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The Pros and Cons of Using a Mortgage Broker in Hull

As could probably be predicted from us, we firmly believe that there are some great reasons for customers to use a mortgage broker in Hull.

As a fair counter argument though, whether it’s via a branch or online, it is still completely viable to go direct to the lender yourself. Luckily we find that most people prefer to make use of a mortgage broker.

Here we will take a look at the pros & cons to both sides.

Pros & Cons of Going Direct

When talking about the option of going directly to a bank or building society, the first thing that immediately springs to mind is that you’ll be free from any broker fees. This of course will save you money.

Whilst that may be a point for, an immediate point against comes to mind too. In previous years, you may have thought “the bank manager will know my finances inside and out”, though when credit scoring was introduced, this no longer became a factor in the process.

One reason why going direct could be preferable, is that some lenders offer exclusive mortgage products that are only available by going direct. This is done so to attract a good spread of business from consumers and brokers alike, switching these exclusive products as they see fit.

On the contrary to this, some products may only be available by going with a mortgage broker. In this case, you’re not only able to see potential exclusive deals from your bank, but other lenders as well. A bank can only offer their own products!

Mortgage Market Changes in 2014

In 2014, the market changed and lenders were no longer allowed to sell mortgages on a non-advised basis to anyone who walked through their door.

Previously, it had been believed that non-advisors were trying to push actual advice on customers. This means they weren’t able to benefit from some of the consumer protection that comes with speaking to a professional mortgage advisor.

The changes meant lenders had to adjust. Heading towards the end of 2014, it was commonplace to be kept waiting over a month just to speak with an advisor. Sometimes today this situation still occurs, which is of course less than ideal when you have had an offer accepted and are ready to go!

Because of the issues that were occuring with these services, applications being made via mortgage brokers went on the rise. This is because many brokers out there, like ourselves, are able to offer customers a more flexible service, at times that best suit them.

When you book your free mortgage appointment with us online, you’ll be able to choose a timeslot that best suits your personal and work life. Oftentimes, your appointment can be booked in for the same day. There is no waiting around for somebody to get back in touch!

Affordability is definitely something that factors into people’s decisions to use a mortgage broker. No matter how good a lender’s deal might seem, you won’t get very far if they won’t lend you enough money!

Buying a house is so important to people, that many customers will opt to go with a trusted and dedicated mortgage broker for professional and personalised mortgage advice in Hull.

Handling More Complex Cases

Nowadays we find that a lot of mortgage applications aren’t as simple as they once were. For one reason or another, there are a lot of contributing factors that can make the mortgage process a lot more challenging now.

Some examples of these are, but are not limited to:

  • Poor Credit History.
  • Self-Employed Income.
  • Mixed Source of Deposit (Savings/Gift).
  • Let-to-Buy (Renting Out Your Property to Buy Another).
  • Contract Workers/Zero Hour Contracts.
  • Affordability.

In the past, it was a lot easier for lenders to stand out from the competition by simply offering a deal that was similar to, but better than another mortgage lender on the market. In modern times this is very different, with lending criteria being the big difference between one option and another.

An example of this is the differences in leniency towards those who are looking to obtain a Self-Employed Mortgage in Hull. Some lenders are willing to be a bit more sympathetic towards previous discrepancies on your credit report. Others, not so much.

A Tailored Process

Your situation is unique to you, it is very unlikely that someone will have the exact same circumstances as you. You could be looking for First-Time Buyer Mortgage Advice in Hull, ready to take the first step towards being a homeowner.

You might be in a tight spot and need some Remortgage Advice in Hull, ahead of consolidating some debts (something that definitely requires an expert opinion). When you explain your position to an experienced mortgage broker, they may have dealt with something that is at least similar in the past.

This allows them to personalise your mortgage advice service and guide you along each step. With a little luck and a lot of hard work, your mortgage advisor in Hull will hopefully be able to recommend the most suitable mortgage, at the lowest rate available to you.

Beyond that though, it’s about more than just getting a mortgage. Even if the application itself is pretty simple to run through, our clients rely on our expertise and industry experience for so much more.

We are able to run through how much the applicant is willing to offer on their potential new home. Our trusted team of mortgage advisors in Hull are able recommend other professional services such as solicitors and property surveys.

Responsive Service

Another reason why using a mortgage broker in Hull could be preferable, is that we tend to be far more responsive than the lenders might be.

Our hard working team quite regularly work late into the evening, outside of normal hours, giving maximum effort on customer cases to ensure the service is prompt but also effective.

Something that is often overlooked when looking at why customers may prefer a broker, is that people’s day-to-day lives are so much busier. A mortgage might be important, but you may have no free time! A mortgage advisor in Hull will take the weight off your shoulders.

Professional applicants especially see the benefits of using a mortgage broker, as they have clients of their own that they charge out their services to and they appreciate having an expert to do the work for them whilst they keep busy.

Mayhap in the future we will see lenders wanting to take business back from the brokers. In the event of this, we may see a more technological approach from them. The world seems to be more focused on that these days.

That’s great news for customers who are fine with speaking to bots or using automated systems. Even more so when the case is straightforward.

For most of us though, there’s an element of “realness” when speaking to a real person. We are getting that “human touch” that only speak to a mortgage advisor in Hull can provide for you.

Book your free mortgage appointment online now using the “Get Started” button. Time slots are available every day, from early until late, at a time that best suits you (subject to availability).

What is an Interest-Only Mortgage?

Interest-Only Mortgage Advice in Hull

What is an Interest-Only Mortgage? | MoneymanTV

There are thousands of interest-only mortgages across the nation that are maturing every year and the homeowners who have one of these may be caught off guard when it comes to having to pay off the capital sum that is owed.

In this article, we take a look at what interest-only mortgages are and what can be done when situations like this occur.

A Summary of Interest-Only Mortgages

Back in the ’80s and ’90s, it was actually really common for residential mortgages to be set up this way. The purpose of these mortgage types, was that you would only pay back (over the course of your term) interest on the amount that you borrowed, with the remaining capital lump sum being paid back once the term ended.

For anyone who had previously taken out an interest-only mortgage, it is likely that you will have been advised to set up a repayment vehicle, perhaps something like a low-cost endowment policy.

The policy would mature over time and was designed with the purpose of helping you to repay the capital balance in full, whilst also giving you sufficient life cover for the duration of your mortgage term. Unfortunately, there are a lot of people who weren’t made aware of the risks attached to this type of product.

One of the risks that cropped up, was that there was no guarantee the policy would actually mature enough to cover the costs of your mortgage debt, which in turn led to many applicants being compensated for them being mis-sold a product.

Nowadays, interest-only mortgages tend to be a popular option for customers who are looking at their options for Buy to Let Mortgages in Hull. These types of people are landlords who buy properties to earn some extra income.

Why do people still have interest-only mortgages?

It is not very common to come across customers who have taken out an interest-only residential mortgage in recent memory, as they are considerably difficult to obtain unless you can prove that you have a very solid strategy for paying back the capital at the end of your term.

For customers who took out an interest-only mortgage at any point in the late ’80s or ’90s and have not switched it to a capital repayment, then you should absolutely look to take action sooner rather than later.

What can I do if my interest-only mortgage is ending?

If you happen to be in this sort of position, the chances that your mortgage lender will send you a letter or give you a call, asking how you plan to pay the capital back will be slim.

It is important to always keep open a line of communication with the mortgage lender, remaining honest and open with them. Contrary to the belief of some, a lender truly does not want to take your property into possession and will only do so if they have no other choice.

Instead of letting things get to that point, here are some other things that you could look to do instead;

  • Ask your lender to convert your interest-only mortgage into a repayment mortgage.
  • Sell your current property and consider downsizing into a more affordable and manageable property.
  • Use savings/other investments to repay whatever you have remaining on the mortgage balance.
  • Remortgage to a new lender, for a better rate.
  • Consider taking out a Retirement Mortgage.

The retirement mortgage market is an area of the world of homeowners that is currently thriving, largely due to the amount of interest-only mortgages that are reaching the end of their terms, without any concrete plans in place to actually pay back the capital.

There are a lot of retirement products available to customers across the country nowadays, and some providers may even possibly let you service the interest element by way of regular monthly repayments.

Creating this sort of agreement means that when you die, the capital balance that is left to pay, is repaid from the house sale and the surplus can be given out to your family.

Is it still possible to obtain an Interest-Only Mortgage?

Interest-only mortgage are still in existence and can be obtain, though there are limitations as to who can obtain one. For example, you may possibly be a landlord with an extensive property portfolio or have some other investments in place, which you can use to help you repay the balance.

Lenders will now take an in-depth look at your strategy for repaying the loan, analysing a lot more deeply than they would’ve done in the past.

They do this in order to ensure that they are only lending for a property that they are confident won’t default. In addition to this, they will also want a much larger deposit to go down, potentially as much as 50%.

They will also want to future proof any of your plans before going ahead. An example of this would be checking that you have enough equity in your home to potentially downsize to a reasonable property down the line.

As always, our team of dedicated mortgage advisors in Hull, here at Hullmoneyman, are always happy to run through the options that are available to you as a home buyer or existing homeowner in Hull. Book your free mortgage appointment online today and we will see how we are able to help you.

Agreement in Principle: Frequently Asked Questions

A Brief Summary of an Agreement in Principle

Customers will always receive an Agreement in Principle from the lender before they can obtain a mortgage on a property. The reason for this is so that you know the lender will agree, in principle, to let you borrow from them.

This part of the process is carried out before the final checks and whilst even with this we cannot guarantee that you will get a mortgage, being given this is certainly a good sign that you’re on your way to mortgage success.

You’ll often see this online being called a Mortgage in Principle and a Decision in Principle. Sometimes it will be shortened to AIP and DIP. Though the collection of names can be confusing to home buyers, worry not as they’re all exactly the same thing.

Once you have gotten an Agreement in Principle, you will be ready for the next steps of the process, fully prepared to support any offers that you look to make as a First Time Buyer in Hull.

By having this document, you may also give yourself room to negotiate with the seller of the property on a lower price.

This is because it will showcase to the seller of the property in question, that you are a serious buyer and have the necessary funds to move on with the mortgage process.

Frequently Asked Agreement in Principle Questions:

Will obtaining an agreement in principle affect credit score? 

We tend to find that a large amount of lenders these days are choosing to go with soft searches instead of doing hard searches. As a standard rule of thumb, a soft search will not affect your credit score, as they don’t usually leave a footprint.

Hard searches will leave a footprint behind, so having lots of them done can be quite damaging, especially if you fail it each time. That’s not to guarantee a soft search will have no effect, but it is very unlikely.

Soft searches offer less in-depth information than you would get from hard searches, though worry not as no matter which one the lender opts to use, they will be doing it for the right reasons.

Should I avoid hard credit checks? 

If you are not getting hard searches taken out on you regularly, then having one done should be pretty harmless. The problem arises is if you start having multiple hard searches taken out on you in quick succession.

Always remember that if you fully know that you do have a good credit rating, there is no need to be put off by the idea of getting a hard search done, especially if it will be the best option for you to go with.

Is an Agreement in Principle a guarantee that I will get the mortgage? 

Though it would be nice for us to say yes and lift your spirits, unfortunately even with an Agreement in Principle to hand, a mortgage is not always a guarantee at the end of the process.

The mortgage lender still needs to take a look at all of your documents and only after their checks are complete will a mortgage underwriter be able to make their final decision.

Customers often get in touch with us after they have previously been declined at the point of application, as they have neglected to read the small print that is stated within their Agreement in Principle.

You are required to provide your mortgage lender with proof of identity, the last 3 months payslips and bank statements to demonstrate your financial capabilities, before a mortgage lender will offer your case.

The required documentation is a little bit different for Self-Employed Mortgage applicants in Hull.

Can I make an offer without an Agreement in Principle? 

Whilst yes, you would be able make an offer without an Agreement in Principle to hand, you would be much better off for getting one prior to making any property purchase offers.

Whether you take the document, a lender will always have to agree in principle before the mortgage itself can proceed.

Any estate agent with credibility will want to see an AIP before they do business with you, as they need concrete confirmation that you have the funds to proceed and won’t be wasting anyone’s time.

How long does it take to get an Agreement in Principle? 

A trusted mortgage advisor in Hull will usually be able to obtain an Agreement in Principle within 24 hours of your free mortgage appointment.

How long does an Agreement in Principle last for?

An Agreement in Principle tends to expire somewhere between 30-90 days. Always be mindful though that you don’t just have to make an offer on the first house you encounter within your price range. Take as much time as you need.

If your Agreement in Principle expires, your mortgage advisor in Hull will easily be able to get you a new one, in order to help you make offers when you are ready to.

Finding the home of your dreams, only for a lender to decline you, can be both frustrating and crushing. To counteract this feeling, we would highly suggest that you get an Agreement in Principle as soon as you can, to make sure you’re wholly prepared for the mortgage process.

Agreement in Principle Mortgage Advice in Hull

To gain a better understanding about what an Agreement in Principle is and how they can be useful, take a look at our helpful YouTube video guide.

What is an Agreement in Principle? | MoneymanTV

Should You Rent or Buy a Property in Hull?

Mortgage Advice in Hull for Home Buyers and Renters

In the perception of many, renting can be seen as a waste of time. If you are younger and your parents have had mortgages of their own in the past, then it is likely they will encourage you to take that leap and become a First-Time Buyer in Hull. Nowadays though, we see more people renting than they ever used to. In this post we will take a look at the pros and cons of buying versus renting.

Why should I buy a property? 

We never truly know if a sudden market boom or drastic plummet is going to occur, due to the ever-changing nature of the market. If you buy a property and it suddenly goes down in value, your disappointment will be understandable. Over the years we have seen this happen often, though history has shown that even when this happens, the value may eventually start to rise again, as it once did. This is all based on the assumption you’re still financially able to keep the property.

Looking back at sold values during the Credit Crunch, it was one of the worst economic era’s in our lifetime. Surprisingly though, less than 10 years later the property market was booming and property values were on the up! If you unfortunately have to sell your home at the wrong time, you may be in a position where you lose out on a lot of money. This can be due to such things as a relationship breakdown or reduction in your personal monthly income, requiring a need for a cash injection via a home sale.

Before committing to buying a home, it is worth getting in touch with an experienced First-Time Buyer Mortgage Broker in Hull as we will be able to look at mortgage protection insurance for you from circumstances that may affect you and your mortgage, such as unexpected illness or even death. That being said, this is not just an investment, this is your home, where you will be creating a life for yourself. The most important thing here is finding something that is appropriate for you and your circumstances.

Will a mortgage be cheaper than renting? 

Generally, your mortgage payments will be cheaper than monthly rental payments. This may not always be the case, but it is more likely to be the case. Interest-rates have been known to go up and down on a whim, which mean your mortgage payments vary depending on the month.

Most people tend to choose a fixed-rate mortgage as a means of counteracting this. Fixed-Rate Mortgages will keep payments consistent for the chosen length of your term, providing a sense of stability for both yourself and the lender. In regard to renting, your payments will either stay the same or become more costly, as it is not often you will see a Landlord opting to lower the rent.

Providing Security & Stability

Owning a home creates a true sense of stability for some people and their families. On the basis you can afford your mortgage payments, this means that so long as you still wish to live there, nobody can forcibly make you leave the property, something that doesn’t quite work out for private tenants.

Whilst you do have some protection as a renter, if the landlord wants their property back, you’re kind of stuck in what you can do. Sometimes you may find the landlord will give you first refusal (ability to buy the property before it goes to market) as a means of avoiding the stress and costs of advertising with an estate agent.

Flexibility 

In some cases, renting is a more flexible choice than being a homeowner. An example of this would be if you found a job in a new area, there is nothing stopping you from handing in notice and moving to that new area in order to pursue that career. Although it would be nice, it doesn’t quite work the same way for homeowners, as you will then need to figure out whether you want to sell your home or rent it out. Either process can be expensive and time consuming.

If you are the sort who likes to move often or are not sure how long you will be around the area, buying may not be the route appropriate for you to take. Home buying requires long term stability and can be seen as more of an investment in both money and time.

Repairs 

A landlord is responsible for any repairs needed on the property they are renting out to you. Some landlords are better than others, however, so be prepared to fix some minor repairs yourself if you’re renting and encounter anything that needs doing. Homeowners are completely responsible for their own repairs and usually the conditions of a mortgage will require the property to be insured so that the lender doesn’t lose out in the event of something happening to it.

Despite it being the more popular option, owning your own home isn’t the right choice for everyone. If you are a young couple, there’s no shame in renting together to see how living together could work out for you in the future. Things might not always work out how we would like them to and removing someone from a mortgage can an awkward and difficult process.

Home buying is a rather large commitment and definitely not something to do out of the blue. It requires careful planning. That being said, if you are renting a property you may find saving up a deposit a bit difficult. In the end, most people decide to buy over renting, though this isn’t the same for every person out there. Most would rather do something for themselves, as opposed to giving someone else money to live in a house that they don’t have control over. Timing is key, so always make sure you’re in a solid place financially before you decide to buy a home.

Agreement in Principle and Soft Credit Searches

Agreement in Principle Mortgage Advice in Hull

What is an Agreement in Principle? | MoneymanTV

When you pass the lenders credit score to qualify for a mortgage, you will obtain an agreement in principle – commonly known as an AIP for short. Having an agreement in principle in place allows you to make an offer on a property. It also can be very useful when negotiating on the asking price, as the seller now knows that you are serious and ready to start.

How does your Agreement in Principle affect your credit score?

This depends on the type of credit search the lender decides to undertake. They will either perform a soft credit search or a hard credit search on your file:

Soft credit searches

Nowadays, it’s more common for a lender to carry out a soft credit search over a hard credit search. They usually choose to perform a soft credit search because they require less information out of it and there is a lot less chance of your credit score being affected by this one.

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 a very strong indication that your application could be accepted.

Hard credit searches

Hard credit searches go a lot more in-depth than soft searches. The main difference between hard and soft searches is that hard credit searches can affect your credit score, by leaving a footprint. Anyone who looks at your file in the future will be able to see that lenders have hard searched your credit score.

This won’t really affect you if you have a good credit score. The problems can come if your score is lower and you have had more than one hard search on your file, as it could look like you are trying to apply for lots of credit at the same time. This is likely to put off a lender.

Does an AIP guarantee a mortgage in Hull?

You will never be guaranteed a mortgage, but having an agreement in principle in place ahead of time will certainly work in your favour. Once you provide the lender with all your documents, an Underwriter will review everything and make a final decision. Agreements in principle usually include small print that can easily be missed, which is why speaking to a Mortgage Broker in Hull can be useful.

When customers reach out to us for help about their agreement in principle, we find that in some cases they’ve been turned away at full mortgage application stage.

The documents required include, but are not limited to, things like ID, payslips and bank statements. As your expert Mortgage Broker in Hull, we take pride in helping you be prepared for all this. If you are looking at starting your mortgage process, you may need to look at how to get prepared for a mortgage in Hull.

It’s necessary to have your agreement in principle in place when making an offer. Most credible estate agents will want you to provide evidence that you are able to proceed with the purchase.

How long will my Agreement in Principle last for?

Normally, your agreement in principle needs renewing after around 30-90 days. As an experienced Mortgage Broker in Hull, we still recommend getting one as early as you can, in order to avoid finding your dream home only to be told you aren’t eligible for a mortgage.

You don’t always need to buy the first house you see after you get your agreement in principle. It’s a simple process, so if it does happen to expire, you can just obtain another.

You may be a First Time Buyer in Hull or you might be thinking of Moving Home in Hull and are looking for great Mortgage Advice in Hull. If so, we think that you will benefit from our dedicated mortgage advice services in Hull.

We offer a free initial mortgage consultation with one of our expert Mortgage Advisors, so feel free to get in touch today and we will see how we can help!

The Different Types of Mortgages Explained

Mortgage Advice Covering The Different Types of Mortgages

No matter whether you are a First Time Buyer looking to make that initial jump onto the property ladder, or are going through the process of Moving House in Hull, you will soon come to realise that there are many different types of mortgages available for customers.

Some options tend to be more popular than others and some are a little harder to come across. We have compiled a list of mortgage types we find that we encounter the most and that you will likely come across. You will also see each section accompanied by one of our MoneymanTV episodes, we hope you find them useful!

You can find more Helpful Mortgage Guides on moneymanTV here or go directly to our “Mortgages Explained” playlist here.

What is a Fixed-Rate Mortgage?

A fixed-rate mortgage means that your mortgage payments are going to remain consistent for a specific period of time.

You are in control of how long you choose to fix your payments for, with common lengths generally being 2, 3 or 5 years or longer.

Regardless of any changes to inflation, interest rates or the economy you can rest easy knowing that your mortgage payment, often your single biggest outgoing, will remain the same.

What is a Fixed-Rate Mortgage? | MoneymanTV

What is a Tracker Mortgage?

A tracker mortgage means that the interest-rate of your mortgage will follow, or track if you will, the Bank of England’s base rate.

In simpler terms, this means that the lender that you are with are not the ones that will be choosing your interest-rate and neither will you.

Instead, you will be paying a percentage above the Bank of England base rate. In an example, if the base rate is 1% and you are tracking at 1% above base rate, that means you will be paying a rate of 2%.

What is a Tracker Mortgage? | MoneymanTV

What is a Repayment Mortgage?

When you take out a repayment mortgage you will be paying back capital and interest combined each month.

Providing that you keep your payments going for the full length of the mortgage term, you will be guaranteed to have your mortgage balance paid off at the end of the term and the property will become yours to own.

In regards to mortgage payments, this is the most risk-free way to pay your capital back to the lender. Early on into your mortgage term, it is mainly the interest that you are paying and your balance will start to go down really slowly, especially if you have taken out a longer term of around 25, 30 or more.

Things take a turn when it comes to the last ten years or so of your mortgage, where your payments are paying off more capital than interest and the balance will come down much faster.

What is Repayment Mortgage? | MoneymanTV

What is an Interest-Only Mortgage?

Whilst a lot of modern buy-to-let mortgages are set up on an interest-only basis, you’ll find it a harder task trying to get a residential property on an interest-only basis.

It is much less likely for a mortgage lender to offer an interest-only product to customers these days, though in some cases it is possible.

Situations where this might be relevant include downsizing when you are older or have other investments that can be used to pay the capital back.

Lenders have strict rules when it comes to offering these products now and the loan to values are a lot lower than back in the day.

What is an Interest-Only Mortgage? | MoneymanTV

What is an Offset Mortgage?

With an offset mortgage, the lender will set you up a savings account to go alongside your mortgage account.

How this works is that let’s say you have a mortgage balance of £100,000 and £20,000 is deposited into your savings account, you only pay interest on the difference, so in this case, £80,000.

This can be a very efficient way of managing your money, especially if you are a higher rate taxpayer.

What is an Offset Mortgage? | MoneymanTV

Mortgage Market Update: Biggest Lending Surge Since 2007

Mortgage Advice in Hull for 2021

In light of the recent announcement from the British Prime Minister Boris Johnson, we want some share the positive news that came with the new lockdown rules.

Similar to the November 2020 lockdown, the property market is still open for business. You can take up house viewings, continue your purchase and still put your home up for sale.

Here is a mortgage market update from Malcolm the ‘moneyman’ himself:

Mortgage Market Update UK – 04th January 2021 | MoneymanTV

Lockdown 2020 and getting a mortgage in Hull

During the last lockdown in November 2020, there was a huge increase in mortgage enquiries. The boom in home purchase approvals reached a massive 105,000 in November, which is the highest since August 2007.

Graphic: UK Moneyman | Source: Bank of England

In October 2020, purchase approvals were at 98,300. This increase of 6,700 is impressive considering we were in the middle of a national lockdown.

Lockdown 2021 and getting a mortgage in Hull

In terms of the property market, the January 2021 lockdown is very similar to the previous November 2020 lockdown. You can still begin your mortgage journey in 2021. It’s up to you how you start this, it could be by yourself or through a Mortgage Broker in Hull.

January is a popular time of year for First Time Buyers, Home Movers, landlords etc., and as time progresses we are seeing more mortgage products becoming available again, allowing for more mortgage options to those investing in the property market.

90% mortgages are still available

Yes, 90% mortgages are still available and lenders are getting more and more confident in the market. They know that the demand is there and that people will only start coming back when they know that they can get a deal with a 5-10% deposit.

There are also other ways to access a 90% mortgage, for example, this could be through the Help to Buy Equity Loan scheme or the Help to Buy Shared Ownership scheme. If you want a Help to Buy Specialist to talk you through how using these methods could help you obtain a mortgage with only a 5-10% deposit, make sure to get in touch right away.

Open as usual

The property market is still open and so are we! We have Mortgage Advisors in Hull available 7 days a week throughout the year to help you through your mortgage journey.

Don’t worry, our free mortgage consultation still applies to every customer in every mortgage situation. Start your 2021 mortgage journey with Hullmoneyman today.

A Guide to Remortgages in Hull: Top Reasons to Consider

Remortgage Broker in Hull

The mortgage journey is a fruitful journey. It has its fair share of both highs and lows, but ultimately you will end up with one of the following: either your dream property to settle down in and maybe have a family, a stepping stone property to propel you further up the ladder or an investment purchase to provide some additional income.

No matter which path you took, there will eventually come a time when your mortgage term is nearing its end. You could sell up and upsize/downsize into a new property. Maybe you are looking sell your portfolio to the tenant or another buyer and look at other avenues? The most popular option however is a Remortgage.

What is a Remortgage?

First, let’s look at the definition. A Remortgage is where you use the proceeds from a new mortgage to pay off a pre-existing mortgage. There are a multitude of various options when taking out a Remortgage, ranging from minor to major.

Utilising the 20 years or so knowledge of our resident “Moneyman” Malcolm Davidson (host of our YouTube channel MoneymanTV), we thought it best to compile a quick guide to all the options you could have when it comes to taking out a Remortgage.

Remortgage For Better Interest Rates

Your initial mortgage deal will normally last 2-5 years and feature low fixed rates or possibly discounted rates. In some cases, you may even be placed on a tracker mortgage, which follows the Bank of England’s base rate.

When your term ends you will likely be moved along to the lenders Standard Variable Rate (you may see this mentioned across the web simply as SVR). In short, an SVR is a mortgage with an interest rate that can possibly change depending simply on what the lender wishes to charge. This does not follow the Bank of England’s base rate like a tracker mortgage.

As such, these are usually the most expensive paths to take, leaving many to look at Remortgaging for better rates, which will hopefully save you money on your monthly repayments.

Remortgage For Home Improvements

2-5 years into occupying your home, you may decide that something isn’t quite right. Maybe you need an extra room or larger living space for your kids/belongings, a new kitchen, a new office, or a loft conversion. Rather than move into a larger house, many seek to release their equity with a Remortgage in order to cover the costs of these.

Though it may seem like a daunting concept having to obtain planning permission and fund/manage your own project, some would argue it’s a lot less stressful and more rewarding than the process of finding a new home, selling your current one and moving your belongings.

In the long run, this may prove even more beneficial as creating more space and having good quality craftsmanship will likely increase the value of your property, handy for if you ever do decide to sell up or rent out.

Remortgage for Changes to Your Term

In some cases, people may simply wish to Remortgage in Hull for a better mortgage term, be that by reducing the length or switching to a more flexible product. Reducing the length does mean you won’t be paying back your mortgage for as long, so aren’t completely tied down forever, but as such your monthly repayments will be a lot higher. The longer your term, the lower the payments will be over time.

Some opt for a more flexible mortgage term when they remortgage. The benefits provided by this option can prove endearing to some homeowners. You may gain the ability to overpay, resulting in being able to pay your mortgage off as quick as you’d like, as well as being able to carry the same mortgage and rates over to another property, should you decide to move at any point in the future.

Though a flexible mortgage sounds near perfect, they usually come in the form of a tracker mortgage, which as mentioned earlier on follows the Bank of England base rate. This means one month your payments could fluctuate based on interest, making them a little unreliable.

Equity Release

Everyone has a level of equity in their property. This is worked out with the difference between what is still owed on the mortgage and the current value of the property. As touched upon briefly, this can be used for home improvements, however there are more options available for you out there.

Some use it to cover long-term care costs, to supplement their income, to have a holiday, to pay off an interest-only mortgage or to simply have free spending money.

In some cases, we find that Buy-to-Let landlords will use Equity Release as a means of covering their deposit for buying a future property to add to their portfolio.

Remortgage to Consolidate Debt

On the topic of Equity Release, another big one people use it for, is to pay off any unsecured debts you may have accrued over time.

Though it may seem easy enough, Debt Consolidation not only bases the amount on how much you’re owed and the value of the property, but also your credit rating. This could mean you are limited in the amount you can borrow.

Additionally, to pay off your previous mortgage and your debts, you will need to borrow more than your outstanding mortgage amount. This means your monthly repayments will most likely be higher. Though not an ideal situation, at least you can rest assured that should you find yourself dealt an unfortunate hand, you do have some options out there.

Should you find yourself with a particularly damaged credit rating, you do still have options to choose from, though these will not be easy and require very Specialist Remortgage Advice in Hull before going forward. Even then, there is no guarantee.

You should always seek mortgage advice before choosing to consolidate and secure any debts against your home.

Experienced Mortgage Advisors in Hull – Get in Touch

If you are reaching the end of your term and are wondering what your option may be for Remortgaging, it is worth your time to Get in Touch with an experienced and trusted mortgage broker in Hull.

An advisor will be able to discuss your circumstances and future goals, in order to create the best plan of action for you in the next step of your mortgage journey. It is our aim to ensure this go around is a quicker and smoother process than your first time.

Should I Transfer My Buy to Let (BTL) Property to my Limited Company?

Buy to Let Limited Company Mortgage Advice in Hull

As an experienced Mortgage Broker in Hull, we have worked with hundreds of local Buy to Let landlords and helped them secure competitive Buy to Let mortgage deals. Our customers who already have a current property portfolio always ask whether it’s possible to transfer ownership from your own individual name(s), into the name of your limited company.

Buying as an SPV in Hull

First of all, it is important to know how a mortgage lender will approach purchases from Limited Companies. There are not a lot of lenders that will accept Ltd Company applications through anything other than an SPV (Special Purpose Vehicle) Company.

An example of this is a company set up specifically for the purpose of investing in properties like this. When registering your company, your registration will include a SIC (Standard Industrial Classification) Code that First of all, you need to be aware of how mortgage lenders approach limited company purchases. There aren’t a lot of mortgage lenders that accept limited company applications through anything other than an SPV (Special Purpose Vehicle) Company, i.e. a company set up specifically for the purpose of investing in this type of property.

When you register a company, your registration includes a SIC (Standard Industrial Classification) Code that sets out the business type(s) in which the company will participate. Mortgage lenders don’t normally accept applications from general trading companies that can trade in other areas, so you have, for example, a plumbing and heating company, you would need to set up a separate company to your Buy to Let properties, rather than simply buying them through your plumbing company.

The SIC codes typically accepted are 68100, 68201, 68209, 68320 but it can vary from lender to lender. To find out more information about SIC Codes, consult the Government website:

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/527619/SIC07_CH_condensed_list_en.csv/preview

Pros and Cons Of Buying Under a Limited Company

Purchasing a Buy to Let property under a limited company comes with both advantages and disadvantages. For example, not every mortgage lender will consider applications from an SPV, preferring to limit their lending to individuals/couples in their own personal name(s). Therefore, individuals tend to have a wider choice of lender and product than SPVs. Of those lenders that will lend to an SPV, the mortgage rates offered would typically be higher than those offered to individuals. On the plus side, in recent years, changes to the way rental income is taxed has meant that, for many people, the tax advantages generated by SPV ownership (relating to how income is taken and how that income is taxed) make up for any extra interest charges or lack of choice.

As a Buy to Let Mortgage Advisor in Hull, the first thing we’d always recommend when considering whether to buy your property portfolio under the auspices of an SPV is that you get advice from a specialist tax advisor. They will assess how factors, such as your other income sources and the rate of personal income tax you pay will affect your overall tax status and establish whether individual or SPV ownership is better for you.

So… Should I transfer properties that I already own to an SPV?

As we mentioned before, the main factor in deciding whether to buy under an SPV is your tax position. This is complicated further when deciding whether to transfer properties you already own as an individual into company ownership. There is a slight problem though, this sort of transaction is not a simple transfer; it’s a change of legal ownership.

The limited company is a separate corporate identity, so the transaction is essentially a purchase by the SPV from you selling as an individual, so you’ll have to account for stamp duty charges, legal costs and new mortgage valuation charges. Also, you will need to remember that limited companies have running expenses and legal obligations. However, these may be offset by the potential upside of some tax-deductible costs or long-term tax benefits.

Where Landlords are looking to increase their property portfolio, it often works out that they continue to hold existing properties in their sole name(s) but purchase any new additions under the company name, thus avoiding all the on-costs of switching. With that said, no case is the same and there may be some circumstances whereas switch would be beneficial in the long run, even considering the costs of switching.

As you can tell, this is a specialist topic meaning that you should know exactly what you are doing. So if you are thinking of taking this route, you should know that our team of mortgage experts are here to help you with all of the arrangements, providing top quality Buy to Let Mortgage Advice in Hull, backed up by introductions to appropriately experienced accountants and solicitors as required.

Malcolm on BBC Radio: Mortgage Payment Holidays Q/A

Mortgage Payment Holidays in Hull

In the last few weeks, we have seen lots of borrowers questioning mortgage payment holidays and how they work. The suggestion is that 1/9 mortgage holders have taken one out since the outbreak of COVID-19, they are becoming quite popular.

Here at your Mortgage Broker in Hull, we have seen quite a surge in borrowers asking us what we would do and what we would recommend them to do in their situation. Here are some of the most commonly asked questions about mortgage payment holidays and their answers from Malcolm’s BBC Radio interview with David Burns on the 15th April 2020.

Are many people taking a Mortgage Payment Holiday? Is it worth doing, is it sensible?

“Well, the suggestion is that there are over a million people that have taken out a mortgage payment holiday. We have had a number of enquires about them and banks have had to redeploy a number of their staff that would usually be processing applications to take the incoming calls as they are constantly being swamped. It seems that everyone wants to take one out, or they are just rushing into it, which you shouldn’t.

In terms of applying for a payment holiday, there are a few things that you will have to look out for. Firstly, the mortgage payments that you are taking a break from will not get written off, you will have to make up these payments at a later date; you can do this in a couple of different ways. Another thing is to not just go cancel your direct debit, the payment holiday has to be an arrangement between you and your lender/bank/building society, so if the borrower were to just cancel the direct debit, then they would be running the risk of their lender marking arrears against their account. This could heavily affect your ability to get a mortgage or other credit in the future.”

Will I end up paying more money back overall because of default interest?

During the BBC Radio show, Malcolm offered to answer questions from the public. We got a really good response and were asked even more valid questions, for example:

“I don’t think it would be worth taking a mortgage holiday because it will still have to paid back at a later date and there will be default interest to pay on top of the basic mortgage they’ve missed”

“My advice to anyone who is asking this question is that if you are continuing to work in your job and your finances are unaffected, you are completely right, there is no need to take a mortgage payment holiday. The scheme was designed to help people whose income has been affected, for example, they might have been laid off through work, or furloughed. So, there are lots of people out there that do need this, and she is absolutely right the payments will need to be made up at a later date, often by an increase in your monthly payments.

In terms of making up the months that you missed, you might be faced with an increase in your monthly mortgage payments. What most people don’t realise is that it could only be by £10 or £20 a month, depending on the size of your mortgage term. So in the end, it may not be that bad of an idea if you are really struggling to afford your payments at the moment.”

Do you have to prove that you are financially struggling?

“No, you do not, the FCA has issued some guidelines to lenders and that is one of the things stated. You do not have to prove that you are suffering from financial hardship at all, you can just make the request and they should handle it sympathetically and then grant the request. They also have other guidelines in place that they need to follow, such as, the payment holiday should not be recorded on the customer’s credit file to impact them getting credit at a later date.

Even if the customer does not specifically ask for a payment holiday, they may call in about their payments, their lender should automatically offer the mortgage holiday option. So, it is not just the borrowers who should ask for one, your lender should offer you one too.”

I have been furloughed, do my mortgage payments get reduced by 20% too?

People have been asking whether they can scale their mortgage payments. For example, you have been furloughed so you are now on 80% of your wage, so are you then also eligible to pay 80% of your mortgage payments?

“I think that if you were being furloughed and you think that your income is going to be adversely affected, you may as well take the first three months now rather than cause yourself any potential sort of hardship down the line just in case the scheme gets pulled in a couple of months when you most need it. If you are questioning your ability to meet your mortgage payments in any way, it could be your best option to take one now. Most customers are actioning on it straight away and starting the 3-month break from now.

The situation is changing rapidly and we are also experiencing what lenders are doing on new mortgages as well; we are in a completely new world. The offer is there at the moment for the 3 month payment holiday, if you don’t need it, don’t take it, if you do, accept it straight away.”

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www.financial-ombudsman.org.uk

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