You should be looking to arrange your next mortgage at least 6 months before your current deal expires. This will allow ample time to allow a smooth transition from your current deal onto the next. As a broker, we can now access your current lenders products as well as that of most other lenders. So a useful starting point is to see what your current provider will offer which we will compare against the market. It is not just about crunching numbers as we will do a full assessment of what is best for you. Does the mortgage term fall within your retirement plans? Has your situation changed? Do you simply want to save money? Whatever the situation, we will give you full advice and ensure you get the best possible outcome.
Our advisers have many years’ experience in the industry and will be on hand to answer any and all questions you have. They will also be willing to meet you at a location of your choice and outside of standard office hours. They appreciate that ‘9-5’ often does not work for you. We strongly recommend that you speak to them as early in the process as possible so that you can establish your budget but below are some tips that may help you along in the meantime:
Lenders now work from affordability models, hence why getting advice is so crucial. It is not easy to say what you can borrow, but as a very rough guide, most lenders allow around 4.5 times your income, some lenders go as high as 5.5 times and what income lenders allow also differs. By that, some lenders do not include bonuses or variable income, whereas other lenders can take 100% of that. Also things like age and other outgoings play a large role.
It is a myth that lenders require large deposits. A lot of work has been done between major lenders and the Government to help those with smaller deposits. You can buy a property with just a 5% deposit subject to your circumstances and value of the property. If 5% is the starting point, every 5% more you put down reduces the rate. Until you have a 40% deposit and therefore access to the cheapest level of funding.
There are literally thousands of options on different product types. Navigating your way through that can be extremely complex and hence why we are on hand to advise you. However, the main structure of a loan has remained the same for some time.
We have outlined some basic options below so you can start to think about what suits you and your circumstance:
Repayment Mortgage (sometimes called Capital & Interest) where each month you pay back both the money borrowed and interest. You can have anything from a 5 to 40 year term to suit your monthly budget, with the peace of mind that as long as you make all your payments on time, at the end of the term your debt is repaid in full and you own the property outright.
Interest Only. This method requires to you purely service the interest on the loan but you are responsible to pay the loan back at a later date. The FCA is happy with this on the basis that you have a viable, clearly defined Repayment Strategy. Most commonly you would use other assets such as property, shares, pensions, ISA’s etc. Some lenders do allow future bonuses or downsizing at a later date. Your method of repaying the loan will have a big impact on the lender recommended as all lenders have different, and sometimes complex, rules around this. Deposits of 25% or more are often required, but not in all circumstances.
Part and Part. You can mix the two above to fit your needs.
Fixed Rate. Does what is says on the tin. You can fix your monthly repayments for typically 2, 3, 5 or 10 years. Most lenders will allow you to repay an extra 10% of the loan even within the fixed rate period. These products can be more expensive but they give you peace of mind and protect you against future interest rate rises.
Variable Rate. These are typically linked to either the Bank of England Base Rate or the lenders own ‘Standard Variable Rate (SVR)’. They tend to be cheaper than fixed rates, and often over a shorter period of 2 years. While they can be cheaper, you are not protected against any rise in interest rates in the future.
Offset. Aside from the two main options on product above, some lenders will allow you to have a linked savings account. Where you have a positive savings balance, these funds are ‘offset’ against the mortgage and no interest is charged against that element of the mortgage. In a simple example, if you have a mortgage of £500,000 and savings of £100,000 you are only charged interest on £400,000 of the loan. This can be very effective if you are self-employed or have lumpy income. There are also tax benefits as no interest is paid on your savings, no tax is deducted. Very beneficial for the right type of people. As there is a premium charged for this product, you often need 10% of the mortgage balance, or more, to make this cost effective.
Penalty Free/Large Overpayments. As mentioned above, most lenders allow you to repay 10% of the mortgage each year at no charge. Sometimes you would like to, or can pay more than this. As per offsets, this option is more expensive, however, if you feel this is likely it can mean you save more interest over the life of the loan. Typically a 0.5% – 1% premium is charged over the comparable ‘standard’ product.
The most relevant product and additional features will be dependent on your personal circumstances and views on interest rates. Again, this really emphasises the need for professional advice.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.
A quick and easy way to calculate your monthly mortgage payments. Simply enter the amount you wish to borrow, the term over which you intend to pay it off and the interest rate. Then hit the ‘Calculate’ button.
The first figure gives the total monthly payment for a straight repayment mortgage, including both interest and payment towards the capital loan amount. This reduces the amount owed on the capital, month by month. The second figure shows the amount of interest payment only.
This information is a guide only and should not be relied on as a recommendation or advice that any particular mortgage is suitable for you. All mortgages are subject to the applicant(s) meeting the eligibility criteria of lenders. Make an appointment to receive mortgage advice suitable for your needs and circumstances.
A fee of up to 1% of the mortgage amount may be charged depending on your circumstances (ie. £1000 on a £100,000 mortgage). A typical fee is £495 plus we will receive commission from the lender.
Your property may be repossessed if you do not keep up repayments on your mortgage.
Rose Capital Partners Ltd is an appointed representative of PRIMIS Mortgage Network, a trading name of Advance Mortgage Funding Limited which is authorised and regulated by the Financial Conduct Authority. The Financial Conduct Authority does not regulate some forms of Buy-to-Let. The guidance and/or advice contained in this website is subject to UK regulatory regime and is therefore restricted to consumers based in the UK. Rose Capital Partners Ltd. Registration No. 08843654 registered in England and Wales. Registered Address, Leigh Saxton Green, Clearwater House, 4-7 Manchester Street, London W1U 3AE.