News from Reuters reports that UK mortgage approvals are currently at the lowest they've been for 2 years (http://uk.reuters.com/article/uk-britain-lending-idUKKCN11Z0TC), why is this?
Granted, house prices are expensive, and there is a lot of debt around but debt hasn't traditionally been a big 'make or break' reason for people not to apply for mortgages.
People's apparent willingness to accept debt has been noteworthy of late. The British people seem to embrace debt with open arms - at least during boom times. The last boom years of 2003 - 2008 saw lots of 'free money' being given away - this 'feel good' attitude persuaded many of us to take on debt, and this study regarding the amount of uk household debt makes interesting reading.
People in the UK seem to still want to buy houses - in Europe this is very different with many more people willing to rent property. This is not necessarily a good idea on the part of Europe in my opinion, as what as house gives you (once you eventually own it) is an asset that you can use in later life. Renting a property gives you no such advantage.
With money being tight at the moment it's imperative to find a mortgage that works for you as cheaply as possible. Don't go to banks, don't go to building societies, they will only sell you their own products, use an independent mortgage broker who will find you the best deal. Doing this one thing will save you thousands of pounds over the lifetime of your mortgage.
A common question mortgage advisers get asked is about credit scores and if a bad credit rating can prevent getting a mortgage to buy a house. Here's a typical question:
"I'm interested in seeing if I can obtain a mortgage but am worried my credit rating may be a problem.
Please could I make arrangements to speak to someone in this regard."
The subject of debt is of course huge, with many UK workers now on the minimum wage and zero hours contracts, what hope is there for buying a house for people in this position? The reaction has been that many people are now forced to rent houses because they can't afford the deposit to buy a house. The hour prices on the property market are also inflated as many people have chosen to invest in bricks and mortar rather than trust their money on the stock market. This has created a house price bubble as too many people, a second house is their investment and was bought when house prices were high. This keeps house prices (unrealistically) high as no one wants to loose money on their investment.
So, buying a house in todays Britain is tricky. It's tricky is you're in full time employment and have a good credit history. It's even more difficult if your circumstances aren't ideal and you think your credit rating may be a problem. Fortunately there is good news: mortgage advisers like Manchester Mortgages (http://manchestermortgages.co.uk/) are experts at finding mortgages for people with poor credit ratings. Most high street lenders will not consider many people with poor credit histories for a mortgage: this is a mistake. It's a mistake because people are increasingly running short of money and are having to work harder to make ends meet. This produces the follow-on effect that fewer people will be eligible for high street mortgages, this presents a huge opportunity for the likes of Manchester Mortgages and similar companies.
The difference an independent mortgage lender can make is huge, and in my opinion the days of the high street mortgage business model are over: these services are old and out-dated. An independent mortgage adviser will look at hundreds of mortgages from a huge number of different lenders and will also speak to them personally, describing people's credit situations (see the page specific to bad credit mortgages at http://manchestermortgages.co.uk/poor-credit-mortgages/) in detail and filling in a mortgage application with the correct information to ensure that a mortgage offer is given rather than rejected.
So in summary then, having a poor credit rating will certainly cause difficulty in getting a mortgage, and the best way of getting around the problem is to use an independent broker as described above.
I've recently been working closely with Alan Dee, a mortgage broker
from Wythenshawe, whose company, 'Manchester Mortgages' arrange a lot of
mortgage deals for house buyers not only in Wythenshawe but also the
more expensive surrounding areas of Cheadle and Gatley (see http://manchestermortgages.co.uk/wythenshawe-mortgage-broker-advisor/ for more).
In a recent Manchester Evening News article (http://www.manchestereveningnews.co.uk/news/greater-manchester-news/wythenshawe-the-new-didsbury-house-9419435), Wythenshawe was termed the new Didsbury - a rather posh and Bohemian area of Manchester.
I met with Alan for a coffee in Wythenshawe's busy town centre and discussed the apparent housing boom that was going on all around us.
"It's only a few years ago that nobody wanted anything to do with Wythenshawe" said Alan, "there were lot's of empty homes and the area had a very bad reputation". Recently though this has changed and I asked Alan why he thought this was. "It has a lot to do with the development of Manchester Airport, which is only a couple of miles away. This has bought a huge amount of new business to the area, and that good because house prices in Wythenshawe are still affordable, whilst many other areas such as Cheadle and Gatley aren't. Also, there's been a lot of redevelopment of the Wythenshawe as a whole - many of the older properties that were is disrepair have been pulled down and whole areas have been redeveloped. This had attracted many new people into the area - it's a great place for first time buyers and buy to let housing."
I went on to ask Alan how difficult it was to get a mortgage in Wythenshawe? "It depends who you go to" he offered. "The high street lenders like the banks will still make you jump through hoops and then it'll take several months to even get the mortgage application process up and running. With an independent or 'whole of market' mortgage broker like Manchester Mortgages, we can give people the best deals available from all the lenders and usually get a mortgage offer out to people within a week".
Was it difficult using a mortgage advisor like Manchester Mortgages I asked Alan? "No, it's not hard at all, we do all the paperwork and fill in the application forms. Also as we have so much experience in providing mortgages we can advise people on the best type of deals and even tailor deals specifically to suit them. A big area for us is getting mortgages for people with bad credit ratings. Many banks and high street lenders won't touch people with a large amount of debt, we do, and we often find them mortgages too" said Alan.
After our coffee I took a walk around Wythenshawe a noticed that it really is an up and coming area - full of potential and promise for the future.
Getting a meeting with a home loan bank can be exceptionally prohibitive. Home loan is and American phrase for what the English call a mortgage broker - see http://buytolet.over-blog.com/.
What is implied by that they for the most part have set times of work ie 9 – 5 Monday to Friday or every so often Saturday Mornings.
It has been evaluated that a meeting with a noteworthy high road moneylender can take upto 2 ½ hours which would typically mean utilized individuals would need to take off time of work spending occasions or an independently employed individual may need to lose ½ a days work which is then beginning to cost cash.
Another standard loan specialist who doesn't offer the office to go into a branch has as of late exhorted it is taking upto 2 weeks to acquire a phone arrangement which can then be 1 hour long or conceivably considerably more.
This can extremely baffling when you have found the house that you need to purchase or if remortgaging masterminding the money for extra getting for maybe home upgrades.
Utilizing an expert Mortgage Broker can take away all that disadvantage.
Most Mortgage Brokers will work around your working week understanding that 9-5 Monday to Friday is not generally helpful.
They may have an office which you can go to outside these hours, say in transit home from work.
They might have the capacity to offer an arrangement at your work environment or visit you at home to examine your home loan necessities.
Individuals today live bustling lives and there is alot of approach your time and managing associations who have set times of opening can be extremely troublesome.
Having the capacity to manage an association who will work around your bustling way of life can be a great deal less unpleasant.
Envision having the capacity to be sat in the solace of your home and have all the high road moneylenders and other authority loan specialists (as not everybodys circumstance is the same) come to you.
Ask you what is vital to you when organizing your home loan not let you know what is accessible from a constrained recommendation and trust your circumstances meet that specific moneylenders criteria.
This is the thing that a home loan intermediary can offer they can take a gander at what is accessible from the entire of the business sector not from a restricted reach, they can meet with you at once and spot helpful to you and take the time and push to take a gander at all alternatives accessible.
WHATS A FIXED PRICE ?
When properties are advertised at a fixed price this means that the seller ( vendor ) is looking for that price and not looking to negotiate / accept a lower figure – therefore if the asking price is £ 200,000 that is what the seller wants – it does not stop you however offering less.
WHAT DOES OIRO MEAN ?
OIRO means ‘ Offers in the Region Of ‘ therefore if a property is advertised at OIRO £ 200,000 the seller is looking for a figure around this amount but would indicate that they would accept a lower figure – for example £ 190,000 or £ 195,000 so always worth starting off with a lower offer.
WHAT DOES OIEO MEAN ?
OIEO means ‘ Offers in Excess Of ‘ therefore if a property is advertised as OIEO £200,000 the seller is looking for offers above this figure – for example £ 210,000/ £215,000 etc – again through there is no reason why not to offer a amount below the £ 200,000.
WHAT DOES GUIDE PRICE MEAN ?
A Guide Price is usually associated with a property that is going to be sold at Auction – therefore the Auctioneer has advertised a price that they feel is the minimum the property should sell for – usually in reality properties at auction usually sell for much more than their Guide Price and is a way of attracting purchasers to the auction.
WHAT DOES CORPORATE SALE MEAN ?
When a property is advertised as a Corporate Sale it usually means that the property has been repossessed by a Bank or Building Society as the mortgage client has defaulted on the mortgage payments and the lender has appointed a company to sell the property to repay the mortgage / loan outstanding on it.
Corporate property sales are usually done via an Estate Agency, the main disadvantage is that you have to go through the Estate Agent to negotiate the price with the company and this can be a very slow process and even once your offer has been accepted the property will remain on the market until you exchange contracts – therefore you could have paid for a valuation, solicitors search fees and lenders admin fees and about to exchange when the corporate company accepts a higher offer from somebody else.
Always consider making a lower offer whatever the price or condition put on it – start low – you can always increase the offer at a later date.
This post discusses the various types of surveys available to home buyers available at http://www.mortgagebrokeradvice.co.uk/
WHAT IS A MORTGAGE VALUATION ?
A mortgage valuation ( or sometimes known as a valuation report ) is not a survey as such – lenders want to know how much the property is worth and to be notified of the property’s present condition.
Lenders will either use their own valuers or a valuer from their chosen panel to do a valuation report – with the valuer making comment to any repairs / reports required ie, structural report, timber and damp, electrical etc.
Unless the lender is offering a free valuation you will have to pay for the cost of this basic report on application of the mortgage.
If any further reports are required such as Timber and damp these usually have to be arranged and paid for by the purchaser unless the vendor of the property is prepared to pay / go halves on these costs.
WHAT IS A HOMEBUYERS REPORT ?
A Homebuyers report is a more detailed survey than the mortgage valuation / report.
It will advise on any major problems such as subsidence, and obvious rot etc.
However the surveyor will not lift up floor boards or drill any holes but provides a more in-depth report than a valuation report – it also costs more.
Again any defects will require more detailed reports as mentioned above.
WHAT IS A BUILDING SURVEY ?
These cost the most but are a more comprehensive detailed report and are usually for very old, timber framed, unusual , listed or thatched properties with the surveyor going in the attic, checking behind walls and looking between floors and ceilings.
They will usually contain estimates and costs and advice for any defects found.
WHAT TYPE OF VALUATION SHOULD I HAVE ?
As everyone has different levels of experience within the house buying process speak to your mortgage broker who will be able to advise you on what report / survey in your particular circumstances should undertaken bearing in mind the condition and age of the proposed property to be purchased.
WHAT IF LENDER WILL NOT LEND THE FULL AMOUNT REQUESTED ?
If after having one of the above reports / surveys done and repairs / work has to be done to the property the lender will require written estimates for the full cost of said repairs – in certain cases the lender will then place what is called a RENTENTION on the mortgage.
For example if you are buying a property for £ 125,000 and require a mortgage of £ 110,000 with you putting in a deposit of £ 15,000 and repair costs are £ 5,000 the lender will reduce your mortgage to £ 105,000 meaning on completion you will have to increase your deposit to £ 20,000.
The lender will then normally give you up to 6 months to have the repairs / works done and will either accept receipts / guarantees provided by the companies who have done the work or send a valuer back to re-inspect your property ( usually for a fee ) and will then increase mortgage back up to £ 110,000 and forward you the £ 5,000 which was previously retained.
Please ensure you fully discuss your valuation / survey requirements with your mortgage broker prior to submitting a full mortgage application to the lender.
A deposit for the property this can be as little as 5% but the bigger the deposit the better the rate, and proof that you can afford the mortgage over the selected term.
The deposit can come from various sources IE savings, Gift from Close relatives (Parents/Grand Parents) or in some case equity within the property ( you would need to seek advice before committing to purchase the property).
Lender will want you to be able to prove that you can afford the mortgage in every case and they do that by looking at your income whether you are employed or self employed.
They will then look at what credit commitments you have already and will usually deduct these from your income to establish affordability.
It is vitally important that when you apply for a mortgage that you can prove your income.
Typically what lenders will look for is the following:
- Proof of Identification typically Passport or Driving Licence
- Proof of residency of current address
- Last three years address history
- Payslips (usually last three if paid monthly but could be more dependent on how you are paid)
- If Self Employed SA 302’s and Tax overviews (These can be obtained by you accountant or directly from HMRC).
- Bank statements
- Mortgage Statement if already a homeowner.
- Details of existing credit commitments (which could include credit card statements, Loan Agreements)
- Or any other document that they feel is necessary.
Therefore it is vitally important that when applying for a mortgage or any other loan for that matter you are able to prove you are the person(s) applying and that you can afford the loan.
You will need to be able to provide to the Bank,Building Society or Specialist lender the original documents.
If using a broker you can usually provide the original documents to them and they will forward certified copies to the lender.
Record keeping is essential and throwing away important documents could result in a long delay in applying for a mortgage or in some cases refusal.
So if you are at the point of thinking about applying for your first mortgage or are thinking about buying your next property ensure that you have got all the correct documentation as the lenders will want to see them.
People may want to remortgage their
property for a variety of reasons, Better interest rate, Borrow more
money for home improvements or to consolidate existing credit
commitments. If you are unsure of what a remortgage actually is, click this link for an explanation http://www.learnmoney.co.uk/mortgages/remortgage.html
If say for example your fixed rate has just ended and you want to fix the rate again for a period of time the lender will take into consideration the value of your house and the outstanding mortgage and generally offer you another rate as long as your mortgage account has been conducted satisfactorily and your income is still sufficient to service the mortgage.
You will then be offered a rate dependent on the loan to value.
What loan to value means is what percentage is the mortgage outstanding to the value of the property.
IE £150,000 mortgage and a £200,000 Property value would represent 75% loan to value.
The loan to value is quite important as this will determine the rate and product a lender would offer.
Dependent what lender you are currently with simply switching interest rate can either be time consuming or simple.
Lenders like the Halifax plc allow mortgage brokers to arrange the switch and this can be done very simply without having to have a 2/3 hour appointment in the branch.
However you may want to borrow more money than you currently have outstanding , so what happens then ?
This is the point when the services of a professional mortgage broker will assist you greatly in the process.
A mortgage broker like myself will be able to look at what your existing lender will offer you and what is also available from the rest of the market.
All lenders have varying criteria for additional borrowing depending on what that additional borrowing is for.
If it is more advantageous to switch lenders the mortgage broker will look at what are the best interest rates, what charges and costs are involved.
Lenders now offer incentives for people to switch their mortgage to them and in many cases can offer better rates than your existing lender.
So whatever your circumstances speaking to a trusted mortgage broker who is independent to your existing lender should be the first place to start because they will be able to look at the full mortgage range and match the correct product/lender to your personal circumstances.
Remember a mortgage is a long term commitment and by taking the correct advice when there are changes to the mortgage could save you £1000’s of pounds in unnecessary interest payments.
What Is A Mortgage ?A mortgage can be seen as a loan that is secured by property or real estate. It is a loan to finance a home. A mortgage is legally binding and gives the lender the right to the real estate property in case the borrower defaults. The lender retains ownership of the house and sells it to recover funds the borrower owes. Simply speaking, until the loan has been repaid, the property is owned by the lender but is operated by the borrower. A mortgage always involves a collateral security which is the home or real estate property. Repayment is always includes interest payments, taxes and insurance
Getting A Mortgage
Firstly, I had to
make the decision of getting a home for myself. I had to make the
decision of acquiring a home. This step was a matter of choice and
decision. Next, I had to figure out how much I needed to borrow from
the mortgage broker. I had to loan what I was able to afford. In order to
estimate affordability, I put a lot of things into consideration so I
create a worthwhile budget. I considered my income level and my
debts. I had to make sure my income will be able to cover my common
debts as well as finance the repayment of the mortgage. I also made
sure I repaid as much of my debts as possible. I had to analyse my
debt to income ratio. I also had to analyse my expenses. Make an
estimated cost of my living expenses to make sure my mortgage choice
and plan does not seriously counter act with my day to day living. I
also had to save income for a deposit. A deposit is the
initial amount paid at the time of purchase. Mortgage loans are of
different types and vary depending on the type of mortgage you want.
For example those seeking to acquire mansions should apply for a
jumbo loan. As for me I was applying for a loan to get my first house
I had to apply for a first time home-buyer loan. The conditions here
were more favourable. Never go for a jumbo loan if you wish to
acquire just a first time buyer home. The next thing I had to do was
where to get my mortgage. I had a list of destinations from which to
choose: mortgage broker, specialist mortgage provider (eg. the Halifax, Northern Rock etc), a retail bank (Barclays, HSBC etc). In the end, I had to go with
a mortgage broker in order to facilitate the granting of my loan.
Choosing a Mortgage Broker
Choosing a mortgage broker was difficult because most of them seemed strange and charged extravagant prices. I had to keep searching thoroughly till I bumped into a certain broker (a lady) who fitted the bill so effectively and offered her services at a fee more affordable. Despite the difficulty I faced in finding a broker, the moment I got the right one everything went fair and smooth. First she did all the paper and legal work required when obtaining a mortgage, asked me what home plan I pursued. She then suggested me the right loan which was suited to my plan. I thank God for her. The advantage with getting a mortgage broker is that your work load and time is being reduced. This applies to a good broker. That is why you have to be careful when selecting a broker. With going solo it is good because you get to do all research alone and get some good knowledge. However it is very time consuming and confusing as it involves a longer and larger process. After getting in touch with a good broker, I had to go to my bank in order to verify my credit history to make sure my transactions where intact and do the necessary corrections. Luckily for me, everything was fine and void of errors. Evidently the process was extremely difficult and strenuous. However, everything went in my favour and I was financially sufficient to apply for the mortgage. What I had left was to compile the necessary documents. Below are the list of documents I compiled
Proof of income and source of income-proof of employment. This is to show I am able to finance the repayment of my loan within the time range.
Proof of assets.
Having gathered all of these documents, I was given a pre-approval document by my lender. A pre-approval document is not an approval for the mortgage. It is some kind of document which puts you in the waiting list. It puts your situation on hold, while the lender reviews your credit history capacity capability, financial statements and all other relevant documents at his disposal to determine your viability and capability.
Other people have different experiences when obtaining a mortgage. Some people fin theirs difficult and strenuous just like my experience for others it was simple as mastering the letters of the alphabet. Bottom line is difficult or easy, when approved we all wear smiles on our faces.