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Different Types of Mortgages Explained in Middlesbrough

Mortgage Advice in Middlesbrough

In the beginning of the mortgage process, you’ll very quickly realise that there are lots of different options available to you as a customer. Below we have put together a list of the most popular types of mortgages available on the market, hopefully answering any questions that you may have. If you would like to speak further with a mortgage advisor in Middlesbrough regarding any of these, please do not hesitate to Get in Touch.

What is a Fixed-rate Mortgage?

What is a Fixed-Rate mortgage? | MoneymanTV

A fixed-rate mortgage is a simple form of mortgage wherein your monthly payments are going to stay the same for a set period of time. You are able to set the length of which you want to fix your payments for yourself, with standard choices being 2, 3 or 5 years or sometimes longer. Even if there happen to be any major changes to inflation, interest rates or the economy, you know that your mortgage payment, usually your biggest outgoing, will stay consistent.

What is a Tracker Mortgage?

What is a Tracker mortgage? | MoneymanTV

A tracker mortgage will follow the Bank of England’s base rate. What this means is that the lender that you are with does not actually set the interest rate themselves, thus making it potentially unpredictable due to the potential for it to change.  You will likely be paying a percentage above the Bank of England base rate. An example of this would be if the base rate is 1% and you are tracking at 1% above base rate, that means that you will be paying a rate of 2%.

What is a Repayment Mortgage?

What is a Repayment mortgage? | MoneymanTV

By taking out a repayment mortgage, this means that each month you will be paying back a total combination of capital and interest. Providing that you keep your payments going for the full length of the mortgage term, the mortgage balance is almost certainly going to be paid off at the end and the property will become yours.

This is widely considered to be the most risk-free way to pay your capital back to the lender, especially as in the early years it is mainly the interest that you are paying and your balance will reduce at a slightly slower pace, especially if you have taken out a term over 25, 30 or 35 years. Your circumstances will change within the last ten years or so of your mortgage, as your payments will be paying off more capital than interest and the balance will come down at a quicker pace.

What is an Interest-only Mortgage?

What is an Interest-Only mortgage? | MoneymanTV

Whilst many Buy to Let mortgages in Middlesbrough are set up on an interest-only basis, taking out a regular residential mortgage in the form of interest-only is a lot more difficult and not seen as often.

It is a lot less likely for lenders to offer an interest-only product to applicants these days.  That being said, there are very particular circumstances where this can be an option. These options can include downsizing later in life or to use the capital to pay off other investments. Lenders are very strict when it comes to offering these products now and the loan to values are a lot lower than they used to be.

What is an offset mortgage?

What is an Offset mortgage? | MoneymanTV

With an offset mortgage, the lender will set you up a savings account to run in tandem with your mortgage account. This is quite in an interesting one in how it works. Let’s say you have a mortgage balance of £100,000 and £20,000 is transfered into your savings account; you would only be paying interest on the difference between the two amounts, so in this case it would be £80,000. This can be a very efficient and financially savvy way of managing your money, especially if you are a taxpayer with higher rates.

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 Middlesbrough

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 Middlesbrough 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 Middlesbrough & those who are Moving Home in Middlesbrough. 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. 

The Main Reasons People Decide to Move House in Middlesbrough

Mortgage Advice in Middlesbrough

Moving Home in Middlesbrough can be tricky for some as it often comes with a considerable amount of pressure and expenses. There are numerous reasons people may choose to do this despite the doubts that surround it. These could range from needing more space or perhaps you are transferring to a new job.

Below are some of the primary reasons why people may find it suitable to move home:

  • Outgrown your home and in need of more room.
  • Hope For an upgrade to a more attractive home.
  • Children have moved out, and you no longer need a home of that volume.
  • You want to get closer to your friends and family.
  • A new job opportunity has presented itself, and you need to move.
  • Moving in with a partner or moving out due to a breakup.
  • You are hoping to save money on home costs.
  • Need a change of scenery and/or lifestyle.
  • Wanting to move into a school catchment area
  • The surrounding area isn’t to your liking, and you want to live in a better area

Nowadays most would instead buy than rent in Middlesbrough, primarily due to the monthly expenses likely being a lot less than rental costs.

Moving home can prove to be a reasonably tricky choice for some due to the emotional bond and the advantages and disadvantages of moving home against staying in your home for longer and making home improvements.

If the latter applies to you, then getting in touch for a Free Mortgage Consultation can be beneficial to you. We’ll book you in when you’re free to speak with one of our Specialist Mortgage Advisors in Middlesbrough.

They’ll help you compare the costs of raising money to improve your home versus the costs of moving, as well as help calculate the approximate maximum borrowing capacity. You’ll also receive a quote on your monthly payments so that you can start thinking about your next step.

Speaking with an experienced Mortgage Advisor in Middlesbrough may be a popular choice, as your Advisor may have a good understanding of the area. They may be able to share with you what kind of options their other clients have been taking recently.

Mortgage Advice in Middlesbrough

Sales Tactics of Estate Agents & Builders

Sales Tactics | Mortgage Advice in Middlesbrough

Whether you are a First Time Buyer in Middlesbrough actively viewing properties or a Home Mover in Middlesbrough 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.

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

Mortgage Advice in Middlesbrough

Gifted Deposits More Popular Than Ever in Middlesbrough

Gifted Deposit Statistics | Mortgage Broker in Middlesbrough

Research gathered from Legal & General; parents are gifting deposits for their children now more than ever before. The gift so much now that it the “Bank of Mum & Dad” was a bank it would be one of the top 10 biggest lenders in the UK.

The average parental gifted deposit in the UK is now up to £24,000. Gifts also come from other family members, including grandparents, as their wealth sometimes skips a generation. Thousands of homebuyers every year are reliant on their families to either get onto the housing ladder in the first place or upgrade to a larger, more beneficial home.

Gifts are vital to the workings of the market and make a significant difference. If they were not accessible; the property market could be very different from how we know it and not for the better.

According to the research gathered, almost 20% of parents who had helped their children buy, did so because they felt it was their responsibility as a parent to help.

Property price rises have outstripped wage increases over the years, putting purchasing a first home out of reach for many, especially if there is only one income bringing in a level of financial stability into the household. It can be a challenge saving for a deposit and having to cover the costs of bills and rent. Some end up Moving Home in Middlesbrough and back in with their parents for a while in the run-up to moving to help with savings.

Of the back of the survey, Legal and General warned that parents’ generosity could impact their standard of living in retirement. Based on their survey of 1600 parents who had helped their children, most were gifting from their savings. Slightly more worrying, though was that many were withdrawing from their pension schemes or their equity.

Effectively this is them “fast-forwarding” their child’s inheritance.

Buying a Property in Joint Names in Middlesbrough

Looking to purchase a property in Middlesbrough?

Statistics show that in recent years property prices have increased at a faster rate than wages. We have found that many people look to purchase in joint names with a partner or friend in order to be able to afford a suitable home at a more reasonable price.

Purchasing in joint names usually will increase your maximum borrowing capacity, as the lender will look at all parties income and take this into account when running the affordability calculations.

How Many People Can Co-Own a Property?

Surprisingly, we work with some lenders who will accept up to 4 people co-owning a property. If for any reason, one of the co-owners of the property decides to no longer contribute to the mortgage repayments, any joint owners will still have the legal right to reside in the property unless this is ruled otherwise by a court.

If you would like to increase the mortgage at a later date, you must gain consent from all co-owners involved. It’s therefore essential that you make long term plans about what will happen in the future should you end up wanting different things. 

Joint Tenancy or Tenancy in Common?

We find the most popular Tenancy for married couples or those in civil partnerships is ‘Joint Tenancy’. With this type of tenure, if either party were to pass away, the property would be handed over to the co-owner. If you have taken out relevant life insurance, at this point, your mortgage would be repaid.

With ‘Joint Tenancy’, when looking to remortgage or sell the property in the future. It would be required that all names on the tenancy agree to this. 

When purchasing with relatives or friends, we find that ‘Tenants In common’ is the most popular tenure. You will still jointly co-own the property but are have the flexibility to do so not with equal shares. This works well if one party is making a more significant financial contribution than the other.

With ‘Tenants in Common’, another positive aspect, is that you can act independently. For example, you can choose to sell or give away your share of the property to someone else without the need to consult other parties.

Do I have to pay the mortgage if we separate?

All mortgage borrowers are jointly and severally liable for mortgage payments If you find yourself paying all future payments without a co-owner, you will still be liable. Preventing the mortgage from falling into any debt. As mortgage arrears showing on your credit file could have the potential to stop you from obtaining a mortgage in the future.

It is best to think of it like this: You don’t own 50% of a property, you own 100% jointly.

How do I remove my ex-partner from a Joint Mortgage?

Lenders will need to be confident that you can keep up with monthly payments on your own before they can approve of this happening.

When purchasing a home with a partner, it’s a whole new chapter starting in your life and can be a great way to start fresh with another individual. In all the excitement of moving home, it can make you wonder about the justifications if things go sideways.

As seen from above, a mortgage is a big financial commitment and making changes is going to be a challenge.

With physical proof that you can maintain mortgage payments since your old partner moved, the lender may agree to your request to put the mortgage into your single name. However, Lenders like the idea that there are two people to pursue in the event of arrears occurring. To remove someone, they will carry out a brand-new affordability assessment, precisely in the same way as they would at the point of purchase.
Whilst a lender may not accept a request, it’s always beneficial to speak with a mortgage advisor beforehand, as there may be other lenders who could agree to your transfer request.

It can also be worth talking to family members to see if they can help you out to make life a little bit easier. They can do so by replacing your ex on your mortgage or by gifting you a lump sum to reduce the amount owed meaning your savings are able to contribute to easing your future mortgage payments.

Can I remove my name from a Joint Mortgage?

If you and your partner split up and you leave the family home, then your responsibility is still shared for mortgage payments. Even if an agreement is settled with your ex that they will make all the payments.

If you are sending your partner money each month, you should keep an eye on your credit report to ensure they are paying the mortgage. If they default, then it will impact your own score.

Is your name still linked with an existing mortgage? Then the payments for that will be considered if you buy a new home of your own. That will mean Lenders might not lend you as much as you would like.

Buying a home with someone is different from renting with them. It’s always better to agree on what would happen to the house should things not plan out as expected.

Whether you are a First Time Buyer or Moving Home in Middlesbrough and thinking of purchasing in Joint Names. Or are you looking to remove a name from a mortgage by looking into a Remortgage in Middlesbrough in your sole name? Please feel free to contact our friendly Mortgage Team, we will be more than happy to answer all of your questions.

Getting Prepared for a Mortgage in Middlesbrough

Mortgage Preparation | Mortgage Advice in Middlesbrough

After you’ve done the hard part of saving up the money for a deposit, the next step is to get prepared for your mortgage application. Included are a few tips and tricks in terms of what documents are needed and how best to get them organised.

Up to Date Credit Report

An up-to-date credit report should be at the top of your list, even before you approach a Mortgage Broker in Middlesbrough. You will not want hang-ups such as a late payment for a mobile phone contract consisting of a small fee of something like £50 to be holding you back from progressing with your mortgage. When your Mortgage Advisor in Middlesbrough looks at your credit report, this will be a deciding factor as to which lender they fit you with.

Another factor that will be a drastic advantage is making sure you’re on the voters roll as it will help in terms of your credit score, along with closing down old credit card accounts.

Proof of ID

You’ll need to produce photo ID to prove who you are. Most customers use a driving licence or passport for this. However, if you are using photo ID such as a Driving Licence for a proof of address, then you can’t use this for Photo ID.

If you are a non-UK national working in England on a Visa, it will be necessary to bring this along too.

Proof of Address

As mentioned beforehand, you’ll need to prove your current address. In order to do this, you will need a utility bill or validated bank statement dated within the last 3 months or a Photo ID such as your driving licence if it isn’t being used for other parts of the application.

Last 3 Months’ Bank Statements

Your bank statements should correlate with your income and regular expenditures. It is important that you plan ahead with your bank statements as lenders will not be pleased if; they see gambling transactions present; if you’ve gone over on an agreed overdraft limit; or direct debits bounce frequently.

Not all lenders will ask to see your bank statements, but most reserve the right to ask and want to be confident that you are not a financial risk to them and that you’re able to take your finances seriously.

An ideal Bank Statement is one where your salary goes in and your bills come out.

Evidence of Deposit

You have your deposit saved up which is a great milestone accomplished but that isn’t where the involvement of the deposit ends. You may have the funds in place but these will need to be audited for anti-money laundering purposes. The best advice for this is to not move finances around too often which will speed up the audit process.

The way to help convince a lender that you’re the best fit is to make a show that you’re able to build your finances up such as finances, though any large deposits will have to be accounted for.

If the deposit is gifted perhaps from a family member or friend then these funds will need to be evidenced as such and the ‘donor’ will need to sign a letter to confirm that it’s ‘non-refundable’ – in other words, not a loan.

Proof of Income

The most important thing when it comes to affordability is to be able to prove your income. If you’re employed this comes in the form of three months payslips and some may want your most recent P60.

Lenders can also take into consideration regular overtime, commission, shift allowance and bonuses, and others may accept wages from more than one employer if you have more than one job.

Though nowadays a lot more applicants tend to be Self-Employed in Middlesbrough. If you’re a self-employed applicant then you’ll need your Accountants’ help to request your last two or three year’s proof of earnings. If by chance you submit your own earnings then one of our Mortgage Advisors in Middlesbrough can advise you on what to download from the Government Gateway.

Budget Planner

One of the best ways to prepare for your mortgage is to put pen to paper and start writing down an estimate of your anticipated outgoings before you plan to be Moving Home in Middlesbrough. From doing this, you are able to work out an idea of how much the council tax and utility bills will be whilst also adding on regular expenditures e.g. food and drink. By planning your budget, you should be able to gain a rough estimate on how much disposable income you will be left with.

Before one of our Mortgage Advisors in Middlesbrough carries out an appointment with you, our Mortgage Broker in Middlesbrough team is able to send over a Budget Planner to help you in advance.

It can be seen that preparing for a mortgage is not an easy task but our Mortgage Advisors in Middlesbrough are able to help guide you. Feel free to get in touch with us for Mortgage Advice in Middlesbrough and see how we can help you today.

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