In depth
Mortgages
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Mortgage
Matters
Mortgage Matters (Hayes) is always ready to help advising and supporting you throughout the entire process of your Mortgages of any kind. We can support to First time buyers, Buy to Let, Let to Buy, Help to Buy, Shared Ownership, Offset Mortgages. We can also help to Re-Mortgage your property with the most suitable option for you.
Please choose your interested section below for detailed information.
The Financial Conduct Authority do not regulate buy to let mortgages.
Think carefully before securing debt against your home, your home may be repossessed if you do not keep up repayments on your mortgage.
Residential Mortgages
First time buyers
Buying your first house is one of the biggest moments in your life. It can be a really exciting and nerve-wrecking experience. There are a range of options available to help first time buyers to get onto the property ladder including Help to Buy, Right to Buy, Shared Ownership, Offset Mortgage etc.
As a first-time home buyer, the most important thing to bear in mind is whether you can really afford to take this step. It’s wise to put together a budget before you start looking for a property. There are now strict checks when you apply for a mortgage. Lenders will check you can afford the mortgage and also ‘stress test’ your ability to make your payments if interest rates were to rise or if your circumstances changed, such as a planned retirement date or if you started a family.
As part of the mortgage application process you’ll need to show the lender evidence of any outgoings you have and prove your income.
Help to Buy
Help to Buy Equity Loan scheme: available to first-time buyers and existing homeowners who want to buy a ‘new build’ house. The purchase price must be no more than £600,000. Under this scheme, you can borrow 20% of the purchase price interest-free for the first five years as long as you have at least a 5% deposit. If you live in London, you can borrow up to 40% of the purchase price.
The Help to Buy equity loan scheme will be extended until 2023. However, this extension will be restricted to first-time buyers purchasing newly built homes.
From 2021, there will also be new regional price caps which could reduce the maximum value of home that can be bought through the Equity Loan Scheme.
Those with a small deposit, could be eligible to use the Help to buy scheme:
This scheme is available in England only. If you live elsewhere in the UK, you can use:
Right to Buy
Right to Buy is for tenants in England, Wales and Northern Ireland who rent their home from their local council. It allows tenants who qualify, to buy their home at a discount. The size of the discount varies depending on where you live and the type of property you want to buy.
Tenants who were living in a council home before it transferred to another landlord such as a housing association, might be eligible to buy their home under the ‘Preserved’ Right to Buy or Right to Acquire schemes. Usually, tenants must have rented from the public sector (i.e. local council, housing association, armed services, NHS or foundation trust) for three years before they can buy under these schemes. The three years can be non-consecutive. So you could still qualify if you rented from the private sector between times when you rented from the public sector.
Right to Acquire is a scheme currently offered in England for housing association tenants who don’t qualify for Right to Buy. The discounts are slightly smaller.
In Northern Ireland: this scheme is called the House Sales Scheme and is for tenants who rent from the Northern Ireland Housing Executive or a housing association.
In Wales: Right to Acquire and Right to Buy ended for all Council and housing association tenants on 26 January 2019
Shared Ownership
Shared ownership is where you buy a share of a home from the landlord, who is usually the council or a housing association, and rent the remaining share.
You need a mortgage to pay for your share, which can be between a quarter and three-quarters of the home’s full value. You then pay a reduced rent on the share you don’t own. Later you can choose to buy a bigger share in the property up to 100% of its value.
Eligibility restrictions on the shared ownership have lifted. You could buy a home through Help to Buy: Shared Ownership in England if:
You have a household income of less than £80,000 (outside London) or £90,000 (inside London)
You are a first-time buyer, you used to own a home but can’t afford to buy one now or own an existing shared ownership property but are looking to move.
Offset Mortgage
An offset mortgage is where you have savings and a mortgage with the same lender and your cash savings are used to reduce – or ‘offset’ – the amount of mortgage interest you’re charged. Instead of a standard savings account, you could place your savings in an offset account linked to your mortgage.
Re-Mortgage
Re-Mortgage is the process of paying off one mortgage with the proceeds from a new mortgage using the same property as security. Homeowners may choose to re-mortgage for various reasons, usually to reduce the overall monthly mortgage payment amounts by switching to a better interest rate for a certain period of time. This process involves simply switching your mortgage to another deal with another lender without actually moving property.
Some people switch mortgages because it will work out cheaper for them. Some people re-mortgage to release the equity from their home where they are borrowing more money than their existing mortgage from a bank or mortgage lender which you can re-invest in other property to let, support to your children to buy their own home or spend on the improvement work of your current home. Other people also re-mortgage to consolidate their short terms debts even though debt consolidations is not always suitable option as securing short term debts against your home could increase the term over which they are paid and therefore increase the overall amount payable towards the mortgage.
You may have to pay an early repayment charge to your existing lender if you re-mortgage.
This article is intended to provide a general appreciation of the topic and it is not advice.
Buy to Let Mortgage
A buy-to-let mortgage is a mortgage sold specifically to people who buy property as an investment, rather than as a place to live. If you plan to rent out a new property, most lenders will prefer you not to finance your purchase with a standard residential mortgage. Buy-to-let mortgages are powerful tools both for seasoned investors and for new landlords looking to take their first steps into the rental property market.
We take time to really understand your needs and objectives and if a buy-to-let property is going to help you to achieve your financial goals, we will secure you a competitive deal. Most borrowers take out an interest-only mortgage for their chosen property. They then only pay the interest on the loan as it accrues every month, generally from the proceeds of the rent they collect. The capital debt – the full amount of the mortgage is paid at the end of an agreed term either by selling the property or from other planned sources. Buy-to-let properties remain a desirable investment for many people wanting to create additional income, particularly in retirement.
Let to Buy Mortgage
Let-to-buy is when you rent out your existing home and buy a new one to live in. Essentially, it involves having two mortgages at the same time. You convert your existing mortgage to a buy-to-let mortgage so you can let out your current home, and then take out a standard residential mortgage on the home you’re buying. There are various considerations and complications with let-to-buy, including the costs and challenges of becoming a landlord and the need to manage two mortgages.
There are a number of reasons you might be considering let-to-buy. Perhaps the most common is that you want to use equity you’ve built up in your home to enable you to move to a new one, while also keeping the existing home as a long-term investment. Let-to-buy could also be suitable for homeowners in the following situations: You’re in a hurry to move to a new home and can’t wait to sell your current property. You have struggled to sell your home due to market conditions. You want to buy a property with a partner but maintain ownership of your current home. You’re moving elsewhere for a few years but plan on moving back to your home in the future.
Mortgage Interest Rates &
Different Payment Options
Fixed Rate
A fixed-rate mortgage is a mortgage where your interest rate is guaranteed to stay the same for a set period of time. This can offer peace of mind because, unlike a variable-rate mortgage (such as a tracker), you’ll know exactly how much you’ll need to repay each month during this period. With a fixed-rate mortgage, your interest rate and therefore your monthly mortgage payments are fixed for a certain period. This can be as short as one years or as long as 10/15 years.
You can currently fix your rate for one, two, three, five, seven, 10 or 15 years. Generally speaking, the longer your fixed-rate deal lasts, the higher the interest rate will be. This is because it is harder for a lender to predict what will happen in the market over a longer period of time – you’re essentially paying for the security of knowing that your rate won’t go up no matter what happens. If you need to pay off your mortgage while you’re in a fixed-rate period, for example if you want to move house or mortgage, it can be very expensive as you’ll generally have to pay an early repayment charge. Most early repayment charges on fixed-rate mortgages will cost you a percentage of the amount you’re repaying, which can end up being thousands of pounds. So, if you’re likely to be moving house within the next five years, you might want to consider a shorter-term fixed-rate deal or a five-year product with no (or low) early repayment charges instead.
When your fixed-rate period comes to an end, your lender will transfer you onto a standard-variable-rate (SVR) mortgage. Every lender sets its own SVR and this can change by any amount at any time.
Variable rate
With a variable rate mortgage, your interest rate could go up or down from month to month, meaning the amount you repay is subject to change.
A standard variable rate mortgage is what you’ll be transferred onto when a fixed, tracker or discount deal comes to an end. Each lender sets its own standard variable rate (SVR), and this is the default interest rate that you’ll be charged if you don’t re-mortgage. Standard variable rates tend to be higher than the rates on other types of mortgage. A standard variable rate is a type of variable-rate mortgage, meaning the total amount that you pay could change each month. When you repay your mortgage, part of the money goes towards the interest charged by your lender, and the other part towards repaying the money you’ve borrowed (the capital). If your lender raises its SVR, your monthly payments will increase. But the extra money you pay will go towards the higher interest rather than the capital, so you wouldn’t be paying off your mortgage more quickly. If you’re on your lender’s SVR, you need to be comfortable with the risk of your monthly mortgage payments going up if the rate changes.
Tracker rate
A tracker mortgage is a home loan where the interest rate you pay is based on an external rate – usually the Bank of England base rate – plus a set percentage. If the base rate went up, the interest rate on your tracker mortgage would also rise. The base rate is set by the Bank of England’s Monetary Policy Committee, which meets eight times a year to vote on what the rate should be. This means the base rate could potentially change eight times a year (though this would be extremely unusual) – so you need to factor in the possibility of your rate going up multiple times when working out what you can afford to repay. In some cases, a base rate fall will lead to a reduction in your interest rate. However, the tracker mortgages with the best rates often have a ‘collar’ (a minimum rate you can pay) set at the amount you’re paying at the beginning of the deal. If you chose a deal with a collar set at your introductory rate, you wouldn’t benefit from base rate decreases but would have to pay for increases. Because a tracker mortgage is a type of variable-rate mortgage, the total amount that you pay each month could change.
Some tracker mortgages follow the London Inter-Bank Offered Rate (Libor) rather than the base rate, though this is more common for buy-to-let mortgages. Libor is the rate banks charge to lend money to each other. Libor trackers are far less common than mortgages tracking the Bank of England base rate. And Libor itself is due to be phased out by 2021, meaning Libor tracker mortgages are on their last legs.
Discount rate
A discount mortgage, also known as a discounted variable rate, has an interest rate that is set a certain amount below the lender’s standard variable rate (SVR). It goes up and down when the SVR moves. Discounted variable rate mortgages offer a discount on a certain interest rate, most commonly a lender’s standard variable rate. The discount can be for an introductory term of two, three or five years, or it could even be for the entire term of the mortgage (a lifetime discounted rate).
Types of Mortgage Payments
Capital & Repayment payment
A repayment mortgage is a home loan where you repay a bit of the capital, which is the amount you borrowed, along with some interest each month. With a repayment mortgage, as long as you meet all your monthly payments, you’re guaranteed to have repaid your entire loan by the end of the mortgage term. Repayment mortgages are by far the most common type of mortgage in the current market – and if you’re buying a home to live in, rather than a buy-to-let property, you’ll nearly always take out a repayment mortgage. In the first few years of your mortgage term, a bigger proportion of each monthly payment goes towards the interest, and a smaller part towards the capital. With time, the balance shifts, with less going towards interest and more towards paying off your loan.
Interest only Payment
With an interest-only mortgage, your monthly payment pays only the interest charges on your loan, not any of the original capital borrowed. This means your payments will be less than on a repayment mortgage, but at the end of the term you’ll still owe the original amount you borrowed from the lender.
Split Mortgage Payment
A split mortgage payment is a loan feature that allows you to split your mortgage payment on a part-repayment and part-Interest Only basis. Only some lenders offer mortgages on a part-repayment and part-interest-only basis. This option means that at the end of the term some of the mortgage capital will still be owed and will need to be repaid.
We Will Help You Every Step Of The Way
From first time buyer to buy to let or let to buy, from Life insurance to Mortgage Protection Insurance or Building and Content Insurance, from re-mortgaging your existing property to protecting your business, we will always be at your reach
