Dax McLean, Author at Mortgageable

Is A Valuation A Good Sign That A Mortgage is Approved?

by Dax McLeanPosted on 7th May 2021

If you are a first-time buyer, the mortgage process may be all new to you.

The terminology, order of events and approval stages may all be confusing at first.

This guide will help to clarify the stages, focusing on the property valuation including whether or not a valuation results in a mortgage approval.

What is a Property Valuation?

Firstly, let’s explore what a property valuation is, and at which stage a valuation is undertaken.

Following a mortgage application, the initial first checks are undertaken on the applicant’s backgrounds and current financial position in order for the lender to offer an agreement in principle.

This is a document confirming that the lender will provisionally lend a set amount of money for a mortgage providing that further checks, which may include a property valuation are completed and are satisfactory to the lender.

An agreement in principle is typically valid for 30 or 90- days from the date of being obtained, and therefore the remaining elements of the application process and further legal steps are to be concluded during this timeframe.

In some circumstances, an extension to the timeframe may be requested, however, the lender will consider the circumstances on a case-by-case basis, and therefore an extension is not guaranteed.

A property valuation or valuation survey is the process undertaken via approved surveyors, authorised by the lender to report back on the property’s current condition and value, in order to proceed with a mortgage.

Traditionally a surveyor would visit the proposed property that the mortgage applicant would like to purchase to undertake the survey, however sometimes these days, surveyors can rely on information found online in order to compile their assessment of the property, depending on the directions of the lender.

Some lenders will charge for the service of a property valuation to be undertaken, whilst others offer free valuations in order to process mortgage applications therefore charges differ between lenders.

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Does a Property Valuation Mean a Mortgage Application is Approved?

There are a number of situations that can result in a mortgage application being declined even once a property valuation has been undertaken, as follows:

The property’s condition – Should the surveyor report back to the lender that the property is in a condition that does not meet the criteria of the lender, this could affect the lending decision. The lending criteria can vary between lenders, however, if the property is not habitable in its current position or has structural problems, most lenders will not offer a standard mortgage against it. Should this situation arise, there may be other options to obtaining the funds such as development finance.
The property’s value – Should the value of the property change from the original estimates, the loan to value ratio in relation to a mortgage is also likely to alter. The loan to value is the ratio between the property value and the deposit or equity held and this affects the interest rate applicable.
The applicant – Lenders may still be completing various checks on the mortgage applicants during the same timeframe that a property valuation has been requested and therefore if something is found during the checks that do not meet the lending criteria, the mortgage application could still be declined. Examples include:
- An applicant fail additional financial affordability checks
- Details of a previous County Court Judgement are found, or any dishonesty of fraudulent claims are discovered.
- Personal circumstances change since the application was made such as the applicant is made redundant
- Insufficient duration of self-employed income
- Concerns involving the applicant’s rights to live in the UK

How Long does it take to Obtain a Mortgage Offer Following a Property Valuation Taking Place?

As the agreement in principle is likely only to be based on the income of the applicant(s) and the credit score(s). Further background checks of the applicant(s) and the property valuation usually follow this initial step.

The timeframe of the property valuation will vary depending on whether the surveyor visits the property or if the process is undertaken using online resources.

Should a surveyor visit the property and prepare a report following this, the valuation will usually take a few days depending on how busy the surveying practice is.

Whereas a desktop report could be undertaken and returned within a few hours. You can pay for an alternative type of valuation should a more in-depth valuation be required.

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Using a Mortgage Broker

Mortgage applicants that use a mortgage broker often find that specific, tailored advice is provided before a mortgage application is submitted, ensuring that the financial products considered are the most appropriate to them.

Brokers are able to search the market and therefore have access to a wide range of financial products and different lenders, to be able to compare mortgage terms for applicants.

Once an application is submitted to the chosen lender, the brokers remain on hand throughout the process to ensure that queries are handled promptly, and that completion takes place as soon and as smoothly as possible.

Related guides:

Does a Valuation Mean that a Mortgage is Approved Summary

A property valuation takes place during a mortgage application to ensure that the condition and value of the property are as expected and meets the lender’s mortgage criteria.

Surveyors are instructed to undertake property valuations either via an in-person visit to the property or by using online resources to create a report which is sent to the lender to review.

Unfortunately, even when a property valuation is submitted, this does not guarantee that a mortgage will be approved as the lender will need to review the details of the report.

They will ensure that the property condition and value meet the lending criteria, whilst continuing with the underwriting process including further checks on the mortgage applicants.

Please feel free to get in touch with our friendly team of advisors to book an initial consultation to discuss the options available to you.

Call us today on 03330 90 60 30 or feel free to contact us. One of our advisors will be happy to talk through all of your options with you.

Further reading:

Can you get a mortgage on benefits?

by Dax McLeanPosted on 22nd April 2021 | Updated 20th January 2023

Which mortgage lenders accept benefits in the UK? (Universal Credit).

The acceptance of pension and state benefit income will vary between mortgage lenders, as not all lenders will accept each type of benefit.

Most lenders will require a mix of types of income rather than solely income by benefits.

This is to lower the risk to lenders from the impact of changes in government decision making within each budget.

This article will explore which types of benefits are commonly accepted as part of the income of a mortgage application, and which types of documentation will need to be supplied for an application.

How does Being a Benefit Recipient Impact a Mortgage Application?

Income calculations and affordability criteria will need to be met before a mortgage offer can be made.

In addition, some benefits are considered riskier to lenders, and therefore not all lenders are prepared to accept certain benefits as income.

Need more help? Check our quick help guides:

Can I Obtain a Mortgage if on a Low Income and Receive Benefits?

Yes, technically neither a low income nor being a benefit recipient will stop a mortgage company from reviewing an application, however, there are other factors that will need to be met before a mortgage offer will be made.

Affordability will be a lenders main concern with a low-income applicant therefore it is worth checking the lender’s criteria before applying, and if any doubt always seeks the advice of a specialised mortgage broker ahead of making any applications. It is worth noting that if mortgage applications are declined, it may negatively impact your credit score, therefore advice should be sought ahead of applying for mortgages.

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Which Benefits are Commonly Accepted by Lenders as Approved Income for a Mortgage Application?

Typically, the following benefits are commonly accepted:

Attendance Allowance Benefit
Carer’s Allowance Benefit
Child Benefit
Child Tax Credit Benefit
Disability Living Allowance
Housing Benefits
Incapacity Benefit
Industrial Injuries Benefit
Maternity Allowance Benefit
Pension Credit Benefit
Severe Disablement Allowance
Universal Credit
Widow’s Pension Benefit
Working Tax Credit Benefit

Some lenders will accept all of the above lists at 100% of the benefit value, whereas others will only allow a proportion of the allowance within the total income calculation, along with other sources of income. In addition, some benefits are time-sensitive and therefore may not be taken into account by some mortgage lenders as the eligibility will expire, such as child benefit due to the age of the children.

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Lots of high streets and other lenders will accept benefit income. However, lenders can change their lending policy at any time. If you are a benefit recipient, it is always worth checking with a mortgage broker for the latest lenders who are prepared to offer mortgages to those applicants in receipt of benefits.

Related guides:

Is There any Additional Help Available to Potential Mortgage Applicants on Benefits?

Yes, there are a range of government-backed schemed for specific groups of benefit recipients such as HOLD, a shared ownership scheme for people with long-term disability or if you are already a mortgage holder and are in receipt of Jobseeker’s Allowance, you may be eligible for support for mortgage interest.

Can I get a Buy-to-Let mortgage on Benefits?

Yes, some lenders will accept benefit income on a mortgage application for a buy-to-let property, however, the choice of lenders may be limited.

If you are seeking a buy-to-let property it is highly recommended that an appointment with a mortgage broker is arranged to review your personal circumstances, financial objects and the whole market of financial products to find the most appropriate mortgage available, on the best terms.

How many mortgages can I Obtain as a Benefit Recipient?

Unfortunately, due to the range of factors involved, there is not a simple answer to the mortgage value that will be offered. How much mortgage will vary case by case, depending on other income streams, equity or assets that can be recorded as collateral for the lender, the personal circumstances of the applicant, affordability and the applicant’s credit score?

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What Happens if Your Circumstances Change?

If you are already a mortgage holder when your circumstances change, it is always worth seeking financial advice as soon as possible and being honest with the mortgage lender. There is often a range of options available to a lender to be able to provide assistance to the mortgage holder, depending on the nature of the change in circumstances.

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Mortgage lenders that accept benefits summary

As we have discussed, there is a wide range of lenders that often will be prepared to review mortgage applications from those in receipt of benefits, however, the type of benefit accepted, and ratio taken into income calculations will vary between lenders.

It is highly recommended that benefit recipients seek the advice of a mortgage broker ahead of making any mortgage applications, to ensure that the whole of the market has been searched prior to an application, ensuring that the lender is suitable and that the best rates and terms have been found.

Brokers can also provide assistance throughout the application process, ensuring that that all terms are fully understood before an application is made, all documentation required is checked before the application submission and that each stage is followed up with the potential lender to aid with a smooth process. Call to book your consultation with our friendly team today.

Call us today on 03330 90 60 30 or feel free to contact us. One of our advisors will be happy to talk through all of your options with you.

Further reading:

Mortgage Lenders That Accept Universal Credit

Kristian Derrick

by Dax McLeanPosted on 22nd April 2021

Navigating the landscape of mortgage applications can be complex, especially when it involves income from benefits such as Universal Credit.

The acceptance criteria for pension and state benefit income as part of a mortgage application significantly vary among lenders.

Not every lender is open to considering every type of benefit, and most prefer a diverse mix of income sources to mitigate risks associated with shifts in government policies and budgetary decisions.

In this article, we will delve into the types of benefits that are most commonly recognized by mortgage lenders in the UK.

We’ll also outline the necessary documentation you’ll need to prepare for your mortgage application.

By understanding these details, you can better navigate the process and identify lenders that align with your financial situation.

How does being a Benefit Recipient Impact a Mortgage Application?

Income calculations and affordability criteria will need to be met before a mortgage offer can be made.

In addition, some benefits are considered riskier to lenders, and therefore not all lenders are prepared to accept certain benefits as income.

Need more help? Check our quick help guides:

Can I Obtain a Mortgage if on a Low Income and Receive Benefits?

Affordability will be a lenders main concern with a low-income applicant, therefore it is worth checking the lender’s criteria before applying, and if any doubt always seeks the advice of a specialised mortgage broker ahead of making any applications.

It is worth noting that if mortgage applications are declined, it may negatively impact your credit score, therefore advice should be sought ahead of applying for mortgages.

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Which Benefits are Commonly Accepted by Lenders as Approved Income for a Mortgage Application?

Typically, the following benefits are commonly accepted:

Attendance Allowance Benefit
Carer’s Allowance Benefit
Child Benefit
Child Tax Credit Benefit
Disability Living Allowance
Housing Benefits
Incapacity Benefit
Industrial Injuries Benefit
Maternity Allowance Benefit
Pension Credit Benefit
Severe Disablement Allowance
Universal Credit
Widow’s Pension Benefit
Working Tax Credit Benefit

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Related guides:

Is There any Additional Help Available to Potential Mortgage Applicants on Benefits?

Can I get a Buy-to-Let mortgage on Benefits?

Yes, some lenders will accept benefit income on a mortgage application for a buy-to-let property, however, the choice of lenders may be limited.

How many mortgages can I Obtain as a Benefit Recipient?

Unfortunately, due to the range of factors involved, there is not a simple answer to the mortgage value that will be offered.

How much mortgage will vary case by case, depending on other income streams, equity or assets that can be recorded as collateral for the lender, the personal circumstances of the applicant, affordability and the applicant’s credit score?

Related guides:

What happens if Your Circumstances Change?

If you are already a mortgage holder when your circumstances change, it is always worth seeking financial advice as soon as possible and being honest with the mortgage lender.

There is often a range of options available to a lender to be able to provide assistance to the mortgage holder, depending on the nature of the change in circumstances.

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Mortgage lenders that accept benefits summary

As we have discussed, there is a wide range of lenders that will often be prepared to review mortgage applications from those in receipt of benefits, however, the type of benefit accepted, and ratio taken into income calculations will vary between lenders.

Call us today on 03330 90 60 30 or feel free to contact us. One of our advisors will be happy to talk through all of your options with you.

Further reading:

Can I get a Secured Loan on a Buy to Let Property?

by Dax McLeanPosted on 22nd April 2021 | Updated 20th January 2023

A secured loan or a second charge mortgage against your buy-to-let property can be a practical way for a landlord to consolidate any debts, invest in a new property or free up some cash for renovations.

In this guide, we will explore how a secured loan application works and the most frequently asked questions with regards to taking out a secured loan on a buy to let property.

What is a Second Charge Mortgage?

A second charge mortgage is a type of secure borrowing against the equity owned within a property. Technically when a second charge mortgage is in place there are two separate mortgages secured against one property.

A second charge mortgage can be obtained even if the applicant does not reside in the property, and therefore buy to let properties may be eligible for this type of financial product.

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Benefits of a Buy to Let Secured Loan

There are a number of benefits of opting for a secured second charge mortgage against a buy to let property as follows:

Preserving an existing mortgage deal – Should the first mortgage already in place on a property still have favourable terms compared with the current mortgage market, it may be sensible to keep this in place rather than re-mortgaging or refinancing the entire borrowing as it could be more cost-effective. Another circumstance when keeping the current mortgage in situ may be if the applicant’s credit rating has changed and therefore the interest rates offered may be higher.
Avoiding exit fees – Should there be exit fees liable on the first mortgage if you were to re-mortgage, it may be more financially beneficial to leave the current mortgage in place and choose a second charge mortgage for further borrowing. Before any decisions are made it is worth checking the terms of the current mortgage and seeking specialised financial advice.
Qualifying eligibility – Often second charge mortgages have differing eligibility criteria to that of a first charge mortgage and therefore they can be easier to be obtained. Should the applicant’s circumstances have changed since the application of the first charge mortgage, it may be worth exploring a second charge mortgage.
Borrowing levels – Although there are other ways to obtain additional finance such as an unsecured personal loan, the borrowing values are typically capped at £25,000 and therefore should higher levels of finance be needed, a secured loan may be the solution.

Related quick help guides:

What can a BTL Second Charge Mortgage be used for?

Commonly, secured buy to let second charge mortgages are used to aid landlord’s expand their property portfolio by utilising the capital in one property to fund deposits or renovations in the next property.

However, the additional finance may be used for a range of other purposes, including consolidating debts as long as the terms from the lender meet the purpose.

Who can apply for a Second Charge Buy to Let Mortgage?

Most property owners can apply for a second charge buy to let mortgage and their application will be reviewed and analysed against the lender’s borrowing criteria and affordability checks.

The main criteria that a lender will be interested in is the level of equity available within the property for the loan to be secured against, and the income of the applicant to cover the repayments.

As we have briefly mentioned, an applicant does not need to live in the property to apply for a second charge mortgage, and in some circumstances, even further borrowing can be made such as a third or fourth mortgage on the same property.

Although on face value, the second charge buy to let mortgages are available for all, it is highly recommended that specialised financial advice is obtained before making an application to ensure that a second charge mortgage is the most cost-effective approach to achieve the objectives and that an application is likely to be accepted.

Read our complete guide on how do secured loans work?

How much can you borrow on a Second Charge Mortgage?

As with standard mortgages and other borrowing, a lender will tailor an offer depending on the personal circumstances of the applicant. The amount that can be borrowed on a second charge mortgage will depend on:

The applicant’s income and expenditure – An applicant will need to prove their income level and meet affordability checks
The applicant’s credit history
The level of equity available within the property – The equity is the value within a property that is owned outright, for example, the difference between the total property value and any mortgage owed
The rental income on the property

Typically, lending is capped at 75% loan to value (LTV) of the property value for a buy to let mortgage however there are differences between lenders.

Some lenders may be prepared to offer second charge mortgages on small values as little as £10,000 however should your requirements be needing finance for less than £25,000 it may be worth comparing the terms against a personal unsecured loan.

Whereas there are a handful of mortgage lenders that may even offer 100% of the property’s value with a second charge mortgage depending on the applicant’s personal circumstances.

The total amount that can be offered on a second charge mortgage will likely vary between lenders and therefore expert financial advisers can assist with navigating the market as they have in-depth knowledge of lenders terms and recent borrowing.

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Buy-to-let secured loan rates

The interest rates on buy-to-let second charge mortgages are typically lower than other forms of finance and for this reason, are a financially wise option for landlords looking for a loan.

The exact rate you will be able to secure depends on a variety of factors. For example, borrowers with a healthy credit history borrowing an amount regarded as affordable at a low loan-to-value (LTV) will usually be offered at extremely competitive rates as you will be regarded as a low-risk applicant.

If you have a poor credit history or a high LTV, then the rates offered to you are likely to be high to pay back for the added risk for the lender.

Still, even those with poor credit can attain a loan from specialist lenders who specialise in receiving applications from individuals with bad credit. Get in touch with us today, for a free no-obligation consultation with one of our expert advisers.

Our advisers are used to working with customers with poor credit history and can help you navigate the entire UK loan market to find a suitable lender with the most competitive terms for your circumstances.

How to get a second charge mortgage on a BTL

Just like a regular mortgage, you submit an application to a lender via a broker or directly. The next steps involve the lender assessing your application and looking into key details such as affordability, credit history etc.

If you have a poor credit history you may also be interested in reading our guide on instalment loans for bad credit.

Can you use a new lender?

Yes! Many people assume that you must take a second charge mortgage out with your current mortgage provider, but you don’t. It can be much more advantageous to search the whole market to find a lender offering the most competitive rates, which our expert advisers will be more than happy to help you with.

Other Considerations with Second Charge Mortgages

As with most financial options, there will be various factors involved and considerations to evaluate including:

Interest rates – Typically, the interests offered on the second charge buy to let mortgages are low in comparison with other lending methods and therefore this type of financial product can be a cost-effective way of raising capital for a number of purposes.
Permission – The first mortgage lender would need to be contacted as part of the application process in order to grant their permission for a second charge to be added to the property.

Helpful guides:

Can I get a Secured Loan on a Buy to Let Property Summary

Being a landlord comes with many responsibilities and decisions needed and the array of financial products available can appear overwhelming with so many elements to thoroughly research and consider, however, our friendly team of financial advisors are at hand to help at every stage.

Whether you are a relatively new landlord but are ready for your next property, or you have years of experience but need some tailored, specialised advice on financing your property portfolio, please do get in touch.

Give Loanable a call today on 01925 988 055 and they will provide you with the best deals available to meet your circumstances and consider any credit history you may have. With their expert advice, they can guide you through the process and give you the knowledge and confidence it takes to acquire a secured loan that is right for you.

If you have read all the information on secured loans carefully and feel that you want to proceed with a secure loan, get in touch with one of Loanable’s secured loan experts by emailing hello@loanable.co.uk who can work with you to find the best deal for your needs and circumstances.

Further reading:

Alternatives to Bridging Loans

by Dax McLeanPosted on 22nd April 2021 | Updated 20th January 2023

Whether you are unsure if a bridging loan is for you, or need to explore alternative finance options, you have come to the right place!

This article will explore what a bridging loan is and the alternatives financial options available should a bridging loan not be appropriate for your requirements.

What is a bridging loan?

A bridging loan is a short-term financial product that provides funds that enable a property purchase to take place while another sale is still in progress.

Technically, a bridging loan uses the equity within one owned property as a deposit towards another property, resulting in two (or more) properties being owned at the same time, while the sale is going through.

Bridging loans are a method of secured lending and therefore to apply for a loan, a procession of a high-value asset is needed.

The equity within the owned property will also need to cover all of the fees associated with purchasing the new property to enable completion, including estate agent fees and stamp duty.

In addition, as bridging loans are a short-term financial solution an exit strategy to pay off the loan will need to be identified and documented as part of the application process.

Bridging loans can range between £5,000 and £10 million, depending on the situation and personal circumstances of the applicant, however, this type of finance is known for the speed at which it can be arranged. Typically, a decision from a lender can be sought very quickly.

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What are the costs of a bridging loan?

Typically, the costs of using a bridging loan can be high, with an interest rate typically around 0.4% – 2 % a month, plus an arrangement fee often payable upfront.

The interest rate offered will depend on a range of factors including:

The total value of the bridging loan
The equity available to secure the loan in other assets
The duration of the loan required
The status of the sale of the asset, including if a buyer has been found, and if contracts have been exchanged
The personal financial circumstances of the applicant

Some lenders may also apply exit fees upon settlement of the bridging loan as well as bank transfer fees and administration fees, therefore applicants must be aware of all of the fine print of any loan offer before committing, to be able to calculate the full costs of the financial option.

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How to Access Bridging Loans

Bridging Loans can be obtained via specialised mortgage brokers who have access to the entire financial market and can therefore provide in-depth market knowledge plus guidance and comparison of quotes on a wide range of financial products. Brokers can also find the most favourable interest rates and borrowing terms for the applicant’s circumstances.

What Alternatives to Bridging Loans are Available?

Other alternatives to bridging loans include:

Unsecured Lending – Depending on the value of finance needed, unsecured loans such as personal loans, credit cards or bank overdrafts, may be an option to raise funds, however, unsecured lending is typically capped at around £30,000. Often the interest rates are usually higher than secured loans, due to the risks to the lender and therefore the overall costs would need to be analysed against other financial options. It is also worth noting that unsecured lending is generally for a much shorter time period than secured lending, typically up to seven years, which is likely to impact the level of repayments.
Remortgaging – A secured method of raising additional finances for a range of purposes can be to re-mortgage the current property, in order to withdraw some equity. Depending on the current terms of the mortgage, there may be savings on interest rates by re-mortgaging however other fees would be applicable such as valuation fees, arrangement fees and solicitor fees and therefore a full costing of the option should be undertaken before proceeding.
Second Charge Mortgages – A second charge mortgage is a further loan on a property, however, the duration of the financial option differs. Second charge mortgages are useful in situations where re-mortgaging would be costly due to early redemption fees. Rates are higher than a first charge mortgage but usually lower than an unsecured loan as the property is used as security.
Specific Finance for the Purpose of the Loan – There is a range of specific financial products on the market for certain circumstances, such as buy to let mortgages, property development finance and equity release products which may be suitable depending on the purpose of needing the loans. To discuss the options available for various scenarios, it is highly recommended that a personalised appointment is made with a finance broker to explore the most suitable option.

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Costs of using a Broker

With some types of borrowing, fees can be added to the loan although this would incur additional interest over the term.

However, often by using a specialised finance broker applicants can save both time and money, as well as relieving stress, knowing that a professional is assisting with the research and throughout a mortgage application.

Alternatives to Bridging Loans Summary

As with any financial decision, it is always suggested that all options are explored and analysed before committing to any option in order to ensure that the option is suitable for the requirements and is cost-effective.

As specialist brokers, we have insight into the current market conditions to be able to advise the best lenders to approach for various situations as we have an insight into recent success rates of other applications. We can also support you from your initial enquiry all throughout the process to completion, aiding with paperwork and any queries along the way.

We highly recommend that financial advice is sought ahead of making any large financial decisions and can support applicants with a range of personal circumstances and financial objectives. Why not call us today to book an appointment to get started!

Give us a call on 03330 90 60 30 or get in touch for advice that is personal to you and takes your credit history into account. That way you will know where you stand in the bridging loans market and we can guide you on your route to securing a suitable loan.

Interest Only Secured Loans

by Dax McLeanPosted on 22nd April 2021 | Updated 20th January 2023

Interest-only mortgages, secured against an asset can be a useful financial solution for a number of circumstances in order to keep the monthly repayments down, however, as with many financial decisions, there is a range of factors to consider.

This article will explore the differences between secured and unsecured loans, the advantages and disadvantages of interest only secured loans, typically how much can be borrowed, the lending criteria and the application process.

What are the Differences between Secured and Unsecured Loans?

Secured Loans

A secured loan is a type of borrowing that, during the application process details of an asset are provided as security to the lender such as property, equipment or land.

The asset acts as collateral for the lender and in turn reduces the risks involved, that in the event of the borrower defaulting on the agreement, the lender could repossess the asset.

Secured loans often have more favourable loan terms than unsecured loans as the lender has some level of protection should the borrower’s circumstances change and can no longer make the repayments.

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Unsecured Loans

Unsecured loans are where an offer to lend is solely based on the personal circumstances of an applicant and therefore the debt is not associated with an asset. Examples of unsecured loans are personal loans, credit cards or bank overdrafts.

Unsecured loans can be useful in certain circumstances however the loan values available are usually capped and therefore are not often used for big projects or purchases.

In addition, the interest rates are usually higher than secured loans, due to the risks to the lender.

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Advantages and Disadvantages of Interest only Secured Loans

Now that we have distinguished between secured and unsecured types of lending, let’s focus more on the advantages and disadvantages of interest only secured loans.

Firstly, let’s clarify what an interest-only secured loan is. An interest-only secured mortgage is a financial product that enables borrowing however the mortgage holder is only required to pay the interest due to the loan each month, during an agreed term. However, at the end of the mortgage term, the capital amount borrowed remains outstanding.

Advantages of Interest-Only Secured Loans

Lower Repayments – Interest-only mortgage repayments are cheaper than those on a standard, repayment mortgage however it is worth bearing in mind that once the mortgage term is concluded, the capital loan is still due and therefore a strategy to repay this will still be required.
Lower interest compared with unsecured loans – Typically lower interest rates are applicable to secured loans due to the linked asset.
Longer repayment terms – Usually secured loans offer longer repayment terms than unsecured loans that are often capped at seven years.

Disadvantages of Interest-Only Secured Loans

Capital remains outstanding – The main downside of interest-only lending is that the capital must be repaid at the end of the mortgage term. Therefore, a repayment strategy must be in place and agreed upon with the lender before taking out the loan.
Interest-only loans can work out expensive – As the capital is not being reduced during the term of the loan the level of interest charged will not decrease either therefore more interest is paid over the term compared with repayment mortgages.
Riskier – As a separate exit strategy is required with interest-only mortgages, the repayment vehicle such as investments or pension funds could act in a different way to the plan therefore there may not be enough of a fund to pay off the capital when needed.

Why would you apply for an interest-only secured loan?

Typically an interest-only secured loan is attained by those looking to renovate their home. For example, upgrading an old kitchen, in which circumstance you can release some equity from your property to fund the project rather than waiting to save up enough cash.

Another popular reason for an interest-only secured loan is to consolidate debts, for example, consolidating multiple credit cards and loans into a single monthly repayment. This often allows people with considerable debts to secure a lower interest rate and lower payments over a longer-term, allowing them to regain control over their finances.

Helpful guides:

How much can you borrow?

As with standard mortgages, the amount that an applicant will be offered will vary depending on the personal circumstances of the applicant, the equity available within the property and the lender’s loan to value criteria.

Minimum equity requirement

The equity within a property is the difference between the property value and the outstanding mortgage balance. Some lenders will have a minimum equity requirement as eligibility criteria for interest-only mortgages, often of £150,000 for first charge loans.

Loan to value (LTV) criteria

As well as minimum equity requirements, lenders usually have a loan to value (LTV) criteria too. For instance, if a lender has an LTV of 60% and your property is valued at £100,000 with a balance of £50,000 owed from your first mortgage, the most you can borrow would be £25,000.

The majority of mortgage lenders have a maximum LTV of around 50%, while some can go as high as 90%. Feel free to get in touch to talk to one of our advisers today, who will be able to offer you help and advice.

Can I Switch from a Standard Mortgage to an Interest Only Mortgage?

One way of obtaining an interest-only mortgage is to enquire about switching your financial product with your current lender.

Bear in mind that your lender does not have to agree to switch products and even if they do, the lender may not offer the most competitive rates or terms, however, this could be a short-term solution depending on the circumstances.

Another matter to be aware of is that switching mortgage products may mean that any early redemption penalties or other similar fees are due.

Therefore, depending on the personal circumstances of the applicant, it may be worth seeking expert assistance to explore the wider mortgage market in order to obtain the most competitive mortgage solution.

Interest Only Second Mortgage vs Remortgage?

Instead of a second mortgage, you may have considered remortgaging your property too, so what should you do?

It’s always worth investigating whether a remortgage maybe your best option, however, there are some scenarios where a second charge mortgage will make more sense.

If you currently have a fixed or tracker rate on your first mortgage, then it may not be financially advantageous to break the contract and incur penalty fees in order to pursue a remortgage deal.

To determine this, it’s a good idea to compare the fees of breaking your first mortgage contract and the fees associated with securing a second mortgage.

Regardless if you have a good mortgage deal, you may not want to refinance at this stage.

Even so, you may be unable to refinance your first mortgage due to other reasons, such as affordability issues, while a loan provider may consider you more suitable.

Another factor is if you do not wish to change your first mortgage repayment plans e.g. extending the term and may wish to take any further financing out on different repayment terms.

The reality is that there are many different things to consider. Mortgage advisors are best placed to be able to advise the most cost-effective and appropriate approach in specific circumstances and therefore if you are considering whether to obtain a second mortgage or to re-mortgage, it would be highly recommended to book a consultation with one of our expert mortgage advisers today.

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Income and affordability

As with all types of finance, lenders will assess your level of income and expenditures and determine if you can afford to make the monthly repayments of a second charge mortgage.

As stated, lenders tend to be more flexible when assessing applications for a second charge mortgage.

Here are the different forms of income that are usually accepted:

Fixed salary full-time employment income
Varied/commission-based full-time employment income
Part-time employment income
Self-employed income (net profit/dividends)
Pension income
Temporary/freelance contract work (value of contract / daily rate)
Investment income (rent/trust monies)
Maintenance payments
Certain government benefit payments

What happens at the end of the interest-only second charge mortgage term?

After you have completed the payments on the interest portion of the loan and have come to the end of the term, the next stage is to repay the original capital amount.

At the point of agreeing on your original loan, you should have come to an agreed repayment method with your lender.

These are some of the most common repayment vehicles offered by lenders:

ISAs to repay an interest only secured loan
Lump sum (tax free) from a pension plan
Endowment policies to repay the secured loan
Sale of the property to repay an interest-only secured loan
Sale of another property owned by yourself to repay an interest only secured loan
Family inheritance or trust fund to repay an interest only secured loan

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Interest only secured loans and bad credit

There’s no denying that poor credit history can impact your eligibility when applying for a loan, however, it depends on when the issue occurred and the type of issue.

If you have a poor credit history you may also be interested in reading our guide on instalment loans for bad credit.

Regardless, even if you have poor credit, it may be possible to borrow money from a specialist lender that accepts applications from individuals with poor credit.

There are loan providers that do offer loans to individuals in the following scenarios:

Late payments
Defaults
CCJs
Mortgage arrears
Debt management plans
With IVAs
After a Bankruptcy
After a Repossession

If any of the above apply to you, the first thing to do is to acquire a current credit report to see exactly what it records. Once you have a copy, you can call one of our advisers who would be happy to discuss your options and help you progress in your application.

Read our complete guide on how do secured loans work?

Interest-Only Secured Loans Summary

As with any big financial decision, research and consideration of all of the factors concerned are needed, including a comparison of costs between various options.

Our specialised team of mortgage experts can provide guidance no matter what stage of the landlord journey you are at – either just starting out, or if you have plenty of rental experience however due to a change of circumstances, you require a tweak to your financial matters. Please get in touch to book a friendly, no-obligation consultation.

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Can I Extend My Interest-Only Mortgage Term?

by Dax McLeanPosted on 1st April 2021 | Updated 20th January 2023

Mortgage advisors are regularly asked general questions such as ‘Can I extend my Interest-only mortgage term?’ however, without knowing the applicant’s full personal circumstances, we cannot easily provide a simple answer.

A typical interest-only mortgage term will range between 5 and 25 years however there are mortgage products on the market providing longer repayment terms of up to 40 years depending on the applicant’s circumstances.

Lenders who offer interest-only mortgages will have their own mortgage terms and lending criteria therefore there is not a simple yes or no answer as to if a mortgage term can be extended.

There are many variables involved including; if the personal circumstances of the mortgage holder have changed during the original mortgage term and depending on if an interest-only extension period is only required in the short term, or over the longer term.

In this guide, we will explore elements that impact whether or not an interest-only mortgage term can be extended.

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Interest Only Mortgages

What is an Interest-Only Mortgage?

An interest-only mortgage is a financial product that enables borrowing to fund a property however the mortgage holder is only required to pay the interest attributable to the loan each month, during an agreed term.

Interest-only mortgage repayments are often considerably cheaper than a standard, repayment mortgage, sometimes around half the monthly cost which can make the financial product very appealing however it is worth bearing in mind that once the mortgage term is concluded, the capital loan is still due and therefore a strategy to repay this will still be required.

Interest-only mortgages are commonly used by Landlords or Property investors who will either sell the property at the end of the mortgage term or seek to refinance.

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For a typical home buyer, although the lower monthly payments are attractive, the borrower would need to plan to repay the capital, either by savings or investment pay-outs to keep the property at the end of the term. Therefore, interest-only mortgages are not generally recommended unless the homeowner has significant equity and a plan to repay the capital.

Following the UK’s 2008 financial crash, the number of interest-only mortgages available on the market decreased dramatically due to the level of risks involved for the lender.

Over recent years the number of lenders offering interest-only mortgages have started to increase again, however, the levels are nowhere near the pre-financial crisis numbers.

Should you be interested in an interest-only mortgage, it is highly recommended that you approach a mortgage broker to assist as brokers have access to the whole market to best placed to locate the best deal available.

How can I pay off my outstanding interest-only debt?

The easiest way to pay off outstanding debt is to sell your property and use the proceeds from the sale to pay off the outstanding balance.

Although, for many homeowners, this is not feasible since they will have paid a small deposit and so be in negative equity, meaning that the property sale will not raise enough money to pay off the mortgage.

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What Terms are Commonly Available for Interest-Only Mortgages?

Residential interest-only mortgage lenders will have strict criteria, which often means that interest-only mortgages are not commonly available to first-time buyers, as the loan to value rate is often capped at 50%, therefore large deposits are needed.

While some lenders restrict their offering of interest-only mortgages only to high-income earners, earning over £100,000 a year.

Lenders will also need to know the repayment strategy for the capital at the end of the mortgage term.

Interest-only, buy-to-let mortgages are more widely available however are specifically designed for investors to finance a property to let out, and not live within it.

Can Interest-Only Mortgages be Obtained for the Short-term?

Interest-only mortgages are available on a short-term basis in some circumstances, for example, should an applicant know that a lump sum from investments will be available within a set timeframe to settle the capital.

The costs of an interest-only short-term mortgage should be compared with other types of short-term borrowing such as bridging loans, before committing.

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As we have discussed, the lenders set their criteria and therefore for further advice on which lenders offer short term interest-only mortgages can be sought from specialist brokers who often have access to the entire financial market and can therefore provide a range of quotes.

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Mortgage extensions – Can I extend my mortgage terms instead?

Some mortgage lenders may consider extending the term on an interest-only mortgage however it is not guaranteed.

There may be the option of switching to an interest-only mortgage with another lender however this would depend on the personal circumstances of the applicant and whether they can meet the lending criteria available.

If a mortgage term extension cannot be obtained, other options may be available such as other borrowing methods including switching to a standard repayment mortgage or bridging loan, paying off the mortgage (if this is an option), or selling the property.

If you are considering extending your mortgage term or switching financial products, it would be worth discussing your options with a mortgage broker, to obtain expert advice as well as compare deals available.

Eligibility Criteria for an Extension to an Interest-Only Mortgage Term

As discussed earlier, the lending criteria for interest-only mortgages is quite strict and there are a streamlined number of lenders offering interest-only mortgages. There are many variables that would impact a lender’s decision on whether to extend the mortgage term on an interest-only mortgage including, the age of the applicant, their personal circumstances and if the applicant still meets the lending criteria.

One element that will likely impact a lender’s decision is if the proposed extension would extend into the applicant’s retirement, as affordability often is a concern to lenders.

Before approaching your current lender or applying to another lender it’s highly recommended to seek expert advice to review all of the circumstances and propose options.

What about Remortgaging?

You could opt to remortgage your property, which in some cases can reduce the interest amounts, allowing you to pay more of the capital component of your mortgage off.

However, bear in mind that if you do want to remortgage, you will need to go through the mortgage application process, meaning things like your outgoings and affordability will be reviewed.

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Extending Your Mortgage Terms Summary

Interest-only mortgages can be obtained, both in the short-term and over the long term depending on the personal circumstances of the mortgage applicant.

A repayment method is required to cover the capital at the end of the mortgage term and the lender would require details of the repayment strategy upon application.

Interest-only mortgages are harder to come by compared with before the financial crisis due to the level of risks involved for the lenders, however, they do serve a purpose in certain situations.

Should you be considering an Interest-only mortgage, contact our friendly team to book an initial consultation to review if this option is the most suitable and cost-effective for your requirements.

Call us today on 03330 90 60 30 or feel free to contact us. One of our advisors will be happy to talk through all of your options with you.

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How much does the average mortgage cost?

by Dax McLeanPosted on 1st April 2021 | Updated 20th January 2023

There are many assumptions made when it comes to the cost of mortgages including that mortgage payments are in line with local rental prices, however in reality calculating an average monthly mortgage repayment is not a straightforward task as there are many variables.

The cost of each mortgage repayment will vary between applicants depending on:

The value of the mortgage.
An applicant’s personal circumstances.
The types of mortgage product.
The interest rate applied.
The length of the mortgage term.
Other fees that may be applicable.

In this guide, we will explore further the varying factors that impact the cost of mortgage repayments.

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Average Mortgage Interest Rates

As briefly mentioned, there are an array of factors that impact the cost of monthly mortgage repayment, however, the mortgage rates also vary between mortgage lenders, the financial products they offer, as well as any promotional offers that are available.

The interest rate applied to a mortgage will also depend on the type of mortgage selected as follows:

Fixed-rate – Often securing the interest rate linked to the mortgage for a set period of time, often between 2 and 5 years.
Standard variable rate – This is the long-term interest rate often applied to a mortgage following the end of an introductory offer.
Tracker – A tracker rate follows the Bank of England base rate at a set percentage higher and will vary from month to month.

Over recent years the interest rates have been very low, however, due to the impact of the coronavirus pandemic, the Bank of England has held the base interest rate very low at 0.1%, to assist with controlling the economic shock of the pandemic.

Such low-interest rates are very attractive for mortgage applicants if they are in the position to proceed with a mortgage such as having a deposit ready.

According to research undertaken by Statista, in September 2019 the average interest rate was 1.56% for a 2-year fixed-rate mortgage while fixing for 3 years increased the rate slightly to 1.66%.

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Fixing an interest rate for a longer period of time such as a 10-year fix increased the average interest rate to 2.65%, meanwhile, the average interest rate payable on a 2-year variable mortgage was 1.61%.

Although this study is slightly out of date now, the details still provide an idea of interest rates and the impact of fixing the interest for longer.

We have discussed the type of mortgages in relation to interest, however, another difference between mortgage products is:

Standard mortgages – Where the monthly repayments cover both interest and a proportion of repaying the capital.
Interest-only mortgages – The capital is not repaid during the term of the mortgage and the monthly repayments are made up solely of interest only. Interest-only mortgages carry higher risks for the lender and therefore will typically incur higher interest rates.

It is important to understand the differences between the types of mortgage when seeking a mortgage.

Also, when researching interest rates offered by lenders it is worth noting that there is often a difference between the advertised rate and the actual interest rate offered depending on the personal circumstances of the applicant.

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Average Duration of a Mortgage Term

The duration of the mortgage term is another factor that will impact the overall cost of the mortgage. Mortgages available within the UK can be offered as short as 6 months, up to a 40-year term, however, the most common mortgage term is usually around 25 years.

By opting for a longer-term mortgage, the monthly repayments can decrease, however, more interest will be payable by extending the mortgage term. However, the trend of increasing house prices has resulted in the need for longer mortgage terms for the affordability of potential home buyers.

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Average Monthly Payments on a Mortgage

As we have discussed, a mortgage repayment is dependent on a whole range of variables including:

The type of mortgage.
The interest rate applicable to the mortgage.
Personal circumstances of the applicant, which may alter the interest rate offered by the lender due to risk factors.
The amount of deposit.
The value of the property.

By altering any of the above variables, the monthly mortgage repayments may change slightly, and therefore significant research should be undertaken before applying for a mortgage. Independent mortgage advisors are best placed to provide advice on the most suitable type of mortgage and find the best deals available on the market.

As mentioned, there are an array of factors that will impact the average monthly mortgage repayment, including differences in property prices depending on the location, therefore national averages are not always very useful due to the range of property prices up and down the country.

As a rough guide, Santander found that in 2018 the average mortgage repayment was £723, with an interest rate of 2.48%.

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Average Total Cost including Interest of a Mortgage

When you consider the total cost of mortgage repayments, many assume that it’s paying for their home, when in reality a lot of the repayment goes towards paying off the interest.

This is for two main reasons:

Firstly, a mortgage amount is a considerable sum of money, so the interest charges on them, particularly on a brand new mortgage is significant. With any type of lending, the higher the sum, the higher the interest.

Secondly, a mortgage term can be over a long duration and so the interest has a long time to grow.

Hence why in many cases, a shorter mortgage term may be preferred. Regardless of the mortgage deal you secure, a considerable amount will be spent on the mortgage interest.

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How to Lower Mortgage Repayments

There are ways of lowering monthly mortgage repayments including:

Increasing the deposit – By putting down a larger deposit, the loan to value changes and therefore the risks decrease to the lender, which can lower the interest rate offered.
Opting for an interest-only mortgage – With this option the capital borrowed is not repaid during the mortgage term and therefore an exit strategy is required to repay the capital.
Paying off a lump sum of the mortgage – If a mortgage holder faces a change of circumstances, in some cases paying off a lump sum of the mortgage may reduce the monthly repayments. This option would be dependent on the terms of the mortgage as often there is a cap on how much can be overpaid.

If the above options are not viable, it may also be worth exploring if the applicant is eligible for any government schemes available such as Help to Buy or Share Ownership schemes.

Average Mortgage Payment Summary

The cost of mortgage repayments varies greatly depending on a wide range of factors as discussed within this article, however, the mortgage market has become more diverse than ever over recent years and therefore there is a wider range of mortgage products available to suit various personal requirements.

Should you wish to discuss the mortgage options available to you, get in touch with our friendly team to book a consultation.

Call us today on 03330 90 60 30 or feel free to contact us. One of our advisors will be happy to talk through all of your options with you.

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Modern Method of Auction – What is it? How does it work?

by Dax McLeanPosted on 1st April 2021 | Updated 20th January 2023

Purchasing property via auction has become increasingly popular over recent years due to a number of reasons including the speed of the property transaction, easier access to quick finance methods suitable for buying at auction as well as the cost savings possible.

The speed of the transaction is one of the biggest benefits to purchasing property via auction as the transaction can typically be concluded within 28 days, compared with at least a 12-week duration within a traditional estate agent property purchase.

This guide will explore the process of purchasing property at auction, as well as a comparison between traditional auction processes and modern methods and looking at what needs to be prepared in advance of bidding at an auction.

How Does a Traditional Property Auction work?

Traditional methods of purchasing property via auction would typically involve advertisements in printed newspapers, via estate agents either online, via shop windows or newsletters, ahead of a traditional auction.

All types of property can be purchased via these methods including repossessed properties, uninhabitable or unmortgage property, development projects as well as standard residential property.

Often a guide price is suggested by the auctioneer, and the vendor typically will set a reserve price, which is the minimum price they are willing to accept for the sale transaction to take place.

However, should the auction not reach this reserve price, private negotiations may take place after the auction.

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What is the Process for buying at Auction?

The process for purchasing property at auction is undertaken in stages as follows:

Pre-auction works – A significant amount of preparation works are completed ahead of the auction including arranging a formal property valuation, completing pre-exchange legal works and preparing marketing details for the auction itself.

Potential buyers would also need to be prepared ahead of the action by having the deposit ready to put down should they win the auction and have the finances in place ahead of any bids at auction.

Depending on the personal financial circumstances of the potential buyer, and the condition of the property, specialist finances may be required to be in place to enable the bidding.

Successful bid during the auction – The bidding takes place at auction and the winning bid would enable the prospective purchaser to move forward onto the next stage of the process.
Contracts are exchanged the same day as the auction – At this stage, the potential buyer and vendor are committed to the purchase, and therefore the buyer would lose their deposit should they pull out.
The potential buyer pays a 10% deposit the same day as the auction – The potential buyer pays the deposit to secure the property on the same day as the auction and therefore needs funding ready.

As mentioned above, the deposit is non-refundable should the buyer decide to pull out of the property transaction unless it can be proven that the vendor has misled the buyer, or a legal matter arises.

Completion – The purchase of the property must be completed within 28 days of the auction. Often there are terms and conditions relating to this strict deadline and therefore if they are not met, penalties are due.

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What should be prepared for ahead of a Property Auction?

Potential Buyer Preparations

As mentioned, should the potential buyer’s bid win at the auction, a 10% deposit is payable the same day and therefore access to funds is required.

Should borrowing be needed, the mortgage offer would need to be in place ahead of the auction to ensure that the 28-day deadline to complete the transaction is met.

The process of applying for a standard residential mortgage would often be too time-consuming ahead of an auction and therefore often other methods of finances are sought.

Commonly, bridging loans are utilised for securing properties sold via auction.

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Bridging loans are a method of short term secured finance that can be arranged promptly. Typically, a lender’s decision on a bridging loan application will be received within 24 hours which is an ideal pace for preparing finances quickly ahead of an auction.

A bridging loan enables a property transaction to take place without delay by applying the equity owned within a current property as a deposit towards another property. The result is that the mortgage holder owns multiple properties while further transactions are proceeding.

Depending on the plans of the purchaser there are a number of options either to develop and sell on the property or refinance once a mortgage offer is in place.

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Vendor Preparations

From a vendor’s perspective, there are often legal preparations to undertake before selling property at auction including;

A Memorandum of Sale.
Any Special Conditions of Sale.
Completing Local Searches.
Completing Land Registry Searches.
Providing Proof of Title.
Providing copies of any leases that affect the property.

Preparing the above documentation can speed up the property transaction however the potential purchaser can choose to commission their own checks as they may not wish to rely on the vendor’s documentation provided.

Potential buyers wishing to undertake their own legal research should do so ahead of the auction as once the contracts are exchanged on the day of the auction, both parties are committed to the transaction no matter if issues are later identified following undertaking further research.

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How does the modern method of auction work?

Traditionally property auctions would take place at an auction house, however, modern property auctions are carried out online.

The process would usually involve a vendor selecting local estate agents to carry out property viewings in order to generate interest. Potential buyers are then invited to submit their bid online.

Similar to a traditional auction, the vendor can set the rules of the auction including setting a reserve price, however, one main difference is that the timeframe for accepting bids would often span 30 days or more, however, this duration can be shorter should the vendor require a quicker sale.

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Should a bid be accepted, the buyer is required to pay a non-refundable reservation fee to secure the transaction.

Such fees are often up to 5% of the property purchase price and are the costs associated with the auction rather than a part payment of the property costs. The reservation fee is only refundable if the failure of the completion is due to the vendor.

The modern method of auctioning not only provides a longer bidding timeframe but the deadlines for completing the transaction are also longer.

A potential buyer within a modern auction would have 56 days to exchange contracts and a further 28 days to complete the transaction, and therefore there is more time to secure finances.

What are the Advantages of the methods of auction?

There are differences between the traditional and modern auctions, however, the advantages would depend on if you are a vendor or potential purchaser. The advantages are summarised below:

Traditional Auction Modern Auction

The legal commitment to the property transaction is in place on the day of the auction. The potential buyer has to pay the 10% deposit, providing security to the seller should the transaction fall through.
Properties that are in a condition that is deemed un-mortgageable can be sold promptly to cash buyers via a traditional auction.
The speed of the property transaction via a traditional auction is often favourable for both parties.
There is a longer timeframe for the property transaction to complete within via a modern auction, which enables potential buyers more time to arrange finances.
The bidding window is open longer and therefore the vendor may receive a wider range of bids from an array of potential vendors, including those that would not commonly attend a traditional auction house.

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Modern Method of Auction Summary

There are many benefits from purchasing property via auctions, however, research and preparations are required to ensure that the process runs smoothly and that the property is in a condition as expected.

Once a winning bid is received at auction, the buyer is legally committed to the transaction and therefore cannot pull out without losing their deposit.

In addition, in order to undertake the necessary research, a potential buyer would need to settle the costs of a property valuation and legal fees prior to the auction, without certainty that they will win at the auction and therefore there is a level of risk involved.

Therefore a potential buyer should be certain that they are ready to proceed with the purchase before attending the auction.

Call us today on 03330 90 60 30 or feel free to contact us. One of our advisors will be happy to talk through all of your options with you.

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What mortgage can I get for £500 a month?

by Dax McLeanPosted on 1st April 2021 | Updated 20th January 2023

Are you wondering what mortgage you can get for £500 a month?

Mortgage advisors are often asked how much can be borrowed while keeping monthly mortgage repayments on target, however, this question isn’t as simple as it seems!

There are many variables that impact the total amount that can be borrowed from mortgage lenders depending on:

An applicant’s personal circumstances.
The mortgage product chosen including the term of the mortgage.
The interest rate set.
Property value.
Value of the deposit.

In addition, it is also worth bearing in mind that the overall cost of a mortgage should not only be assessed by the cost of the monthly repayments.

There are also other considerations including the value of other fees such as application fees, arrangement fees, valuation fees, broker fees and transaction fees.

In this guide, we will explore further the variations that impact the total amount that can be borrowed on a mortgage as well as other considerations.

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How Much can be Borrowed for £500 Monthly Mortgage Repayments?

As mentioned, there is not a simple answer to how much can be borrowed keeping mortgage payments at £500 per month, due to the varying factors involved.

As a very rough guide, a standard repayment mortgage value of £112,000 taken over a term of 25 years, with an interest rate of 2.5% would set monthly repayments at around £502.45. The monthly repayments could be approximately half the cost of an interest-only mortgage is chosen.

However, such examples must be taken as illustrations only as so many elements would depend on a potential mortgage applicant’s personal circumstances, including employment status and income levels, as well as the property itself and the proposed loan to value rate.

In addition, there will be differences between lenders on how much they are prepared to lend depending on their borrowing criteria.

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Property prices range vastly up and down the country and therefore depending on the desired location, a mortgage value of £112,000 as seen in the above example, may not stretch very far!

In locations with higher value properties, larger deposits would be needed or other methods to keep the costs affordable such as government schemes, should the mortgage applicant be eligible, such as Help to Buy or Share Ownership schemes.

There are various websites that provide mortgage calculators that estimate the value of a mortgage that could be offered without impacting a credit score by applying for a mortgage. While undertaking research into the mortgage market, such calculators may be a useful tool.

Once initial research has been completed, it is strongly advised that the assistance of an Independent mortgage advisor is sought to advise on the most suitable type of mortgage for the applicant’s personal circumstances, and to find the best deals available on the market.

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What Factors will Impact the Total Mortgage Offer?

In addition to a mortgage applicant’s employment status and income, mortgage lenders often have further borrowing criteria that assess mortgage applicants on other elements such as their credit scores and age.

Each mortgage lender will have slightly different lending criteria and therefore to obtain an insight into which lenders would be the most appropriate, it is strongly advised to seek advice from an independent mortgage advisor.

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What Type of Mortgage Would Keep my Monthly Mortgage Repayments low?

There are a number of ways to keep the monthly mortgage repayments low as follows:

Extending the mortgage term – Opting to take a mortgage over a longer-term can reduce the monthly repayments amounts, however, the overall cost of the mortgage will increase due to paying interest for a longer-term.
Increasing the level of deposit – By putting down a larger deposit, the loan to value changes and therefore the risks decrease to the lender. It is common for lenders to provide mortgage terms, including interest rate depending on loan to value rate, and therefore should it be possible for an applicant to increase their deposit, they are likely to receive more favourable mortgage terms.
Choosing a Variable Interest Mortgage – A standard variable rate mortgage is a type of mortgage product where the interest rate can fluctuate, and therefore the level of repayments can also change. The interest rate is set by the mortgage lender however it is also linked to the Bank of England base rate, which as we have already discussed, is very low at present.

Often mortgage holders are moved onto a standard variable rate product following the end of an introductory offer on a mortgage such as a fixed-rate period.

Fixed-rate mortgages provide consistency to the mortgage holder as the payments remain the same each month, however, overall fixing the mortgage interest rate can be more expensive over the longer term.

Opting for an interest-only mortgage – With this option the capital borrowed is not repaid during the mortgage term and therefore an exit strategy is required to repay the capital, however in some circumstances interest only mortgages may be suitable and can keep the monthly costs down significantly.

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What Interest Rates Would Be Applicable for a Mortgage with £500 Monthly Repayments?

The interest rate attributed to a mortgage is not set depending on the value of the monthly repayments. The interest rate on mortgages is often calculated by the criteria set by the lender as well as the Bank of England base interest rate.

Currently, the Bank of England base rate is set at a very low rate of 0.1%, to assist with controlling the economic shock of the coronavirus pandemic. Such low-interest rates are very attractive for mortgage applicants, should they be in a position to proceed with an application.

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Summary – What mortgage can I get for £500 a month?

The total value that a mortgage lender will be prepared to lend varies greatly depending on a wide range of factors as discussed within this article, however typically the loan to value rate and personal circumstances are the biggest factor.

Should you wish to discuss the mortgage options that may be available to you, as well as discuss edibility, contact us today to arrange an initial consultation with our mortgage advisors.

Call us today on 03330 90 60 30 or feel free to contact us. One of our advisors will be happy to talk through all of your options with you.

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