First Mortgage Support

By: Michael Challiner

The government predicts an increase of more than 2 million UK households over the next 10 years, due mainly to an increase in EU immigrants and a trend of smaller households. This obviously leaves a good opportunity for would be buy to let landlords, especially with the better buy to let rates we are currently experiencing and the extra tenants wanting accommodation.

So, what are the requirements of buying to let? Well, the main requirement of a buy to let mortgage is that the rent value of the property can cover costs of purchasing and maintaining the household. This can include mortgage payments, letting agency fees, building maintenance, building insurance, advertising, accountancy fees, management charges and any other associated costs. For example, licenses will be required for houses with more than 3 stories and more than 5 occupants. In fact, a general requirement is that rent covers 130% of the mortgage payments.

For example, a £100,000 mortgage will require potential rent of £520 per month. This is calculated from an £80,000 mortgage (after a £20,000 deposit payment) with an assumed rate of 6%. This example would command mortgage payments of £400 per month, so add your 30% to this and you come to the previously stated £520 rent. This appears to be a fair assessment when you consider the possible periods of time without tenants on top of all the previously mentioned house costs.

Fortunately for you, Council Tax is the responsibility of the tenants once they are occupying the house. However, you will be responsible for a percentage of the area rate if the house is unoccupied for more than 6 months. This will be a smaller percentage if the house is unfurnished.

Once paying tenants are in place, you will need to inform HM Customs and Excise of your new source of income. Expect a fine of £100 if you’ve not spoken to them within a month. Once you are making money from the house then taxes of 22 to 40% will be charged on any profit. Remember this is profit and not rent received so be sure to subtract mortgage payments that don’t cover the part paying the principle (this does incur tax unfortunately), and other related outgoings from this amount.

So, with all this information at hand you have decided to go ahead and purchase your buy to let household. The next question is where to buy this house. Obviously, if you want to manage repairs and any other issues with the house yourself, it makes sense to purchase close to your home town. However, if you are using an agent then this isn’t so important and you can buy in one of the more profitable areas.

According to UCB home loans (these are the buy to let division of the Nationwide building society), the better performing areas for property investment are Colchester, Rugby, Peterborough, Swansea, Belfast and Glasgow. Also worth noting is that East London, having been less desirable of late, is now making a comeback due to the current regeneration of the area (London having secured the 2012 Olympic games).

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By: Peter Kenny

If you have bad credit, then you might think that getting a mortgage is impossible. Obviously it is harder to get a mortgage if you have bad credit, but it is by no means impossible. There are more and more lenders willing to offer mortgages to people with a poor credit rating, especially if your credit problems are in the past. Here are some useful tips on how to get a mortgage with poor credit:

Look at your credit

Before applying for a mortgage, make sure that your credit report is in order. Get hold of a copy and get any mistakes changed. If you have had credit problems in the past but have cleared them up, then you want your credit report to reflect this. An accurate credit report will help you to secure a better mortgage. Also, don’t open or close any accounts as this can affect your score. Try and spread any debts you have or reduce them, as this will put you in a better position.

Have cash reserves

If you have bad credit and cannot afford to put money down on a mortgage, then the lenders will want to see that you have a low debt-to-income ratio and that you have adequate cash reserves. The lender has to see that despite your problems, you are not a huge risk to them and that you will be able to make the payments.

Finding the right lender

Finding the right lender is very important, especially if you want to get a decent interest rate. The best way to find a good deal is online, because you can search for provider rates in just a few clicks. Also, most of the best deals are online due to online companies having low overhead costs. Despite this, it does pay to look offline as well. The more you shop around the better deal you can find.

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By: Tabitha Naylor

If you have weighed out the pros and cons, and have recently decided that taking out a second mortgage makes sense to you, there are a few things to keep in mind.

First and foremost, it is best to spend time looking for the best deal; don’t jump on the 1st second mortgage quote that comes your way. Make sure you take the time to locate the loan that will best suit yours and your family’s needs.

There may be several reasons why you would want to find a second mortgage for your home. This may be to lower your monthly payments, consolidate debt, build up equity, or to get out of a first mortgage faster. No matter what your reasons are, there are several factors which must be considered when searching.

The first thing to consider is the lender that will be best for you. Lenders are available in several different types of arenas, including thrift institutions, commercial banks, mortgage companies, and credit unions. Each will have different prices and terms that you can check into. There is also the possibility of getting a mortgage through a mortgage broker. Mortgage brokers will locate lenders for you, which can eliminate the amount of time you spend “shopping around.” If you decide to use a broker to find the loan, you should check with several different brokers, to ensure you are truly getting the best deal. Speaking with two or three brokers is sufficient. Anything more and you are just wasting your time. Make sure to choose a good loan, with a quality broker, who will provide you with an exemplary level of service, if this is the route you choose.

The second item to look into when considering a second mortgage is the pricing. There are several costs to keep in mind when reviewing the different possibilities. The first, and probably most important, is the interest rate. Then, you will want to consider other aspects, such as the rate being fixed or adjustable, and what the differences in payments will be. The next cost to keep in mind is the APR, or annual percentage rate. APR includes things such as the interest rate, points, broker fees, and credit charges.

When reviewing the breakdown of fees associated with your new loan, you will also want to check into the fees that will be included in the loan. Fees typically include everything from underwriting fees, title fees, closing costs, broker fees, and settlement charges. Many times, all of these fees will be in one lump sum. It is important to know the cost of each different fee, as well as the total. There are some loans that have no costs attached to them as well, but the rates are usually much higher as a result.

If you have a bad credit report, there are still ways to get a second mortgage. It will just be a matter of finding the right mortgage company, as well as understanding the problems with your credit report. If you explain the situation to your lender up front, it will eliminate a lot of headache down the road. Whether you are dealing with a lender, bank, or broker, your mortgage professional’s ultimate goal is to get you approved for a loan. Being upfront and honest from the get-go lets your mortgage professional know you are serious about a new loan. This can go a long way, especially if your situation is a difficult one.

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By: Michael Challiner

Based on an average priced property, it now costs an incredible £5,551 to move house in the UK and with mortgage lending hitting record highs it is now more important than ever that anyone moving or buying their first home is aware of any hidden costs.

Buyers tend to get caught up in the excitement of choosing a new home and run the risk of paying the price financially by not ensuring they get the best value from their mortgage.

If you’re willing to bargain over fixtures and fittings it also makes sense to look at the other ways you can get a better deal when you move. Borrowers should start with a mortgage as it will be, in the vast majority of cases, the most expensive commitment.

Early Repayment Charges (ERCs) are a part of most mortgages, but some have more favourable terms than others. Some only have ERCs during the initial competitive rate, whilst others have overhanging ERCs which lock a borrower in whilst still paying a lender’s Standard Variable Rate.

There is virtually no need for any borrower to have to accept overhanging ERCs with the competitive nature of the UK market and the number of deals available to consumers.

Taking a mortgage where there are only ERCs within the initial, favourable term makes sense for most borrowers but it may be a good idea for some to have no ERCs at any time. You are likely to pay a little more in interest for the privilege, but it can be the right decision for those who need the flexibility of not being tied in.

However, it is all too easy to get caught up in the now and forget about what might happen later down the line. Leaving your mortgage will incur exit fees. These have recently come under fire for unfairly penalising consumers and as a result, have become a vital part of the decision making process.

Exit fees come under a variety of names including, administration charges, sealing fees or deeds-release fees. They tend to be around £195-£295 but this figure is rising as lenders look to recoup lost revenue from competitive rate pricing.

It may not seem like a huge sum of money in the scheme of things, but these charges have seen an unnatural rise over the last three years and are a clear sign of lenders simply making money out of the consumer. At the very least, you should be aware of what the fees are on your deal in the first place.

Lower ‘Higher Lending Charges’ (HLCs) will apply to borrowers who do not have a large deposit. They are applied by lenders, usually on loans over 90% loan to value, who view these borrowers as a greater risk because they haven’t shored up their borrowings with a down payment.

However, first time buyers ma not need to put up with HLCs anymore as lenders are now coming out with more products for those wanting to borrow as much as 100%.

The industry is beginning to realise that whilst first time buyers may find it hard to get a deposit together, they are still more than capable of meeting monthly mortgage repayments.

Stamp Duty is more often than not more than likely to be the biggest individual cost to home movers outside of the actual purchase, costing Britons £5 million pounds a year.

Although the initial stamp duty charge of £125,000 is heavily publicised because of the potential burden to first time buyers, those moving or sometimes purchasing their first property need to be aware of the second and third bracket. Once a property reaches £250,000 the stamp duty charge jumps from 1% to 3%. The variations in stamp duty costs can be dramatic depending on the location of the property.

It is vital that homeowners look at the tiers before they make their move or even start looking. Many properties are priced just above different thresholds with the view they will be bargained down. If you’re not aware of these cut off points then it can end up costing you more than you originally expected.

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By: Joseph Kenny

If you are a homeowner and in need of some extra cash, one possibility you could consider is taking out a second mortgage. If the present value of your house exceeds the amount you paid for it (your mortgage total), then you have equity that can be used to borrow more money. This is basically a loan that is secured on your house – and is sometimes termed a further advance.

Finding Another Lender?

You can approach your existing lender for a second mortgage, or shop around for a lower interest rate. It’s likely your second mortgage will be for a lesser amount of capital, but will nevertheless be subject to higher interest rates and possible charges. This is because it represents more of a risk to the lender – the lender takes a ‘second charge’ over your property, which means that if the debt was recalled and your house repossessed, they would be second in line after your main lender to receive their debt.

For What Purpose?

Secured loans and second mortgages are popular with people who want to raise extra funds – for example if you want to carry out home improvements or set up in business and need capital to get going. Although it can be a good way to find a cash lump sum fast, be aware that you are eating into the investment that your property should be. You should make sure that you have planned for the extra cost of repayments beyond what you initially were bound to. If the mortgage term will last into your retirement, will you be in a position to keep up the repayments?

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By: Michael Challiner

With the housing market is now showing marked signs of recovery, especially in the South and London, the number of homeowners mortgaging for more than £500,00 is increasing. (Also see Latest Market Facts at the end of this article.)

Previously, prospective borrowers for these mega mortgages have experienced a mixed reception from the lenders – sometimes the lenders would provide the facility but viewed them as higher risk. For that reason lenders typically charged a premium rate of interest. But no longer. The tide has turned.

Mega mortgages have well and truly joined the mainstream and lenders are now competing hard for the business. Instead of facing a premium, borrowers are being offered around a quarter of a percent less than comparable deals for more normal sized mortgages. This is because lenders are increasingly basing their lending decisions on the borrowers ability to afford the mortgage with lesser emphasis being placed on the security provided by the property. It also helps that interest rates remain low.

If you’re a potential mega mortgage borrower, you’ll find that the banks will generally be the most welcoming. Compared to building societies and other mortgage lenders, banks tend to set higher lending limits. Some smaller lenders still set a cap at £500,000 whilst others restrict the amount they’ll lend against an individual property. But perhaps the best way of finding a really competitive mega mortgage is to go through a specialist mortgage broker. In the current market, any broker worth their salt will be able to source a great deal on six and seven figure mortgages.

For example, the Halifax will lend up to 90% on a 4.49% fixed rate for a two years on mortgages up to £2 million. And the arrangement fee is just £499. If you’ve got a larger deposit, at least 25%, then there are several other deals around at 3.99% - again for a two year fix usually with a fee of just a quarter of a percent.

Latest House Market Facts

In March, the average achieved sales price was 94% of the asking price.

The average number of viewings to sales was 11.
During March house prices in England and Wales rose by 0.5% driven by buoyant London market. London prices grew by 1.1%.

This is the fourth month in succession of house price growth. It’s also the highest monthly rise since the summer 2004.

Over the last 12 months house prices rose by 0.1%.

The performance of the London market results from of a number of factors:

· A shortage of new housing coming onto the market
· London has underperformed in terms of house price growth over the last few years. This in turn has meant that incomes and house prices in the capital are more closely aligned than in other regions.

In other parts of England and Wales, levels of affordability remain stretched.

At a local level away from London, prices have picked up – mainly in cities in the South of England. Berkshire (0.7%) and East Sussex (0.6%) performed well.

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