Today, Thursday, 2nd August, the Bank of England have voted to raise official interest rates by 0.25 percentage points to 0.75%
The last rate rise was in November 2017, when rates rose from 0.25% to 0.5%.
Although this sounds low, roughly four million UK households on a standard variable or tracker rate mortgage, which rises and falls with the official rate, will see their monthly mortgage payments automatically go up by roughly £30 a month.
Today’s rate increase to 0.75% makes the base rate the highest it’s been since March 2009, when it was dropped following the financial crisis and recession.
Read on and find out how you can remortgage to future-proof your monthly payments from any further rate increases for years to come.
What a rate rise means for mortgages
A 0.25% increase sounds quite small, but when you apply it to mortgages, monthly payments start to look more expensive.
It’s particularly expensive if you are on your lender’s standard variable rate (SVR), or the rollover, or reversion rate, that you pay once your fixed rate term has expired.
For example, if you were on a 3.99% standard variable rate, your monthly payments on a 25-year £200,000 mortgage would be an extra £340 a year with a 0.25 percentage point rise. Remember – this happened last November – so if you’ve been on your SVR since then and, taking into account the rise of another 0.25 percentage points today, it will be costing you an additional £680 this year alone. That soon adds up!
If you don’t know whether you’re on an SVR you can find it on your latest mortgage statement or call your lender to confirm.
Isn’t a rate rise already accounted for?
Most lenders have already nudged up their rates in anticipation of today’s announcement. As Martin Lewis said in a recent article: “Less than a year ago the very cheapest two-year fixed [mortgage] was under 1%, the similar cheapest deal is now around 1.35%, and five-year deals are up a similar amount too.”
The good news is, that while lender’s prices have risen compared to a year ago, you can still get a two-year fixed that is very low in historical terms. Today, the average rate for a new mortgage is 2.09%, but two years ago it was 2.3%, five years ago it was 3.2% and in 2007 it was 6%.
With the base rate predicted to continue to go upwards, homeowners should act as soon as they are able, to lock in low monthly mortgage payments.
Aren’t I too late then?
No! Firstly, if you know you’re on your lender’s SVR then it makes sense to switch away as soon as possible as it is always more expensive than fixing.
If you’re coming to the end of your initial period in a couple of weeks and are looking to remortgage then you also aren’t too late to make savings. If more rate rises come, which economists predict they will, then lenders’ prices for new mortgage products will also move upwards. The key is to avoid going on to your lender’s SVR and fix a cheap deal as soon as you can. In this market, the longer you leave it, the more risk you run that prices will have continued to go up when you do come to remortgage off your SVR.
If you are already in the process of remortgaging with Habito, then just make sure we have all the necessary details to complete your application as soon as possible. If that means rummaging through files and folders to find employment documents and mortgage statements, now’s the time!
If you need more advice on what documents you’ll need to complete your remortgage, and where to find them, get in touch with one of our mortgage experts for some helpful advice. If you’re interested in reading more about how you can prepare yourself for the smoothest remortgage possible, have a look at our blog post detailing what documents you’ll need to make this happen.
If you’ve remortgaged recently to a fixed-rate deal, then don’t worry – your mortgage payments will stay the same for now, whatever decision the Bank makes.
Can I switch my fixed-rate mortgage early to get a better deal?
If you’re looking to remortgage but not for several months – then make sure you know exactly when your current deal expires and think about for how long you might want to fix it for to protect yourself in the future. In this market, generally speaking, the longer you can fix your rate for, the better. While a five-, seven- or ten-year fixed rate will mean higher monthly payments than a two-year deal, it will also guarantee protection from any further Bank of England rate rises until at least 2023.
With most mortgages you can get released early – but it’ll probably cost you a fair bit. The early repayment charge (ERC) that accompanies most fixed-rate mortgages can add up to thousands of pounds, so you need to do your sums carefully to work out whether cutting your losses and switching to a new longer-term fixed rate is worth it. Our expert advisers are always happy to take a look and tell you whether switching early makes sense or not. They can start helping you find your next mortgage up to four months before your existing deal finishes.
I’m new here, how can Habito help?
At Habito, we search 90 lenders and thousands of deals to find the right mortgage for you. We then manage your application from start to finish, doing all the heavy lifting for you. And best of all we’re completely free – so what are you waiting for? See if you could save by remortgaging today.
Despite all the financial doom and gloom of the last few years, one bright light for homeowners has been the rapid rise in property values. Average UK house prices have shot up by nearly 30% over the last five years, and now many of us are taking advantage of that extra cash we’ve built up in bricks and mortar by taking out what’s known as a second mortgage (or homeowner loan). During the last year, Brits have borrowed more than £1 billion in second mortgages to help cover everything from loft extensions to wedding bills.
A second mortgage is basically an additional long-term loan (usually with a new lender) on the home you already have your main mortgage on, and it can be a brilliant way to release equity to fund some of life’s big-ticket items – all without having to pay any early remortgage penalties or max out your monthly budget with a high-interest unsecured loan.
How do I work out my equity?
As the value of your home (hopefully) goes up, your equity goes up too. But what is equity? Simply put, it’s the share of the value of your property that you actually own as opposed to borrow as part of a mortgage.
Let’s say that you bought your home five years ago for £300,000 with a mortgage of £200,000 – that means your equity at the time was £100,000. Now let’s say, today, the value of your house has gone up to £390,000 and you’ve paid off £10,000 of your mortgage. Your equity would now be £200,000: £390,000 minus £190,000 remaining mortgage debt. This is the maximum sum you could theoretically borrow on a second mortgage (although the minimum loan size usually starts from around £10,000).
What can I use a second mortgage for?
Unlike your primary mortgage, the answer is pretty much anything you like. The most common reason for taking out a second mortgage is to fund major home improvements such as a new kitchen, but other reasons might be starting a business, paying the school fees, helping the kids with a deposit on their first flat or even treating yourself to that dream Caribbean cruise.
However, before you pack your suitcase, bear in mind that this is a loan secured on your home. So you need to be 110% sure that you’ll be able to afford both your mortgage payments every month, because the last thing you want to do is turn your shabby flat into a show home only to end up getting the place repossessed because you’ve stretched your finances too far.
Do I have to be a homeowner to apply?
A second mortgage is guaranteed against the value of your home, so it makes sense that only existing homeowners are allowed to apply for one – although as long as you’re the owner, you don’t have to actually be living in the property that you’re securing the new loan against.
Do I have to pass an affordability check?
Getting a second mortgage is very similar to getting a first mortgage and you’ll have to pass the same stringent checks to prove that you can afford the repayments. You’ll need to provide evidence of your income and your regular outgoings (including your current mortgage payments), and undergo a search of your credit history before you can get the financial thumbs-up.
Why don’t I just remortgage or take out an unsecured loan?
Good question. Second mortgages won’t be the best solution for everyone, so it’s crucial to take advice from an independent mortgage broker before signing on the dotted line.
Second mortgage vs remortgage
Second mortgages often have a higher rate of interest than first mortgages to reflect the added risk involved for the lender – in the event of repossession, the second lender has to wait their turn to recover their loan as the primary lender gets to recoup their share first. So remortgaging (paying off your current mortgage and replacing it with a new, lower interest one) can sometimes be a cheaper way to raise extra funds.
However, if remortgaging would involve paying a hefty early repayment charge because you’re still in a fixed rate deal period, or switching to a higher interest rate because your credit has taken a turn for the worse since you took out your original loan, then a second mortgage can be a great idea: there’s no ERC as you’re keeping your primary mortgage, and that higher interest rate will only apply to the new loan amount (for example, the cost of that fancy kitchen) rather than your entire home loan.
Second mortgage vs unsecured loan
If you only need to borrow a small amount, you’ll almost certainly be better off going for a personal loan or credit card. Let’s say you want to borrow £5,000 and you take out a second mortgage with 5% interest over 20 years, you’ll pay nearly £3,000 extra in interest. But if you repay the same amount with a much higher 15% interest, over a period of three years directly to your credit card or personal loan provider, you’ll pay just £1,200 extra in interest.
However, if you’re finding it tricky to get an unsecured loan (perhaps because you’re self-employed or your credit rating has taken a dip), then a second mortgage can be easier to secure. Why? Because all that equity in your home is acting as a solid guarantee that the lender will get their money back even if you default on the loan.
Should I use a second mortgage to consolidate my debts?
Consolidating your high-interest debt into a low-interest, long-term second mortgage can seem like a tempting idea, but you’ll almost certainly end up paying more in the long run. The other major issue with consolidating debt this way is that you’re switching unsecured debt to secured debt. This means you could be putting your home at risk if you can’t afford the monthly repayments and the debts will stay with you for the length of the loan term. Instead, try and clear the debts by contacting lenders and negotiating a payment plan that you can keep up with.
Is a second mortgage the same as a second home mortgage?
In a word, no. A second mortgage is an additional loan on a home you already own, whereas a second home mortgage is a brand new loan to purchase a property other than the one that’s your main residence. Second home mortgages are often used to buy a holiday home or buy-to-let property.
Whether you’re looking for a second mortgage, a second home mortgage or a remortgage, our expert advisors are always on hand to talk you through your options and let you know what the best move would be for you. Get a quote today.
Securing a mortgage is straightforward for the vast majority of homebuyers, but there are still plenty of reasons why your agreement in principle or full mortgage application could end up being declined by the lender – from having an adverse credit score to not being registered to vote on the electoral roll.
Obviously the best way to secure a mortgage is not to get declined in the first place, and that’s why it’s crucial to get yourself as prepared as possible before you start applying (for our top tips on the best way to do this, click here). However, getting the thumbs-down from a lender doesn’t have to mean giving up all hope of ever getting a home loan.
Most mortgages are declined because your profile simply doesn’t fit with your chosen lender’s set-in-stone criteria – for instance, you’ve been self-employed for two years, but they need three years’ worth of accounts. But each individual lender has different policies on what is and isn’t acceptable, so read on and find out all about how to turn that rejection upside down.
Agreement in principle declined
An AIP (agreement in principle), also known as an MIP (mortgage in principle) or DIP (decision in principle), is essentially a non-binding pre-approval statement from a lender showing that they’re willing to lend you a certain amount of money as long as the information you provide turns out to be honest and reliable – and it can be a useful tool to help you stand out from other prospective buyers.
To be able to sign off an agreement in principle, though, a lender will need to look at a variety of factors such as your income, your outgoings, your credit score and your deposit to work out whether you’re realistically going to be able to afford the amount of money you’re looking to borrow.
If you’re declined…
The bad news is that appealing against the decision is usually a non-starter – AIP rejections are rarely overturned. But the good news is that eligibility criteria for AIPs differ between lenders and each will have their own ‘pass mark’. This means that if you don’t make the grade, then you’ll hopefully be able to find another lender who’s more willing to help.
The best way to go about this is to use a whole-of-market broker (like us here at Habito). Why? Because they will have expert, in-depth knowledge of each individual lender and can point you in the direction of those most likely to say yes. If you just approach another lender yourself and their approval criteria are also incompatible with your circumstances, you’ll get rejected again (and if they perform a hard search on your credit file then you might earn a black mark against your name at the same time).
It’s also worth trying to find out why your AIP was declined in the first place. Knowing why you were rejected means you can take steps to increase your chances of getting approved next time round. For example, if you were declined because of a poor credit score, you can take action to improve it (you can read our tips on that here).
Full mortgage application declined
A full mortgage application requires a far more in-depth trawl through your credit history than an AIP and the process lenders use to assess your ‘mortgageability’ is called underwriting (it’s the underwriter’s job to approve or decline your application). Even if you have an AIP, you can still be turned down when it comes to the full mortgage application.
Being declined for a mortgage is usually down to one of two reasons: either a thorough search of your credit history has discovered some adverse credit information (such as frequent payday loans or County Court Judgments – CCJs) that makes you an unacceptable risk, or the mortgage underwriter finds that your profile doesn’t meet the lender’s strict approval criteria – for example, because you haven’t been in your current job for long enough.
If you’re declined…
If your mortgage application is declined by the underwriters, the first thing to do is try and find out the exact reason why you were rejected. Once you know this, you need to contact a whole-of-market broker who can advise you which particular lender would be most appropriate for your specific situation.
Even if your application is rejected because of your poor credit score, there are lenders who are happy to consider a wide range of adverse credit issues. But be warned that interest rates and charges will be much higher on an ‘adverse credit mortgage’ than a standard mortgage, and you’ll also need to come up with a bigger deposit – usually at least 15% of the purchase price.
If you were already approved for an AIP before being rejected for a full mortgage because of a policy issue, there’s a very strong chance that another lender out there will want your business. The fact that you were only declined on the basis of policy criteria rather than any longstanding credit problems indicates that your credit score was good enough for a ‘pass’.
Mortgage application declined after valuation
When you apply for a mortgage, your chosen lender will arrange for a surveyor of their choice to carry out a free mortgage valuation on the home you’re looking to buy. Unlike a homebuyer survey, these valuation reports are for the sole benefit of the lender – they assess the true market value of the property and identify any characteristics or major structural defects that might affect its value in terms of security for the proposed loan.
If your lender discovers the property you’re buying is worth less than your requested mortgage amount, they could ask you to increase your deposit or even decline your application entirely – after all, they want reassurances that they’ll be able to get their money back if they need to repossess the property. You may also get rejected if the building is deemed unsuitable because it’s non-standard – maybe it’s constructed out of concrete or is on the 15th floor of a high-rise block (if you’re worried about this, check the lender’s policy criteria before you start applying to avoid rejection).
If you’re declined…
If your mortgage has been declined because the valuation report has down-valued the property, it’s not an easy decision to contest and you may have to up your deposit. However, you can try appealing by finding recent examples of similar local homes that have sold for more or you can even pay a surveyor for an independent valuation (although be warned that they might come up with the same figure as the lender’s surveyor and you’ll have wasted a few hundred pounds in the process).
If you’re rejected on the grounds that the property is not a standard build, then don’t give up hope. Properties that aren’t an acceptable construction type for one lender may well be acceptable with another – speak to an expert mortgage advisor who will have knowledge of the best lenders for non-standard builds. But also think about whether it’s really the right place for you – lenders need to factor in how easy a property would be to resell if it had to be repossessed, so if they’re concerned then maybe you should be too.
Mortgage application declined after exchange of contracts
You’d think at this stage your mortgage offer was secure, and it pretty much is. But very occasionally, a loan offer can be withdrawn even after contracts have been exchanged – and when it does happen, it can cause major headaches for the unfortunate homebuyer.
The most common reason is that the lender uncovers previously undisclosed historical adverse credit such as bankruptcy or some false information on your application form, so it’s crucial to be 100% upfront when applying for your mortgage.
Another reason could be that your mortgage offer actually expires before the completion date. This is most common with new-build properties that are under construction and get delayed. The best way to avoid this is to pre-empt the problem by asking your lender for an extension. With a few weeks’ notice, they should be able to extend your offer by a month or more.
Finally, you can still get rejected at this late stage if your financial situation has changed dramatically since your initial application (you’ve lost your job, perhaps, or taken out a high-interest loan), so try and keep your finances steady in the run-up to the completion date.
If you’re declined…
If you’re declined at this stage and the sale falls through, it could end up costing you thousands of pounds in lost fees and deposit. So it’s crucial to secure a new mortgage offer as quickly as possible.
If you’ve been rejected because your mortgage offer has expired (they usually last three to six months), then you should be able to reapply for the same deal if it still exists – after all, you’ve been declined on account of your timekeeping, not your bookkeeping. Alternatively, there’s nothing stopping you searching the market again to try and find an even better offer before the completion date, although time might be tight for this.
However, if you’ve been rejected because the lender has unearthed some serious credit problems or inaccurate financial information, then you’ll probably have to swallow your losses and sort out your finances properly before starting the whole process again.
Get a mortgage quote today
Whichever type of mortgage you need, or if you’d like to speak more about different types of mortgages with a mortgage expert, start your fee-free application with Habito today here.
Porting your mortgage basically involves packing up your current loan deal when you sell your home and taking it with you (or ‘porting’ it) to your new property. A moveable mortgage sounds sensible enough, right? After all, it means you can keep the same interest rate, you don’t have to go through the hassle of applying for a brand new mortgage with a brand new lender, and you won’t be liable for any nasty fees for leaving your existing contract too early (as long as you stick to the same loan amount).
So far, so straightforward. But before you call your current lender to get the go-ahead, you should dig out your original mortgage offer letter and grab a calculator to work out whether you’re even allowed to port your mortgage in the first place, and if porting is the best idea for you financially going forward. To help you decide, read our guide and discover all about how porting works and if it would work for you – or whether you might be better off remortgaging with a new lender instead.
How does porting work?
Porting is a bit like remortgaging, except that you’re staying with the same lender. Normally, the process involves paying off your original mortgage on the day you complete on your new home (so there’s no outstanding loan on the property you’re selling). At the same time, the rate, terms and conditions of that original mortgage are seamlessly transferred to a new mortgage contract for the same amount with the same lender. If the sale and purchase don’t happen quite so simultaneously, most lenders will give you a few months’ grace period. You’ll have to pay any early repayment charges (ERCs) up front, but you can apply for a refund once the new mortgage kicks in.
So, you get the same rate, same lender, same loan amount, same rules… but a new offer letter – and this is where things can go pear-shaped for potential ‘porters’. In order to secure that new offer letter, you need to be approved again. And to be approved, you need to reapply for your existing deal and show that you’re still a solid investment. Why? Because you’re effectively asking your lender to re-lend you the money to buy your new home.
The lender will carry out a valuation of the property you’re planning to buy and take an in-depth look at your household income and credit score to decide whether you still meet their affordability criteria. Then, and only then, will they be able to port your existing deal to your new home. So you need to do everything you can to make sure that you’re still ‘mortgageable’.
Am I still mortgageable?
One of the big advantages of porting with your existing lender is that they already know you’re a trusted borrower, but don’t just assume that it’s a done deal because you were approved last time round. Maybe you’ve been made redundant, switched to being self-employed or missed a couple of mortgage payments since you secured your original offer – all of which can make porting harder to get signed off. Lending criteria have also become a lot tougher since the Financial Conduct Authority’s Mortgage Market Review, so the fact that you secured a £150,000 mortgage a few years ago is no cast-iron guarantee that you’ll get the thumbs-up again – redundancy or no redundancy.
The first thing to do before you even attempt to port your mortgage is to get hold of a copy of your credit report – this is a list of your accounts such as credit cards, phone contracts and utility bills, the dates they were started, the amount of each loan and, crucially, any late or missed payments. In the UK, the three main credit reference agencies (CRAs) are Experian, Equifax and CallCredit, and each will hold a file on you. Check all three before applying to port your mortgage, address any mistakes and cancel any unused credit cards that show up.
If your porting application is refused by your current lender, you can ask for them to review their decision. Still a no-go? Then you’ll need to look elsewhere for a more accommodating lender to remortgage with, or postpone your plans and stay put for the time being.
Can I increase my mortgage when I port?
When you move house, it’s often because you’re looking to take a step up the property ladder. But if you want to increase your loan when you port then the lender could well refuse the request. Instead they may insist that you take out an additional top-up mortgage to cover the extra borrowing, with all the usual set-up costs attached such as arrangement and booking fees. And don’t expect any mind-blowingly low rates – the additional top-up loan will almost certainly have a higher interest rate attached (a two-mortgage borrower is seen as a riskier bet by lenders). And before you ask, you can’t top up your portable mortgage with a loan from another lender.
Can I decrease my mortgage when I port?
You should be fine if you want to port your mortgage but borrow less than your existing balance, perhaps because you’re downsizing to a smaller property. However, you will need to repay the outstanding amount back to your lender – and this could well result in you being liable for an early repayment charge on the amount not being ported.
Should I just switch lenders instead?
That depends. You need to do your sums carefully and weigh up whether switching lenders makes better financial sense than porting your current deal. The advantages are obvious – you’ll be able to choose from the best rates on the market and won’t be tied down to one lender’s deals. But you might have to cough up a hefty early repayment charge to get your hands on those rates.
Early repayment charges are penalty fees that kick in if you want to switch lender while you’re still locked into the initial tie-in period of your fixed-rate mortgage deal (usually two to five years). And they can mount up: for example, let’s say you have a remaining loan of £100,000 and the early repayment charge in your contract is currently 5%. If you wanted to change lender right now, you’d be landed with an extra fee of £5,000. However,Early repayment charges are calculated on a sliding scale – perhaps 5% in Year 1, but only 1% in Year 5 – so whether you choose to stay or switch depends partly on how far through the tie-in period you are. That said, if you’re still in Year 1 but on a lousy rate, then it might be worth swallowing a hefty early repayment charge to get out and remortgage on a super-low deal.
On top of any early repayment charges, you’ll also need to factor in the cost of extras such as conveyancing fees, valuation fees, arrangement fees and redemption fees (although many remortgage deals will pick up the tab for some of these). However, on the flip side, a brand new, low-interest remortgage can soon make up for all those penalty payments. Time to get the calculator out again…
Our expert mortgage advisors can help you find the best mortgage deals on the market, and we’re always happy to take a look and tell you whether you’d be better off switching or porting. We search more than 20,000 mortgage products and 90 lenders to bring you the very best deals out there. And unlike those pesky early repayment charges, it won’t cost you a penny.
Whether you’re on the hunt for a better interest rate, need more payment flexibility or want to release some extra cash to finish off that loft conversion, remortgaging can make huge financial sense and possibly save you thousands – yes, thousands – of pounds a year. But should you remortgage with the same lender?
None of us like to pay over the odds – whether it’s for car insurance, the weekly grocery shop or the monthly mortgage bill. But the truth is that some two million Brits are overpaying on their lender’s SVR (standard variable rate). What’s an SVR? Basically, it’s the bog-standard interest rate your lender shifts you to when your initial fixed-term teaser rate expires – and being stuck on it is pretty much the same as throwing money down the drain.
With interest rates set to rise further over the next couple of years, it’s more important than ever to check if you could save some cash by remortgaging to a new fixed-term deal. Don’t think it’s worth the hassle? Think again – it really isn’t that much hassle, especially when you have the experts at Habito helping you out, and the savings can be seriously significant. We’re talking week-in-the-sun, new-flatscreen-TV significant! In fact, the only question you should be asking is whether it makes more sense to remortgage with the lender you’re already with or take advantage of a better deal elsewhere. So read on as we explain the pros and cons of staying put or switching.
Should I Remortgage with the same lender or should I switch?
The answer to this depends on all sorts of things, from what exit fees are involved to how healthy your credit rating is. But one thing it definitely doesn’t depend on is loyalty. Staying loyal to your partner, pet or favourite footie team is usually worth the effort. Staying loyal to your mortgage lender usually isn’t – what we call the ‘mortgage loyalty penalty’ costs the nation an estimated £29 billion every year in excessive mortgage payments. You’re free to take your mortgage elsewhere when your fixed term comes to an end (usually two to five years), so do your research and work out whether it’s a better deal to stay or switch. But whatever you do, don’t do nothing.
STAY – You can skip the fees
When you remortgage with a new lender, you need a conveyancer (a solicitor who specialises in property law) to sort out the paperwork involved in swapping over your outstanding loan. You’ll also need to get a current valuation and probably have to pay an exit fee for jumping ship from your existing lender. In other words, switching to a better deal elsewhere usually means a degree of financial and logistical pain for your remortgage gain (although many deals pick up the tab for some of these fees).
However, things are different if you simply want to move to a new mortgage deal with your existing lender. This is officially known as a product transfer, but it could just as easily be called a minimum fuss remortgage. Why? Because your biggest reward for staying put is a fee-free, hassle-free switch. No extra legal paperwork, no new valuation and, as you’re not actually going anywhere, no exit fee either.
STAY – You can save time
You may be in a mad rush to remortgage, but all that extra paperwork means switching to a new lender can take a fair amount of time – ideally you need to start looking into the available options roughly 4 weeks to three months before your current rate expires.
On the other hand, pick a no-fuss product transfer with your current lender and you could be remortgaged to a new deal in the time it takes to say: ‘Why did we stay on that dreaded SVR rate for so long?’. Just remember, though: you’ll have all the time in the world to count the cost if you could have got a better deal by going elsewhere.
STAY – You’re already a trusted borrower
Just because you were approved for a mortgage a few years ago, there’s no guarantee you’ll get a remortgage with a new lender. They’ll carry out a fresh credit check, and if your circumstances have changed then you may not match their affordability criteria. Maybe you’ve been made redundant, switched to being self-employed or you’re currently on maternity/paternity leave – major changes such as these can make securing a new remortgage deal trickier.
However, your current lender doesn’t have to perform a credit check when you remortgage, as long as you’re not borrowing more money or making major changes – after all, they already know whether you can make the monthly payments or not. Obviously this can be a real bonus if your affordability rating has taken a bit of a knock recently. Beware, though, this isn’t a blanket rule – some lenders still carry out credit checks on existing customers to be on the safe side, so double-check the fine print.
SWITCH – You can access the best deals
Stick with the same lender and you’re only going to be able to access their deals, which is just a tiny fraction of the overall remortgage market. Even worse, as an existing customer you might not even be able to take advantage of all their shiny ‘new customer’ deals either.
There’s a whole world of discounted rates and juicy incentives out there, so even if your existing lender is offering a good deal you’d be mad not to compare it with what else is on offer. The easiest way to do this is via an online broker such as Habito. We search far and wide – more than 20,000 mortgages and 90 lenders – to bring you the very best deals out there. And we’re free, so no more dreaded fees to add to the spreadsheet.
Another problem with sticking with the same lender is that your property will probably get a drive-by valuation at best. Why does this matter? Because you won’t benefit if the market value has increased significantly and the LTV (loan to value) has changed as a result. LTV is the size of your mortgage as a percentage of the value of your property and works across pricing bands (95%, 90%, 85%, 80%, 75%, etc) – the lower your band when you apply for a remortgage, the wider your choice of deals will be.
SWITCH – You can make your loan more flexible
As well as saving you money, remortgaging with a new lender can give you increased flexibility over your finances. For instance, you might have had a windfall or promotion at work and want to start making overpayments to reduce your overall loan. Or you might want the option to take a payment holiday at some point in the future. Whichever mortgage bolt-on you’re after, chances are there’s a deal out there for you. But remember that increased flexibility will probably mean a slightly increased interest rate, so make sure your bolt-ons are going to be put to good use.
SWITCH – You’ll be welcomed with open arms
As 21st-century consumers we’re bombarded with incentive deals all the time, from BOGOFs to cuddly meerkats, and the remortgage market is no different. That’s great news for switchers as there’s a huge range of ‘golden hellos’ to pick from as a new customer – from free legal work to juicy cash-back offers. One word of warning, though: sometimes the rates on these deals are higher than the no-frills rates, so they could end up costing you more in the long run.
Ready to find the best remortgage deal for you? Our expert advisors can start helping you find your next mortgage up to four months before your existing deal finishes. We’re always happy to take a look and tell you if it would be worth switching early or waiting. You’ll only have to enter your details once and we’ll handle the rest for you when the time is right. You can start the process here or get a quote using our mortgage calculator here.
You might think that the process of securing a mortgage and buying a new home is complicated and exhausting enough without having to worry about writing your will as well, but the truth is there couldn’t be a better time to do it. Becoming a homeowner is almost certainly the biggest financial commitment of your life, and putting a legally binding will together can help to protect your family and keep them financially secure with a roof over their heads if anything ever happens to you.
Sorting out a loved one’s affairs when they die without a will can be a legal and emotional minefield. We’ve all heard horror stories of families squabbling over who gets to keep what, and this is the last thing anyone wants to deal with when they’re trying to come to terms with a bereavement. So most people have got a will in place, right? Wrong.
Nearly 60% of adults in the UK still haven’t got round to writing one yet. And it’s not just carefree twenty-somethings who are guilty of delaying putting pen to paper. More than a third of over-55s are still will-less and an alarming 68% of 35-54 year olds are in danger of dying intestate (without a will), despite being the most likely age group to have kids under 18 and major financial commitments such as a mortgage to consider.
Sadly, your mortgage responsibilities don’t stop if you pass away. Your debts still need to be paid and this includes your outstanding loan balance. Lenders are generally quite sympathetic and will give as much assistance as possible, but they do have the legal right to demand the amount be repaid in full. And if this can’t be covered by the estate, they can ask for the property to be sold to make up the difference. That’s why it’s so important to take out life insurance – if you die, the proceeds of the insurance payout can be used to pay off the mortgage balance or at least reduce it to a more affordable level, which will hopefully allow your loved ones to remain in the family home.
How does writing a will protect you?
By making proper legal provision in the form of a will you can specify exactly where you’d like your money, property and belongings to end up in the event of your death. If you have young children, it also allows you to nominate a guardian to look after them until they reach adulthood and are old enough to take control of their inheritance. In addition, having a will in place speeds up probate (the legal process of dealing with someone’s estate) and can help to mitigate the amount of inheritance tax payable on the property and money you leave behind.
Once you’ve worked out how you’d like your estate to be divided up, you can store the will away and get on with enjoying life, safe in the knowledge that if anything does happen to you the financial fallout for those left behind will be kept to an absolute minimum.
What happens if I die without a will?
Many people assume that if you die without having made a will, then your estate simply passes to your partner or children. But it’s not always quite as straightforward as that. There are detailed laws, known as rules of intestacy, that specify who inherits how much when you die without a will. In other words, it won’t be you but the law that says who gets what, and sometimes that can lead to situations such as your long-term partner ending up with nothing or the government pocketing the lot.
- If your partner dies without making a will, and you weren’t married or in a civil partnership, you have no rights to inherit anything from them, including the home you lived in together.
- If there are no surviving relatives to claim inheritance under the rules of intestacy, then the estate passes directly to the Crown – known as bona vacantia (or ownerless goods). Millions of pounds went into the government’s coffers last year thanks to this little Latin phrase.
Can I write a will myself?
Yes, you can, and there are plenty of DIY will kits available online and in the shops. But making mistakes in your will can prove hugely costly further down the line – your relatives could face big legal fees and the will could end up being challenged or disregarded completely. The smallest things can invalidate a will – you might name someone as a beneficiary but the name doesn’t match what’s on their birth certificate, for instance, or you might not get it witnessed properly.
A will needs to be accurate, clear and totally unambiguous. So it’s usually safest to use a professional will-writing service or a solicitor. Solicitors generally charge £200 or more to draw up a will, while professional online will-writing services such as Farewill cost considerably less and your will can be created in as little as 15 minutes. It’s then checked over by a legal expert before being sent back to you to print, sign, witness and tuck securely away. It will need to be signed in the presence of two witnesses (non-beneficiaries) and they’ll also need to sign in your presence and in the presence of each other as witnesses to your signature.
What should my will cover?
The most basic will should cover who you want to benefit from your estate, who should be responsible for any children under 18 and who will be in charge of organising your estate and following the instructions you leave in your will – this person is called your ‘executor’, and you can name more than one person if you want to. For a will to be legally valid, you must be 18 or over, write it voluntarily and of sound mind, and have it properly witnessed.
If your circumstances are 100% straightforward, then wills can be very simple to draw up. But things are often more complicated – you might share a home with someone who isn’t your husband, wife or civil partner, for example, or you might have children from another marriage – and this is when it really is crucial to get some professional advice.
Can I change my will?
Kids, marriage, moving abroad, divorce – as life changes, your will may need to be adjusted too. The good news is you can alter your will as many times as you like, but the only way you can do this is by making an official alteration called a ‘codicil’ or drawing up an entirely new will. Which option you choose will depend on how many changes you want to make and how complicated they are.
Farewill is the UK’s largest wills provider, helping thousands of people across England and Wales write their wills simply and easily online. A Farewill will costs just £50 and takes 15 minutes to complete. For £10 a year, you can login and update your will at any time.
Before November, there hadn’t been an interest rate rise for nearly a decade in the UK – which meant that anyone who’d bought a home from 2008 onwards had never had to experience a rising interest rate market. But it’s all change now the Bank of England has bitten the bullet and decided to bump up the base rate from 0.25% to 0.5% to try and stem the country’s increasing inflation.
So, how is the Bank of England’s decision going to affect the Bank of You? And how can remortgaging help to ease the pain behind the interest rate rise? We’ve got it all covered, from the reasons behind the Bank’s decision to the best ways to remortgage – and save on your monthly payments.
How does the Bank of England decide the interest rate?
The Bank of England’s Monetary Policy Committee (MPC), which is made up of nine members and led by Governor Mark Carney, meets on the first Thursday of each month to set the official UK interest rate (the base rate) – the figure at which commercial banks borrow from the Bank of England. And since 2009, those monthly interest rate meetings have been, quite frankly, uninteresting as the MPC hasn’t had too much to decide. In fact, the base rate has only had to be altered once during that entire time – a 0.25% drop in August 2016 to its lowest ever level of 0.25%.
So why the sudden change of heart for the Old Lady of Threadneedle Street? Well, it’s all down to the current level of inflation. The MPC has an inflation target of 2%, and if the rate goes too far above or below that then Carney and his crew need to take action to stabilise the economy. As it stands, inflation is at a four-year high of 3%, which is a full percentage point above where it should be. This spike, mostly driven by a slump in the value of the pound following the Brexit referendum vote, has inevitably ended in a hike.
What does this mean for mortgages?
At Habito we search more than 20,000 mortgages from over 90 lenders to find the right one just for you. And we’re also determined to make the mortgage process more transparent. That’s why we want to make sure you understand exactly how interest rate rises can affect your home loan – and what we can help you do about it.
The good news is that if you’re still on a two-, three- or five-year initial ‘teaser’ fixed rate, then your mortgage payments will remain the same for now, however much Mr Carney decides to tinker with the interest rates. But be warned, this honeymoon period will only last until the end of the fixed term.
After that, you’ll move onto your SVR (standard variable rate) – which averages 4.6% at the moment – unless you do something about it. That’s why, if you’re one of the hundreds of thousands of borrowers reaching the end of their fixed term every month, it always pays to think about remortgaging, whether there are any more interest rate rises or not.
If you’re already one of the estimated three million people on a standard variable rate or tracker mortgage, even this measly 0.25% interest rate rise on a 25-year £200,000 loan will see your payments jump by £480 a year.
Will there be more rate rises to come?
Some people reading this might think, ‘it’s only 0.25%, I don’t need to do anything yet’, but burying your head in the sand and hoping for no more rises could prove to be a costly mistake, especially as the Brexit process is turning out to be less of a smooth uncoupling, and more of a tricky divorce.
If the pound continues to slump and inflation continues to rise, then further interest rate rises seem highly likely. Many experts believe this initial hike could be just the tip of the iceberg and that rates will continue to edge up during the next few years. For example, the National Institute of Economic and Social Research (NIESR) think tank believes that this first rise will be followed by more hikes every six months until the base rate is up at 2% by 2021.
Even if the base rate rose just one percentage point higher, the impact on your family finances would be severe – the additional cost on a 25-year £200,000 mortgage would come closer to an extra £150 a month, or an eye-watering £1,760 a year on top of your usual payments. That’s an awful lot of piggy banks that’ll need emptying if you don’t take action soon.
How can you protect yourself from a rate rise?
So, what can homeowners do to combat the creeping base rate rise? Well, the positive news is that it’s not too late to act. Despite the Bank of England’s 0.25% rise, interest rates remain at historic lows and fierce competition between different lenders means that it’s still a borrower’s market with thousands of cheap remortgage deals up for grabs across the sector.
But if rates do continue to go up, this window of opportunity will start to close as lenders hike the prices of their mortgages. The result? Not only will millions of homeowners’ monthly payments skyrocket, it will also be more expensive to remortgage to a cheaper fixed rate. So, if you’re on a tracker or variable rate mortgage or your fixed rate is about to end, you need to act now to protect yourself and secure the best deal for the future.
A recent YouGov survey found that more than a third of Brits haven’t changed their mortgage during the last five years, which means that there are an awful lot of people coughing up thousands of pounds every year in excessive mortgage fees – what we call the ‘mortgage loyalty penalty’. But it doesn’t have to be like that! Remortgaging with Habito is as simple as switching your energy, mobile or broadband provider, only you’ll enjoy much more rewarding returns.
The process of switching to a new lender is the same as applying for a new mortgage, so you can either go directly to the new lender or you can use a mortgage intermediary (broker) such as Habito, which will act on your behalf with the lender (and we’ll do it all for free).
You’ll need to be prepared with all the correct documentation and there’ll probably be a conveyancing fee from your solicitor as legal work is needed to change the original lender’s interest from the property to the new lender. However, most remortgages include a free legal package, so this might not add on any cost to you.
Once the remortgage has been accepted by your new lender, your solicitor will manage the transfer of money to pay off your old mortgage. And then the only thing left for you to do is decide what you’re going to do with all that money you’ve just saved yourself!
Top Tips: How to get yourself remortgage ready
Don’t Leave It Too Late
It can take time to switch on to a new remortgage rate, so you should start looking into the available options well in advance – roughly 14 weeks to three months before your current rate expires is ideal. Don’t worry, you won’t have to switch the second you’re approved, though: once you successfully apply, you’ll get an offer with an expiry date attached.
Do Check Your Credit Score
It’s crucial to make sure your credit history is squeaky clean before applying for a remortgage. In the UK, there are several credit reference agencies (CRAs) such as ClearScore, Experian, Equifax and CallCredit, and each will hold a file on you called a credit report. Check as many as possible before applying (the most any will cost you is a couple of quid), address any mistakes and cancel any unused credit cards that show up.
Don’t switch too soon
You don’t want to switch too soon because some mortgage terms will include an early repayment charge if you switch while you’re still within the initial ‘teaser’ period. This charge can be as much as 2%-5% of your outstanding loan, which can add up to several thousand pounds, so timing your remortgage right is key! If there is a charge, arrange for your remortgage to start the day after the penalty period ends on your current deal.
Do sort out your paperwork
You know all that paperwork you had to get together for your last mortgage application? You’ll need to do the same this time round as well, unfortunately, so it’s worth hunting it down in plenty of time. Documents include high-resolution scans of:
◦ Proof of salary (payslips, or SA302 forms if self-employed)
◦ Proof of address (council tax/utility bill)
◦ ID (passport or driver’s licence) and bank statements
Don’t Go On a Shopping Spree
Lenders need to know that you’re sensible with your money and can afford to make repayments on your home loan. So, in the weeks and months running up to applying for a remortgage, it makes sense to avoid applying for extra credit or buying big-ticket items.
Do Speak To Habito
With Habito, if it suits you, you can do the whole process – receive advice and make the application – all online. However, we understand that sometimes you just want to talk to somebody, which is why we have our brilliantly helpful team of (human) mortgage experts on hand to guide you through the process every step of the way. So get chatting!
What are you waiting for?
Consumers are currently missing out on a staggering £29 billion a year by sticking with the same old mortgage year on year, and with interest rates on the rise that figure is only going to get worse. So it’s more important than ever to secure the best deal you possibly can on your home loan, and with Habito it’s more straightforward than ever too. Get in touch and let us free you from standard variable rate mortgage hell – before Mr Carney has his next monthly meeting.
Finally, after months of trawling estate agent websites and trekking around the local area in search of fresh ‘For Sale’ signs, you’ve spotted your dream home. Better yet, the asking price seems pretty reasonable too. All you need to do now is secure a mortgage and domestic bliss is just round the corner.
For the majority of people who apply for a mortgage each year, the hunt for a home has a fairytale ending. And once you get your mortgage approved, the lender will leave you in peace as long as you make your monthly repayments.
But if you’re one of the millions of adults in the UK with the dreaded words ‘bad credit’ attached to your name, getting a mortgage in the first place can be a whole different ballgame – less fairytale, more frustration.
How much bad debt is there?
Debt comes in many forms – from student loans to credit cards, phone contracts to payday loans. It’s crucial to understand the difference between ‘good’ and ‘bad’ debt, especially if you’re about to apply for a major loan such as a mortgage.
It’s no surprise to learn that the economic downturn over the last ten years has created a mass of debt in the UK. According to The Money Charity, unsecured debt now tops £200 billion, the highest level since 2008 – and credit card debt alone currently stands at £68.5 billion. To put this into perspective, that averages out at nearly £7,500 of debt for every household.
- £200.882 billion – Level of unsecured debt in the UK
- £7,413 – Amount the average household owes in unsecured debt
- 248 – Number of people declared bankrupt or insolvent every day
- 3,321 – Number of county court judgments (CCJs) issued daily
Pretty shocking, right? And when it comes to working out your individual credit score it’s not just major black marks like CCJs and bankruptcy that count against you. Smaller issues such as paying your phone bill late or missing a credit card payment can also have an effect on your application.
All of this means that there are a lot of potential pitfalls between spotting that ‘For Sale’ sign and getting the keys to the front door. On the other hand, if you stay within your credit limit and pay back your loans on time you can build up ‘good credit’. This actually helps to boost your credit score and makes you more attractive to potential lenders.
Read your credit report
The first thing to do before you apply for a mortgage is to get hold of a copy of your credit report. This is a footprint of your credit history. It is a list of your accounts such as credit cards, phone contracts and utility bills, the dates they were started, the amount of each loan and, crucially, any late or missed payments. Also included will be details of any CCJs, repossessions or bankruptcies.
Who works out my credit score?
Your three-digit credit score is worked out by a credit reference agency (CRA) and there are three of these in the UK: Experian, Equifax and Callcredit. They all have a statutory duty to supply you with a copy of your credit report for a maximum of £2. You can access your credit file online in a matter of minutes, so get checking as soon as possible.
It’s worth getting a report from all three, as they may have different information that could adversely affect your credit score. You can also check your credit score as many times as you like without it having an impact on your score.
What’s a good credit score?
Basically, a high credit score means that you’re deemed low-risk and this obviously appeals to lenders. Conversely, a low credit score means you’re viewed as higher-risk and more likely to default on payments in the future. A ‘good credit score’ will differ between lenders as they use different scoring scales. This is a rough guide to good scores with the three CRAs.
A good credit score with:
- Experian is scoring over 880 out of 999
- Equifax is scoring over 420 out of 700
- Callcredit is scoring 4 out of 5
With outstanding mortgage lending now at £1.344 trillion (that’s 12 noughts!), it’s no surprise that mortgage providers might impose a higher interest rate or turn down your application all together if you fall into the high-risk category.
Can I still get a mortgage with a bad credit score?
If your credit history isn’t blemish-free, don’t give up all hope of becoming a homeowner. When it comes to getting a mortgage application approved, there’s bad credit and then there’s really bad credit. A missed mobile phone payment a few years ago means you’re far less of a risk to lenders than someone with a string of CCJs to their name.
Before submitting anything to a lender, we also perform our own affordability assessment. This leaves no footprint on your credit history and ensures that you have the best possible chance of being accepted for a mortgage.
Depending on how poor your credit history is, some lenders may not be willing to offer you a mortgage. But plenty of others could be much more sympathetic.
That said, if you’ve experienced a CCJ, IVA (Individual Voluntary Arrangement) or bankruptcy in the past, we, unfortunately, won’t be able to help you. The best place to start is by working with a company like ClearScore who give you access to your credit score and report for free. They also offer tips and coaching to improve your credit score and get you in better shape for a mortgage application.
You may also be tempted to take out a so-called ‘adverse credit’ mortgage. But be aware that interest rates and charges will be considerably higher than a standard mortgage. You will also need to put down a bigger deposit – usually at least 15% of the purchase price.
Don’t get caught out by mobile phone providers – A Habito Customer Story
|Name: Fei Yan
Occupation: Works in operations / compliance
Property type: Terraced house with 5 bedrooms
Location: West London
Fei Yan had a mortgage approved with another broker but it was declined on the day of completion. He called his mortgage broker and the bank but got no real answers as to why the mortgage wasn’t going through; only that there were ‘personal data issues’. It turned there was default on his mobile phone account for £8 with O2 – a debt that Fei didn’t even know about. The issue took weeks to sort out and then his bank didn’t return the valuation costs.He decided to go with Habito because he needed a quick turnaround to secure his dream house. Luckily, Habito successfully sorted a mortgage for Fei.“Habito was checking on the progress of my application every day, so I was always confident that my application was progressing at speed. My approval came in on the 30th of January and they released the funds the next day. I know this was because they were able to put pressure on the bank to be faster than the usual time frame.”
Habito’s top 5 ways to improve your score and make lenders love you:
- Check that you’re on the electoral register
Simply put, the electoral register allows lenders to check that you are who you say you are. It is key to making sure the information you’ve supplied in your mortgage application is accurate. You can register here.
- Challenge any errors in your credit report
If your file shows that you defaulted on a payment, it’s bad news for your credit score. But sometimes mistakes are made – if that’s the case, it’s crucial to fix them. Contact the lender and ask them to delete the error from your file. Failing that, contact one of the credit reference agencies or the Financial Ombudsman. And remember, it’s important to check all three CRAs before applying for a mortgage.
- Cancel any unused credit or store cards
Having unused credit or store cards will mark you out as someone who doesn’t use credit often. It also shows you have a limited credit history, so it’s best to cancel unused cards. At the same time, don’t cancel all your cards. Having a credit card that you repay in full every month shows potential mortgage lenders that you’re a responsible borrower.
- Avoid payday loans and withdrawing cash with a credit card
Doing either of these frequently suggests you’re unable to manage your money and this will reflect on your credit score. That’s not to mention the effect it will have on your overall finances. An occasional credit card ATM withdrawal on holiday should be OK. You still have to pay the money back on time and in full – and don’t make a habit of it!
- Pay your bills on time
It sounds obvious, but forgetting payments can cost you dearly on your credit score. So set up automatic payments or reminders to make sure you don’t miss any due dates. That goes for all bills, be it your rent or your monthly phone bill. Again, though, don’t stress too much about one late payment a few years ago. The negative impact missed payments have decreases with time.
How bad credit affects the ability to own a home continues to be a contentious issue. However, the rules around responsible lending are in place for important reasons.
Most people are aware of the financial crisis which started in 2007 on the back of subprime lending. People without a repayment strategy were loaned irresponsible amounts of money. This caused loan defaults on a mass scale, and initiated the collapse of several major financial institutions.
Just like you, we don’t want this to happen again. We understand that people want to take out mortgages to help them buy their dream home. That’s why we’re here to guide you through your mortgage application. We’ll answer any credit and affordability questions you might have.
Hopefully you now have a better understanding of bad credit, and how it affects your mortgage eligibility. For any more questions, don’t hesitate to get in contact with one of our mortgage experts.
Can Habito help with this?
At the moment, the answer is no. However, we are aware that buying a house is much more than sorting out a mortgage. We are currently working on becoming more involved with the process even beyond the point of receiving a mortgage offer.
- If you’re purchasing a property
You will need to make arrangements and appoint a solicitors firm who will handle this part of the application. We can’t stress enough how important it is to be represented by solicitors that make you feel confident about the process. You also will be negotiating their fees and the ways you’re going to be working together. Therefore, it’s vital to feel comfortable about asking a lot of questions and communicating regularly.
- If you’re remortgaging
The lender may offer you a solicitor as part of the remortgage package. If this is the case, you won’t be liable for any fees – the lender will pick up any fees.
My mortgage has gone to offer. What now?
We will always email you a copy of your mortgage offer. You will also receive the complete documentation from the lender within a few business days. From this point on, the only documentation to complete will be between you and your solicitors.
Once you receive a “solicitors pack”, you will need to fill in the questionnaire included and post it back. It will also include the instructions about the way your solicitors will operate. This should include how to access their online portal and track your application until completion.
Remember, solicitors are not mortgage advisers
Our job might be done once you get your mortgage offer, but we’re always open to questions. Our mortgage promise means we’ll watch your mortgage, and make sure you never end up on your lender’s variable rate. When your introductory period is up, you will be transferred over to this more expensive rate. But not with Habito! We want to continue saving you money, and we’ll alert you when it’s time to switch. We’ll manage the remortgage process, and make sure you keep your pounds in your pocket.
Moving Stories: What did buying your first home mean to you?
That first home feeling
Why buying was the best thing you ever did
Surviving the buying process
So here are a few pointers to keep you on the right side of homebuyer sanity:
Between estate agents, solicitors, mortgage brokers and lenders there are numerous parties involved. There are on average 10 people involved in every single house purchase – which means an awful lot of pressure on you as a buyer to get the job done. But remember, this is the biggest investment of your life, so don’t be pushed into anything rash.
Estate agent rushing you to put in an offer? Lender pressuring you to buy one of its ‘add-on’ products or services? Remember that you will eventually get over the threshold and have the keys in your hand. Whether it takes an extra couple of weeks or not, you’ll still feel great. So don’t get distracted by people wanting to rush the deal through, and don’t put up with bad service.
Scare tactics are there to do exactly that – scare you into making a rash decision. So don’t just use the estate agent’s in-house broker or conveyancer because they make it sound like the easiest option. Instead, shop around for your advice. That way, you’ll end up with a better price and a lot more peace of mind.
How Habito can help
Owning your first home is an important step for millions of Britons. Fixing the outdated mortgage application process has been our mission at Habito from day one. We want to make sure the UK can access a free digital mortgage broker that puts customers first. It all starts with signing up, entering some personal details (this shouldn’t take more than ten minutes) and telling us about some of your future plans. From here, we can connect you with one of our mortgage experts for personalised mortgage advice.
You can do this using live chat they are available wherever you are – at home, in the office or on the beach. When we’re all clear on how to proceed you’ll continue to be personally looked after by one of our human experts. They take care of your entire mortgage application from start to finish. And what’s more our service will cost you absolutely nothing. Zip, zilch, nada!
Finally, enjoy your new home!
Congratulations on making it from homebuyer to homeowner! Remember that when your first mortgage deal expires, you don’t have to stay put on the lender’s standard rate. Again, it really pays to shop around as you could possibly save thousands – yes, thousands – of pounds a year just by switching to a new lender. Here at Habito, we make it simple – when it’s time to remortgage, we alert customers. We always help people switch quickly and easily so they never have to pay over the odds. Just think what grand designs that extra money could be put towards!
A break with tradition – how online brokers are taking the misery out of mortgages
Traditional mortgage brokers – all pain, no gain
Putting customers back in control
Traditional vs online mortgage brokers: the facts
Traditional mortgage brokers
- Customer fees are often high
- Analyse limited range of lenders
- Limited office hours
- Recommendation can take weeks
Online mortgage brokers
- Service is fee-free
- Analyse vast range of lenders
- Service available 24/7
- Recommendation within days
How online mortgage broking works
Our mortgage promise
Brilliant, where do I sign up?
The best part is you can sign up with us on your desktop, phone or tablet, 24/7. Habito fits in with your lifestyle, not the other way round. The first step is a conversation with our Digital Mortgage Adviser to discuss your mortgage needs. This will help you find the best option for your individual circumstances. You can chat everything through with our mortgage experts via online live chat every day. All from the comfort of your sofa.
How Habito came about
Time to break up?
When you start your remortgage, it’s natural to have anxiety about the process. What actually happens? Well, hopefully we can shed some light on the process of remortgaging once we’ve found you the right deal.
These are the key things that happen when you find a new mortgage lender through Habito (apart from saving money).
- You get your property valued.
- You submit your mortgage offer through Habito.
- Once your case is agreed you will receive a mortgage offer from the lender to confirm you are ready to transfer your mortgage.
- Once that’s done, the solicitor will handle the transfer of deeds from one lender to another. They transfer money and deeds.
- At completion, a letter will be sent through for you to sign.
- You will receive a letter from the new lender confirming that your mortgage has been transferred. Your new mortgage payment will be taken based on your requested date and account details.
That’s all. And we can help you through the entire process starting with Mortgage Calculator, which shows you how much you can potentially save. If you’re looking to change your mortgage terms, we have several detailed blog posts. We have a guide to moving your mortgage, and when to start looking to remortgage.
Whether you’re a first-time buyer or looking to remortgage, your property must be valued before your mortgage is approved. This is because lenders need to know they are lending the correct amount of money.A mortgage is a ‘secured loan‘ because the money you are being lent is secured against the value of the property.
This means lenders need to have an accurate estimate of what your property is worth. This is so they don’t end up lending you more than the value of the property. More importantly, you’re going to want a survey to check the condition of the property depending on its current state. This is to make sure the property you’re buying is up to the standard you expect.
First Time Buyers and Home Movers
There are several different types of home valuations depending on several factors. The two main factors are which type of mortgage you need, and the condition of the property. These valuations all have different prices, another factor to take into account when totting up what you are spending on home-buying services. For more information, check out the Money Advice Service’s website.
- A Condition Report is a basic survey suitable for new-builds and homes in good condition. A HomeBuyer Report is a survey for property in decent condition, and will identify any structural issues or problems like damp.
- A Home Condition Survey is similar to a full building survey. This will provide you with information on how to deal with problems identified at the property.
- A Full Structural Survey is suitable for older home or properties requiring repairs. This is an extensive survey providing detailed advice on repairs. It also includes a report on the potential for hidden defects in the property.
If you’re looking to remortgage, lenders will also have to carry out a valuation. This will not be as thorough as a first-time buyer or home mover mortgage. That’s because your lender will have already valued your house. This means they already have a figure to base their valuation on.
The reason they need to carry out another valuation is to make sure your property hasn’t deteriorated and lost value. Often lenders will carry out a very quick valuation for a remortgage, often just driving past the property! However, you should build in some time for this to happen in your remortgaging process.
For more information on remortgages, including when and how it is advisable to remortgage, head over to our dedicated page.
You can do your own property valuation
Finally, there are also ways of checking the value of your property yourself. Lenders will likely not accept this as a final valuation, but it is always helpful to know. There are several free online valuation services available, we suggest you check out Settled. You can also check out historical sale prices of similar property in your area to guide your valuation. One place you can find these sale prices is the HM Land Registry.
Finding out how much your house is worth is usually one of the earlier steps to take in the process of getting a mortgage. However, you can start speaking to a mortgage expert before your valuation. In the case of remortgages, they can advise when exactly to get these valuations done. If you’d like to get in contact with a member of our mortgage expert team, head over to Habito. They should be able to answer any questions you have, and guide you through your application. So what’s the wait? Get started now.
What is interest and why’s it so important?
So which one should I choose?
Can I talk to someone about them?
First things first
Maintaining your monthly payments is critical to staying on the good side of your lender. It is in both the lenders and your best interest to avoid defaulting on your mortgage. If your circumstances change, lenders will work with you to help continue repaying your mortgage. To put it simply, lenders would rather you were paying some money rather than no money towards your mortgage.
If you do lose your job or take a salary cut, it’s important to communicate this with your lender as soon as possible. If you take a salary cut, lenders may be able to adjust your mortgage terms to fit around your new salary. This might mean a raise in your interest rates, but lower monthly payments that you can continue to manage. If you have lost your job we advise heading over to the Money Advice Services information page on being out of work.
If you lose your job, the first thing to check is whether you have any payment protection. This is a form of insurance you may have been sold when you took out your mortgage. Due to the sales techniques used in the past, you may not be aware that you have payment protection. This means it is advisable to check with your lender whether or not you have this form of cover. If you do have payment protection, the level of cover it will provide will depend on the policy you took out. The government has advice on claiming payment protection and what to do if you think you may have been mis-sold it.
Lenders also have features called ‘mortgage holidays’ which your deal may be covered by. It is important to note that not all mortgages have this option. Some mortgages will require you to have previously overpaid to be able to access a mortgage holiday.
A mortgage holiday allows you to suspend monthly payments for an agreed period of time. Your mortgage balance will be accruing interest for the duration of the holiday, which can push back the term of the mortgage. Mortgage holidays will temporarily reduce the burden of your monthly payments. This is extremely helpful if you are moving between jobs and not earning, or taking a break from work. Mortgage holidays are a temporary solution and are not suitable if you have a permanent drop in household income. The Money Advice Service has further information available on mortgage holidays here.
The most important thing to do should you lose your job or take a pay cut is communicate with your lender. Waiting even a few days can eat up your buffer zone of time and lead you into further problems. If you’re quick to speak with your mortgage lender you should be able to come to an agreement for how to continue managing your mortgage. If you aren’t able to come to an agreement, just having time on your side is an advantage when it comes to planning how you will decide to continue. So, pay cuts and unexpected job losses needn’t keep you up at night if you have, or are looking for, a mortgage.
Hopefully nothing, but….
The most common issue people have when applying for a mortgage is bad credit. Lenders perform affordability assessments on all applicants, and a history of credit issues is a red flag. Credit issues won’t come out of the blue, and working towards minimising any you might have is a must before applying for a mortgage. This post details credit issues that can be resolved, and credit issues that can cause a real barrier to a successful application. If you do have bad credit history, there are organisations that can offer advice. Speak to the Money Advice Service in the first instance.
Having credit commitments shouldn’t be a barrier to mortgages. Manageable debts such as credit cards and student loans prove to lenders you can borrow responsibly. If you keep on top of your monthly payments, credit shouldn’t detract from your mortgage eligibility.
These issues shouldn’t stop you being able to get a mortgage. However, if you do fall into these categories, it’s a good idea to resolve them to make sure you get the best possible mortgage offer. Here are two issues that could prevent you getting a mortgage.
Low Credit Score
A credit score is a number which reflects your borrowing habits. Different credit scoring agencies will have different scales to measure this, but they all work on the same principle. The better your borrowing habits, the higher you’ll score. There are several credit rating agencies in Britain including Equifax, Experian, Callcredit and ClearScore.
The information in your credit file includes:
- Search footprints on your file, such as credit applications
- Financial links to other people including joint loans and bank accounts
- Late / missed payments or defaults
- Outstanding debt with lenders
- County Court Judgments (CCJs) against you
- If you’re on the electoral register at your current address
- If you have been declared bankrupt or entered an IVA (Individual Voluntary Arrangement).
We encourage all applicants to create accounts with the three main agencies and check their score. Applying for mortgages before checking your credit score can cause some nasty surprises. We want to help you avoid that happening, so try and stay on top of your credit before applying.
There are many ways to improve your credit score and increase your chance of a successful mortgage application. We would recommend checking out the Money Advice Services guide to increasing your credit score before anything else.
Large fluctuations in income and spending can be another red flag to lenders. Your income is the main factor that lenders take into account when assessing affordability. This is why lenders need evidence of your income for the last two years at least, and several months of bank statements to check spending.
Because of the length of a mortgage, lenders need to be able to predict your future income so they can be sure you will be able to manage future payments. If your income has large fluctuations, it will be harder for lenders to predict this accurately. This is why income can become such an issue when applying for a mortgage.
Furthermore, erratic spending patterns can also have an impact on your mortgage application. Lenders will be impressed with stable, manageable monthly outgoings. You can read more about income and outgoing in our post that answers the question ‘How much can I borrow?’.
Some credit issues can prevent a successful mortgage application. This is because of the criteria lenders must follow to ensure appropriate lending. Issues such as CCJs and IVAs will stay on your credit file for 6 years and will seriously affect your mortgage eligibility. If you have defaulted on a previous mortgage, it is unlikely you will be approved for another mortgage. These issues will present a greater challenge to getting a mortgage, but some lenders can help those who fall into these categories.
You can help yourself by always staying on top of your credit and spending. We encourage people to go out and check their scores with the different credit agencies, and work towards improving them if possible. We want to help you borrow responsibly, and we think managing your personal finances is a great place to start.
This will depend on your lender and mortgage. Some deals allow greater flexibility when looking to change mortgage. Others will have penalties for switching mortgages or leaving early to take advantage of better rates.
If you are on a fixed rate deal, it is likely you will have to pay a fee to leave your deal early. Fixed rate mortgages have the benefit of certainty as they lock in an agreed rate for a fixed number of years. Fixed rates have, over the last few years, continued to fall. Between July 2012 and July 2017, average interest rates for a 2-year fixed mortgage dropped by 2.25%. Yes – you read that right!
Most fixed rate deals have 2-, 3- and 5-year introductory terms. Once this period expires, you will be transferred over to your lender’s standard variable rate (SVR). If you leave your fixed rate deal early, you may be charged a penalty fee by your lender. This might negate the effect of moving to a cheaper deal, so careful checking is important. This is something you need to take into account when thinking about switching. These deals are usually only a few years long so forking out to leave early, and then only saving a small amount monthly might not be worth it. If you’d like more information on what a fixed rate is, and its advantages, check out our fixed rate blog post.
Standard Variable Rate (SVR)
If you have found yourself on your lender’s standard variable rate, it’s probably time to make a move. This is the lender’s ‘default’ mortgage rate, and it’s significantly more expensive than any other rates they offer. At the time of writing, the average SVR rate in the UK was 4.28%. The average interest rate for a 2-year fixed 75% LTV mortgages was 1.42%. That’s a 2.86% difference (!), which equates to massive savings over a long period of time.
One positive of being on an SVR is not paying fees to switch to another rate. If you are switching to a deal with your existing lender, this should be a relatively straightforward process. If you are switching to a different lender, we would encourage speaking to one of our friendly mortgage experts. It takes just ten minutes to create an account and complete your personal details. From there you can have a live web chat or phone call with one of our friendly mortgage experts. They’re here to answer any questions you might have, and guide you through your mortgage application.
Does it move with me?
Some mortgages are portable, allowing you to ‘port’ your mortgage across to a new property. Porting your mortgage means sticking with the same lender, but borrowing a different amount of money. This is usually more money, as people want to upgrade their property. You can also exit your mortgage by paying it off with the sale of your house, but this often incurs fees for exiting before the mortgage term is up.
The porting process will vary depending on the price of the property you are moving into. Also, it will depend on your lender and the terms of your unique mortgage. Some will be more flexible than others when it comes to porting and exiting.
If you want to move to a cheaper property, you may have to pay early repayment charges on the sum you are no longer borrowing. In this case, you essentially pay off the whole mortgage with the sale of your old home. You then borrow less than you originally did to pay for your new home. The difference in cost between the two properties is what you would pay early repayment fees on. This is because you agreed to pay off the sum over the mortgage term, so paying it all back at once will result in fees.
Moving on up
If you’re moving to a more expensive property, you may have increased fees on the loan amount. More expensive property usually means borrowing more money. If you use the same amount of equity, your loan to value ratio will increase. This will likely cause an increase in your interest rate, meaning even higher monthly payments. If you are able to maintain your loan to value ratio, you should be able to move to a more expensive property whilst maintaining your interest rate.
Here’s an example: You buy a £200,000 house with a £50,000 deposit. This means your loan to value ratio is 75%. If you were to move to a £300,000 house, and had a £50,000 deposit, your LTV will increase to 83.3%. To keep your interest rate the same, you would need a 25% deposit on your new house, £75,000. Therefore, it is unlikely you will be offered the same rate on a more expensive mortgage if you cannot increase the deposit by the same percentage.
Exiting your mortgage
Everyone has the right to leave their mortgage, as long as they meet the terms of the deal. This, of course, means paying back the amount you borrowed, plus any fees. Your mortgage contract has an agreement on the length of the term, for example, 25 years. If you repay the full amount before this term, you may be liable for charges. These are called early repayment charges (ERC) and vary depending on your lender and mortgage. Unless you are on your lender’s Standard Variable Rate it is likely you will pay these fees.
The fees are charged on the amount outstanding you are repaying, and can be anywhere between 1-5%. This can rack up some serious fees if you’re repaying a large amount. A 1.5% fee when repaying £200,000 from the sale of your home will incur a £3,000 fee.
However, it may be advisable to pay this fee in some cases. Interest rates have continued to fall since 2012, and are significantly lower than those of mid-2000s. This means stumping up some ERCs could be financially viable to shave a few percent interest off your remaining loan. In the end, it comes back to your specific circumstance, and the home you are moving into. Our team of mortgage experts are here to answer any of your moving house questions, so what’s the hold up? Head over to Habito and find out now the easiest way to move your mortgage.
Whether you’re a first-time buyer, a seasoned homeowner or just looking to remortgage, tracking down the right mortgage with the best rate can be time-consuming, a lot of hassle and outright difficult.
There are over 20,000 mortgages to pick from in the UK and almost as many pitfalls to avoid along the way. So, it can make a lot of sense to tap into a professional broker’s expertise and industry know-how to help you find the ideal mortgage fit for your finances.
So what is a mortgage broker? A mortgage broker is an intermediary, linking the borrower like you, to a lender, which is usually a bank or building society. Your mortgage broker manages the application on your behalf, researching deals, talking with lenders and taking the burden off of you.
Read on and find out how mortgage broking works – and how you can make it work for you.
What does a mortgage broker do?
Buying a home is almost certainly the biggest investment you’ll make in your life, so the last thing you want to do is get stuck with a mortgage that’s less than perfect – or even worse, be turned down altogether because your application doesn’t match the lenders criteria.
But a skilled broker can find you the best deal, guide you safely and swiftly through the application process from beginning to end, and take-on most of the paperwork along the way.
In other words, the benefits of using a mortgage broker are they’ll save you time, hassle and money – which, let’s face it, is the perfect scenario.
And because brokers have a professional duty of care, you’ll be protected by the full force of the Financial Ombudsman if you end up being mis-sold an unsuitable mortgage that’s not as shiny as it was made out to be (you can check the Financial Services Register to see if a broker is properly qualified).
What are the benefits of using a mortgage broker?
A mortgage broker is in the simplest terms a middleman – using their expertise and resources to take the heavy lifting out of your mortgage application. There are several benefits to using a mortgage broker, not limited to making your life easier when looking for a mortgage.
Applying for a mortgage is a timely, complicated and often drawn out procedure, and by handing over your application to a broker, you can remove a lot of the stress of applying for a mortgage.
You can save heaps of time when using a broker to apply for your mortgage. Between researching mortgages, filling in forms and chasing lenders, mortgage applications are by no means speedy. By letting a broker manage your mortgage application, you can free up time to focus on what matters most to you. Buying or moving home can be a challenging experience, so any free time you can claw back is always a positive.
There are over 20,000 mortgages currently on the market, so choosing the best value mortgage can be tricky without the help of a mortgage broker. They will review your financial circumstances and find the best one for you from the mortgages available to them.
3) Avoid overpaying in the future
When you take out a new mortgage, you are usually offered a discounted rate for a set number of years, known as your introductory period. This is usually for 2, 3 or 5 years, and the interest rate is fixed.
Following this, you will be transferred to your lenders more expensive Standard Variable Rate (SVR), which is often several percent greater interest than your introductory rate. This can lead to an increase in monthly payments by hundreds of pounds.
A mortgage broker will keep track of this for you and find you a new deal via a remortgage when your introductory period ends, to keep you from ever overpaying when you don’t have to.
Aren’t all mortgage brokers the same?
Far from it – fees and levels of service vary considerably between brokers, and this can make a big difference to your stress levels and bank balance.
There are two main types of mortgage broker in the UK: those who are tied to one particular lender or a panel of lenders, and those who are totally independent and not tied to any lenders at all.
Tied mortgage brokers
Brokers who are tied to a particular lender or group of lenders are so limited on the range of mortgages they can offer and this means they may not be able to find you the best deal.
Independent mortgage brokers
Independent brokers are whole-of-market, which means they have access to a far wider range of lenders and are able to offer totally impartial advice and recommendations based solely on what’s best for you.
One element that’s common to all brokers, tied or independent, is that once they recommend a mortgage, they must provide you with a document outlining the key facts and figures. The Key Facts Illustration (also known as ESIS, for European Standardised Information Sheet) shows the mortgage amount, mortgage term, interest rates during and after the fixed period, monthly payments, any fees (including when and how they need to be paid), and any other additional features.
Do I need a mortgage broker?
It’s not compulsory to use a broker and it’s possible to source your own mortgage by scanning comparison sites for a deal that looks tempting (although bear in mind that just because you spot a great rate online doesn’t mean you’re actually eligible for it or won’t incur hefty fees on top).
However, while comparison sites can give a decent overview of the market, what they can’t give you is the start-to-finish guidance and back-up of a qualified broker, or the added protection of the Financial Ombudsman if things go awry. Not only that, a broker will take a lot of the legwork out of the application process, leaving you with more time to get on with the important things in life – like deciding what colour to paint the kitchen.
Mortgage brokers vs banks
You could also take a walk down the high street and pop into your local bank or building society branch. Again this is a good starting point, as they know you and your financial situation, but they’ll only tell you about their own mortgages rather than the thousands that exist across the market. And you’ll have to dig out all your financial background information each time you approach a new bank, whereas a broker will only need your details once to search the mortgage market for the most suitable deal.
How much do mortgage advisors charge?
That depends on who you’re dealing with. Some mortgage brokers bill clients for sourcing and arranging a mortgage, and this fee can come in the form of a lump sum (typically £500 or so), an hourly rate or a commission on the value of the mortgage, which can put extra strain on budget-conscious borrowers. Always make sure that you double-check the cost of the mortgage advisor fees up front.
On the other hand, some brokers don’t charge customers a penny for their services. Instead, they receive a small ‘procuration’ fee from the lender for processing the mortgage application. This is also normally claimed by advisers who also charges a fee to the customer for their advice.
Many online brokers are able to offer ‘fee-free’ services as cutting-edge technology has replaced the need for bricks-and-mortar branches.
Why use an online mortgage broker?
While traditional, offline brokers might once have looked at a handful of lenders at best and processed your application in the space of a few weeks, now smart algorithms can analyse your financial data and access thousands of deals in a fraction a second – and also alert you when a better remortgage deal comes along in the future. Which means that prospective buyers can be matched up with their perfect mortgage in record time, all the time – and all without having to leave the comfort of their sofa.
Traditional mortgage brokers
- Often charge the customer a fee
- Analyse a limited range of lenders
- Limited office hours
- The recommendation can take weeks
Online mortgage brokers
- Service is often fee-free
- Analyse a vast range of lenders
- Service available 24/7
- Recommendation within days
Get a mortgage quote today
Whichever type of mortgage you need, or if you’d like to speak more about different types of mortgages with a mortgage expert, start your fee-free application with Habito today here.
What are they?
When you take out a mortgage, you will typically repay the money you borrow, the ‘capital’, along with interest on the loan. The interest you pay on the loan can vary depending on the mortgage you take out. Interest rates offered are either fixed or variable. If you’d like some more information on fixed-rate mortgages you can head over to a blog post we have on them here. The two main variable rates are the standard variable rate and the tracker rate.
Standard Variable Rate
A standard variable rate mortgage or SVR is an interest rate that is set by, and varies, between lender. Each lender’s SVR will differ and is based on a number of factors. The SVR can be thought of as the default interest rate lenders charge on mortgages. When your fixed term ends, you will be moved over to the SVR automatically. Whilst SVR rates may rise and fall with Bank of England interest rates, lenders set the SVR arbitrarily and can adjust it at their discretion.
There are some positives to standard variable rates. The main benefit of being on an SVR is that there are often no early repayment charges on these loans. These are charges you incur for paying off your whole loan in order to remortgage. Overpaying means paying more than the agreed monthly amount. There are a number of reasons why people overpay. The most common are coming into a large sum of money, such as a severance/redundancy payout or inheritance. Repayment is when you repay the whole current balance in order to remortgage. Lenders will often charge hefty fees for doing this on fixed-rate mortgages, something you need to watch out for.
Tracker rates, you guessed it, track another interest rate. This is usually the Bank of England’s base rate, plus a fixed amount e.g. 2.5%. This means when central bank interest rates increase, your monthly payments will increase. Conversely, where they to drop, you would pay less per month in interest. However, with tracker mortgages, you are usually not free from early repayment charges if you want to switch and remortgage.
Which Do I Choose?
About that, neither really. Right now, fixed-rate mortgages are being offered for very low-interest rates (for low loan-to-value mortgages). Even the lowest standard variable rate (SVR) is likely to be 1.5-2.0% higher interest than the lowest fixed rate at the moment. This means if you are on your lender’s SVR, chances are you’re paying over the odds. Not to worry, Habito can help with this. In around fifteen minutes you can create your account, fill in your details, and speak to one of our mortgage experts for personalised mortgage advice on how to save. People who switch from their lenders SVR to a fixed rate can save hundreds, if not thousands a year. For more advice on remortgages, we have an area of our blog dedicated to them right here.
Lenders want to get to know you
If you’re after a mortgage, lenders are going to want to see some information about you. Before your mortgage application is approved, lenders need to perform an affordability assessment. This is to make sure you’ll be able to manage mortgage repayments. For them to conduct this assessment they need some vital information about any of the applicants.
So What Do I Need?
There are three main forms of documents you’ll need to provide. These are proof of identity, proof of address, and proof of income.
Applicants will also have to provide proof of any credit commitments. Depending on what type of buyer you are, you’ll also be asked for some purchase specific documents.
These documents are either physical copies such as passports or paper bills, or electronic copies such as bank statements. We can verify your documents electronically which is great because it means you don’t have to send any precious originals and sensitive information in the post to us. However, we do need full colour, high-quality files in PDF format, scanned on a flatbed scanner. All documents must be legible and complete. Illegible documents are a major cause of delays to mortgage applications and something we want to help you avoid. Digital copies of documents can be downloaded and sent directly by email or web chat.
Proof of Identity Documents
- Photographic ID – You’ll need to submit at least two forms of photographic ID. These are usually a passport and a driver’s license.
Proof of Address Documents
- Bank Statement – Lenders will require at least three months worth of bank statements for a mortgage application. These should show your income being credited.
- Council Tax Statement – These are another form of proof of address. This should be addressed to your correct name and address.
- Utility Bill – You’ll need to provide a utility bill from the last three months as proof of address. These include phone, electricity and gas bills.
Proof of Income Documents
The proof of income documents you’ll be required to provide will vary depending on how you’re employed. For most applicants, the proof of income they’ll need is super simple, but those who are self-employed needn’t worry.
- Full-time employment – If you are in regular full-time employment you’ll only need two forms of proof of income. You will need your last three months payslips and your latest P60.
- New Job – If you’ve recently started a job (less than a month) you’ll need a copy of your employment contract.
- Maternity Leave – If you’re currently on maternity leave you’ll need a letter from your employer confirming your income when you return to work. Lenders will also want to see a payslip from before you left work.
- Contractor – If you’re a contractor, you’ll need your employment contract showing your day rate.
- Self-Employed – If you’re a sole trader or in a partnership, you’ll need your tax year computations (SA302) and tax year overview for the last two years.
- Limited Company Partner – If you’re self-employed in a limited company, you’ll need your tax year computations (SA302), tax year overview and company accounts for the last two years.
If you receive any form of secondary income which you intend on using to pay your mortgage, you will be asked for proof. This includes monthly, quarterly or yearly bonuses. For bonuses, you’ll need the payslips which show the bonuses and your latest P60.
If you receive rental income you’ll need your tax year overviews and tax computations (SA302) for the last two years.
- Credit Cards – If you have any credit cards, please confirm the lender and the current balance.
- Personal Loans – If you have any personal loans, please confirm the lender, current balance and monthly payments.
- Car Finance – If you have any car finance, please confirm the provider, the balance remaining, and the monthly payment.
- Hire Purchase Agreements – If you have any hire purchase agreements please confirm any purchases on 0% that may become payments over the next two years.
- Memorandum of Sale – If you’re buying a house or moving, lenders will want to see a memorandum of sale.
- Mortgage Deposit Balance – If you’re a first-time buyer or moving home, lenders will need proof of your deposit in the form of a bank statement.
- Mortgage Statement – If you’re looking to remortgage, you will have to present your latest mortgage statement.
The largest expense associated with buying a house, apart from the mortgage, is the stamp duty. This is a form of tax you pay when you purchase property or land. Stamp Duty has to be paid within 30 days of completion of the sale of your property. First-time buyers will receive Stamp Duty relief on all property sales completed after 23/11/17, paying no Stamp Duty on property up to £300,000. First-time buyers will also receive relief on property up to £500,000 paying 5% Stamp Duty on the portion of the property price between £300,000-£500,000.
Your solicitor should handle Stamp Duty tax return and payment on your behalf on the day of completion. There’s plenty of info on stamp duty, including how much it is and when you pay it here.
This is a fee you pay the lender for organising the mortgage. Back in the days of stacks of paperwork, this used to reflect the administrative costs of the application. Now, it is now a major cost of the loan and competitively priced. Some lender’s arrangement fees are paid as a percentage of the loan instead of a flat rate, so choosing the right mortgage for you is key to reducing costs.
Arrangement fees vary depending on factors such as the lenders and size of the mortgage. They typically start around £1,000 and go all the way up to around £2,000.
These are the fees you pay your solicitor or conveyancer for legal work during the home buying process. Property purchases usually require professional legal help due to the complex and costly nature of the purchase. These fees are associated with paperwork and administrative costs. This includes property searches, dealing with the other party’s solicitor, and the exchange and completion of contracts.
A portion of the fees are paid upfront for services like property searches, with the rest paid upon completion of the sale. The costs will be different depending on whether you use a conveyancer or solicitor. A conveyancer is a legal adviser specialising in property law, whilst solicitors specialise in all areas of law. Solicitors generally provide a more thorough service at a larger price. Fees also depend on the property tenure, price, and whether it is a remortgage or outright purchase. Average legal fees are around £1000-£1500.
Lenders will need to carry out an inspection of the property before approving your mortgage. This is to ensure it’s a sound investment to lend on and valued appropriately. Lenders will also charge an administrative fee for covering the costs of the processing the mortgage valuation.
Valuation fees are paid upfront when you submit the mortgage application. The valuation administration fee is often included or paid at the same time as the valuation fee. This will vary depending on the price and condition of the house. Typical valuation costs are around £400 but can exceed £1000 in some cases. If the sale falls through after the valuation, this fee is usually non-refundable.
A booking fee is an upfront fee intended to cover the cost of ‘booking’ or ‘reserving’ your mortgage while it is in the process of being approved. The booking fee is paid upfront when you submit the mortgage application. Some lenders do not charge a booking fee, or incorporate it into the arrangement fee. The booking fee is typically £100, but can be as much as £250.
Telegraphic Transfer (CHAPS) Fee
This covers the cost of transferring money from the mortgage provider to the solicitor when purchasing the property. This is paid to the solicitor on completion of the purchase. The cost of the CHAPS fee is usually £25-£30.
Most brokers charge a fee for their service, but here at Habito, we never charge a penny. Because we charge lenders, not customers, we are able to provide our service free of charge. Some lenders charge hundreds, even thousands of pounds for arranging your mortgage. You can read more about broker fees here. Our service is free, and always will be, because we want to help you find mortgage bliss without any extra expense.
The simple answer to this question is no. All applicants will undergo the same affordability assessment and document submission process.
Can joint applicants borrow more?
Before lenders agree to a mortgage, they perform an affordability assessment on all applicants. This involves examining your income and credit commitments. If you have a good credit score and a clear credit history you should be able to borrow, as a very rough guide, up to 4.5 times your income. This means how much you can borrow is dependant on your income. Therefore, a joint application combining two incomes should allow you to borrow more money.
Applying for a mortgage with someone else doesn’t make the application more complicated. Plus, the benefit is that you are usually able to borrow more. This is why so many people choose to apply for a mortgage with someone else, be it a partner or a friend. When it comes to document submission, the type of documents required are pretty much the same whether it’s a joint or single applicant. Each applicant will need to provide proof of address, identity and income, and proof of any credit commitments. If you’re making a joint application to buy a house, only one memorandum of sale will be needed. This is the same with deposit balances and mortgage statements when moving or getting a remortgage. A full list of documents required can be found in this post.
Submitting your documents for a joint application
One thing that is different when you’re applying with someone else is keeping track of documents. Picture this: you’re applying for a mortgage on your own. You know which folder you saved your bank statements in, you know where the scans of your passport are, your P60 form is in front of you. Then imagine doing this for two people with different documents in different forms. Stressful, we know.
Keeping track of all the documents you’ll need can be hard work. The mix of photos, scans and downloaded documents can cause some confusion. When making a joint application, we recommend storing all your documents and correspondence in one place. This might sound simple, but is a great tip. If one person is managing most of the application, and the other applicant has to unexpectedly complete the next step, knowing where all your documents are stored is a lifesaver. We would also advise trying to package all your documents on the computer, avoiding literal paperwork and making them easy to keep track of.
What’s next in my joint application?
This is where the expert advice of our team of mortgage experts will be indispensable. If you’d like to speak to one of them, you can start by visiting our homepage and creating an account. After entering some details about yourself and your co-applicant, you can have a chat with one of our mortgage experts who can advise you on your options. Once your ready to submit an application our mortgage experts and case managers will guide you through each step of the process.
How do they decide?
Lenders need to follow strict suitability guidelines when approving someone for a mortgage. To make sure they are lending responsibly, they have to carry out checks on all applicants. These are called affordability assessments. They take into account your income, debt, future plans and any past issues you may have had with credit. These checks are more aimed at lending responsible amounts of money, rather than saying yes or no to an application.
There are several fairly clear requirements for taking out a loan. You need stable income and savings to use for a deposit. You will also need a solid credit history. Without these three things, you’ll struggle to find a mortgage provider who will approve you.
Who are lenders?
Mortgage lenders can be split into two groups: banks and building societies. In the past, these two groups were fairly distinct. In the 1980s building societies were offered the chance to demutualise. This helped them to keep up competition with banks, giving them many of the same rights as the banks. There is no hard and fast rule about which offer better rates, it just depends on your circumstances. All lenders are regulated by the Financial Conduct Authority, and this regulation should create a level playing field between them.
What makes someone viable
There are some fairly consistent rules as to what qualifies someone for a mortgage. First things first you will need a solid and consistent income. Being unemployed will make it almost impossible to get a mortgage (sorry guys). Having a good credit history is also key to being approved for a mortgage. Issues such as County Court Judgments (CCJs), Individual Voluntary Agreement (IVAs), bankruptcies and loan defaults will all affect your chance of a successful mortgage application. Further information on mortgage eligibility can be found here, courtesy of the Money Advice Service.
This is the process where lenders analyse the risk of lending you money. This assesses the likelihood that you will default on the loan, and the outcome of the application hangs on it. All of the documents that lenders will want are analysed for any warning signs pointing towards high risk. Whilst this might all sound cold and unreceptive, lenders have good reason to be so careful. The financial disaster that was 2007-2012 was spurred on by subprime lending, which means lending to people who can’t afford it. Subprime lending on a mass scale caused financial institutions to topple, and this is a situation none of us wants to see again. This is why the Financial Conduct Authority is so strict with lenders, ensuring they are lending money responsibly.
Still not clear?
If you’re still wondering about whether you will be eligible for a mortgage, sign up and create an account. Within minutes you can have an idea of what you could expect to borrow, all for free and without any credit checks. You can do this by having a quick chat with one of our friendly mortgage experts. They can answer any questions you might have concerning mortgage eligibility. Our mortgage experts will guide you through your application from sign-up to completion.
This is all part of our mortgage promise. We want to find you the right mortgage, whilst saving you time and money. This allows you to focus on the things most important to you, and get one step closer to mortgage bliss.