FAQ’s

A Mortgage Broker is someone who works for you, not a lender. This is because Mortgage Brokers are not employed by a single bank or lender, like a Mortgage Adviser. Mortgage Brokers have access to lots of different lenders and as such, their main goal is to place your mortgage application with a lender that best suits YOUR needs.

One of the most important things to remember is that a Mortgage Broker has a duty of care to provide you with the best advice. On the face of it, this might not mean much to you but in reality it offers you quite a lot of consumer protection. If a Mortgage Broker gives you bad or incorrect advice, not only do they have to follow a strict complaints procedure, but you can also claim for compensation via the Financial Services Compensation Scheme if you are out of pocket due to bad advice.

Before a Mortgage Broker or Adviser gives you any advice, they will complete a Fact Find that details most of your personal circumstances, such as:

Your name

Current address and address history

Your job and income

Any current mortgages or properties that you own

Any insurance policies that you have

Your monthly expenditure

Your credit history

Any credit commitments such as Hire Purchase, Credit Cards etc

Any savings

They will also discuss with you:

The different types of mortgages available

A mortgage term that suits your needs and budget

The different ways to repay a mortgage

Whether you particularly like or dislike any lender

The fees you are likely to pay, including survey, lenders fees and conveyancing

Whether you have any specific needs, such as a speedy mortgage agreement

The mortgage process from start to finish

Following this, they will advise you on the right mortgage and related insurance policies that suit your needs. This advice will be in writing and there is no obligation to proceed with their mortgage or insurance advice. You can of course speak to a few brokers and lenders before you’re satisfied that you’ve found the right one.

The first step to getting a mortgage is to speak to your preferred Mortgage Broker, bank or building society, Please see FAQ ‘What does a Mortgage Broker do’ to find out the process.

Once you have decided who you would like to use, the mortgage broker/adviser will provide you with an MIP or Mortgage in Principle. Estate agents will often insist you have a Mortgage in Principle before they allow you to make an offer on a property.

A Mortgage Agreement in Principle or MIP means that the lender has agreed your mortgage subject to you providing evidence of the information you already supplied, such as:

Proof of income (payslips/P60/accounts/SA302/employer’s reference)

Identification (passport/driving licence/utility bills)

Bank statements (normally 3 months from all accounts)

Proof of your deposit if you’re buying a property

Once the lender receives all requested documents and a satisfactory valuation on the property, they will issue you with a formal Mortgage Offer (see FAQ 'What is a Mortgage Offer?').

No, in fact it’s best to obtain an MIP Mortgage in Principle before you find a property. Please see FAQ 'What is the step by step process of a mortgage?'.

There are three main types of documents that a lender may ask you for:

Identification

Passport

Driving Licence

Utility Bill

Proof of Earnings

Payslips

Employment Reference

P60

SA302

Certified Accounts

Contractor Contract

Bank Statements

Typically three months from all accounts

When you receive your Mortgage in Principle, the lender will give you a list of any documents they require from you, such as proof of earnings, identification, bank statements and proof of deposit.

Providing you supply all documents that have been requested and there are no issues with the property valuation, then the lender will agree the mortgage and issue you with a Mortgage Offer.

A Mortgage Offer is a formal agreement to lend from the lender. It means that the lender is happy to lend to you and happy to lend on the property.

The only potential issues that could come up after you've received your Mortgage Offer, are issues with the conveyancing. For example, your solicitor may find out that the property is at risk of flooding, there may be new developments due to be built close to your property that may adversely affect the value or there may be issues with the property boundaries. Although any issues that come up during conveyancing may slow completion of the mortgage, it is better you know all relevant information so that you can make an informed choice as to whether you still want to proceed with the purchase or not.

A Mortgage Offer is generally valid for three months, although the lender may extend in special circumstances. If you don’t complete within the three months, the offer will lapse and you will have to reapply.

It depends on your circumstances but typically, from start to finish, it’s 3 weeks.

You could help speed things up by having all your documents in place before you apply, such as your identification (passport/driving licence/utility bills), proof of earnings (payslips/P60/SA302/accounts) and bank statements.

It is also advisable to know what’s on your credit report so that both you and the lender don’t get any surprises. It is not uncommon for errors to be on credit reports so you should familiarise yourself with your own report and you should update any information that is incorrect.

There are three main credit agencies in the UK; Experian, Equifax and Transunion (previous name Call Credit) and you can obtain your credit report for free from all of these companies. You can join Money Saving Expert’s credit club which will give you free access to your Experian report, Clearscore will give you free access to your Equifax report and Credit Karma will give you free access to your Transunion report.

If there are issues with the valuation of the property, this may slow the application down. There may be defects in the property, the lender may ask for additional reports or the property may simply not be worth as much as thought. If you’re buying a property however, it's a good thing to find out about any potential issues as it means you can make an informed choice as to whether you still want to buy.

Conveyancing issues could slow down the completion of a mortgage. There may be issues that come up such as, the property is in a flood area or that the council have granted planning permission for a large prison to be built near your property. As with valuations, you would probably rather know this information before you commit to buying a property.

There are four main types mortgages available, fixed, tracker, discounted and standard variable rate (SVR).

Please see FAQ’s:

What is a Fixed Rate?
What is a Tracker Rate?
What is a Discounted Rate?
What is a Standard Variable Rate?

Lenders often offer 2, 3 and 5 year fixed rates. This means that your payment will stay the same for whatever fixed term you select, i.e. 2, 3 or 5 years.

Fixed rates are best for people who are concerned that interest rates might go up and for people who like the security of having the same monthly payment.

Pros

• Your payment will stay the same for whatever period you select (2, 3 or 5 years) giving you stability and the ability to budget for that period
  
• If interest rates go up, your payment doesn’t go up within your fixed term
  
• A short-term fixed rate, i.e. 2 years, will often be a more attractive rate compared to a 3 or 5 year fixed rate
  
• A long-term fixed rate, i.e. 3 or 5 years, is likely to be the least attractive rate but offers the most stability as your payment will not change for 3 or 5 years

Cons
• Will give you stability over the fixed term but when the fixed term ends, unless you remortgage, you will automatically revert to the lender's standard variable rate which could be a lot higher, especially if interest rates have risen while you were on your fixed rate.
  
• If interest rates go down, your payment will not go down
  
• Two year fixed rates can be more attractive than 3 or 5 year fixed rates but it is likely you will end up remortgaging every two years. Costs and effort associated with a remortgage every two years can be draining
  
• A longer fixed rate will give you more stability because your payments stay the same but if you decide to move house within the fixed period, it is likely you will have an early repayment charge or you would have to port your mortgage to the new property which could mean limiting your lending options on the new property
  
• If you are planning on making large lump sum payments to reduce your mortgage, then a fixed rate is unlikely to suit you as there will be restrictions on the amount you can overpay

A tracker rate is one that is variable but doesn’t track the lender’s standard variable rate, in most cases, it tracks the Bank of England base rate.

A tracker is a variable rate so it can go up and down from month to month.

The current base rate is set at 0.75% and a lender may offer you a tracker deal which states base plus 1%, therefore your rate would be 1.75%.

Tracker rates are best for people who think that interest rates will drop or will stay the same and who are not concerned by potential rises in interest rates.

Pros

• Although a tracker can go up or down, it offers a bit more security than a discount or standard variable rate mortgage because the lender cannot change the rate, it’s the Bank of England that decides if interest rates change
  
• Generally one of the most attractive rates available and normally lower than any fixed or variable rate
  
• A lower interest rate gives you a good opportunity to make additional payments into your mortgage to reduce the balance or term
  
• Normally a short two year tracker rate is offered by lenders, meaning you have flexibility to review your rate after the two year ends
  
• Could have a capped rate, meaning your rate will not go above a certain amount
  
  Cons
  
• Is variable and can change from month to month
  
• Although a short term 2 year tracker rate is likely to be the most attractive, you will have to review your mortgage every 2 years if you don’t want to transfer to the lender’s standard variable rate
  
• Could have a floor rate, meaning any drop in rates will be capped so you may not get the full benefit of a large drop in interest rates
  
• Will normally revert to the lenders standard variable rate after the two year deal ends which is likely to be higher than the tracker rate

A discounted mortgage is a variable mortgage which means payments could go up and down each month.

The discount offered is deducted from the lender’s standard variable (SVR).

The average SVR as at January 2019* is 4.9%, therefore if a lender offered a 2% discount, your interest rate would be 2.9%.

Lenders generally offer discounted rates for either 2, 3 or 5 years, although lifetime discounts are available.

Discounted rates are best for people who think that interest rates will drop or will stay the same and who are not concerned by potential rises in interest rates.

Pros

• When interest rates are low, your payments will be low
  
• Can have lower arrangement fees in comparison to fixed and tracker rates
  
  Cons
  
• As it’s a variable mortgage, your payments could change from month to month
  
• It is set against the lenders standard variable rate which the lender could change at anytime
  
• If the Bank of England base rate drops, it is not necessarily the case that your lender will drop their SVR too, meaning you may not benefit from a drop in interest rates

A standard variable rate mortgage is the lender’s rate without any special introductory rates such as a fixed, tracker or discount.

The lender can set it at any level and it’s the rate you will revert to when your introductory period ends (that’s if you don’t apply for another mortgage).

An SVR is a variable mortgage, meaning your payments could go up and down each month.

Pros

• Unlikely to be any early repayment charges so may be suitable for someone who is planning to pay their mortgage off in the short term
  
• Your interest rate may drop if the Bank of England drops their rates but it is the lender’s discretion whether they drop their SVR in line with base rates or not
  
  Cons
  
• Likely to be a higher rate than fixed, tracker or variable rates

No one can predict if interest rates will go up or not. The Bank of England generally increases interest rates to reduce inflation when the economy is overheating but as inflation has been at record lows over the last 10 years, so have interest rates.

It remains to be seen whether interest rates will rise again, especially with the uncertainty over Brexit.

The best thing you could do to protect your finances is to calculate what your monthly repayments would be should there be a rise in interest rates. And ask yourself if you could comfortably withstand a higher mortgage payment.

At The Right Advice, we will tell you what your payments will be if there is a 2% rise in interest rates and we will also tell you what your payments will be based on the lender’s highest interest rate over the past 20 years.

If you think you would struggle if interest rates were to rise, then you could save more money towards a deposit so that don’t need to borrow as much, or you could reconsider the property you want to buy.

If you already own a property and you’re worried about a rise in interest rates, you could review your mortgage with a view to transferring to a fixed rate or you could consider extending the term to reduce your mortgage payments.

Of course, there are lots of factors to take into account when extending the term of your mortgage, such as your planned retirement date and the fact you would increase the total interest payable over the term, but it’s worth a conversation with a good mortgage broker such as The Right Advice if you have concerns about your mortgage.

In the olden days, most people would take a mortgage over 25 years, however you would be hard pushed to find a single mortgage broker who could explain why 25 years is the best term. In short, it isn’t because everyone’s circumstances are different.

At The Right Advice, we will advise you to take a mortgage term that suits your needs.

For example, you may have a monthly budget that you would like to stick to, or you may have a set date you would like the mortgage to be repaid by. Whatever your circumstances, your mortgage will be tailored to suit you.

As a rule of thumb, we recommend the shortest mortgage term affordable. Of course, the mortgage that we recommend must be affordable, but the reason it should be the shortest term affordable is that the longer you have a mortgage or any debt, the more interest you pay, so we always recommend the shortest to keep the interest you pay to a minimum.

Repayment
A repayment mortgage is were each month, you repay the capital and interest, meaning that if you pay every payment when it’s due, your mortgage will be guaranteed to be paid off at the end of the mortgage term.

A repayment mortgage is suited to people who want the certainty of the mortgage being paid off at the end of the term and who do not want to take any risks by having an investment designed to repay the mortgage.

A repayment mortgage will have a higher monthly payment than an interest only mortgage but that’s because you are paying the capital and interest.

Interest Only
With an interest only mortgage, you’re only paying the interest, so at the end of the mortgage term, you still owe the lender the entire mortgage balance.

An interest only mortgage will have a lower monthly payment than a capital and interest mortgage because you’re only paying the interest.

If you would like to apply for an interest only mortgage, lenders nowadays will ask for proof of your repayment vehicle. Typical repayment vehicles are as follows:

• Stocks and Shares ISA’s
  
• Investment Bonds
  
• Shares
  
• Unit Trusts
  
• Pension schemes
  
• Cash savings, for example a cash ISA
  
• Other properties or owned assets

If you have an interest only mortgage with no repayment vehicle in place and you’re worried about how you will pay the mortgage at the end of the term, get in touch with The Right Advice. You may be able to switch the mortgage to repayment and extend the term if the payments are too high. Of course, our advice would depend on a lot of factors but get in touch and we will do the best we can to get your mortgage on track.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

There are three main types of survey that can be carried out:

Mortgage Valuation – Level 1 Survey
This survey is carried out as a minimum and is suitable for new build homes and for homes that you already own. It is for the lenders benefit, not yours, and it is designed to give enough information to the lender so that they can decide if the property is safe to lend on and up to what amount. The property valuation amount that you provide will be checked by the surveyor who has local knowledge of similar properties that have sold within the area and whether the valuation amount you have provided is reasonable. You shouldn’t rely on this type of survey if you are buying a property because it is not for your benefit, it’s short, lasting between 15-30 minutes and will only detail obvious defects.

Homebuyer’s Valuation – Level 2 Survey
This survey is optional and a bit more costly but it may save you money as it can alert you to potential structural problems such as subsidence or damp, any visible defects and the surveyor will also try to uncover any hidden defects This survey is suitable for all types of property but you may want to consider a full structural survey for older properties. The average cost is £400.

Building Survey – Level 3 Survey
This survey was previously known as a Full Structural Survey and is optional but it’s the most detailed survey. They are suitable for all types of property but are particularly suited to older, listed, unusual or significantly altered properties. They are also appropriate for properties that you plan to renovate or change. They will detail significant and more insignificant defects and the impact they may have. They will test walls for damp, advise if there has been any alterations to supporting walls or any renovations that have been carried out without planning permission, detail the presence of hazardous material (such as asbestos), damage to masonry, roof or timbers, woodworm, dry rot, conditions of existing damp proofing and insulation, technical information on the build of the property, any potential problems from trees close to property and recommendations for further investigation. The average cost is between £500-£1300.

Whether purchasing, selling or remortgaging a property, you'll need a solicitor or conveyancer (a specialist property lawyer) to handle the legal work for both you and the lender.

If you're remortgaging, lenders sometimes offer free conveyancing as part of the mortgage but it’s best to check with your mortgage broker/adviser before you apply.

If you’re buying a property, you will have to pay the conveyancing costs out of your own pocket. You should speak to a few conveyancers before you proceed to get a full breakdown of costs and confirmation of their timescales to ensure they can complete on time.

Your solicitor will help you from when your Mortgage Offer is issued, to when you complete the purchase or the remortgage. Although if you’re buying a property, it is a good idea to tell your solicitor that you want to use them before you apply for the mortgage and advise them of the lender you are applying to as not all lenders are able to use all solicitors.

As a rule of thumb, your solicitor must have a minimum of two partners, one partner to act for you and the other to act for the lender,

As part of the legal process, your solicitor will:

• Conduct searches with organisations such as the local authority, to check if there are any building plans in progress, like a large prison next door!
  
• Check that there are no financial liabilities on the property from previous owners
  
• Check if the property is at risk of flooding
  
• Check the contracts drawn up with the seller’s solicitor which details property boundaries
  
• Liaise with your mortgage lender
  
• Transfer funds between lenders or to the seller

Your solicitor will also advise you of any costs you have to pay, such as Stamp Duty and their fees. The conveyancing costs for the average property purchase is £850.

There are four main fees included within the mortgage process:

Valuation/Survey
The fee for the survey will depend upon the value of the property and the type of survey that is carried out.

A basic mortgage valuation could cost between £150-£1500*, although in some cases, lenders will offer a free valuation as part of a remortgage.

Lenders Fees
Lenders may charge upfront fees such as a booking fee and they may also charge an arrangement fee.

A typical booking fee is £99 and will not be refunded if the mortgage doesn’t go ahead. An arrangement fee could be from £0 up to £2000. You can pay the arrangement fee upfront or add it to the loan, however if you add it to the loan, you will be charged interest on the fee over the term of the mortgage.

The lender will charge a CHAPs fee of around £50 which is a fee to cover the cost of transferring the mortgage funds to your solicitor.

A lender may charge you for the additional admin costs of checking you have buildings insurance in place. This fee is normally between £25 and £50.

A lender may also charge a closure fee when you remortgage in future or if you repay the mortgage completely. Fees range from £50-£300*.

Mortgage Advice Fee
Mortgage Advisers that work for one lender will not charge you an advice fee and neither will some brokers.

Most brokers on the other hand, do charge a fee, although they have access to a lot of lenders so they may find you a cheaper mortgage than if you were to go direct to the lender.

In addition, a good broker can take some of the stress out of a mortgage application by helping you complete the paperwork and by dealing with the lender, surveyor and solicitor.

Of course, you should weigh up both options before you decide,

At The Right Advice, our initial appointment is free, however we charge a fee of between 0% and 2% of your mortgage when your mortgage offers. Typically this will be 0.78% of your loan. The total fee will depend upon your personal circumstances, employment record and credit history. We will provide you with written confirmation of our fee prior to the commencement of any chargeable activity. We will also receive commission from the lender.

Solicitor/Conveyancing
Solicitor’s fees are approximately between £850 to £1500* for a purchase but lenders will often offer ‘free legals’ as part of a remortgage.

Solicitors may also charge search fees typically around £250*.

Your solicitor will also confirm how much Stamp Duty and Capital Gains tax, if any, you have to pay.

*Money Advice Service

BUYING

1. Speak to your preferred Mortgage Broker/Adviser for advice
2. Confirm all your financial information to Broker/Adviser who will detail this in a Fact Find
3. Decide on the type of mortgage you would like
4. Obtain an MIP (Mortgage in Principle) from your Broker/Adviser
5. Start viewing properties
6. Put offer in on property
7. Offer on property accepted
8. Apply for Mortgage via Broker/Adviser
9. Supply any information the lender has asked for such as proof of earnings and identification
10. Property valuation is carried out
11. Assuming documents you have supplied to lender and property valuation are acceptable, Mortgage Offer is issued
12. Solicitor carries out conveyancing
13. Mortgage completes and you get your keys!

REMORTGAGE

1. Speak to your preferred Mortgage Broker/Adviser for advice
2. Confirm all your financial information to Broker/Adviser who will detail this in a Fact Find
3. Decide on the type of mortgage you would like
4. Obtain an MIP (Mortgage in Principle) from your Broker/Adviser
5. Apply for Mortgage via Broker/Adviser
6. Supply any information the lender has asked for such as proof of earnings and identification
7. Property valuation is carried out
8. Assuming documents you have supplied to lender and property valuation are acceptable, Mortgage Offer is issued
9. Solicitor carries out conveyancing
10. Mortgage completes and you get your new rate!