Author: Dax McLean

Since 2022, the increased rates introduced by the Bank of England has impacted mortgage affordability for the average Brit.

Hikes have made it almost impossible for some trying to get onto the property ladder for the first time or working with a tighter budget.

The solution? Mortgages with a guarantor!

Guarantor mortgages are certainly not new to the UK market, and they’re best known for providing first-time and budget buyers with inroads to the property world.

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Getting a mortgage isn’t easy for everyone, especially if your earnings don’t reach the minimum requirement, the accrued savings for a deposit aren’t high enough, or you have a less-than-stellar credit rating or haven’t built one up yet.

While a guarantor loan might seem like a financial saviour, it doesn’t come without risks and challenges – for both buyer and guarantor.

To better understand if a guarantor loan is the most viable option, here’s what you need to know…

Guarantor Loans – What Are They?

Guarantor loans allow applicants to use a relative to co-sign the mortgage agreement to act as a guarantor for the debt.

This means that the guarantor will agree to settle the outstanding amount if the home buyer defaults on their mortgage payments.

Getting someone to agree to be a guarantor is tricky, as they will be required to provide collateral, usually in the form of their accrued savings or their own home or assets.

As a guarantor, there’s a lot of risk involved. While they are required to cover costs that the home buyer cannot, they will never own equity in the property.

Types of Guarantor Loans Available in the UK

More mortgage providers are developing products that allow close family members and parents to assist borrowers in qualifying for a mortgage.

Here’s an overview of each product type for your consideration.

Family Springboard Mortgages, aka Deposit Boost Mortgages

These mortgages make it possible for family members to help the buyer by offering their savings as collateral for the mortgage.

Some well-known financial services providers offer this type of mortgage, including Family Building Society and Barclays Bank.

While each lender has different requirements, they usually work similarly.

Related mortgage guides: 

• What to do if your mortgage expires.
• Disadvantages of paying your mortgage off.
• Best mortgage brokers in the UK.
• Should you pay off your mortgage early?
• 50-year mortgages UK.

Some institutions allow first-time buyers to get a mortgage with zero deposit if a family member puts 10% of the property value into a linked savings account.

After a set number of years, and all mortgage instalments have been paid according to the mortgage agreement, the family member can receive their 10% deposit back with the added benefit of interest included.

If the home buyer cannot afford their payments, the 10% can be used to cover costs.

Joint Borrower Sole Proprietor Mortgage (JBSP)

Joint borrower sole proprietor mortgages are very sought-after. This type of mortgage requires a family member to share liability for the mortgage.

While only the buyer is listed on the property deeds, the family member will be jointly liable for the debt.

Not being listed on the deeds makes it simpler for the assisting family member to avoid the cost of tax, stamp duties, and other fees often associated with owning equity in a second home.

Even with a co-signatory, the home buyer can benefit from the exemptions offered on stamp duties for first-time buyers.

The costs of a JBSP are best discussed with a mortgage broker, but in most instances, these loans are offered at the standard rates of the lender and based on the loan to value.

Not all lenders offer this type of mortgage as it’s quite a niche product that could be impacted by the age of the family member offering assistance, and of course, there’s risk to all parties.

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Advantages of Acquiring a UK Guarantor Mortgage

One advantage for guarantors is that a parent or close family member can help a loved one buy their first home without having to gift them money to use as a deposit.

For some people who already own their own home or have a large savings, this is the ideal situation.

Guarantors aren’t expected to pay anything towards the mortgage if the buyer keeps on top of their monthly repayments.

Any cash that the guarantor offers as collateral for the mortgage is given back to them after the arrangement comes to an end.

It’s only used if the buyer defaults on the mortgage payments or can no longer afford the instalments.

Is A Guarantor Mortgage the Right Fit for Me?

Guarantor mortgages aren’t well suited to everyone.

If you’re a first-time buyer and don’t have a big enough deposit or your income isn’t high enough to meet the stipulated requirements, a guarantor mortgage may be the best choice for you.

Some buyers have no credit history because they have never been in debt or have a poor credit history – in both of these instances, guarantor mortgages can be beneficial.

In such instances, the guarantor will need to be financially stable and have a good credit history in order for the mortgage to be granted.

One of the biggest perks of guarantor mortgages is that you can possibly borrow 100% of the property value instead of having to put down a hefty deposit.

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Who Can You Ask to Be a Guarantor On Your Mortgage?

Some terms and conditions govern guarantor mortgages.

For instance, the guarantor must be a parent or close family member.

You’ll need to ask a family member who is financially stable with a good credit history, as the lender will assess their creditworthiness as if they are the home buyer.

In most instances, the guarantor must meet all the lender’s qualifying criteria.

Sometimes, the rules are slightly different – as with offset and family springboard mortgages.

Lenders pay close attention to the guarantor’s financial situation to ensure that the person signing surety on the mortgage can realistically afford to cover the costs of the entire mortgage if the buyer defaults on the loan or can no longer afford it.

If you’re wondering if retired parents can be your mortgage guarantor, the answer is yes.

In such instances where the guarantor is retired, the mortgage provider will assess their savings and assets that they can provide as collateral along with their current credit rating and pension income, if any.

Some lenders see age as a factor when assessing whether a guarantor is fitting or not.

Before applying for a guarantor loan with a retired guarantor, it is best to consult with a professional mortgage broker to see the likelihood of being accepted and also to ensure you’re considering all of your options.

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What Are the Risks of Guarantor Mortgages for Both Buyer and Guarantor?

The table below presents some of the risks faced by each party:

• Risks to the Guarantor Risks to the Buyer
• Responsible for the debt if the buyer defaults on the agreement
• If a guarantor passes away, the buyer must find a new guarantor
• Responsible for the fees on late payments
• If a 100% mortgage is acquired and house prices dip, the buyer could be in negative equity in the home.
• If the property is repossessed and sold to defray costs, the guarantor is responsible for the shortfall between the sale price and outstanding mortgage amount.
• The buyer is financially linked to the guarantor for the foreseeable future, which could make family ties awkward in the long run.
• Any property or assets offered as collateral are at risk if the mortgage amount cannot be covered.
• Savings could be lost if used as security, and the home buyer cannot pay the outstanding mortgage
• Could impact the guarantor’s ability to get approval for other credit types, as they may be seen as financially overextended in terms of responsibilities.

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.

Is It Possible to Switch From a Guarantor Mortgage to Another Type?

All lenders have their own terms and stipulations when it comes to guarantor mortgages.

Generally, lenders will require the home buyer to build a decent amount of equity in the property before they can switch to a guarantor-free mortgage.

This is usually around 20%, but it’s lender-dependent.

Most lenders anticipate a buyer’s income increasing over time along with their equity in the property, which means that the guarantor will no longer be needed in time.

At such a time when the buyer is in a better financial position, they can remortgage the property and hopefully get a better interest rate without the need for a guarantor.

Sometimes, that’s impossible, and remortgaging may still require a guarantor.

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Mortgage with Guarantor in the UK Conclusion

If you’re unsure if a guarantor mortgage is the best route for you, chatting with an unbiased professional mortgage broker can help you better plan and put things into the right financial perspective.

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

According to Statista, mortgage rate increases broke records in 2022, seeing the Bank of England introduce several bank rate hikes that resulted in higher mortgage rates.

With increasing mortgage rates, many Brits have looked into switching mortgage deals to enjoy better rates.

New deals have hit the market, and you might even find yourself shopping around for better options.

What happens if you come across a variable rate mortgage? Should you get one, or are there more viable mortgage types for you?

You may even wonder if you should consider tracker mortgages or SVR mortgages (Standard variable rate) before considering a discount variable rate mortgage.

One of the biggest driving forces behind switching mortgage types is costs, and if you’re looking to save and think that a discount variable rate mortgage is the way to do that, there are a few things you’ll need to know about this kind of mortgage first.

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How Discounted Variable Mortgages Work in the UK

The first thing you should be aware of as someone on the property ladder is that all mortgage companies have what’s called a standard variable rate.

This is an interest rate that the lender itself determines.

The Bank of England’s base rate then influences how the lender’s interest rate fluctuates, but it’s not strictly linked to that base rate.

If you are on a tracker or fixed-rate mortgage, and the initial term ends (usually 2 to 5 years), your mortgage will revert to a standard variable rate.

You can remortgage when that happens or just before.

For many, a discounted variable rate mortgage is alluring because it sets the interest you’ll pay at just below the provider’s standard variable rate for a set term.

The interest rate isn’t fixed, though, so it will rise and fall as the mortgage provider’s standard variable rate does.

In this way, discounted variable mortgages work rather similarly to tracker mortgages.

Of course, they’re not tracking the Bank of England’s base rate but rather the lender’s standard variable rate at a discounted amount.

An example of how a discounted variable rate mortgage works:

• Your lender has a standard variable rate of 3%, and if you’ve been given a 1% discount, you’ll be paying 2% interest.
• If the lender’s rate suddenly increases to 4%, your interest rate will increase, but only to 3%.
• Mortgage providers can fluctuate their interest rates at any time.

Related mortgage guides: 

• What to do if your mortgage expires.
• Disadvantages of paying your mortgage off.
• Best mortgage brokers in the UK.
• Should you pay off your mortgage early?
• 50-year mortgages UK.

How Discounted Variable Rate and Tracker Mortgages Compare

You’ll find that discounted variable rate mortgages and tracker mortgages have a similar format, but there’s one area where they are different.

A tracker mortgage will closely follow the base rate of interest put out by the Bank of England.

The result is that borrowers on this type of mortgage often enjoy a lower interest rate than other mortgage types.

Discounted variable rate mortgages are different in that they track the mortgage provider’s standard variable rate.

Essentially, this means that they can sometimes be cheaper than standard variable rate mortgages, but the rate can jump and fall without warning, unlike tracker mortgages.

Pros and Cons of Discounted Variable Rate Mortgages UK

Advantages

Not all discounted variable rate mortgages in the UK are the same.

The products may have differences, but here are some of the most common associated advantages to expect:

• If the Bank of England happens to reduce its interest rate and your lender responds by dropping its interest rate, you could benefit from an even lower interest rate.
• As long as your deal is in place, your interest rate will be lower than your mortgage provider’s standard variable rate.
• Associated early repayment charges are usually lower when you have a discounted variable rate mortgage. This is beneficial if you wish to pay a little more each month to pay down the debt sooner.

Disadvantages

• Monthly instalments on a discounted variable rate mortgage are not fixed, meaning that even half a per cent rise in the interest rate could increase your monthly instalment exponentially.
• Fluctuating mortgage payments can make it hard to budget each month.
• Lenders typically apply a collar to discounted variable rate mortgages. This is a limit to the level that your interest rate can drop to.

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Costs Associated with UK Discounted Variable Rate Mortgages

All mortgages come with fees, but discounted variable rate mortgages come with additional fees that some other mortgages simply don’t have.

Before acquiring a discounted variable rate mortgage, check that the fees won’t negate any anticipated savings.

Some fees to enquire about include the arrangement or establishment fee and any penalties you might face, such as early repayment charges and exit fees.

To get the best possible deal, it’s always recommended to use an experienced mortgage broker who can find the best deals and investigate the fees before you sign anything.

A mortgage broker can also advise you if the discounted variable rate mortgage is best for your specific financial situation and affordability.

Related mortgages guides: 

• What to do if your mortgage expires.
• Disadvantages of paying your mortgage off.
• Best mortgage brokers in the UK.
• Should you pay off your mortgage early?
• 50-year mortgages UK.

What To Do If I Can’t Afford My Discounted Variable Rate Mortgage Instalments?

Sometimes life and finances become a bit challenging and the fluctuating interest rate of a discounted variable rate mortgage can become difficult to afford.

In such an instance, there are various courses of action you can take.

• Remortgage and move onto a different mortgage deal – this could incur early repayment charges
• Switch to an interest-only deal
• Take a break from your repayments

All of these will help you immediately experience financial relief, but may increase the overall cost of your mortgage in the long run.

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FAQs

What Are Variable Mortgage Rates UK 2023?

It’s difficult to pinpoint an exact variable mortgage rate UK 2023 as each lender determines their own variable rate.

That said, the common average variable mortgage rate is around 8%.

What is a Discounted Standard Variable Rate Mortgage?

This is a type of variable rate mortgage with an interest rate that’s discounted from the lender’s standard variable rate, but still follows its fluctuation patterns.

How Long Are Typical Discounted Variable Rate Mortgage Terms in the UK?

In the UK, discounted variable rate mortgage terms usually run for 2 to 5 years before the deal will revert to a standard variable rate mortgage, or the borrower can remortgage.

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

Rumour has it that 50-year mortgages will soon become available in the UK, but understandably, many Brits are unsure about whether they should lock their mortgage in for the next half-century!

For many, thinking ahead to next month or next year is tough.

The average mortgage, which usually lasts 25 to 35 years, can even be daunting.

With 50-year mortgages on the horizon, even more forethought may be required when considering buying a property.

One particular lender has been given the go-ahead to offer such mortgages, and it’s got the property market in a fluster, especially where fixed rates are typically available between two and five years.

Are 50-Year Mortgages a Complete Surprise to the UK Market?

While only one lender is licensed to offer 50-year mortgages in the UK, it’s rumoured that more lenders will join in quite soon with similar offers.

These could be referred to as “ultra-long fixed term” mortgages.

Of course, the mortgage market has been heading in this direction for quite some time, with some mortgage lenders already offering credit between 11 and 40 years.

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What’s the reason behind 50-year mortgages getting granted?

It’s said that the Government wants to promote intergenerational lending to assist younger investors in entering the property market.

50-Year Mortgages UK – What’s the Catch?

A 50-year mortgage comes with a longer repayment period, providing better cashflow each month.

But, and it’s a big one, 50-year mortgages are more expensive than regular-term mortgages.

Advantages of 50-Year Mortgages

Despite the higher rates attached to long-term loans, they’ve still received a lot of public interest.

A 5% deposit is required in most instances, which is highly attractive to first-time buyers trying to get onto the property ladder.

With fluctuating interest rates causing uncertainty, it is no surprise that the fixed rate is attractive.

Another drawcard for 50-year mortgage providers is that they can offer property buyers less stress and greater convenience, as they won’t have to worry about remortgaging the home every 2–5 years.

The length of the fixed term also allows people to plan their financial futures with more certainty.

Knowing your mortgage monthly instalments for the foreseeable future can be a comfort.

Of course, there’s the issue of financial stress tests that borrowers have to pass to get the mortgage they apply for.

This test determines if they can afford the mortgage if there are upward changes to the interest rate in the future.

This may not mean that lenders no longer bother with stress tests, but the basis of these tests may make it simpler for borrowers to pass them.

Restrictions on how many borrowers can access will certainly apply.

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Disadvantages of 50-Year Mortgages in the UK

One of the biggest downsides of a 50-year mortgage is probably the risk involved.

There’s simply no knowing how a person’s financial situation or even living situation might change in the next 50 years.

And there may be hefty repayment charges if you wish to settle the amount earlier.

A possible disadvantage to be aware of is that while rates are astronomical and ever-increasing right now, that’s not to say it will always be that way.

Some borrowers may lock themselves into a fixed rate for the next 50 years, only to find that rates drop in the near future to lower than their current fixed rate.

It’s thought that if lenders consider waiving early repayment charges on their long-term fixed mortgages, they may become even more popular.

They may even become more popular if it’s possible for borrowers to acquire more than 15% of their mortgage above 4.5 times their income, but right now, that’s speculation.

Those who are looking to buy a family home to live in for the rest of their lives will find the 50-year mortgage a very viable option.

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How Will Brits Respond to the 50-Year Mortgage?

One of the big questions surrounding 50-year mortgages is how Britons will accept it, if at all.

Industry experts imply that it may remain a niche product because the general British mindset is on two-year fixed-rate mortgages.

Lenders and banks typically see longer-term loans as riskier, so the criteria to qualify may be fairly strict, or some lenders may simply not be keen to offer such products.

The consensus is that the 50-year mortgage will appeal to certain customers based on their unique financial situation and stage of life.

Some say that there are rumblings of a new product that may come after the 50-year loan, where children can inherit property with an existing mortgage to get into the property market.

There’s always the risk that inheriting children may not afford the instalments of the existing mortgage, which could mean it’s a while before such a product hits the market.

50-Year Mortgages UK Conclusion

Whether a 50-year mortgage is for you will come down to the intricacies of your personal financial situation.

To ensure that you make the right financial decision for you, it’s recommended to chat with a qualified and experienced mortgage broker who can present the various options available to you and assist you with making the right choice.

FAQs

How Does a 50-Year Mortgage Work?

When a mortgage is spread over 50 years, the monthly instalments will be around 50% of what would be on a standard-term mortgage.

Borrowers can then expect to have more cash flow for everyday life.

Related mortgage guides: 

• What to do if your mortgage expires.
• Disadvantages of paying your mortgage off.
• Best mortgage brokers in the UK.
• Should you pay off your mortgage early?
• 50-year mortgages UK.

Is a 50-Year or 30-Year Mortgage Better?

A 50-year mortgage may be more appealing because it comes with slightly lower monthly instalments than a 30-year mortgage.

The disadvantage, however, is that you’ll be paying off the property for longer and may have higher fees to pay.

Are Banks Offering 50-Year Mortgages?

Currently, only one mortgage lender, Perenna, is offering 50-year mortgages, but it’s believed that other lenders and banks will offer similar products in the future.

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

If you’re looking for Sharia-compliant financial services in the UK, there are some options available.

Statistics show us that 20 banks provided services in Islamic finance as of 2016, with five of them being fully Sharia law compliant.

More banks and financial institutions are starting to offer Sharia-compliant products and services.

Interest-bearing loans are forbidden in Islam, which can pose a problem when wanting to buy a home.

Of course, the property and mortgage market caters to halal alternatives, providing options for Islamic buyers to get on the property ladder in the most Sharia-compliant way.

Nowadays, Muslims in the UK can purchase the home of their dreams with a Sharia-compliant mortgage.

Below, we look at Islamic mortgages and what you need to know:

What Are Islamic Mortgages?

Sharia-compliant mortgage alternatives provide buyers with options to purchase a home with no interest.

You’ll find many options available, all with a basic loan model.

With an Islamic mortgage, the bank will purchase the property and thus become the official property owner.

To purchase the property, you will pay monthly “rental” amounts to buy out the bank’s stake in the property.

You must pay the rental portions for a set period to become the legal owner.

There will either be a nil balance at the end or a lump sum that needs to be settled for the property to become legally yours.

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Three Types of Sharia Mortgages in the UK

There are three main types of Sharia-compliant mortgages that you can access in the UK.

These include:

• Murabaha

With this particular no-interest plan, a Sharia-compliant provider purchases the property and then sells it to you at a higher price, which you then pay in set monthly instalments.

This type of halal mortgage is typically seen in commercial property purchases.

• Ijara

This is a purchase plan enabling buyers to pay a portion of rent and a portion of capital payment towards the outstanding amount.

Throughout the term of the loan, your stake in the property remains consistent.

• Diminishing Musharaka

This halal purchase plan works as a joint agreement between an Islamic bank and the buyer.

This works with the buyer paying set instalments each month that go towards reducing the bank’s ownership of the property while increasing yours.

Deciding which of these mortgage alternatives is right for you will take some time and consideration.

As with all things, there are pros and cons to keep in mind.

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.

Disadvantages & Advantages of Islamic Alternative Loans

One of the biggest disadvantages of alternative loans is that you might end up paying more rent than is usual for your local area.

Of course, this isn’t always the case, as some mortgages work out to less rental than the area average.

This is because the majority of halal and Islamic mortgage providers apply LIBOR-pegged values to determine the rental amount.

LIBOR is the London Interbank Offered Rate, which used to be a standard benchmark representing the interest rates typically applied to short-term loans between banks.

Another thing you need to be aware of is that the bank will be the legal owner of the property while you’re paying monthly instalments, but that doesn’t mean you’re exempt from the fees that property owners usually face.

This means that you will still need to pay the required amounts for the stamp duties, conveyancing, and insurance.

These amounts are added to the initial cost of the purchase plan.

In terms of advantages, Islamic mortgages allow you to purchase a property while still observing Sharia laws.

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They’re available to Muslims and non-Muslims and offer an ethical way of borrowing.

Required Deposit for Islamic Loans in UK

When applying for an Islamic alternative loan, you will need to put down an initial deposit. This is usually set at 20% of the loan amount.

Finding Islamic Mortgages in the UK

If you’re a Sharia buyer and want to find great Islamic mortgages, you don’t have to seek out specific Islamic banks.

Several Sharia mortgage alternatives can be found at building societies and UK banks.

Islamic purchase plans and mortgages are regulated by the FCA (Financial Conduct Authority).

While there are three types of Sharia purchase plans available, several products are available within each, so it’s advised to discuss the various options and your financial situation with a halal mortgage broker specialist before making a final decision.

Islamic Mortgages Conclusion

Finding an Islamic mortgage is getting easier than it was in years gone by.

With the right mortgage expert to guide you and with some consideration for your current financial situation, you can find a Sharia-compliant mortgage that sets you up to buy the home of your dreams without having to worry about going against Sharia law.

FAQs

Which Banks and Building Societies in the UK Offer Islamic Mortgages?

Several banks and building societies offer Islamic mortgages, such as Gatehouse, Al Alhi, Heylo Housing, and United National Bank, to name a few.

How Do I Check if an Islamic Mortgage is Sharia-Compliant?

Islamic mortgage providers usually have a panel of Islamic scholars that verify if the services and products they’re offered are Sharia-compliant.

Providers who are legitimate will be willing to share the details of their panel members.

Why Are Islamic Mortgages More Expensive?

In some instances, Islamic mortgages can be more expensive than other mortgages because of the increased administration cost and the fact there’s little competition, with very few lenders offering Islamic purchase plans.

Related mortgage guides: 

• What to do if your mortgage expires.
• Disadvantages of paying your mortgage off.
• Best mortgage brokers in the UK.
• Should you pay off your mortgage early?
• 50-year mortgages UK.

Do Islamic Mortgages Require a Credit Check?

Yes, credit checks also apply to halal mortgages, as is the law.

Credit checks ensure that you can comfortably afford the instalments attached to a loan.

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Who is Eligible for Islamic Mortgages?

It’s not only Islamic buyers that can make use of Islamic mortgages.

Sharia-compliant mortgage providers can offer services and products to non-Islamic buyers too.

Islamic banks are required to offer in line with a set of social and ethical responsibilities.

You can’t make use of Islamic loans if you’re dealing in alcohol, gambling, tobacco, arms, or pornography.

What Makes Islamic Mortgages Halal?

As Islamic mortgages don’t include an interest based loan, they’re considered halal.

Traditional mortgages are considered haram (forbidden) as interest is required.

Banks and providers of Islamic mortgages usually seek guidance from Islamic law experts to ensure that their payment plans are genuinely Sharia-compliant.

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

According to Statista, mortgage loans in the UK are projected to experience an increase in monthly costs by the 4th quarter of 2024.

This statistic alone may have new homeowners looking at their mortgage deal and wondering if they should try to pay it early or switch to a better deal.

If your financial situation changes, and you want to repay your mortgage early, or if a new property catches your eye, and you want to get rid of your current property, so you can get it, chances are that settling your current mortgage early is on the forefront of your mind.

If you don’t want to continue with your existing mortgage, you can pay it off early or remortgage, but you should know a few things first.

One of the biggest disadvantages of paying your mortgage early or remortgaging is the ERC (early repayment charge) that your current lender will impose on you.

If you’re exiting your mortgage early to save money, you should first take the time to ensure that the ERC won’t negate any expected savings.

To fully understand how it works, you only need to learn more about ERCs and how they work. Then, you can find ways to avoid or minimise it.

Below, we cover everything you need to know before deciding whether repaying your mortgage early is worth it.

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What is an ERC?

It isn’t easy to provide a precise figure for an ERC, as each is calculated as a percentage of the remaining mortgage balance.

Usually, ERCs are between 1% and 5% of the mortgage balance.

Sometimes, lenders are more lenient on the percentage, especially if the mortgage deal is already nearing its end.

For instance, if you’re trying to exit your current mortgage deal in the first year, you may have the highest percentage applied of 5%, but if you’re in the fourth year of your mortgage, you may find you’ll have a 1% charge.

Of course, this cannot be guaranteed, as each mortgage lender has its own terms.

What Do Early Repayment Charges Cost on the Average UK Mortgage?

It’s difficult to provide a precise figure for an ERC as each is calculated as a percentage of the remaining mortgage balance.

Usually, ERCs are between 1% and 5% of the mortgage balance.

In some instances, lenders are more lenient on the percentage, especially if the mortgage deal is already nearing its end.

For instance, if you’re trying to exit your current mortgage deal in the first year, you may have the highest percentage applied of 5% but if you’re in the fourth year of your mortgage, you may find you’ll have a 1% charge.

Of course, this cannot be guaranteed, as each mortgage lender has its own terms.

Related mortgage guides: 

• What to do if your mortgage expires.
• Disadvantages of paying your mortgage off.
• Best mortgage brokers in the UK.
• Should you pay off your mortgage early?
• 50-year mortgages UK.

When Do ERCs Apply?

Every mortgage has a tie-in period. This is the period of your fixed-rate deal.

ERCs apply during the tie-in period.

Sometimes, depending on your contract, it may extend beyond the tie-in period.

For example, someone on a 2-year fixed rate deal may still face an ERC when switching to another deal within the first 3 years of their mortgage.

It may be disadvantageous to switch to a new deal within your tie-in period, but once that time passes, you may find that switching saves you money.

Another thing to be aware of is that an ERC may also apply to other types of mortgages, including variable-rate mortgages.

You may also have to pay an early repayment charge in the following scenarios:

• You have a lump sum to pay off the mortgage before the mortgage term ends.
• Your mortgage is still in a special-rate period, and you switch to a new mortgage deal.
• You find a better mortgage deal and switch to it before the end of your contract.
• You overpay each month in hopes of paying down your mortgage quicker.
• You can’t move your mortgage to a new property, but you’re moving home.
• Your new property is worth less than your current home, and you wish to transfer your mortgage to the new property.

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How Lenders Approach ERCs

Every UK mortgage lender is different, with their own terms and conditions in place.

Some lenders have a flat penalty fee for early repayment, whereas others may apply a certain percentage of the outstanding mortgage amount.

By looking at your mortgage contract, you can determine the specific terms and conditions if you repay your mortgage early.

All the details should be listed in your mortgage contract.

When getting into a mortgage deal, it’s best to inquire directly about the possible fees and penalties if you settle your mortgage early.

Is It Possible to Get a Mortgage with No Early Repayment Charge?

You will find that not all mortgages have an ERC worked into the deal.

For instance, standard variable rate mortgages and tracker mortgages rarely include an ERC.

You may think it’s a great idea to get one of these mortgages but keep in mind that they’re also more expensive than other mortgage types as they come with higher interest rates.

That said, if you think you’ll be repaying your mortgage early or want to have the option of changing to a different mortgage deal during the loan term, these mortgage types may be the most viable option for you.

If you’d prefer to start with a low-interest mortgage with lower monthly instalments, you may want to avoid standard variable rate mortgages and tracker mortgages.

If you’re unsure what type of mortgage is best suited to your financial situation and future plans, discussing the various options with a professional mortgage advisor is in your best interests.

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.

Tips for Avoiding Early Repayment Charges on Your UK Mortgage

Everyone hoping to switch mortgage deals or pay off their mortgage early wants to know how to avoid those pesky early repayment charges.

If you check your mortgage contract, you may find that there’s a specific date mentioned when early repayment charges will no longer apply.

If you adhere to this date, there should be no penalty when switching deals or repaying early.

This is just one way of avoiding early repayment charges on your mortgage. Some other ways include:

• Avoid overpaying the agreed mortgage instalment amounts.
• Instead of switching to a new mortgage deal when you move, port your mortgage. First, check with the mortgage lender if they charge fees for porting a mortgage.
• Opt for a mortgage deal that doesn’t impose ERCs. This could be a standard variable rate mortgage or a tracker mortgage.
• Opt to have the ERC added to your new mortgage deal. This is a short-term cash flow fix but isn’t the most financially sound option, as interest will be added to the additional amount.

Is the ERC Worth It?

You may wonder if it’s worth simply going ahead with your plans to exit the mortgage early and pay the early repayment charge.

If the early repayment charge won’t put you in a difficult financial position, it may be worth it.

Also, and quite obviously, if you can save a decent amount of money by changing to a different mortgage deal, it’s certainly worth it.

If you won’t be saving any money and the exit will exhaust your finances, you may want to stick with your current mortgage or wait until the date when the ERC will no longer apply.

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Mortgage Early Repayment Conclusion

It can certainly help to discuss the various options with your real estate agent or dedicated mortgage advisor.

Understanding the pros and cons of exiting your existing mortgage early and how ERCs actually work can save you headaches and financial burdens in the future.

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

If you’ve found the home of your dreams, but the mortgage you’d require to cover the cost is £180,000, you may wonder if you can even afford it.

The average UK mortgage granted is around 200,000. Before applying for a mortgage, it’s a good idea to calculate the monthly instalments.

That way, you’ll avoid overindebting yourself or plunging your budget into distress.

The amount you’ll pay on a £180,000 mortgage will depend on several factors, but a general example can be provided.

Say you acquire a standard repayment mortgage with an interest rate of around 6%, which is typical for current times. The term you received is 25 years.

Your expected monthly instalments would be around £1,160 per month.

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What Salary Do I Need for a £180,000 Mortgage?

While several factors come into play when applying for a £180,000 mortgage, the general earnings required are around £40,000 to £45,000 per annum.

This is because most lenders will only loan you an amount that is 4 to 4.5 times your annual salary.

That said, your amount is only one factor of an affordability assessment.

For example, some borrowers have acquired up to 7 times their annual salary based on certain factors.

How Much Deposit Do I Need on a £180,000 Mortgage?

The deposit is an important focus point for most borrowers, as it’s the most difficult part to organise.

On a mortgage of £180,000 in the UK, lenders typically expect a minimum of 15% deposit.

If you put down a 15% deposit, which comes to £31,800, you’d realistically be able to purchase a property for £212,000 while acquiring a mortgage for £180,200.

With this in mind, remember that many mortgage deals and schemes are on the market, meaning there’s no hard and fast rule about putting down a 15% deposit.

Sometimes, borrowers only put down a 5% deposit (£9,500), enabling them to purchase property valued up to £190,000.

Sometimes, lenders can offer a zero deposit option, but this is very rare.

Factors that Influence Mortgage Repayments UK

Of course, several factors can influence mortgage repayments as follows:

Mortgage Type

The amount of interest added to your loan will influence how much you pay towards your monthly instalments.

For instance, tracker mortgages have interest rates in line with the Bank of England base rate.

As the base rate fluctuates, so does your mortgage instalment.

If you’d prefer no surprises and want to know with certainty how much you’ll pay each month, a fixed-rate mortgage is a good option.

The rates on a fixed-rate mortgage may appear higher at first, but they’re consistent and won’t spike when the interest rate does.

Another type of mortgage is an interest-only mortgage.

This type of mortgage has greatly reduced rates. During the term of your mortgage, you would only pay the interest on the loan.

At the end of your loan term, you will have a lump sum of £180,000 to pay.

These types of mortgages are a little trickier, as lenders will want you to show evidence of settling the remaining amount when the interest is paid off.

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Interest Rate

Interest rates you are offered can be the difference between an affordable mortgage and one you cannot afford.

As of July 2023, mortgage rates in the UK are between 5.5% and 6.5%.

You may think 1% less isn’t a big amount, but it certainly is on a mortgage of £180,000.

Your creditworthiness will influence how lenders see you and ultimately determine what sort of interest rate you can get.

If you meet the criteria in place by the lender, you’ve got a better chance of achieving a mortgage rate on the lower end of the scale.

Of course, the best deals are often negotiated with the help of a mortgage broker.

Mortgage Term

The length of time you have to repay your mortgage (the term) can influence how much you repay. Many mortgages run over 25 years, but several runs for 30 years.

It’s important to note that choosing a longer repayment term may seem like you’re paying less, as your monthly instalments would be lower.

However, a longer term means you pay more in interest over the loan term.

Related mortgage guides: 

• What to do if your mortgage expires.
• Disadvantages of paying your mortgage off.
• Best mortgage brokers in the UK.
• Should you pay off your mortgage early?
• 50-year mortgages UK.

Additional UK Mortgage Costs to Consider

When applying for a mortgage, the amount you pay back is not the amount you’ll genuinely pay back.

You must have some additional funds set aside to cover additional mortgage costs.

These include:

Establishment fee

This can range from £1000 to £2500, which is paid to the lender as a lump sum or split between monthly payments.

If you can’t afford to pay this off as a lump sum in advance and opt for the amount to be added to your instalments, you’ll pay interest on it.

Broker Fees

Brokers may charge the buyer and the lender a commission, but some don’t charge the buyer.

These fees can vary from one broker to the next.

Deposit

You’ll need to put down a deposit between 5% and 25% depending on the housing scheme or mortgage type you happen to get.

Stamp Duties

Stamp duties are fees paid to the government. If you’re purchasing a £180,000 property, the stamp duty will likely be around 2%.

Valuation Fees

In most instances, valuation fees are around £300. The lender will charge this to evaluate the premises to confirm its value.

Survey Costs

A survey is a more thorough inspection of the property to determine if there are underlying issues that may need attention and be costly to tend to.

The survey usually costs between £400 and £1,500.

Conveyancing Costs

A solicitor must be hired to manage the official and legal paperwork during the purchase.

Conveyancing fees in the UK typically cost between £800 and £1,500.

Sometimes, lenders will cover this cost, but it’s not always the case.

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£180,000 Mortgage UK Conclusion

If you’re interested in purchasing a property that’s in the £180,000 price range, you’ll need to ensure you have a good credit record, earn around £40,000-£45,000 per month, and meet the lenders’ eligibility criteria.

Speaking with a professional mortgage advisor could help you find the right deal for you.

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

Mortgage brokers are professional individuals who know everything there is to know about mortgages.

When acquiring the services of a mortgage broker in the UK, you can rest assured that you’ll learn about all the most viable mortgage options available.

Selecting the ideal mortgage deal for you can be a daunting experience, especially if all the lenders and their packages seem similar.

With a mortgage broker, you can cut through the noise of mortgage comparisons and get advice on which options suit your financial situation.

Below, we feature the ins and outs of using a mortgage broker and mention some of the leading names in the UK.

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Do I Really Need a Mortgage Broker?

No law says you must hire a mortgage broker, but it’s recommended.

Mortgage brokers are qualified advisors tasked with getting their clients the best mortgage deal possible.

Mortgage brokers are also qualified individuals.

They must have qualifications to practice, and they’re regulated by the Financial Conduct Authority (FCA).

While brokers can advise on all types of lenders and mortgages, it’s good to note that some lenders only deal directly with clients, so they may not have access to every deal out there.

Before knowing if you really need one when you’re buying a property, you’ll need to consider several things.

First and foremost, if your situation is unique, you may want to consider hiring a specialist mortgage broker.

People with irregular income or a desire to buy a unique property often benefit from the advice and guidance of a professional mortgage broker.

If your situation is considered normal or standard, you can still benefit greatly from using a mortgage broker because they spend their time hunting for the best deals available, ensuring that you’re never paying more than you absolutely have to.

A mortgage broker will also handle all of the paperwork, ensure you know about housing and government schemes you can sign up for, and keep tabs on the process to ensure everything progresses swiftly.

Related mortgage guides: 

• What to do if your mortgage expires.
• Disadvantages of paying your mortgage off.
• Best mortgage brokers in the UK.
• Should you pay off your mortgage early?
• 50-year mortgages UK.

Benefits of Using a UK Mortgage Broker

There are several perks to using a mortgage broker in the UK. With the right mortgage broker on your side, you can save yourself hassle, stress, and time.

Of course, the main aim is also to cut back on the costs of buying a new home.

Competent mortgage brokers won’t just parrot mortgage company information. Their knowledge goes far deeper than that.

They will have an expert understanding of the industry and be able to recommend lenders most likely to approve your application based on a quick overview of your financial situation.

Fees are normal when using a mortgage broker.

Usually, buyers will pay a fee to the mortgage broker for their services and collect a commission from the lender.

Some estate agencies or mortgage companies offer mortgage broker services free to the buyer and only collect a commission from the lender.

Your mortgage broker isn’t guaranteed to be a miracle worker, though.

Some lenders make it a rule to only deal with a direct buyer, which means you won’t be able to use a broker to access such deals.

That said, and it’s often the case, some mortgage advisors have access to mortgage deals that are not open to direct customers.

Overview of advantages of using a mortgage broker:

• Professional brokers are focused on finding the best deal for you.
• Tied brokers may be able to organise lower interest rates and certain incentives for you.
• Your broker may recommend a solicitor to hire when purchasing a property.
• Brokers act as an intermediary between the buyer and lender, which means that you won’t find yourself accepting terms or agreeing to deals that you don’t entirely understand. Your broker will explain everything to you.
• Mortgage brokers do all the legwork during the mortgage setup. This includes making calls, doing progress checks, gathering documents, and ensuring that the mortgage application goes through timeously.

Finding the Best UK Mortgage Brokers

If you’re looking for a mortgage broker in the UK, you will find that there are thousands registered.

Here are a few ways you can find the best mortgage brokers available to you:

Local Estate Agency

If your local estate agency buys and sells homes, they may have their own in-house mortgage brokers.

Using a local mortgage broker through the agency you wish to buy a property can save time and money and give you peace of mind that the broker has a vested interest in ensuring your deal goes through.

Using Comparison Sites

Several online platforms will allow you to input your requirements, and the system provides you with a list of options to consider.

In most instances, mortgage brokers on comparison sites are legitimate.

Check Review Sites

Finding excellent reviews for mortgage brokers online is a great way to get insight into the type of service they offer and what to expect.

You will also know which mortgage advisors to avoid.

Personal Recommendations

Word of mouth is a powerful way to find the right mortgage advisor.

Perhaps a family member or friend had a great experience with a particular mortgage broker.

They can help you connect with them and get the ball rolling.

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.

What Qualifications Should a Mortgage Broker in the UK Have?

You may want to ensure that your mortgage broker is a reliable, transparent and experienced individual.

Simply trusting that someone is a qualified and approved mortgage broker would be risky.

If you wish to check the qualifications of your mortgage advisor, they should have a level 3 qualification.

Some mortgage brokers have a Certificate in Mortgage Advice and Practice diploma, also referred to as a CeMAP diploma.

This is a higher level qualification and indicates more experience in the industry.

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Best Mortgage Brokers in the UK Conclusion

Finding the best mortgage brokers in the UK takes a bit of time and forethought.

Opt for mortgage advisors who are qualified, experienced, and come with good reviews and reputations in the industry.

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

According to the Office for National Statistics, in 2019, 33% of the total UK workforce (around 10.6 million people) worked in key worker positions.

That’s a large portion of the population that may want or need to buy housing.

Key workers are notoriously paid less than their worth, and if you’re a key worker, you may experience this too.

If you work in the UK as a paramedic, doctor, nurse, care worker, social worker, educator, public serviceman, police, or crime agency staff member, you’re considered a key worker.

While your responsibilities are sure to be tough, there are several perks to being a key worker in the UK, with various housing schemes being one of them.

You may think that a key worker housing scheme makes homeownership easier, and it does.

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But you still have your work cut out to ensure that you find the right key worker housing scheme option for you and figure out which mortgage lenders will likely approve your application in conjunction with the housing scheme.

Below, we look at the various ins and outs of key working housing schemes and what you can expect.

Understanding how these schemes work and how you can get a mortgage through one of these schemes will help you invest in a property with confidence.

Are You Eligible for the UK Key Worker Housing Scheme?

One of the first things you need to consider is if you’re eligible for the key worker housing schemes that are available.

Not everyone is eligible for the key worker housing scheme just because they’re key workers.

You’ll need to meet certain eligibility criteria to qualify.

The requirements to qualify include:

• Your annual income must be £60,000 or less.
• You must be permanently employed and have proof thereof.
• Your retirement cannot be less than 5 years in the future.
• At least 5% deposit is required, and you’ll need to prove that you have this amount or how you will raise the amount.
• Proof showing that an affordable home cannot be bought at an affordable rate without financial aid within a reasonable travelling distance to work must be given.
• Citizens of the UK, applicants with indefinite leave to remain, or EU/EEA citizenship is preferred. That said, applicants without indefinite leave to remain can qualify in certain situations.
• Certain housing schemes only support first-time buyers, but this is not always the case.
• To apply, you will need a valid form of ID.

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What UK Key Worker Housing Schemes are Available in 2023?

Several housing schemes are available to key workers in the UK; some are open to other individuals, too, not only key workers.

The best way forward is to have a good understanding of the mortgages and schemes available, as certain ones may not specifically be advertised for key workers, but are ideal for such individuals.

1. Right to Buy

If you live in a council house or have social housing in the UK, you may be able to purchase the property at a large discount if you’ve lived in it for 3 or more years.

The longer you’ve lived in the home, the bigger your discount will be.

This scheme aims to build a new low-cost home for every home bought.

Not all homes have this option, but it’s worth investigating.

2. Shared Ownership

You can consider shared ownership if you can’t afford a mortgage on 100% of the property.

With a shared ownership scheme, you can buy a portion of the home between 25% and 75%.

You’ll then pay rent towards the balance of the property value.

Through stair casing, you could buy a higher home value later on.

It’s common for these properties to come with a 99-year lease, but this is not always the case.

Related mortgages guides: 

• What to do if your mortgage expires.
• Disadvantages of paying your mortgage off.
• Best mortgage brokers in the UK.
• Should you pay off your mortgage early?
• 50-year mortgages UK.

3. Help to Buy Equity Loans

To qualify for Help to Buy equity loans, you’ll need to be a first-time buyer and have a 5% deposit available.

This scheme is ideal if you want a mortgage but don’t have a lump sum to use as a deposit.

The government loan provided covers the rest of the deposit amount.

For 5 years, you won’t pay interest on the government portion of the loan.

You won’t have to make your first payment on that portion of your finance for the first 5 years of your mortgage.

4. 95% Mortgages

This government-backed guarantee mortgage allows buyers to purchase a home with only a 5% deposit.

5. First Homes Scheme for Key Workers

The First Homes scheme for key workers was introduced in 2021.

Most key workers in this scheme can buy a home at 30% less than its market value.

The next buyer of the home will also get the same discount.

This scheme is in place to help the community benefit from buying homes below market value.

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.

Can Key Workers with Bad Credit Qualify for Housing Schemes in the UK?

While it’s not impossible to get a mortgage or qualify for a key worker housing scheme, having a poor credit history may make it difficult to qualify for a scheme.

Before applying for a housing scheme or mortgage deal, take the time to check your credit score.

If your credit score is poor, you can do a few things to increase it, such as paying down debt, paying accounts on time, and ensuring that your information with the various credit bureaus is correct.

How to Get Onto a UK Key Worker Housing Scheme

If you want to get onto a housing scheme, you’ll need to search your local council for relevant schemes.

You can also consult with a property expert or mortgage broker, who can advise you of the relevant schemes you qualify for in your area.

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Key Worker Housing Scheme Conclusion

If you’re a key worker in the UK and want to cut back on the costs of buying property or need a bit of financial relief so that you can buy a home comfortably, take the time to investigate the various housing schemes in your area.

Consult with a mortgage expert on the options available, too.

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

According to the Financial Conduct Authority in the UK, the total value of new approved mortgages in the first quarter of 2023 was 16.1% lower than in the previous quarter, and a whopping 40.7% lower than the previous year.

Since 2020, the value of UK mortgages is the lowest it’s ever been, in 2023.

This indicates that fewer people are applying for, and getting approved for mortgages, potentially due to inaffordability.

One must wonder what the market would look like if more options were available for blue light and key workers, who generally struggle to get full financing for a property.

Blue light workers in the UK are typically NHS, social care, armed forces, rescue services, and emergency services staff members and as such a worker, you may qualify for various blue light benefits.

The Blue Light Card Scheme is one program and while there’s no such thing as blue light card mortgages, your card can get you various discounts on estate agency and letting management fees with certain companies.

If you’re in possession of a Blue Light Worker card, you’re already a key worker and can take advantage of several housing schemes and mortgages that may suit your needs and situation (not specifically aimed at blue light workers).

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Mortgages Ideal for Blue Light Workers in the UK

While not all of these mortgages and housing schemes are designed specifically for blue light workers, they can provide various benefits for people working in blue light jobs.

As an NHS or blue light worker, you can effectively apply for the following mortgage types:

• Buy to let mortgages
• Residential mortgages
• Joint mortgages
• Mortgage schemes (Help to Buy and Shared Ownership, for example)

Do Blue Light Workers Get Mortgage Discounts?

While discounted mortgage deals for blue light workers aren’t widely advertised, they exist.

Some lenders – not all – provide discounted mortgages, lower fees, and reduced deposits for individuals working in the care field.

Working with a mortgage advisor is recommended to ensure that you know what discounts are available and can take advantage of them.

Blue light workers who may consider applying for discounted mortgages or special offers include the likes of surgeons, dentists, ambulance workers, police, mental healthcare workers, blood transfusion services, and various other trusts and NHS workers.

How to Qualify for Blue Light Mortgages

You’ll have to meet the same requirements as other applicants applying for discounted mortgage types or mortgages with additional perks.

To qualify, lenders may ask to look at your:

• Blue light career contracted hours
• Credit score
• Annual income (payslips and bank statements)
• The expected length of your contract (for contractors)
• What your blue light worker role is

Some lenders work differently from others and focus on assisting blue light workers.

It’s a good idea to find out which lenders are more likely to help a blue light worker, as each lender has a different scoring system for qualifying applicants.

Again, a mortgage advisor may be best suited to check which lenders you will most likely get a positive outcome from.

How Much Can I Borrow as a Blue Light Worker?

There’s no hard and fast rule about how much a blue light worker can borrow, as each person’s financial situation is unique.

That said, the general rule of thumb is that lenders provide between 3 and 5 times an applicant’s annual income.

You’ll need to undergo a standard affordability assessment to confirm that you can afford the expected monthly instalments without plunging your budget into distress.

Of course, it’s not just your pay band that determines how much you can borrow.

Your credit score and history will play a role too.

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 Long Must I Be a Blue Light Worker to Apply for a Mortgage?

You don’t have to have worked in the care industry for years to qualify for a mortgage.

In fact, you can possibly get a mortgage even if you’ve just started working in care.

The mortgage lender you apply with will examine your contract, proof of employment, or payslips/income.

The terms of your employment in an official appointment letter can be a suitable basis for applying for your mortgage.

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What is the NHS Key Worker Mortgage Scheme?

Many blue light workers remember a previously available housing scheme and assume they can still apply.

The NHS key worker scheme was a government initiative set in place to help NHS, and other care staff get a mortgage.

This scheme is no longer available, but you can consider several alternative mortgage options that offer low-interest rates and reduced deposits.

The NHS key worker scheme was disbanded in 2019.

Alternative Schemes for Blue Light Workers Interested in a Mortgage

Below are some alternatives to the NHS key worker mortgage scheme:

Help to Buy Mortgages

The Help to Buy scheme perfectly suits individuals who need help to raise a large deposit to buy a home.

If you qualify for this scheme, you can get a mortgage with just a 5% deposit.

The government will top up your deposit by adding 20%, bringing it up to 25%.

Shared Ownership Mortgages

Shared ownership mortgages are a good option for blue light workers who can’t afford a mortgage for the full value of the home they wish to buy.

With a shared ownership mortgage, you can buy a portion of the property and then pay rent at a reduced rate on the balance outstanding.

When buying a portion of the property, you can expect to be able to buy between 25% and 75% of the property.

You can later buy a larger share of the property if you wish to.

The perks of a shared ownership mortgage are that the deposit and monthly instalments are typically lower than on a mortgage for the property’s full value.

Related mortgages guides: 

• What to do if your mortgage expires.
• Disadvantages of paying your mortgage off.
• Best mortgage brokers in the UK.
• Should you pay off your mortgage early?
• 50-year mortgages UK.

Right to Buy

If you’re a blue light worker who rents a council house or a housing association residence, you may find that the Right to Buy scheme can help you purchase the property you’re already in.

You’ll be able to buy the property at a discounted rate, ensuring that you’re not out of pocket.

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Blue Light Worker Mortgages Conclusion

Consulting with a mortgage advisor is the best way to ensure that you’re aware of the various blue light worker mortgages or options that are suited to individuals in your situation.

With the help of an expert, you can find out which schemes and mortgage types you’re likely to qualify for, and can get help with the process of setting everything in place.

Call us today on 03330 906 030 or contact us to speak to one of our friendly advisors.

According to Statista, the distribution of mortgages in the UK in 2022 shows that only 4.1% of properties bought with a mortgage are owned by people 65 years of age and older.

The same statistics show the following:

•  61.7% of homeowners 65+ bought the property outright
• In the age group of 25 to 34, only 1.5% bought the property outright while 22.5% bought property with a mortgage

This certainly shows that in the younger age brackets, the ability to afford to pay off an entire mortgage immediately is less likely.

It might seem like a brilliant idea to pay your UK mortgage early.

After all, you won’t be forking out cash every month.

But the question begs to be answered; is it a good idea to pay your mortgage early?

Below is everything you need to know to make a more informed decision.

Advantages of Paying Off Your UK Mortgage Early

Let’s first get to the good stuff.

If you can pay off your mortgage early, you might have come into an inheritance, earned a decent wage that’s allowed you to save, or made a lump sum through investment.

Regardless of the ‘how,’ you can now settle the outstanding amount on your home loan.

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What are the advantages? We’ll tell you:

1. Get Out of Excess Interest

Along with the amount you borrow to pay for your UK home, you’ll have interest to pay. In most instances, the interest amount is sizeable.

Regardless of the type of mortgage you opt for, the longer the repayment terms are, the more interest you’ll pay.

Paying your mortgage off earlier than anticipated will reduce your interest costs by thousands of pounds.

However, remember that some mortgage companies in the UK penalise homeowners for paying off their mortgage early due to the interest (income) they will lose.

2. Living Without Debt

Most people’s UK home loan or mortgage is their biggest debt.

It’s likely your biggest monthly instalments and comes with the heaviest consequences if you miss payments throughout the year.

Clearing your mortgage could mean you have more cash to spend on other expenses.

The money you save on your mortgage could buy you that holiday you’ve always dreamt of, or help you refurnish your home.

3. You’ll Have a Genuine Place to Call Home

Once your mortgage is settled, the property is officially yours to do with whatever you want.

The terms restricting whether you can rent, sell, or give the property away all fall away, and you’ll have a place to call home – genuinely.

Disadvantages of Paying Off Your UK Home Loan Early

Paying your UK mortgage off early comes with definite benefits, but what are the downsides?

How to handle all financial situations comes down to an individual’s circumstances.

Financial decisions have advantages and disadvantages, so it requires a bit of forethought before deciding what to do.

With that in mind, here are the common drawbacks of paying off your mortgage early.

Related mortgage guides: 

• What to do if your mortgage expires.
• Disadvantages of paying your mortgage off.
• Best mortgage brokers in the UK.
• Should you pay off your mortgage early?
• 50-year mortgages UK.

1. Sneaky Early Settlement Penalties

Not everyone will have the opportunity to settle their UK mortgage early, so the idea of early settlement fees probably doesn’t come up.

These fees may be called ERC (early repayment charges) or “exit fees” on your mortgage contract.

When granting your mortgage, the lender carefully calculates their portion of income on the deal through the many months of interest charges that span the length of your loan contract.

When you cut the deal early and settle, they’ll lose out on all those months of income.

Naturally, everyone has bills to pay and wants their piece of the pie, so they mitigate the loss by imposing penalties on those who try to pay off their UK home mortgage early.

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2. Losing Out on Tax and Interest Benefits

If your savings are currently earning interest, you should check if your interest is more than the amount you’re paying towards your home loan each month.

It may be beneficial to leave your savings in the account, accruing interest to make a profit (the difference between the interest you’re earning and what you’re paying towards your mortgage).

You could use the interest on your savings to pay your monthly mortgage instalments. Then there’s your pension to think about.

Depending on your age and pension pot, you may benefit more from contributing funds in your savings to your retirement instead of paying down your mortgage.

While it’s not always the case, there are scenarios where the tax advantage of doing so would be more beneficial.

3. Overlooking the Benefits of Prioritising Your Higher Interest Borrowing

Many people will be in multiple forms of debt, not just with their home loan.

If you compare your debt accounts carefully, you may find that you have other forms of debt with higher interest charges attached.

Car finance and credit cards typically come with higher interest rates attached.

You may find it more beneficial to pay your smaller debts off that have more significant interest rates than paying off your mortgage early.

You’ll then have extra monthly cash to pay down your mortgage.

I Want to Pay Off My UK Mortgage Early, How Can I Do That?

If you want to pay your mortgage off early, here are a few ways you can do that:

Full Lump Sum Payment of Your Mortgage

If you happen to have a sudden influx of cash and have the full mortgage amount available, remember to check with the lender what their penalties and early settlement fees are, as this will increase the amount you’ll have to pay over.

A full lump sum is often the easiest way to pay your mortgage early.

Remortgaging

This option is slightly different, as you won’t be free from your mortgage.

That said, when you remortgage your existing loan, you can negotiate better terms that could contribute to paying off your outstanding mortgage amount quickly.

Remortgaging can help you do one of two things as follows:

• Overpay your mortgage

If you choose to overpay your mortgage by 10% of the loan amount each year, in addition to your current instalments, you won’t incur fees or charges (this is only available with some mortgage providers).

This will help you settle your home loan sooner than anticipated.

• Offset your savings

Offset mortgages let homeowners host their savings accounts with their mortgage provider.

In such instances, you can offset your savings balance against the interest charged on your mortgage.

When your interest is paid faster with your savings, you’ll pay more into your loan balance each month.

Remember that remortgaging comes with fees, so you’ll need to calculate if this is the right option.

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Disadvantages And Advantages Of Paying Your Mortgage Off Conclusion

Whether you should pay your mortgage early in the UK will come down to your unique financial situation.

Take the time to consider your finances and do the calculations before making any big financial decisions.

It’s always recommended to consult with a mortgage broker, so you’re assured of making a decision will all the costs and terms/conditions in mind.

Call us today on 03330 906 030 or contact us to speak to one of our friendly advisors.