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.
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.
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.
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.
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!
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.
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.
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.
The Financial Conduct Authority does not regulate some types of buy to let or commercial mortgages.
Thousands of interest only mortgages are maturing every year and lots of mortgage-holders are not prepared to repay the capital sum owed. Here we examine how this situation has occurred and what can be done.
Interest only mortgages remain popular amongst buy to let applicants who buy up properties for extra income, but in the 80’s and 90’s most residential mortgages were set up this way. The idea was that you would only pay back the interest on the money you owed and you would pay back the capital lump sum at the end of the term.
When you took out an interest-only mortgage you may also have been advised to set up a repayment vehicle such as a low-cost endowment policy. The policy would then mature and was designed to repay the capital balance in full whilst also providing life cover through the term.
Unfortunately, many people weren’t made aware of the risks attached to these products, in particular, that there was no guarantee the policy would mature for a sufficient amount to repay the mortgage debt and this led to many applicants being compensated for being mis sold to.
It’s unlikely that you will have taken out an interest-only residential mortgage in the last few years as they are fairly difficult to get unless you can prove a robust strategy for paying back the capital. If you took out an interest-only mortgage in the late ’80s or ’90s and have not switched it to a capital repayment then it could be maturing soon and action needs to be taken.
If you have found yourself in this position it is highly likely that your mortgage lender will have been writing to you asking how you intend to repay the capital. It’s vital that you keep the line of communication fully open with them, they will not want to take your property into possession and will only do so as a last resort.
Here are some of the options you can consider:
The retirement mortgage market has become seemingly popular, largely due to the number of interest only mortgage reaching cessation with no repayment plan in place.
There are far more retirement products available these days and some providers let you service the interest element by way of regular monthly payments.
This means that when you die the capital balance is repaid from the house sale and the surplus passes to your family.
Interest only mortgage still have their place, for example, you may have a portfolio of properties or other investments in place to repay the money you have borrowed. Lenders will now want to examine your strategy for repaying the loan much more deeply than they did in the past to ensure they are not left with a mortgage on their books which could default.
They will want a big deposit to go down, possibly as much as 50%. They will also want to “sense-check” your plans, for example, will you have enough equity in your home to be able to down-size to a reasonable property at a later date.
Whilst it is widely accepted that there is a national housing shortage, the government has launched several schemes over the years. These have been under the “Help to Buy” banner, designed to get people onto the property ladder.
Unfortunately calling all the schemes Help to Buy has caused confusion amongst consumers! Here’s a look at what’s out there right now.
This is the most popular scheme and is available on new build properties only. You will have seen houses being built all around Hull and Beverley. The government will lend you up to 20% of the purchase price. Usually, my customers put down a 5% deposit and take out a 75% mortgage for the rest. Remember, it’s a loan not a gift and the government have a stake in your new home until you pay them back.
If you’re in the armed forces, you can borrow up to 50% of your salary, up to a maximum of £25,000 interest-free towards a new home.
If you’re Self Employed in Beverley, there are still a lot of options available to you. It’s a good idea to get hold of your Accountant and speak to a mortgage broker in Beverley for mortgage advice.
Yes and no, the Help to Buy Equity Loan is for new build properties only. The Forces Help to Buy can be a new or old property.
There may be options available to you even if you have a poor credit score. Mortgage lenders are becoming increasingly competitive on criteria and many challenger banks are entering the market. Again, please seek mortgage advice from a reliable mortgage expert!
A minimum of 5% as a rule.
Yes, family members and sometimes friends can gift (not a loan). This is a popular way for First Time Buyers to get on the property ladder. It’s also popular for home movers moving to a bigger home. In a recent Government Survey, 27% of such buyers relied on family and friends to help with a deposit.
Yes, with the Help to Buy Equity Scheme the government loan is interest-free for 5 years. After this, you’ll pay fees. Hopefully, the property will have increased in value and you can potentially remortgage the property at any time. This likely would be to raise funds to increase your share. Remember, the government will also receive their share of any profit made.
The Help to Buy Equity Loan and the Forces Help to Buy Scheme are for both First Time Buyers in Beverley and Home Movers in Beverley. However, the Help to Buy Equity Loan is designed specifically for those who have never owned a property.
The first stage would be to have a free mortgage consultation. This is to work out your maximum borrowing and also to get a mortgage agreement in principle certificate. This puts you in a strong position to make an offer. Once you have this in place you’ll be a “Qualified Buyer”, the next step is to go and view houses!
For more information and further terms and conditions about any of the above schemes please refer to the https://www.ownyourhome.gov.uk/ website.