Remortgaging in Beverley When House Value Has Increased

Anyone that is already the owner of a property, whether they own a family home or a buy to let in Beverley, will likely see it as an investment. It’s more than just giving yourself a home, it’s the largest asset in your name, something you can perhaps later sell or pass to your children and beyond.

The property market is always going through changes and moving up and down. There will be times where you may see property prices at major highs.

During these sorts of peaks, it can be worthwhile taking a look at the remortgage options available to you, as you may find that you are actually able to access more favourable loan to values, and in turn much better rates of interest as well.

What is a loan to value and why do people remortgage in Beverley for a better one?

The Loan to Value (LTV) ratio represents the proportion of a mortgage loan compared to the market value of the property, expressed as a percentage. For instance, if you buy a property worth £100,000 with a deposit of £10,000 (10%), you will require a 90% LTV mortgage.

LTV ratios are usually divided into tiers by mortgage lenders. The tiers usually range from 60% to 95%, but this can vary depending on the mortgage lender.

A lower LTV ratio can result in access to mortgage deals with more favorable interest rates. For example, let’s say that after a few years, the value of your property increases to £110,000 and the mortgage balance decreases to £80,000.

This results in a new LTV ratio of 73%. If you were to remortgage in Beverley, you would be looking for a 75% LTV mortgage, which should have a more favorable interest rate. However, other market conditions can also impact the interest rate at the time of remortgaging.

Mortgage lenders offer more competitive interest rates for lower LTV mortgages because they pose a lower risk.

How do I find out the value of my property in Beverley?

To get better interest rates or favorable terms, you need to determine the worth of your property in comparison to what you paid for it. This requires a property valuation.

When you remortgage in Beverley, you switch to a new mortgage lender, as opposed to a product transfer, where you obtain a new mortgage with the same mortgage lender.

Since you are working with a new mortgage lender, they will want to know the value of the property being used as collateral. Typically, there are two types of property valuations: Automated Valuation Model (AVM) and physical valuation.

An AVM, also known as a desktop valuation, is an automated process that cross-references similar properties in the same area to determine the value, without a physical inspection of your property.

On the other hand, a physical valuation involves a professional visiting your home to inspect both the interior and exterior, to determine the true value of the property.

This is particularly useful if you have made any home improvements or extensions that other properties in the area might not have, which an AVM might overlook. If you prefer a physical valuation, you can discuss this with your mortgage advisor in Beverley during your free appointment.

Remortgage in Beverley to Release Equity When Home Value Has Increased

While you can leverage the equity in your home for better deals, you might also choose to remortgage in Beverley to release that equity. People do this for various reasons, such as for funding home improvements.

When it comes to a remortgage in Beverley for releasing equity, it’s important to be cautious. Essentially, you are taking out a new mortgage to replace the old one, but this time, at a higher loan to value. Because of this, your monthly mortgage payments may increase.

The goal for many is that by investing in home improvements, they can increase the value of their property, resulting in a lower loan to value when they remortgage again.

It’s crucial to consider market conditions and have a well-planned strategy when dealing with such a significant financial investment as your home. A mortgage advisor in Beverley can provide the best advice for your specific situation.

Can I remortgage in Beverley early if the value of my home has increased?

In some situations, you may consider remortgaging in Beverley prior to the end of your fixed term. Although remortgaging early is usually ahead of the end of your fixed term, you may have the opportunity to remortgage even earlier, a year before, for instance.

That said, be aware that you may have to pay an early repayment charge (ERC) if you choose to break your contractual terms. Predicting house prices is uncertain, and it may not be financially feasible for you to remortgage early.

Early remortgaging is typically only considered if there is a compelling reason to do so. It is strongly recommended to seek the advice of a mortgage broker in Beverley if you are considering this option.

One example could be during the COVID-19 pandemic when the Bank of England base rate dropped to an all-time low. As a result, people who were set to remortgage in Beverley at the end of their fixed-rate mortgage period had the opportunity to secure these low interest rates.

If you were a year away from this scenario, you might not be able to take advantage of this unless you remortgaged early and locked in a longer term. While this is a specific example from a unique time, it highlights how early remortgaging can lead to financial benefits.

If your home value has increased, it may also be a good time to remortgage early to access lower loan-to-value rates, even though you may have to pay the early repayment charge.

In addition to this, however, you will likely have to pay arrangement, valuation, and solicitor fees for your new mortgage, in addition to the early repayment charge (which may be waived by your current mortgage lender if you opt for a product transfer).

Before making a decision, it’s important to speak with a mortgage broker in Beverley to understand your options and determine whether your savings will outweigh the costs.

What is Gazumping? Should Home Buyers Be Afraid Of It?

The term ‘gazumping’ is a term that may be familiar to you, however, have you may not be sure of what it is about. The word ‘Gazumping’ is terminology for when the seller of the property you are interested in accepts another offer from another party, prior to your purchase being completed.

Originating from the Yiddish word ‘Gezump’, it was used to describe when someone swindles or cheats someone out of something, being primarily used way back in the 1920s.

Now ‘Gazumping’, it is a word prominent in house buying and was regularly used in the 1970-80s.

Is Gazumping illegal?

Through our experience as a mortgage broker in Beverley, we have been able to speak with customers regularly on the topic of Gazumping. We’re often asked if Gazumping is illegal, and the unfortunate answer to this, is that it’s not.

This is something that many home buyers may be asking when they go through the home buying and mortgage process across the country. Nobody quite understands how this type of practice is legal, despite how immoral it is.

The reason that Gazumping is deemed to be completely fine and legal, is because you and the seller are not contractually bound, no meeting with lawyers has taken place. As such, they have no obligation to sell to you, as your agreement has only been verbal.

The idea of being gazumped can be a scary one for first time buyers in Beverley especially, even if it may be less likely to occur. It’s an understandable feeling, as this gives you the risk of losing your dream home and nobody wants that to happen, especially if you are in a property chain.

Another factor that can affect home buyers is the idea that they may lose money from being Gazumped. Non-refundable expenses that are involved with the home buying process such as property surveys, conveyancing fees and mortgage arrangements fees.

How does Gazumping happen?

As touched upon above, the agreement between both parties to buy or sell a property, whilst you may want it to be honoured, is not legally binding. This only happens when lawyers exchange contracts to make it official.

It is not a simple process to make this happen. The mortgage process can often take several weeks, with the point between an offer being accepted and the contracts being exchanged taking quite a while to happen.

It’s generally during this step where an eager first time buyer in Beverley may jump in whilst your process is going on, and make a much more preferable offer to the seller of the property. They can do this either by speaking with the estate agent or going directly to the seller themselves.

The more favourable deal may also include things such as a higher purchase price, a faster sale or a particular buyer who is not going through a property chain. Gazumping covers all these circumstances wherein a seller may prefer another buyer over you, despite giving their word.

Buyers Market vs Sellers Market

One factor that could impact the chances of being Gazumped by a seller is the type of market that is currently happening, such as a sellers market or a buyers market.

For example, if the market is currently a sellers market, this means that there is a very popular, busy market. Commonplace occurrences are high demand, fewer properties, people wanting to buy and bidding wars between buyers that could see property prices rise.

In this instance, you will find that Gazumping is much more likely to happen, because someone may jump in with a higher bid for the seller, who at that point may be likely to accept.

On the other side of the coin, if the market is currently a buyers market, this means there are more houses than buyers, and a seller may not be receiving a lot of offers. This means you have less chance of someone Gazumping you and there is more space for price negotiations with the seller.

Ways to Avoid Being Gazumped

One of the reasons why you may experience a delay between your offer being accepted and the contract exchange, could be because you need a property survey to be carried out.

Below are some useful ways in which you could increase the possibility of you achieving higher mortgage success and avoiding being Gazumped.

• Search for a conveyancing solicitor or surveyor early into the process, so you can reduce the wait time.
• Provide all the necessary information as quick as you can for a smoother mortgage process.
• To show the lender that you are ready to go, obtain an mortgage agreement in principle. This will provide you with an advantage over other buyers who cannot yet prove they are eligible for a mortgage.

Other Helpful Gazumping Tips

We would recommend that you first ask the seller to remove the property from the open market. They’re under no obligation to do this, but doing so means the property is not as visible to potential Gazumpers.

We typically find a lot of sellers will honour their buyers request and indeed remove it from the open market, especially if it is a buyers market and they aren’t receiving many offers.

Putting in place a lock-in agreement, where both sides will make a deposit towards a binding agreement between one another, can be another handy trick. If any one party chose to withdraw or alter their deal, the other party would keep that parties deposit.

This can be costly due to the legal fees involved, though it may very well be worth the money saved and security provided to you during your mortgage process.

You could also look at insurance products, as having something in place to protect you from Gazumping can be a useful way to save yourself from losing money.

How a Mortgage Broker in Beverley Can Help

Even though Gazumping can never be 100% prevented, there are lots of ways to protect yourself as a buyer. As an open & honest mortgage broker in Beverley, we are here to help.

Book a free mortgage appointment today and see how our helpful team are able to help you on your mortgage journey as a first time buyer in Beverley.

What is a 95% Mortgage?

A 95% mortgage is as simple as the name would suggest; you are borrowing against 95% of the price of a property, and then you are covering the remaining 5% with your deposit. An example of this is if you looked at buying a property that was worth £150,000 with a 95% mortgage, you would be putting down £7,500 as your deposit and borrow the remaining £142,500 from the lender. 

95% Mortgage Advice in Beverley

Off the back of the March 2021 Budget, Boris Johnson announced a Mortgage Guarantee Scheme for mortgage lenders, making 95% mortgages more readily available from the bigger high street banks.   

This is fantastic news for First-Time Buyers and Home Movers alike, as this scheme will continue running until December 2022. Certain terms and conditions will apply though, which is something your Mortgage Advisor in Beverley will be able to look at, to see if you qualify.    

All our customers who opt to Get in Touch will receive a free, no-obligation mortgage consultation where one of our dedicated mortgage advisors will be able to make a recommendation on the best possible route for you to take.

Can I get a 95% mortgage?

95% mortgages are usually accessible by both First-Time Buyers in Beverley & those who are Moving Home in Beverley. Whilst saving for a 5% deposit sounds like a pretty straightforward concept, you’ll still need to have an acceptable credit score and prove that you are able to afford your monthly mortgage repayments, in order to access a 95% mortgage.

Improving your credit score

A good credit score is essential in the process of obtaining any mortgage, especially a 95% mortgage. Things like paying any current credit commitments on time, ensuring your addresses are updated and checking that you’re on the voters roll, can all help with your credit score.

Affordability 

Affordability is another one that is important to take note of. By giving the lender details of your income and monthly outgoings (things like your bank statements will be necessary for this) and any pre-existing credit commitments, your lender will be able to get a general overview of whether or not you are able to afford this type of mortgage.

Can my family help me get a 95% mortgage?

Nowadays we see lots of family members helping each other get onto the property ladder, especially parents looking to further their children’s lives. The way this usually happens is by gifting the person looking to find their home, the deposit required. Known through the industry as the “Bank of Mum & Dad, Gifted Deposits are only intended to be a gift, and not as a loan. The lender will need proof that this has been agreed, before it can be used towards your mortgage. 

How do I choose the right 95% mortgage?

When looking for a 95% mortgage, you want to make sure you have the right type of mortgage. Each mortgage type works differently, with that choice allowing you to find one that is most appropriate for your personal and financial situation. 

Some homeowners and home buyers prefer Fixed Rate or Tracker Mortgages, mortgage types which mean you either keep interest rates at a set amount for the term given or have your interest rates tracking the Bank of England base rates.

Alternatively, you might find that Interest-Only or a Repayment Mortgages are more your style. Interest-Only allows cheaper payments until you need to pay a lump sum at the end (mostly now used for Buy-to-Lets), whereas a Repayment mortgage (a normal mortgage if you’d like) means you’ll be paying interest and capital combined per month.

How can a bigger deposit help with my mortgage? 

Seeing as a mortgage is such a large financial outgoing, you need to be prepared and need to be aware. You might find things like higher interest rates, remortgaging difficulties due to less equity and then negative equity all cropping up if you’re not. 

There is no need to worry though, as all these can be avoided if you’re savvy enough with your process to begin with. The more deposit you put down for a property, the less risk the lender will see you as. 

A larger deposit, of say 10-15%, would not only reduce the rates of interest by a noticeable amount, but would also give the property more equity and reduce the risk of negative equity, thanks in part to you borrowing less against the property. 

So, whilst the risks may seem intimidating, planning ahead and saving for a bigger deposit to access something like a 90% or even an 85% mortgage will be a massive help in your mortgage journey and something you’ll be able to reap the rewards from in the future.