Author: Dax McClean

Are you considering paying off the balance on your mortgage, remortgaging with a different lender, or transferring the loan to a different property and wondering how much it will cost?

Knowing how much it can cost to end a mortgage before the agreed term ends is vital for making informed decisions.

Here is everything you need to know about early mortgage exit fees.

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What is An Early Exit Mortgage Fee?

An early exit fee is an administration charge that lenders impose when you pay off your mortgage before the agreed term ends.

You’ll likely face an early exit fee when you remortgage to a new lender, move houses, and port your mortgage or make overpayments to clear your balance early.

Lenders may refer to an early exit fee in various names, including closure fees, repayment administration fees, discharge fees, or deeds release fees.

The payment usually covers the administration costs of closing your mortgage account, including releasing deeds and updating records.

Previously, mortgage lenders typically held the property title deeds and placed a legal charge against your house until you repay the debt.

The exit fee covered the costs of removing the charge and sending the deeds to your solicitor or new lender, hence the ‘deeds release fee.’

How Much is An Early Exit Fee?

Early exit fees differ among lenders, ranging from £50 to £300. Some lenders don’t charge exit fees for new applicants, while others include it as part of the administration fee.

They can refer to it as an account fee and charge you upfront at the beginning of the mortgage instead of waiting until your exit.

Ensure you review your terms when comparing options and consider the impact of the exit fees when deciding whether to remortgage and switch providers before the end of your deal.

If your current lender charges exit fees, you must determine whether the benefits of moving to a new lender, such as low monthly payments, outweigh how much you’ll pay when leaving.

Some older mortgage deals may feature higher fees, so check your mortgage agreement if you’re unsure about what you might pay.

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When Will You Pay a Mortgage Exit Fee?

Generally, you’ll pay an early exit fee anytime you close the mortgage account with your current lender. This can happen in scenarios like:

• The End of Your Term – When you make your final payment at the end of your agreed mortgage term, the lender will formally charge the exit fee to close the account.

• When Remortgaging – If you decide to switch to a new lender before your current mortgage term ends, you must pay the exit fee to close the old account before opening a new one.

• When Selling Your Property – If you sell your house and use the proceeds to repay your mortgage, the lender can apply the exit fee as part of the settlement process.

Is the Mortgage Exit Fee Similar to an Early Repayment Charge?

No. Mortgage exit fees differ from early repayment charges (ERCs). You’ll normally pay an ERC when leaving a particular interest rate deal before the agreed term ends.

This can be a fixed-rate, tracker, or discounted mortgage deal, and the charge usually applies during the tie-in period because of breaking the agreement.

An early repayment charge can cost you more than an exit fee, depending on the lender’s terms and when you pay off the mortgage. Lenders usually charge ERCs as a percentage of the outstanding mortgage amount, ranging from 1% to 5%.

For example, assume you have a £200,000 mortgage on a 5-year fixed deal with an ERC of 2%.

If you want to remortgage and move to a different lender after 2 years, your current lender will charge you £4,000 (2% x 200,000) for switching before the agreed term ends. If the lender has an exit fee, they’ll include it in the total amount.

Some lenders charge ERCs on a sliding scale, where the percentage decreases over time. For example, the lender may charge 5% in the first year, 4% in the second, 3% in the third, and so on until the tie-in period ends.

Others don’t charge ERCs in every scenario, so ensure you review the specifics of your agreement when considering a switch or ask the lender directly.

Related reading: 

• Reasons for remortgaging.
• Remortgaging to release equity.
• Remortgaging to buy another property.
• Remortgaging with bad credit.
• Remortgaging for home improvements.
• I own my house outright can I remortgage? 
• Capital raising mortgages.

How Can You Avoid Mortgage Exit Fees?

The mortgage exit fee is generally unavoidable unless your lender doesn’t impose it.

Even if you choose to ride out the mortgage term to the very end, they can still charge the fee as an admin expense to close your mortgage account.

However, there are various strategies you can use to reduce their impact. These include:

• Confirming the fee before entering an agreement – Ask potential lenders about their exit fee when shopping for a mortgage. This can give you a clearer picture of how much it will cost to close the account in the future.

• Avoid frequent switching – Remortgaging too often will result in repeated exit fees, which can pile up and outweigh the benefits of changing lenders. Ensure you compare the benefits of new deals with the cost of the fees associated with leaving the current lender.

• Negotiate with your lender – Although it’s not guaranteed, you can try negotiating with the provider, especially if you’ve been a long-term customer and your repayment history is excellent. Sometimes, the lender may be willing to reduce the exit fee or waive it altogether.

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Can You Get Overcharged?

In the past, there were cases of customers facing higher exit fees than expected, but a Statement of Good Practice from the Financial Services Authority (FSA) helped prevent such increases. Following the statement, lenders agreed to charge an exit fee that can’t vary during your mortgage term.

The fee should also reflect the admin costs of an exit, and any variations should be explained from the outset. If a lender charges you a higher exit fee than what is stated on your contract, you’re allowed to ask for a refund.

Call us today on 01925 906 210 or contact us to speak to one of our friendly advisors.

Final Thoughts

Understanding all the fees associated with a mortgage, including exit fees, is essential to make informed decisions in your house-buying journey.

Always ask potential lenders about all the fees involved and incorporate the services of a mortgage broker who can guide you through the process and ensure nothing sneaks up on you.

Sources and References

• https://www.fca.org.uk/news/press-releases/mortgage-exit-administration-fees-meafs-update

Proving that you have a stable job and income is vital for getting approved for a mortgage.

Lenders verify income by asking for payslips if you work as a pay-as-you-earn (PAYE) employee. Payslips prove how much you earn and help assess how much you can borrow.

But how many payslips do you need for a mortgage in the UK? Read on to find out.

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How Many Payslips Are Required for a Mortgage?

Mortgage providers usually require you to provide at least three of your most recent payslips if paid monthly. The number of payslips you must provide will vary based on various factors. These include:

Frequency of Payments

Lenders can ask for a different number of payslips depending on how often you get paid.

The payment frequency will help determine the consistency of your income, with most lenders preferring to work with borrowers with regular income instead of unpredictable earnings.

The table below shows the number of payslips you may need for a mortgage depending on the frequency of payments:

Payment Frequency	Number of Payslips Needed
Every week	8 payslips
Every two weeks	6 payslips
Every month	3 payslips
Every quarter	3 payslips
Every half-year	4 payslips
Every year	2 payslips

Extra Income

If you get extra income like a bonus, overtime, or commission, lenders will need you to show more payslips.

Providers may consider the additional income as part of their earnings depending on their criteria and the type of income.

You must show the lender that the extra income is regular so they can count it as part of your earnings.

The Lender’s Policy

Lenders can have varying requirements and criteria for mortgage approval. Some can feature strict guidelines for proving income, while others can be more flexible.

Factors like your credit score or deposit size can also impact how many payslips you must show. You may face less scrutiny if you have a sizeable deposit or a strong credit history.

What Information Should Your Payslips Include?

Most lenders require your payslips to have essential information like:

• A clearly shown pay date and tax period
• Employee name that matches the name in the mortgage application
• Your net pay
• Your gross pay in the form of basic salary, notional salary, or contractual pay
• Additional allowances, including shift, location, or car allowances
• Any overtime, bonus, or commission if included
• An address matching the address on your application
• The employers name
• The outgoings included in your application, such as childcare or student loan payments

Why Do Lenders Ask for Payslips?

To Confirm Your Employment and Profession

The payslips prove to the lender that you’re permanently employed and have a stable income to afford mortgage repayments comfortably.

Your employment type can affect how much you can borrow. High street lenders like banks prefer working with employed applicants as they’re considered lower risk.

They also favour applicants in low-risk careers, including those with a structured career path, such as doctors, police, teachers, and solicitors. Borrowers in such careers can easily qualify for higher income multiples.

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To Comply with Lending Regulations

The Financial Conduct Authority (FCA) requires mortgage providers to assess whether you can afford repayments for the loan you wish to take out before approval.

Lenders must take reasonable steps to ensure you don’t get into unmanageable debt, including asking for your payslips to confirm your earnings.

They undertake a mortgage affordability assessment by considering your income, debts, and how much you spend.

Related reading: 

• Reasons for remortgaging.
• Remortgaging to release equity.
• Remortgaging to buy another property.
• Remortgaging with bad credit.
• Remortgaging for home improvements.
• I own my house outright can I remortgage? 
• Capital raising mortgages.

To Determine Your Borrowing Capacity

Payslips also help lenders confirm how much you earn to determine how much you can borrow.

Most lenders assess your borrowing capacity using income multiples and are willing to offer 4 to 4.5 or 5 times your annual income.

For example, if your income is £40,000, you’ll likely be able to borrow £160,000-200,000.

If your payslips show consistent overtime, bonus, and commission payments, some lenders can include them as part of your overall income, increasing your borrowing capacity.

To Calculate Your Debt-to-Income Ratio

The payslips also allow lenders to calculate your debt-to-income ratio when assessing your affordability.

The ratio shows the proportion of your income spent on paying off existing debts, including personal loans, credit card debt, or car finance.

For example, if you have a monthly income of £2,000 and spend £500 paying off debts, your debt-to-income ratio is ((500/2,000) x 100), or 25%.

The lender will reduce the amount they’re willing to offer if you have a large debt, such as 50% of your monthly income.

Most lenders prefer a debt-to-income ratio below 20% since it shows you’re a low-risk borrower who manages debts well.

Can You Qualify for a Mortgage without Payslips?

Yes! If you’re self-employed or a contractor, you can use other documents instead of payslips to prove your income. Lenders will want evidence of your recent, current, and potential future earnings.

Documents you can use include:

Tax Returns

Most lenders will require you to provide at least two to three years of your SA302 tax overview or HM Revenue and Customs (HMRC) documents.

They’ll calculate your earnings over two or three years of accounts, with some considering one year of accounts or less.

If you do your Self-assessment tax return, you can print your tax year overview or tax calculation using commercial software or the HMRC’s online services.

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Bank Statements

Lenders will want to see your bank statements for 3 to 6 months to assess your finances and income.

Bank statements can help lenders verify your income, clarify affordability, check for additional risk factors, and see your deposit funds.

Things that lenders look at in your bank statements include how much you earn, the outgoings, deposit source, and issues like excessive gambling or possible fraud.

You can optimise your bank statements before applying by avoiding unnecessary overdraft facilities, avoiding non-essential purchases, and ensuring your income or earnings go into the same account.

Call us today on 01925 906 210 or contact us to speak to one of our friendly advisors.

Final Thoughts

Most lenders require at least three of your most recent payslips to qualify for a mortgage if you’re paid monthly.

However, the payslips needed can vary depending on how often you’re paid, the lender’s policy, and whether you receive any extra income.

Taking out a mortgage is a big financial commitment, so it’s essential to work out how much it will cost you.

Knowing your monthly repayments will help you determine whether the deal you get is affordable now and in the future.

This guide explores everything you need to know about repayments on an £80,000 mortgage over 10 years.

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What is the Monthly Cost of an £80,000 Mortgage Over 10 Years?

The monthly cost of an £80,000 mortgage over 10 years would be £849. This is based on a capital repayment agreement and an interest rate of 5%, a typical deal in the current UK market.

The total amount you’d pay by the end of the mortgage term would be £101,823. You can get lower monthly repayments if you take out the mortgage for a longer term, but you’d pay more overall.

What Factors Impact Repayments an £80,000 Mortgage Over 10 Years?

Various factors can impact the monthly repayments on an £80,000 mortgage over 10 years. These include:

Repayment Type

You can choose a capital or interest-only repayment mortgage, and each will impact how much you pay monthly.

Most residential mortgages in the UK involve a capital repayment structure where you pay back a portion of the capital and interest every month.

With interest-only mortgages, your monthly repayments only cover the interest, so you’ll still owe the full amount you borrow at the end of the term.

You’ll get lower monthly repayments with an interest-only mortgage, but you’ll pay more overall and must have a reliable repayment vehicle to repay the capital in one lump sum.

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Interest Rate

Lenders charge an interest on the amount you borrow when you take out a mortgage. It’s the cost of borrowing the money and is a percentage of the loan amount. The interest is usually added to your monthly mortgage repayments, impacting how much you pay.

A low interest rate will translate to lower monthly repayments and reduce the total cost of the mortgage, so you can save a lot by getting a favourable rate.

Factors that will impact the interest rate you get include your credit history, employment status, and loan-to-value (LTV) ratio.

For example, although there are lenders who will help you get a mortgage if you have non-traditional employment, they’ll likely charge a higher interest rate than someone with a formal job.

The table below shows how much a £80,000 mortgage over 10 years will cost per month and, in total, based on different interest rates on a capital repayment structure.

Interest Rate	Monthly Repayments	Overall Repayment
3.5%	£791	£94,930
4%	£810	£97,195
4.5%	£829	£99,493
5%	£849	£101,823
5.5%	£868	£104,185
6%	£888	£106,580

Product Type

The mortgage type you choose will impact your repayments. The most common product types for residential mortgages in the UK are fixed-rate and tracker-rate mortgages.

A fixed-rate product allows you to lock in the same interest rate for a period. The interest rate remains the same no matter what happens, so your repayments won’t be affected when interest rates in the market rise.

You can plan for the same amount monthly and get significant savings if you lock in a low rate for the long term.

Tracker rate mortgages change according to the base rate set by the Bank of England. The tracker rate rises when the base rate rises and falls when it goes down, meaning your repayments can differ from one month to the next.

Related reading: 

• Reasons for remortgaging.
• Remortgaging to release equity.
• Remortgaging to buy another property.
• Remortgaging with bad credit.
• Remortgaging for home improvements.
• I own my house outright can I remortgage? 
• Capital raising mortgages.

Credit History

Your credit history helps lenders determine how well you manage your finances and your reliability as a borrower.

It can show how responsible you’ve been when borrowing money. A positive credit history will improve your chances of getting a mortgage with better rates, which will reduce your monthly repayments and overall cost.

You’ll likely get a higher interest rate if you have a negative credit history since lenders consider you a higher risk.

Deposit Size

The deposit size will affect the interest rate you get and impact your monthly repayments.

Lenders have minimum deposit requirements, which is the amount you must put down to qualify for the mortgage.

The lowest you can get is 5% of the property’s value, but such deals will feature less favourable interest rates.

Many lenders will want you to put down a 10% deposit. Higher deposits can give you access to a wider pool of lenders with better deals and more competitive interest rates that will keep your repayments low.

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What Other Costs Are Involved?

You should expect other costs before and after taking out an £80,000 mortgage. These include:

Product/Arrangement Fees

Some providers can charge up to £2,000 to set up the mortgage. Others may not charge anything but will likely have higher interest rates.

You can pay it upfront or add it to the mortgage, increasing your debt and monthly repayments.

Valuation Fees

Depending on the lender, you may need to cover the property valuation cost. Valuation ensures the property is worth what you’re paying and can cost you between £250 and £1,500. In certain deals, the lender can waive this cost.

Booking Fee

You may need to pay a fee when making a formal mortgage application. It can cost from £99 to £250, and you’ll need to pay upfront. Some lenders can waive this fee or roll it into the product fees.

Account Fees

The account fee covers the general administration of your mortgage account, including maintenance and eventual closure. It can cost from £100 to £300.

Missed Payment Penalties

If you fall into arrears or miss a mortgage payment, the lender may charge a missed payment penalty, which can vary depending on the lender.

Early Repayment Charges

Some lenders can impose an early repayment charge (ERC) if you overpay more than the allowed limit or pay off your mortgage too early. It’s usually 1% to 5% of the outstanding mortgage.

Call us today on 01925 906 210 or contact us to speak to one of our friendly advisors.

Final Thoughts

Repayments on an £80,000 mortgage over 10 years can vary depending on the repayment type, interest rate, deposit size, product type, and credit history.

Consulting a qualified and experienced mortgage broker can ensure you get the best deal for your situation.

Knowing how long it would take to sell your house can ensure you set realistic goals and expectations.

The process can feel lengthy and frustrating, especially if you’re in a rush. Every property is different, and various factors can impact the selling process, some of which are outside your control.

This guide explores everything you need to know about how long it takes to sell a house in the UK to ensure you have a realistic timeline of the process.

What is the Average Time of Selling a House in the UK?

The UK government notes that the average time to sell a home in the UK is around five months.

However, it can take longer depending on where you live, the type of property you’re selling, and whether you’re involved in a chain or sequence of property transactions.

It’s important to note that the timeline runs from the moment you list your home until the completion date when the buyer can move in.

How Long Do the Stages of Selling a House Take?

Selling a house involves several stages, each impacting the total time taken. These include:

Stage 1: Listing Your House (1-3 Days)

Listing your house on the open market, also known as an estate agent sale, is the first stage in the selling process. It involves advertising your home with an estate agent to find and negotiate a deal with interested buyers.

Research estate agents before you get the ball rolling to avoid wasting time looking for the right match.

Once you choose a suitable agent, they’ll visit your property to take photos for the listing and ensure the home has a valid Energy Performance Certificate (EPC). The process can take between one and three days.

Stage 2: Getting An Offer (5-14 weeks)

An essential factor that will impact how long it takes between listing your property and getting an offer is how hot or cold the property market in your area is.

In cold markets, there are a few buyers around, meaning your home can take a while to sell, while in hot markets, there’s more demand from buyers, meaning your house will sell quickly.

You can get an offer in around five weeks or 32 days in a hot market, and it can take around 14 weeks to get an offer in a cold market.

Stage 3: Conveyancing and Mortgage Application (12-16 weeks)

Conveyancing is usually the longest part of the house-selling process and can take around 12 to 16 weeks. It starts after accepting an offer on your property and involves checks to ensure you and the buyer are truthful about the property and the ability to buy.

The buyer’s solicitor organises various searches on your property, including local authority searches, environmental searches, water and drainage searches, and a Land Registry search.

The conveyancing can take longer if the searches find a problem that requires further investigation or if the property has a leasehold or restrictive covenants.

Due to limited resources, local authorities can be slow when completing search requests.

The buyer’s mortgage can directly depend on the results of the surveys, which can delay the process further since selling the property depends on the buyer’s access to funds.

The buyer’s conveyancer will also contact the other conveyancers in the chain to prepare contracts for exchange and completion.

Stage 4: Exchanging Contracts and Completion (7-28 days)

You can exchange contracts once the surveys and searches are complete and the buyer has arranged their finances.

Both parties and their conveyancers will review the contracts to ensure they’re correct. The conveyancers from both parties will then make a formal exchange.

The exchange can occur over a recorded phone call and usually happens as part of a property chain.

All the buyers in the chain must be fully ready since it involves the first conveyancer calling the second to conduct the exchange, the second calling the third, and so on. The process continues until all the parties in the chain finish exchanging contracts.

The property purchase becomes legally binding to complete after the contract exchange. You can sue the buyer for your legal costs and deposit if they back out after the exchange.

Related reading: 

• Reasons for remortgaging.
• Remortgaging to release equity.
• Remortgaging to buy another property.
• Remortgaging with bad credit.
• Remortgaging for home improvements.
• I own my house outright can I remortgage? 
• Capital raising mortgages.

The final stage is completion and involves the buyer becoming the legal owner of the house.

All parties in the chain agree on a completion date before exchanging contracts. It’s the day sellers move, and buyers pay in full for the property through their conveyancer or solicitor.

Although it’s possible to exchange and complete on the same day, it’s not recommended. It can be challenging to arrange and can result in disaster if a mortgage company fails to pay out in time or some paperwork goes missing.

Completion is generally set for 7 to 28 days after the contract exchange to give everyone enough time to get their money in place and prepare for the upcoming move.

What Can You Do to Speed Up the Sale of a House?

Make Your Property More Desirable

Your property’s condition is one of the most influential factors when selling a house in the UK.

Homes in good condition usually sell faster than those requiring work, so make your property as desirable as possible to attract buyers and offers.

You want buyers to visualise themselves living in the house, which can be challenging if poorly maintained and cluttered.

Set a Reasonable Price

Reasonable pricing will attract more buyers and lead to more offers. Fewer people will view and make offers on overpriced houses, meaning they’ll stay on the market longer, and you may end up selling for a lower price than you would have if you had listed it for less.

Research the recent sales prices of similar houses in your area to determine a realistic price. You can also consider size, location, condition, and unique features.

Communicate and Stay Responsive

Keep regular contact with your estate agent and solicitor to ensure you’re up to speed with progress and that it’s on track.

You can also arrange regular updates with everyone involved to ensure they know what they should do and when. You should also go through, sign, and return all documents quickly to avoid delaying the process.

Final Thoughts

Selling a house in the UK can take around six months or up to 34 weeks. However, the time can vary depending on how long each stage takes.

Strategies like making your house more desirable, setting a reasonable price, regularly communicating with all parties, and staying responsive can help speed up the selling process.

Sources and References

• https://www.gov.uk/selling-a-home

An interest-only mortgage can be right for you if you want to buy a property and keep monthly payments low since you’re only paying the interest. According to statistics, 49% of UK households are still experiencing the cost-of-living crisis as of September 2024, making the lower monthly payments of interest-only mortgages more attractive.

However, they can be more expensive overall and carry more risk than a repayment mortgage, so it’s vital to ensure you make an informed decision. This guide explores interest-only mortgage rates in the UK and everything you need to know when looking at interest-only mortgage deals.

What Are Interest-Only Mortgages?

Interest-only mortgages are a type of mortgage product where the monthly payments only cover the interest you owe and not the capital you borrow. You only repay the capital as a lump sum at the end of the mortgage term. For example, if you take out an interest-only mortgage for £150,000, you’ll still owe the lender £150,000 at the end of your mortgage term.

Although the monthly repayments work out cheaper, the long-term costs are higher since the interest is charged on the total amount each month for the entire term.

What Are the Best Interest-Only Mortgage Rates in the UK?

Interest-only mortgage rates in the UK can be fixed or variable, and they usually differ between lenders so it’s always recommended to shop around to find the best deals. Generally, interest-only mortgages feature higher interest rates than standard repayment mortgages since there’s more risk to the lender.

The table below can give you a rough idea of the interest-only mortgage rates available among different lenders.

Lender	Initial Rate	Max LTV	Product Details
Nationwide	4.04%	60%	5-year fixed rate
Santander	4.40%	75%	2-year fixed rate
Barclays	4.65%	90%	5-year fixed rate
HSBC	5.54%	85%	2-year tracker rate

The rates are accurate as of September 2024 but can change at the lender’s discretion. Various mortgage rate calculators are available online to help you compare the rates among different lenders based on factors like property value, mortgage amount, and term.

A specialist mortgage broker can also help you access some of the best interest-only mortgage rates available by giving you access to the entire market and offering bespoke rates suitable for your circumstances.

Does Deposit Affect Interest-Only Mortgage Rates?

Yes! The amount of deposit you have can affect the interest-only mortgage rate you get. A considerable deposit will lower the loan-to-value (LTV) ratio, which is the amount of the property’s value the mortgage will cover. For example, if you have a 20% deposit and take out a mortgage to cover the rest of the property’s value, the LTV will be 80%.

Most lenders have caps on the minimum LTV they can accept on interest-only mortgages. The lower the LTV, the higher your chances of getting favourable rates from the lender. A larger deposit will also give you access to more lenders and mortgage deals since you’ll be considered a lower risk.

Can You Get a Residential Interest-Only Mortgage?

Although it’s not impossible to get a residential interest-only mortgage, it’s more challenging than getting one for a buy-to-let property. Not all lenders offer interest-only mortgages because they’re considered high risk, and those who do feature strict eligibility criteria. These include:

• Large deposits – You must have a substantial deposit to qualify, such as 25%. Some lenders insist on higher amounts and reserve the best rates for those with deposits of 40% and above.

• High incomes – Some lenders will set higher minimum income requirements for residential interest-only mortgages, while others will only consider high net-worth individuals. Minimum thresholds can range from £50,000 – £75,000 per year for single applicants or a combined income of £100,000 for joint applicants.

• Repayment plan – Lenders will require you to have a solid repayment plan for clearing the lump sum at the end of the mortgage term. These can include savings, investments in shares or bonds, a pension plan, unit trusts, selling a different property, or selling other assets like vehicles.

• Standard property – Most lenders will only consider your application if you’re buying a property with standard construction. Properties with non-standard constructions, like those with timer frames, pose higher risks for lenders.

Can You Switch to An Interest-Only Mortgage?

Yes. It’s possible to switch from a repayment mortgage to an interest-only mortgage if your lender agrees, and it can be an effective short-term solution to keeping your monthly payments manageable.

Thanks to the government’s Mortgage Charter introduced in 2023, you can get a temporary breather by switching to an interest-only mortgage without worrying about affordability assessments or credit checks. It makes it easier to switch for six months and get temporary relief by lowering your monthly outgoings. You’ll then revert to your original repayment structure after six months.

If you’re considering a long-term switch to an interest-only mortgage, you must ensure you meet the lender’s criteria and have a robust repayment plan.

Can You Get a Part Interest-Only Mortgage?

Yes. Such products are called part and part mortgages, and they combine both capital and interest-only repayments. Half-repayment and half-interest mortgages allow you to repay a portion instead of all of your mortgage through monthly repayments, leaving you with a smaller balance to settle at the end of the term.

A part interest-only mortgage offers unique benefits, including:

• Paying less in monthly repayments than a repayment mortgage
• Reducing the amount you would have paid at the end of an interest-only mortgage
• Paying less interest than an interest-only mortgage since the debt reduces over time

However, you still need to have a feasible repayment strategy to clear the lumpsum at the end of the mortgage.

Can Remortgaging Reduce Interest-Only Mortgage Rates?

It’s possible to get better rates when remortgaging on an interest-only mortgage since you’ll likely have more equity, which reduces the risk for the lender. If you’ve already paid down a large amount of your mortgage or the property has risen in value, you can get reasonable rates on an interest-only remortgage and save money on monthly payments.

You can shop around for better deals or ask your current lender about their offers since most providers usually have exclusive rates for existing customers.

Final Thoughts

Interest-only mortgages can ensure your monthly payments remain low, but they’re riskier than repayment mortgages and feature higher long-term costs. Consulting an experienced mortgage broker can help you access some of the best interest-only mortgage rates available by giving you access to the entire market.

Sources and References: 

• https://www.statista.com/statistics/1300280/great-britain-cost-of-living-increase/#:~:text=British%20adults%20reporting%20a%20cost%20of%20living%20increase%202021%2D2024&text=As%20of%20September%202024%2C%2049,45%20percent%20in%20late%20July.
• https://www.gov.uk/government/publications/mortgage-charter/mortgage-charter

Are you considering owning your home but are struggling to save a deposit? A recent report by the Building Societies Association shows affordability is one of the most significant barriers to buying a home, especially for first-time buyers with single incomes or unstable and lower-than-average incomes.

Thankfully, a zero-deposit mortgage can help make your dream of homeownership a reality. Here’s everything you need to know about zero-deposit mortgages in the UK.

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What Is a Zero Deposit Mortgage?

Zero deposit mortgages are also called 100% LTV (loan-to-value) or no-deposit mortgages. These kinds of mortgages allow you to borrow an amount that covers the whole purchase price of a property, which helps you overcome the challenge of saving up for a deposit.

For example, suppose you’re buying a property costing £200,000. A zero-deposit mortgage will allow you to borrow the total amount of £200,000 from the mortgage lender, meaning you don’t need to pay any money upfront.

Do All Lenders Offer Zero Deposit Mortgages?

Zero deposit mortgages are available among select lenders. Most mortgage providers need at least a 5% deposit, while others require 10% to 20% of the property’s value.

A larger deposit gives you access to a broader range of mortgage deals and lower rates, making your mortgage repayments more affordable.

Lenders stopped offering zero-deposit mortgages after the 2008 financial crisis, but they’ve recently made a comeback in 2023.

Some lenders offering zero-deposit mortgages will require you to have a guarantor who will put up their home or savings as security to reduce the risks involved.

How Do You Get a Mortgage with No Deposit?

You can get a mortgage with no deposit through various ways. These include:

Skipton’s Zero Deposit Mortgage

The Skipton Building Society introduced a truly zero-deposit mortgage in 2023, and it doesn’t require a guarantor or family support. The mortgage aims to help renters get onto the property ladder with a zero or less than five per cent deposit.

It initially targeted first-time buyers with a good track record of renting but is now available to anyone who hasn’t owned a property in the UK in the last three years. You must meet various criteria to qualify for Skipton’s zero deposit mortgage, including:

• Be at least 21 years of age
• Evidence of paying at least 12 months of rent on time in a row over the last 18 months
• Evidence of not missing any payments on your debts or credit cards within the past six months.
• Having a good credit history
• Show you can afford monthly mortgage payments, which can’t be higher than your rent payments
• The property you want to buy can’t exceed more than £600,000
• The property can’t be a newly built flat

Incorporating A Guarantor

Some lenders can give you a zero-deposit mortgage if you have the support of a guarantor.

A guarantor mortgage can be an excellent choice if you have bad credit or no credit history and involves a close family member or friend taking on some of the risks of taking out a mortgage.

The guarantor reduces the lender’s risk by agreeing to repay the amount you borrow if you can’t keep up with mortgage payments. Lenders can set up guarantor mortgages in a few different ways depending on how the other party is willing to help you. These can include:

• Using property as security

The guarantor can put up their home as security for your mortgage. The lender places a legal charge against the property to guarantee repayments if you cannot make them. The guarantor must own the property outright or have substantial equity.

If you default on the mortgage and the lender repossesses your property and sells it for less than the remaining balance, they can also repossess the guarantor’s home.

• Using savings as security

Some lenders allow guarantors to use savings as security instead of their home, which can be through a family deposit or offset mortgage.

In a family deposit mortgage, the guarantor deposits some of their savings in a dedicated account linked to the mortgage.

It can be 5% to 20% of the property’s value and remains in place for a set period or until you pay off an agreed mortgage amount.

The guarantor receives their money back plus interest if you meet your mortgage payments. If you default and the sale of your property doesn’t cover the balance, the lender can use the money to cover what you owe.

Family offset mortgages are similar to family deposit mortgages, but the guarantor will not earn any interest on their savings. It helps to offset the amount you pay against the amount in the linked savings account.

This means you won’t pay interest on a part of your mortgage equal to the amount your guarantor has set aside, lowering your monthly payments.

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Using A Gifted Deposit

A family member or friend can give you the money for a deposit instead of being a guarantor. Gifted deposits can be funded entirely or partly by cash gifts from friends or family members.

Some lenders can offer 100% LTV mortgages with family-gifted deposits, and you may need to show the lender a letter from whoever gave you the money confirming that you won’t pay it back.

Some lenders can also give you a mortgage in cases where other parties have contributed to the deposit in the form of a gift. For example, a seller can offer you a property at a discounted price to make a quick sale, and it can be regarded as a vendor gift.

Can You Get a Zero Deposit Mortgage for A Buy-to-Let Property?

No. Mortgages for buy-to-let properties usually feature more stringent criteria, making it almost impossible to get approval if you don’t have a deposit.

Lenders typically ask for a deposit of 25% for a buy-to-let property, with a limited number accepting as low as 15%.

Call us today on 01925 906 210 or contact us to speak to one of our friendly advisors.

Final Thoughts

A zero-deposit mortgage makes it possible to buy a home where you would otherwise struggle. However, they also feature various challenges, so it’s always recommended to consult a qualified mortgage advisor or broker specialising in zero-deposit mortgages.

Sources and References

• https://www.bsa.org.uk/getmedia/fb2a8bac-9926-45f9-936c-3055f8bca405/BSA-First-Time-Buyers-Report-2024-(Exec-Summary-v1).pdf

Mortgage applications can take a lot of time and energy, so the last thing you want is to get turned down.

Mortgage providers have become stricter with their lending requirements, and you may face one or more stumbling blocks that can impact your chances of getting approved.

Each lender has different criteria you need to meet, so it’s worth knowing what might stand in your way when looking for home financing.

This guide explores some of the factors that can hinder your success when applying for a mortgage in the UK and offers tips on how to overcome them.

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A Low or Small Deposit

Saving enough deposit can be a big hurdle for many prospective home buyers. The deposit is relevant for your loan to value (LTV), and lenders require you to have a minimum deposit amount.

You may need to have at least 10% of the property’s purchase price to get approved by most lenders, and even more, if you want the best rates.

Some lenders can accept 5% deposits if you tick the right boxes. There are various options you can consider if you have no deposit whatsoever. These include:

• A gifted deposit – Some lenders can accept gifted deposits if you have a family member or friend willing to help. The gift can’t be a loan, and you must provide proof of source.

• Using a government scheme – Schemes like Shared Ownership offer an affordable way to become a homeowner. It allows you to buy a share of a house using a mortgage and pay rent on the rest. The deposit is considered as a portion of the share you’re buying, so a small amount should be enough.

Affordability

Affordability is a common reason that can stop you from getting a mortgage. All lenders carry out affordability checks and can decline your application if they feel you can’t comfortably keep up with mortgage repayments. One fundamental way they assess affordability is by applying income multiples to your income or earnings.

Most lenders cap their lending at 4.5 times your income, while some can stretch it to 5 or 6 times in the right circumstances. Lenders will stress test such multiples and consider other factors like the cost of living when determining your affordability.

Strategies you can use to improve affordability include:

• Increasing your income – Many lenders can accept additional forms of income so you can take on side hustles or second jobs and include overtime payments in your application.

• Incorporate a guarantor – A guarantor mortgage can help you purchase a home if your financial circumstances don’t meet the lender’s requirements. It involves incorporating a family member who guarantees to step in and make repayments when you can’t.

• Consider a cheaper house – The property you’re considering may be too expensive and may require a higher loan amount, so you may want to consider lowering your horizons and going for a more affordable property.

• Reducing your debts and spending – Your debts and spending habits can increase your financial obligations and stop you from getting a mortgage due to a high debt-to-income ratio. Consider paying off your debts and reducing your monthly outgoings before applying to improve your prospects.

Bad Credit

Less-than-perfect credit can stop you from getting a mortgage, especially if the credit issue is recent and severe, such as bankruptcy or repossession.

Lenders usually consider the reason, severity, and age of your credit issues when assessing your creditworthiness to ensure you have a good track record of paying back what you borrow.

Some are lenient and flexible, while others will automatically turn you away if they consider you too much of a risk based on your credit profile. Actions you can take to help you get a mortgage if you have bad credit include:

• Correcting your credit report – Check your credit report for any inaccuracies or outdated information. Errors can impact your rating, so ensure the information is correct and up to date to strengthen your chances of approval.

• Applying through a specialist – Some brokers specialise in connecting bad credit borrowers to lenders who consider all kinds of credit scores. They can offer their experience and knowledge and significantly improve your chances of getting a good deal even with bad credit.

Property Issues

Trying to buy a property with issues or one that’s unusual can stop you from getting a mortgage. Most lenders will be wary of issues like non-standard construction or properties situated in an area with a high risk of flooding.

Some lenders can consider properties made from bricks and mortar as unmortgageable, making it a deal breaker when you need financing.

Actions you can consider to improve your chances of success include:

• Approaching a specialist – Some mortgage lenders specialise in properties with non-standard construction or those that need some work. Such lenders have experience offering mortgages for unusual build types and can be more welcoming than high-street lenders.

• A larger deposit – Lenders may require higher deposits for non-standard property mortgages, such as 25% as a minimum. Save as much deposit as you can to improve your chances.

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Failing to Prove Your Income

Being unable to prove your income can stop you from getting a mortgage. This usually affects self-employed borrowers and contractors who don’t have payslips to prove their employment and how much they make. Lenders want to ensure you have a job and income before they can let you borrow.

Things you can do to improve your chances include:

• Providing bank statements – You can show lenders three or six months of bank statements to help verify your income.
• Providing your SA302 tax overview – You can use your latest SA302 tax overview to prove your income. Some lenders may want these to cover up to three years, while others can consider 12 months or less.

Final Thoughts

Different issues can affect your chances of getting a mortgage, depending on your circumstances.

Ensure you consult an independent, experienced mortgage broker if you’re concerned about problems that can affect your mortgage application to get bespoke advice that can help you get a successful outcome.

Call us today on 01925 906 210 or contact us to speak to one of our friendly advisors.