Whether you are buying your first home, your family home, that investment property, holiday home or funding that loft, new kitchen extension, the main consideration is to get the mortgage so you can settle in.
Obtaining a mortgage is a big step. Keeping it affordable throughout the years is one of the most important elements of financial planning that often goes unchecked.
Over the last 20-years I have helped many clients secure their home and manage their costs. Here are my top tips to get the most from your mortgage and keep the mortgage burden to a minimum.
Time and Stress
- House buying and booking builders can be the perfect storm, when time is tight and stress levels rising
- We understand the marketplace, which means that you can see what deals are available to you. One person to ascertain the costs and what you need to do to get the mortgage agreed quickly.
- Lenders require a great deal of information and checks, not all require the same. Knowing what is available, realistic and required saves a lot of worry and headaches
- Get your bank account in order. Lenders will look at statements to see if you are keeping to your commitments and not going over any unagreed overdrafts
- Make sure your self-employed accounts are in order and note that lenders request SA302’s. These are the reciepts provided by the Inland Revenue to show the income you have declared
- Logon to Equifax or Experian and obtain your credit file, so you can see at an early stage if there is any incorrect debt information. These also help us to choose the right lender for you
As a mortgage is secured against your home, it could be repossessed if you do not keep up the mortgage repayments
Is it better to stay with the same lender or switch?
- Many lenders charge fees for lower rates and many offer 2, 3 , 5-year rates.
Is a 2-year rate with a fee every 2-years cost effective, or should you consider longer-terms to keep the overall fees lower?
- Many have different parts to their mortgages at alternating rates. Let’s see if these can be consolidated into a competitive single rate.
- Value based rates provide access to lower rates based on your mortgage versus property value. Sometimes, changing lender will give you access to a lower rate if your property has increased in value since the original mortgage was started.
- Even if you cannot get a competitive rate due to poor credit history, it doesn’t mean you cannot remortgage onto a better rate, once your credit rating improves.
We are finding that the house price boom means saving for larger and larger deposits is simply out of reach for many young couples.
The options open to first purchase has been better with some government schemes, but some are ending soon, as the new government administration review. Therefore, many are turning to their parents for help.
Releasing equity from a parent or grandparents property is often done via an Equity Release or Lifetime Mortgage. This type of mortgage requires a lot of consideration and this is only available from an Adviser such as Aspen that has specific qualifications and licences.
Protecting Deposits gifted to your children
- With more and more parents providing deposits so they can have their house back, a potentially awkward conversation needs to be had.
- What happens to the deposit you gave your children if they have a partner and that relationship breaks down. Assuming they both own the property, the equity (including your funded deposit), forms part of the money that will be split.
Using a Trust to protect the money you give to your children will help keep your financial gifts ‘in the family’ and protect them against relationship breakdowns.
Make sure the property is owned as Tenants in Common, to define a specific percentage of ownership (60/40 for example)
Create a Second Charge on the property to the value of the gift.
I see a number of issues like this where proper planning was not conducted and considered upfront.
Interest rates will change throughout the life of your mortgage, as will certain aspects of your life. Making sure you can maintain the mortgage if you lose your job, or indeed, cannot work due to sickness or long-term illness.
We believe that a fundamental bedrock in planning is making sure you are protected against the worst of lifes unknowns;
Income can be protected utilising certain types of insurances that will replace income if you are made redundant, or are unable to work due to illnesses or medical issues.
Making sure the mortgage is repaid on untimely death or contracting a serious illness provides for real piece of mind.
Many of our clients purchase a home as friends, siblings or as non-married / non-civivl partners and this can create an issue for the survivor if it is not clear what is to happen to each others share.
UK law does not recognise a ‘common law’ partner. The simplest and most cost effective way to protect yourself and your beneficiaries is to make Wills.