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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. 

Agreement in Principle and Soft Credit Searches

Mortgage Advice in Beverley

More and more people these days pay much closer attention to their credit rating, especially First Time Buyers as they tend to worry about being accepted. Consumer awareness of credit scoring is higher now than ever before. We’d say at least half of the people who contact us for the first time, have already looked at their credit report online.

There are many different credit reference agencies out there. Most people will have heard of Experian or Equifax, but we recommend potential new clients to use Check My File for a 30-day free trial, which is £14.99 a month thereafter and can be cancelled at any time. This is because of this report “sweeps” several of those reference agencies and collates the information into an easily understandable colour-coded report.

Often, clients ask if we will be doing a credit search on them, because they are aware that too many searches can have an adverse effect on their credit score. Lenders always run credit checks but we always seek a client’s permission before doing so. There are 2 different types of credit searches that Banks can run on a customer: hard searches or soft ones.

What is a hard credit search?

A hard credit search is an in-depth look at your credit report. Any financial institution carrying out one of these should seek your permission to do so. The advantage of a “hard” search is the lender is looking into your situation quite closely. If you pass the credit score then it’s fairly likely that your application will ultimately be successful. The only thing that can really go wrong from then on, is if for some reason you cannot provide satisfactory documentation to back up the information you have disclosed. Either that, or it turns out you have provided false details.

The bad news about a hard search though is that it leaves a “footprint” on your credit file. This means anyone who looks at your report in the future can see you have had a search carried out. This isn’t necessarily a bad thing, but if you have several footprints registered in a short period of time then it could look like you applying for lots of credit at the same time.

The footprint does not state whether your application was successful or not. However, if you have several searches over a few weeks, then lenders’ systems could wrongly assume you are being declined on the basis of; “Why else would you go to lender number 2 unless lender number 1 had said no?”.

The odd hard footprint on your record from time to time is no big deal. There’s no need to worry too much about this, just be careful not to have too many.

What is a soft credit search?

A soft credit search is a “lighter touch” look at your financial situation. This is the kind of search that would routinely be carried out on price comparison websites. This would give you an indication of what products might be available to you. It can also be useful if someone wants to verify your identity.

Some mortgage lenders do soft searches in the first instance. More and more lenders seem to be changing to doing this type of search. Whilst the financial institution doing a soft search obtains less information about you than if they had done a hard search, an agreement in principle from one of these lenders is usually still an extremely strong signal that your full application will be accepted.

You will be able to see that someone has carried out a soft search on you if you check your credit file. The good news though, is that these searches are not visible to other financial institutions like banks. This means that you can apply for an agreement in principle for a mortgage, without it damaging your credit score. This is irrespective of whether it is successful or not.

If you are wanting to make an offer on a property, we always think it is an excellent idea to have your mortgage agreement in principle in place prior to contacting the estate agent. You want to give yourselves the best possible chance of securing the property you want at the lowest price so if you can present yourselves as having your finances in place then you are definitely putting yourself in a stronger position. Having the agreement in principle also sometimes puts the agent off trying to “cross-sell” their own in-house mortgage services to you.

Mortgages in Beverley for the Self Employed

According to the Office of National Statistics, the UK is going through a bit of a self-employed “boom”. The number of self-employed individuals rose from 3.8m in 2008 to 4.6m in 2015. This could be down in part to people being inspired to become the new Peter Jones on Dragon’s Den or Richard Branson. More realistically it’s just that work patterns have been changing for several years now.

No longer would someone be expected to leave school at 18 and work for one employer all the way through to retirement. The rise in new engineering and digital occupations, in particular, give rise to self-employed roles and short-term contracts. However, the uncertain nature of this type of work can make Banks nervous about issuing mortgages.

It’s not impossible to get a mortgage if you are Self Employed by any means but it certainly is a specialist area so here I take the opportunity to help you get prepared if you are in this position and thinking of buying a house.

How many years’ accounts do I need?

At the moment it’s a minimum of one year’s trading with some lenders wanting a minimum of two. The reason for this is that so many businesses fail in the first year Banks aren’t willing to take on that level of risk.

How is my income assessed?

Most lenders take the average of your last 2 years’ earnings. Some go off the latest year. This could be good news for you if your profits are increasing.

I’m a Director of my own Limited company – does this mean I’m employed?

Yes and no. Yes, you are employed but no, the lenders do not assess you as an employee unless you own less than 25% of the shares. Most lenders add your salary to your declared dividend to calculate your annual earnings with the odd one using net profit (this can be good if your business retains some profit).

My net profits don’t reflect the true picture of my business – what can I do?

This is a familiar question but there’s not much that can be done. Your mortgage application is assessed on the income declared (net profit or salary/dividend) to the Revenue. If you want to get a mortgage then you need to have paid some tax.

How much deposit do I need?

This is the same as an employed applicant. A minimum of 5%, although it may be more if you only have one year’s accounts.

Will a bigger deposit help me?

The more deposit you are able to put down the better deal the lender is likely to offer you. This means you will have a wider choice of lenders, in terms of the maximum mortgage that will be made available to you. Although this doesn’t make a massive difference.

I’m a contractor – am I treated differently?

Yes, it can be. Lenders do seem to like Contractors at the moment. If you’ve built up a good track record then the lenders can consider taking your “daily rate” and applying a multiplier to this, rather than your net profit. I have seen lenders offer bigger mortgages to contractor applicants using this method, especially for IT contractors.

Can I self-certify my income?

Unfortunately, “self-certs” were widely abused in the pre-credit crunch days and there is no sign of this type of mortgage returning.

Taking out a mortgage as a sole trader, partner or Company Director can certainly be more complicated. More so than it would be for an employee. Some lenders are more flexible than others. In my opinion, it’s a good idea to get a reliable Mortgage Broker in Beverley on your side early on in the process. This is so you have realistic aspirations from the start. Long gone are the days when a Bank Manager could “take a view” on your circumstances just because you are a loyal customer. The lenders lean increasingly upon their computerised credit scoring systems. Like lots of things, it’s just knowing where to look.

How Much Can I Borrow For A Mortgage in Beverley?

Mortgage Advice in Beverley

The two most common questions we are asked on a daily basis are, “Can I get a mortgage in my situation?” and “How much can I borrow?”. In this article, we explain the latter which has changed quite a lot in the past decade.

Historic Rules

Back in the ’80s and ’90s, most mortgage applications were manually underwritten. That is to say, there was lots of “human intervention” in the process of approving mortgage applications. You’d make an appointment with your Building Society Manager, and they would interview you.

They would encourage you to save with them for a while until you prove yourself credit-worthy. The manager would then grant you the equivalent of an agreement in principle. This would then be followed by advice on how much they were prepared to lend.

This sounds very much like a highly personalised process with a common-sense approach. That being said, it could lead to inconsistent decision-making. The manager has the discretion to interpret the lending manual. In other words, it would be possible to approach the same Building Society in a different town or city. You could possibly obtain a different outcome.

With a view to eradicating the above and more importantly, cut costs, Lenders moved to automated affordability calculations. “Caps” were applied so they would lend you more than, say, 3 or 4 times your household income.

As the 2000s progressed, lenders were becoming more and more generous in how much they would lend. Some lenders would offer self-certified mortgages. This was where no background checks would be carried out as regards how much an applicant actually was earning!

The market crashed and to all intents and purposes, 2008-2010 were very difficult years if you were trying to get on the property ladder. The lenders battened down the hatches and created a very cautious (over-corrected) lending environment.

Nowadays Approach

The market recovered and in 2014 the regulator launched the Mortgage Market Review (MMR). This was a new set of guidelines for Lenders to adhere to. Gone were the old-style income multipliers which took little account of household expenditure. Before 2014, two applicants earning the same could borrow roughly the same as each other.

This was irrespective of how much they spent each month. Then came new affordability models. These took a much more forensic view of how mortgage applicants managed their money on a monthly basis.

There is still a “cap” in place (most Lenders will not go past 4.75 times your annual income) but your spending habits are analysed also. So, for example, if you have high childcare costs, lots of credit commitments and a student loan you will be offered less than your work-colleague who doesn’t have any of that expenditure.

We are still constantly surprised by the large variances lender to lender in how much (or little) they will lend. Some lenders seem to penalise low-earners (perhaps they are not looking for that type of applicant), some take pension contributions as a fixed outgoing so would often lend, say a public sector worker with a big pension deduction less than a private sector and so on.

It really is horses for courses and if you need to maximise your borrowing capability to obtain the home you need to buy then you’ll definitely need a Mortgage Broker in Beverley on your side who can research the market on your behalf to see if anyone will lend you the amount you need.

Critical Illness Insurance Advice in Beverley

Mortgage Broker in Beverley

Critical Illness Insurance pays out a lump sum if you are diagnosed with one of the conditions on the policy such as Cancer, Heart Attack or Stroke. Sometimes Insurers receive criticism for declining claims when someone is very ill but with an illness not covered on their policy but most major providers actually payout over 90% of claims.

If claims are denied it can also be because the claimant did not disclose an underlying medical condition they had when they took the policy out.

In the event of a claim the lump sum is paid out irrespective of whether the claimant returns to work or not, the key thing is whether the illness they had matched the definition on their policy.

The claimant can use the lump sum they receive for any purpose they wish. Be this to repay their mortgage, pay for medical care or make modifications to their home.

Different insurers cover different illnesses on their policies and it’s wise to take advice prior to selecting a policy. This will ensure that you end up with one that is suitable for your needs. Critical Illness Insurance is much more expensive than life cover because the chances of you making a claim are far higher.

Your chances of surviving the types of conditions covered are far higher than they were 30 years ago. However, if you are unfortunate enough to contract one of them then there are often financial consequences. Hence the popularity of the cover, especially for applicants who have mortgages or children to think about.

Our Critical Illness Insurance Advice Service

It’s very important to us that all of our customers are given an equal opportunity to take insurance out through ourselves.  We wouldn’t be doing our job right if we didn’t mention it! 

We offer all of our customers a free, no-obligation protection review where we’ll have a look at any existing policies you have in place and assess their suitability.  We’ll then recommend which insurances, including critical illness and income protection, meet your needs.  If required, we’ll then tailor the plan to match your available monthly budget. 

Beverleymoneyman.com
Providing Critical Illness Insurance Advice in Beverley & Surrounding Areas

Product Transfer V Remortgage Advice in Beverley

What is a product transfer?

When your introductory mortgage deal comes to an end your mortgage lender may offer you a new deal to stay with them, this is known as a product transfer.

Are you rewarded for being loyal?

Unfortunately, lenders do not always reward your loyalty and the offer they make you may not be competitive with deals you could get elsewhere. Even more annoyingly, these product transfer rates are not as good as the deal they offer new customers either!

Tempted by an online switch?

Whilst swapping to a new deal with your current lender may well be fairly easy online, it is always in your interest to see what other deals you may be eligible for. Lenders will also tempt you to effect a new deal online without taking advice.

This can be really dangerous because if you do this without advice you are waving goodbye to all the valuable consumer protection you would otherwise have benefitted from.

You’ll be opting out of advice

We have seen numerous examples of customers affecting these “follow-on” deals and locking themselves into an inappropriate deal. Because of this, they have basically opted out of advice, waving a lot of their rights in terms of making a complaint.

We once had a case where a customer who was pregnant did this and was declined for a small further advance to fund some necessary home improvements a few months later. She then had to pay a hefty early repayment charge to swap to a new lender who would grant her the additional funds.

Always get Mortgage Advice in Beverley

If we think a product transfer is the most suitable deal for you we will recommend that as a course of action for you and if we arrange the mortgage for you as a mortgage broker then all the regulation and consumer protection will apply.

In short, even if your requirement seems straightforward we recommend you always take advice – a second opinion costs nothing and making a mistake when taking a new product can be costly.

The Remortgage market is highly competitive and savings can generally be made by searching the market for a new deal.

Sales Tactics of Estate Agents & Builders

Mortgage Advice in Beverley

Whether you are a First Time Buyer in Beverley actively viewing properties or a Home Mover in Beverley with your house on the market, you may have noticed that some of the larger estate agents and builders are very keen for you to use their in-house mortgage advisor and conveyancing services. 

Being part of a stand-alone mortgage business we receive lots of feedback as to what sales tactics can be used, examples of this are:

  • Refusing to put your offer forward to the vendor if you have not taken in-house mortgage advice or favouring another offer over yours because you already have your mortgage sorted. Please note these situations are illegal. 
  • Quoting extortionate conveyancing fees, I recently had a client who was quoted more than £1,500 for a straight forward purchase with an estate agent.  They got this down to £750 with our help by using another conveyancer local to them. 
  • From the big well known colourful online agents, within minutes of making your offer they may call you wanting the name of your conveyancer, not just the company, the actual individual acting for you! At the same time pushing their extortionately overpriced quotations, and refuse to take the property off the market without this.   Don’t worry, we can help you be ready for this.

Don’t be fooled, popular Estate Agent & Builder sales quotes include:

“Keeping everything under one roof is easier with one point of contact”

“If you use our services it will give the vendor peace of mind that everything will go through smoothly”

“You need to come in and see our mortgage advisor for your offer to be qualified”

“Your offer is more likely to be accepted if you use our mortgage advisor”

“We get better deals than most brokers”

“Everything is likely to go through quicker if you use us”

“We will do all of the chasing of the solicitors for you and they’ll be more responsive to us due to the amount of work we send them”

“We’ll give you a free carpet/washing machine if you use our (extortionately priced) recommended conveyancing service”

Remember, when negotiating a purchase price, do you really want the seller of your property having access to your personal financial situation and potentially knowing your maximum borrowing? 

Here at Beverleymoneyman, we work solely for you! 

We are genuinely open and honest and only have your best interests at heart, we’re here to save both your time and money. 

Life Insurance Advice in Beverley

Life insurance is designed to pay out, usually in a lump sum, in the event of death.  With regards to your mortgage, the sum assured should be enough to pay off your outstanding balance.

Here is some information about the most popular types:

  • Whole of Life Insurance
  • Term Assurance
  • Family Income Benefit
  • Joint Life Insurance
  • Death in Service

Whole of Life Insurance

Whole of life insurance does not have an end date, therefore, providing premiums are being met the policy will pay out.  Generally speaking, this type of insurance is used for family protection and also as part of inheritance tax planning.

Term Assurance

Term assurance is the most popular type of family insurance used to cover a mortgage. 

Our Advisors will recommend the sum assured and term of the policy, usually to run in line with your new mortgage.   Providing that all premiums are maintained, the sum assured will be paid out if you were to die during the term. 

There are various types of Term Assurance available, such as decreasing and increasing cover.  As part of our personal protection review, the most suitable policy for your needs will be recommended. 

Family Income Benefit

This is another version of Term Assurance, where instead of the sum assured being paid as a lump sum on death, it’s paid as an agreed monthly payment.  This is very good for families looking to insure an income. 

A good advisor will usually recommend a mixture of insurance types tailor-made to match your personal and family requirements. 

Joint Life Insurance

If a property has been purchased in joint names, you could consider taking out a single life policy that will payout in the event of one of you dying.

This can be cheaper than paying the premiums on two separate policies, but bear in mind that joint policies only payout on the first death, after that the cover ends. 

If you had two separate policies, the second policy would remain in force even after a claim had been made on the first.

Death in Service

Many companies offer their employees family a lump sum payment if the staff member dies while they are employed by the firm.

Although this doesn’t mean the death has to be at the workplace or in any way related to the job done.

This cover will most likely end as soon as you leave the company.

Our Insurance Advice Service

It’s very important to us that all of our customers are given an equal opportunity to take insurance out through ourselves.  We wouldn’t be doing our job right if we didn’t mention it! 

We offer all of our customers a free, no-obligation protection review where we’ll have a look at any existing policies you have in place and assess their suitability.  We’ll then recommend which products, including critical illness and income protection that meet your needs.  If required, we’ll then tailor the plan to match your available monthly budget. 

Beverleymoneyman.com
Providing Life Insurance Advice in Beverley & Surrounding Areas

Mortgage Protection Insurance Explained

Mortgage Protection Insurance is a term used to encompass various types of cover designed to protect borrowers from events which could severely impact their ability to maintain mortgage payments.

There are different variations but when connected to a mortgage they are all there to provide peace of mind and usually fall into the following categories:

  • Life Cover
  • Critical Illness Insurance
  • Income Protection
  • Family Income Benefit

Life Cover

As a rule, if the policyholder dies within the term, then the sum assured should be enough to pay off the outstanding mortgage balance and ensure the borrower’s dependants aren’t left with a debt they might not otherwise be able to manage.   

Our advisors can run through all the different types of life cover and recommend the most suitable plan for you.

Critical Illness Insurance

Critical Illness Insurance works in a similar way to Life Assurance, in that it is usually taken for a specific term of years and can have the different options such as level/increasing etc. It is designed to pay out a lump sum and, like Life cover, for borrowers it is typically taken on a decreasing term basis in line with the reduction of your mortgage balance.

The key is that the benefit is paid if you fall victim to one of a number of specified critical illnesses and pays out whatever the long-term prognosis of that illness. The type of illnesses covered vary from company to company, that’s why this type of insurance cannot be solely price driven and advice is recommended.

In practice many companies will offer Life and Critical Illness Critical cover as a combined policy and would usually pay out on the “first event” i.e. whatever happens first – either death or serious illness – the pay-out is made. They can also be written on a single or joint life basis

Income Protection

Whereas Life and Critical Illness cover pay out a lump sum, Income Protection pays out a monthly sum designed to replace your wages in the event of you being unfit to work. Unlike Critical Illness cover, there are no restrictions on the illnesses or injuries covered, the only factor being whether they make you unfit to work. There are however restrictions on how much you can cover and how quickly benefits would start to be paid.

Like Life and Critical Illness cover, these policies are underwritten based on your health and lifestyle at the time you apply. All income protection policies are written on a single life basis.

Family Income Benefit

Probably the least common of the mortgage protection type policies but can often be valuable – particularly for those with young families. These plans can be taken to cover Life and/or Critical Illness and are underwritten on the application in the same way as mentioned above.

However, unlike the traditional forms of policy, rather than pay out a lump sum, the cover would pay an annual or monthly income for the remainder of the term of the plan. Thus, it can replace the income of the main breadwinner for a number of years, dependent upon a particular client’s circumstances and, because of this would usually be written on a level or basis, or an index-linked basis designed to keep up with inflation.

Summary

There’s an adage that says you can never have too much insurance. Certainly, many people have one or more of the different types of policy and it would be wrong to think of Mortgage Protection Insurance as just an “either/or” choice. However, in the real world, affordability plays a massive part, so whilst it would be fantastic to cover yourself for every potential opportunity, a good advisor will sit down with you and tailor the type of cover to be the most suitable combination to your family’s priority and budget.

This is where we can help! 

Please give us a call or fill out our enquiry form to speak with one of our Dedicated Protection Specialists.

Don’t Pretend You Live Somewhere You Don’t

Mortgage Advice in Beverley

When it comes to applying for a mortgage and your credit score, the fewer addresses you have on your record the better, however it seems that people are becoming savvier and aware of this.

We are now seeing more and more applicants who have moved out of their parents address into rented accommodation but think that it is a good idea to leave their bank statements, credit card and Electoral Roll information registered at their previous address.

There are good reasons why people do this, however, I’m afraid this is now a flawed strategy. Almost without fail, if you have moved to a new address, there will be some record of this on your credit report. This could be from a delivery address when you have ordered something online or a car/home insurance search and many more.

By far a better strategy for you if you are thinking about taking out a mortgage is to get all of your accounts (credit cards / current accounts) and electoral roll changed over to your new address. When updating your address on your credit file and electoral roll ensure you double check the date in and date out. If you do make a mistake with these dates it can appear that you are living in two places at the same time.
This is a more open and honest way of trying to apply for a mortgage.

Mortgage Broker in Beverley

UK Moneyman Limited is authorised and regulated by the Financial Conduct Authority.
UK Moneyman Limited registered in England, registered number 6789312 and registered office 10 Consort Court, Hull, HU9 1PU.

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