the actual value.

There are a wide variety of lenders that offer these and sometimes allow you to borrow extra should you wish to improve your home, you can not borrow to debt consolidate as the council or housing association do not allow this.  Usually as well you do not need a deposit as this is taken into account from the discount you have been given.

Quite often the council or housing association ascertain their own value (which is usually less than the market value) and then give you a discount off this and that is the price they are offering to you for.

Most lenders we have access to usually use the market value to lend against in most situations.

Please be aware that like mortgages, councils have penalties too, and if you try to sell the house within 5 years you have to pay back your discount.

Tracker Mortgages

These are usually tracking Bank of England’s base rate which is reviewed on the first Thursday of every month but sometimes they can track LIBOR (London inter-bank offered rate) which varies from lender to lender and are usually reviewed every 3 months.

This is where the lender tracks Bank of England by a set amount i.e plus 1% or minus 0.5%, so whatever happens to bank of england you will always be a set amount above or below it for a set period.

Most often they are a lot lower than the lenders variable rate.

These have the same benefits and drawbacks as a variable and discounted rates in that your monthly amount can go up or down.