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Frequently Asked Questions (FAQ)
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A mortgage is a type of loan designed to help you buy a house. You pay a cash deposit towards the value of the house and then the rest is covered by the mortgage. You borrow the money from a bank or building society and then pay this money back along with interest, every month for a set number of years (this is called the mortgage term).
The bank or building society secures the loan against your property so if you don’t make your monthly payments, your house could be repossessed by the lender and sold to repay the mortgage amount.
A mortgage broker is someone who specializes in providing advice about mortgages. They are also known as mortgage advisers. They have an extensive knowledge of the mortgage market which their clients can take advantage of, and can search a comprehensive range of mortgage products to ensure you get the one which is best suited to your circumstances.
In short, a mortgage broker can save you time and potentially money by scouring the market on your behalf to make sure you get the right mortgage for your circumstances.
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What you can borrow when applying for a mortgage depends largely on your current income and any liabilities which you may have, such as credit cards, loans or finance. Banks and building societies have their own calculators and formulas to work out what you can borrow from them.
In our initial consultation, we would take enough information from you in order to calculate which lenders would lend you what you need to either purchase your next property or remortgage your current home.
A remortgage is when you apply for a mortgage with a new lender but stay in your current home. You may want to do this for a number of reasons. Your current fixed rate could be coming to an end, you could have already moved on to the bank’s variable rate at the end of your fixed rate period, or you may want to raise some capital for home improvements or a whole host of other reasons.
You can secure a new rate or new mortgage on your current property often up to 6 months before the end of your current fixed rate, so it’s important to speak to a broker early to see what other deals and products are available.
Conveyancing is the transfer of the legal title of a property from one person to another, and often refers to the legal process that takes place when you buy or sell a property.
You will need a solicitor or conveyancer to carry out this legal process if you’re buying or selling a property, and also if you’re remortgaging to another lender. In this instance, lenders often offer either free legals or cashback to assist in paying any legal fees. Speak to your broker about this.
The short answer is yes you can, but it all depends on the type of bad credit, whether it be missed payments, defaults, CCJs or IVAs/bankruptcies, the amount of bad credit and the value associated with it, and credit score. You may also need a larger deposit so that the mortgage amount against the value of the property is lower.
Your choice of lender may be limited, and rates and fees may be higher than the High Street banks and building societies, but there are specialist lenders who will consider lending to those with adverse credit. It’s important if you have bad credit to speak to a broker as soon as possible to get specialist advice.
An early repayment charge is a penalty applied if you repay your mortgage (or overpay more than is allowed) during a tie-in period. This is typically the length of time you are on an initial deal, eg, fixed for two, three, five years etc.
Basically, you’re being penalised for breaking the deal early so the lender uses the fee to recoup some of the interest it is losing. The charge is usually a percentage of the outstanding mortgage debt – it often reduces the longer you stay with it.
Often Early Repayment Charges are unavoidable, and sometimes it may be worth paying them if the deal you move on to saves you enough money on your new monthly payments over the fixed rate period. This is something that a Mortgage Broker can advise you on.
The only insurance you need as a condition of your mortgage when you buy a house is Buildings Insurance. This covers your house against any damage that may need to be repaired. It only applies to the structural aspects of your home, such as the walls, roof, floors etc., and it protects the mortgage lenders interest in your property by ensuring that any damage that may occur will be put right.
Contrary to popular belief, it is not a legal requirement that you have life insurance when you have a mortgage, and indeed it may not be the best type of protection for you in any event, depending on your circumstances. Life insurance ensures that should something happen to you, they will receive a lump sum that is either equivalent to the mortgage amount or a level amount depending on the type of life insurance you take out.
Here at Stonebrook Mortgages, we can carry out a review of your Insurance needs to ensure you are covered for the things that you need, whether that be life insurance, income protection, critical illness cover, family income benefit, funeral expenses, or accident protection. There is no hard sell here at Stonebrook. We will only ever recommend the protection that you need based on your circumstances.
In addition to your deposit, which can be your largest upfront cost when buying a house, you also need to consider the following:-
- Stamp Duty – this is a tax paid as a percentage of the purchase price of the property that you are buying. It varies greatly depending on your buyer status (first-time buyer or home mover) and whether you’re buying an additional property such as a Buy to Let or Holiday Home. It’s important to get legal advice as to exactly how much Stamp Duty you’ll have to pay.
- Valuation fee – mortgage lenders will assess the value of the property you are buying to establish how much they are prepared to lend to you. Some lenders offer free valuations and others can charge anywhere from £200 upwards. It all depends on the product and the lender that you choose.
- Surveyor’s fee – this is an additional survey which you can pay for separately to the mortgage and it’s important to have this done in order to establish if there is anything you need to know about the property that could affect you in the future. These vary from around £300-£500 for a basic home buyers survey up to around £600-800 for a full structural survey.
- Legal fees – you’ll need to instruct a solicitor to conduct the conveyancing process on your behalf. Including any costs for searches that they will carry out on the property, electronic transfer fees, ID checks etc, you can expect to pay anything from around £1000+VAT to £1500+VAT for this service. It can often be more than this though so make sure you get a breakdown of all the costs before you decide on which solicitor to use.
- Removal costs – you may need to use a removals service to move your belongings to your new property. These range from around £350-£600 for a local move so make sure you shop around.