Category: Mortgages

What happens when you pay off your mortgage in the UK? Here we explain the whole process and what’s involved during this exciting time. 

Settling your mortgage once and for all brings a new sense of achievement and pride in the home you truly own.

But what happens when you pay off your mortgage?

Do you throw a party and kick up your feet, or are there other steps you need to take to establish property ownership?

This guide explores what happens when you pay off your mortgage and what to expect.

Final mortgage payment

Ask the lender for your mortgage redemption details or quote before making the final payment. It includes the final amount due to settle the home loan and any associated fees.

The quote shows how much interest and principal you need to pay to own your home free and clear.

You may have to pay some fees with the final mortgage payment to release the final paperwork and ensure the lender takes care of the necessary administration work.

Such fees could include an account fee if you deferred it to the end of the mortgage term and an exit or redemption fee.

Quick help mortgage guides: 

• Best offset mortgage rates UK
• Can you get a mortgage 7 times your salary?
• Contractor mortgages
• Best lifetime tracker mortgages
• Expat mortgages
• Mortgage repayments on a 300k a month mortgage

What documents can you expect?

Once you’ve officially paid off your mortgage, you’ll receive a closing statement letter from the lender confirming you have repaid your mortgage in full and some paperwork to complete.

They’ll also send you a copy of your title deeds and a discharge that removes the lender’s charge over your home.

The lender can remove the charge on your property, or you can instruct your solicitor to discharge the standard security from the Land Registry.

They can help you finalise the arrangements, update the Land Registry and obtain a copy of your deeds. You’ll also pay a small fee for the deeds.

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The process is relatively straightforward. The solicitor prepares an application for discharging the security and sends it to the lender for signing.

Once it’s signed and returned to the solicitor, they send it to the Land Registry with the application form and fee.

The application is then processed, and the relevant register is updated to remove the standard security.

If the lender hasn’t sent you any documentation after paying off your mortgage, ensure you contact them and request confirmation that your mortgage has been paid in full and charges on the property removed.

How is your credit score affected after you pay off your mortgage?

Shortly after clearing your mortgage, your credit report will update, but there’ll likely not be a dramatic increase in your credit score.

Over the years, your payment history and amount owed have already been factored into your credit score. Every situation is different, and debt is only one factor that affects your credit score.

For example, the effect on your credit score can be noticeable if you’re paying off a large lump sum. The credit report will suddenly show a much lower or zero amount owed.

Such a metric can be a significant component in your credit score, resulting in a nice positive bump. However, the effect can be negligible if you already have excellent credit.

Ensure you check the report 30 or 60 days after paying off your mortgage to confirm that it reflects as paid off and there are no outstanding balances which can affect your credit score.

Other steps after paying off your mortgage

·       Contact your insurance company

Contact third parties like the home insurance linked to your mortgage, and inform them that you’ve cleared the mortgage and no longer owe the mortgage lender any money.

If you were paying through the lender, inform them you’ll now pay the bills directly and have them remove the lender from the policy. Ensure you do the same for any other insurance, like a flood coverage policy.

·       Cancel automatic payments

Cancel any direct debit or the automatic monthly mortgage payments you had set up to ensure you don’t make unnecessary payments to the lender and start chasing refunds.

·       Contact the tax collector

If property tax statements have been going to the lender, you have to contact them and let them know of the change in ownership if the lender hasn’t done so already. Ensure all statements come to you directly.

·       Set money aside for insurance and taxes

Now that you’re a complete property owner, you must consider property tax obligations and ensure you stay protected by keeping up with payments for homeowner’s insurance.

Insurance protects the house structure and your personal liability and contents.

What happens after paying off a mortgage early?

While paying off your mortgage early provides excellent relief from years of monthly payments, most lenders will impose early exit penalties or fees.

Such charges are aimed at helping lenders get back some of the money they lose in interest when you repay the mortgage early.

Consult the terms and conditions of the mortgage agreement before you pay off the mortgage early or make more significant mortgage repayments.

Early repayment charges are usually a percentage of the loan or equivalent to a certain number of monthly payments.

Sometimes the cost of penalty charges and exit fees can outweigh the benefits of clearing the mortgage early, and the last thing you want is to lose money while trying to save money.

Recommended reading for mortgage hunters: 

• Mortgage deposit gifts
• How much does a mortgage broker cost?
• Can you build on the green belt?
• Shortest term mortgage in the UK
• Buying a warehouse in the UK
• Porting a mortgage explained
• Transferring a mortgage

Can you remortgage after paying off your mortgage?

Yes. When you own the property outright, you’re in a better position, usually called mortgaging an encumbered property.

Since you own all the equity in the property, you’ll be attractive to lenders and can access better deals with competitive rates and terms.

Full ownership also provides more security. If you default, the lender can quickly recover the debt by repossessing and selling the property without other lenders preventing them from settling the debt.

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What happens after paying off an interest-only mortgage?

With interest-only mortgages, you only repay the interest on the loan over the loan period and then repay the original capital at the end of the term.

You can repay the capital using your savings, by remortgaging, or sell the property and use the proceeds to settle the debt.

What Happens After Mortgage Paid Off Final thoughts

Once you pay off your mortgage, ensure you get the necessary documents from the lender and use the extra funds you now have to think about your future through a pension or retirement plan.

You can also consider renovations and home improvements, vacationing or settling other debts.

Call us today on 03330 90 60 30 or contact us to speak to one of our friendly advisors.

Buying your own warehouse can save money, especially considering what a year’s warehouse rental costs you.

A warehouse not only gives you access to cheaper rates but can also help build your business’s long-term equity.

If you’re thinking about buying your first warehouse, here’s what you need to know…

Consider Your Space Requirements

If you’ve rented a smaller warehouse before and are looking to rent a space that will accommodate your projected growth, consider looking for a building that is at least the same size or bigger to cater to the growth of your business.

When looking for a warehouse, you should consider the size and functionality of the space.

Also, consider other features of the warehouse, such as the location of the cargo door, type of loading ramp, and accessibility of the location.

Once you’ve found something that’s suitable, put in an offer.

This works similarly to a home purchase (including putting down a deposit, conducting a survey, inspections, and an appraisal).

Warehouses are classed as Industrial B2, B8 or Class E, which covers warehouses and factories.

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Putting in an Offer to Purchase

Some borrowers take too long to decide on a property and lose out.

Keep in mind that property sales can fluctuate throughout the year.

Properties may sell fast in one quarter and much slower in others.

It’s best to keep an eye on the market to know how to behave when you find the ideal warehouse or commercial property to buy.

If you’re looking for an in-demand property and find the perfect space, put in an offer to purchase as soon as possible.

The seller will have an idea of what they want for the property in mind. This is what they expect, but it’s by no means what you have to offer.

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You can determine how much you want to offer on the advertised property. The owner can then decide yes or no.

If you’re willing to take the risk of a turn-down, you can offer a rate that’s a few thousand pounds less than advertised.

Those not willing to take risks will offer the requested amount or close to it.

You only start applying for mortgages once the owner accepts the purchase offer.

When you’re ready to put in an offer to purchase, both parties will do due diligence, which includes searches for:

• Local authority.
• Environmental and flood risk.
• Drainage and water.
• Highways.
• Chancel.

While you may be excited to get a warehouse mortgage, never be tempted to rush the due diligence process.

It is up to the buyer to provide evidence of any relevant faults with the property.

How Do I Get a Commercial Mortgage in the UK?

Commercial loans are very different to home loans. They are much harder to get, and lenders tend to be far more selective.

Even when you find a bank willing to give you the loan, the interest rates may not be as good as you would like.

If you want a good rate on your warehouse loan, you should talk to a mortgage broker with experience in the market.

Brokers have connections with many different banks and financial institutions and know how to find the best possible finance solution for you.

Need more help? Check our quick help guides: 

• Reasons why a mortgage could be declined on affordability. 
• How reliable is a mortgage in principle?
• How do joint mortgages work?
• Can you get a mortgage on a fixed-term contract?

Official Paperwork Gathering & Processing

Getting the paperwork right during the buying process is important.

Banks have requirements when providing finance for purchasing property, and of course, there are legalities to exchange certain documents when the sale goes through.

It can be a complicated process if you have never done it before.

Some buyers opt to handle the paperwork themselves.

In instances like this, a professional solicitor or licensed conveyancer will need to be hired to ensure the sale’s legal aspects are correctly managed.

Lenders will require property checks to ascertain if the property’s value aligns with the loan amount requested.

A survey is usually done to assess any possible problems existing on the property, determine its condition and determine if the structural aspects are stable and safe.

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Sign the Contract & Exchange With the Seller

Once the paperwork has been submitted and the seller has accepted your offer, the solicitors must first be happy, and then the contract can be signed and exchanged with the sellers.

It’s at this stage of the process that the deposit for the warehouse must be put down.

Once the deposit is paid, there’s no backing out of the deal, as you may face negative ramifications with the lender (and other lenders) in future.

Once this is done and all details are verified, you’re given the keys to the property – you now have your own warehouse!

But wait, you’re not quite done yet. There’s more!

At this stage, there are still fees to pay on the balance of the property cost, the stamp duties, the conveyancer or solicitor fees, and any removal costs that may have racked up.

What’s next?

Of course, the next steps involve ensuring that you manage your finance contract strictly according to the terms of your mortgage agreement, or you could find yourself heavily penalised, the property repossessed, and negatively impacting your credit record.

Your warehouse will undoubtedly earn you more freedom to carry out your business proceedings as you see fit and also help you capitalise on new growth opportunities.

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Buying a Warehouse Last Word

If you’re tired of helping someone else make money on the property you use for your business, consider buying your own warehouse or commercial property with the help of a professional mortgage broker on your side.

Then, hunt the market for the ideal deal and move your business into a warehouse that supports business operations and promotes the growth of the business over the long term.

There are plenty of benefits to owning your own business premises, including cost savings.

Further reading: 

• How much does the average mortgage cost?
• Modern method of auction 
• What mortgage can I get for £500? 
• Mortgages for discharged bankrupts

Not many people in the UK will tell you that they opted for the shortest-term mortgage available in the UK, and that’s because they’re not entirely affordable to every borrower.

That said, Brexit and an apparent lack of trust in the housing market from consumers are making the housing market a little unstable.

For the wealthiest investors, short-term mortgages provide some stability and investment protection – to a degree.

For most, now is the ultimate time to grab the chance of getting short-term fixed rates or short-term mortgages. Unfortunately, while most may want it, not all can afford it.

In this overview, we look at short-term mortgages, their benefits, the eligibility requirements and how they stack up against fixed-rate mortgages.

We also cover the benefits of fixed-rate mortgages and the eligibility requirements to apply for one.

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What Are Short-Term Mortgages? 

If you think about a short-term mortgage, what comes to mind? Most would think it’s a mortgage that’s held over a short period.

But most also think the mortgage amount is far less than a “standard” mortgage.

Here’s the truth. Short-term mortgages are “standard” mortgage amounts paid over a far shorter term than a standard mortgage.

Most people in the UK pay off a mortgage over what feels like a lifetime. Short-term mortgages are quite contrary.

If you’re looking for a short-term mortgage, they don’t get any shorter than 5 years.

This type of short-term mortgage is commonly selected by those who can pay high monthly instalments.

Of course, the reason behind this is to avoid interest.

Fixed-rate mortgages give borrowers peace of mind that they can plan effectively even with fluctuating rates.

Need more help? Check our quick help guides: 

• Reasons why a mortgage could be declined on affordability. 
• How reliable is a mortgage in principle?
• How do joint mortgages work?
• Can you get a mortgage on a fixed-term contract?

What Are the Benefits of Short-Term Mortgages?

If the idea of a short mortgage period scares you when you consider the size of your mortgage, you might wonder if there are any benefits involved for the borrower opting for one.

Of course, there must be viable and very high-value benefits to opting for short-term mortgages, or people wouldn’t put themselves under financial pressure.

One of the major benefits is that short-term mortgages minimise the interest payable.

It also helps to foresee how the fluctuating market will affect the property and financing.

For instance, predicting how the housing market will look in around 2 to 3 years is simpler, enabling investors to avoid the negative impact of market changes.

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Eligibility Requirements for Short-Term Mortgages?

Are you eligible for a short-term mortgage, and if not, why not? Not everyone can afford to borrow a mortgage and pay it back quickly.

This type of mortgage is specifically aimed at those with a stable financial situation. And for these people, two eligibility requirements come into play:

1. Enough equity.
2. Enough capital.

Sounds simple, right? If you’re a wealthy investor, surely proving this affordability is simple, right?

Not quite!

You may think it would be a simple task to prove capital and equity in abundance, but it can be quite tough when a very short turnaround is required.

As such, it’s a mortgage option most often selected by wealthy individuals, landlords, and property developers.

Capital has either been gained through business or long-term life savings.

Why the switch from long-term mortgages to short-term mortgages for some? Is there a deeper underlying reason?

The reasons are pretty obvious, for those who have a good financial understanding, that is.

Long-term mortgages can frustrate borrowers, especially with all the required credit checks.

When short-term mortgages are in play, the tedious task of credit checks could possibly be avoided.

As short-term mortgages are paid off pretty quickly, lenders consistently don’t need to get updates on high equity borrowers.

As a result, short-term loans are the ideal option if you’re a high equity borrower interested in investing without accumulating debt.

That said, it’s evident that short-term fixed-rate mortgages are just as viable.

So what are short-term fixed-rate mortgages?

If you’re not familiar with these mortgage types, read on.

Short-Term Fixed-Rate Mortgages – The Benefits 

What’s the drawcard when it comes to short-term fixed-rate mortgages? Is there one? It’s all about saving money in the long run.

When interest rates fluctuate, you will enjoy more stability if you have a short-term fixed-rate mortgage. Let’s take, for example, a mortgage that spans 35 years.

With this type of mortgage, you can select a fixed rate for a certain period that is usually available in 2, 3, 5 and 10-year increments.

Once the set fixed-rate period has lapsed, the borrower can agree on a new fixed rate term with the lender providing the funding.

You could remortgage too or transfer onto the standard variable rate offered by the lender. These fixed-rate periods protect the borrower from interest rate spikes.

It’s a good idea to discuss your financial situation and ideas with an experienced mortgage broker if you feel inspired to pay back your mortgage in a super short term or protect yourself from spikes in the interest rate.

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Eligibility Criteria for Fixed Rate Mortgages

Fixed-rate mortgages have eligibility requirements varying from one lender to the next.

These include:

• Borrowers applying must have a good credit record.
• Applicants must be financially stable – and prove affordability.
• Applicants must be between the ages of 25 and 85 years old.
• The minimum annual income of the applicant cannot be less than £25,000.
• Applicants must be able to put down a 25% deposit.
• The property in question must show obvious potential value and be suitable for renting out.

A word on deposit sizes: While the average requested deposit is 25% on short-term loans, some lenders ask for a 40% to 45% deposit. The larger the deposit that is put down, the lower the overall rates will be on the property finance. In addition, a higher deposit makes it easier for bad credit or no credit borrowers to get approved.

Quick help mortgage guides: 

• Best offset mortgage rates UK
• Can you get a mortgage 7 times your salary?
• Contractor mortgages
• Best lifetime tracker mortgages
• Expat mortgages
• Mortgage repayments on a 300k a month mortgage

Check Today's Best Rates >

Shortest Term Mortgage Last Word

If you’re in the financial position to pay off your mortgage in five years, considering the various benefits of the shortest-term mortgages in the UK may be in your best interests.

Of course, you should consult a professional mortgage broker before making such a big decision.

Call us today on 01925 906 210 or contact us. One of our advisors can talk through all of your options with you.

Further reading: 

• How much does the average mortgage cost?
• Modern method of auction 
• What mortgage can I get for £500? 
• Mortgages for discharged bankrupts

Sometimes the best business investments are simply overlooked because most people never think about them.

On the other hand, some investors make great investment decisions because they look where no one is looking for opportunities.

One such investment opportunity is building on green belt land.

That said, while building on the green belt may be profitable, it’s important to be aware of its various regulations.

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What is Green Belt Land?

The ‘green belt’ is a term used to describe UK-protected countryside and open space.

Government policy also uses this to describe areas of land that should be protected.

It is not given to individual pieces of land but rather large sections of connected space surrounding towns and cities.

The idea of having green belt land was first considered in the 1930s but was only set in place by local authorities with the passing of the Town and Country Planning Act of 1947.

The National Planning Policy Framework determines that the green belt legislation was implemented for five simple reasons.

The legislation is purposed with:

1. Ensuring there is no risk of large built-up areas unrestricted growth.
2. Preserving the unique characteristics of historic towns.
3. Creating a barrier between towns, preventing them from merging.
4. Protecting the countryside from encroachment.
5. Encouraging the recycling of derelict and other urban lands for urban regeneration.

While some love to hate greenbelt areas because they restrict the growth of building development, most still agree that the five objectives listed above are important and must be adhered to.

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Where to Find Green Belt Land

One of the purposes of setting green belt areas aside is to prevent urban sprawl from eating up the countryside.

Unsurprisingly, some major green belt areas are on the outskirts of the major cities: Birmingham, Newcastle, London, and Manchester.

Green Belt vs Greenfield Land – What’s the Difference?

Green belt land has tight restrictions to protect it against unnecessary development.

Greenfield land is different because it is a space that’s never been built on previously and, in most instances, is used as grassland or for agricultural purposes.

It’s not uncommon for people to confuse the two. But greenfield land is less protected than green belt land.

Am I Allowed to Build on Green Belt Land?

If you want to build on green belt land, you must be prepared to get planning permission beforehand, as the level of protection in these areas can be quite high.

That said, it is still possible to build on green belt land. And because of this, investors have asked Government to clarify which areas are green belts.

As it turns out, some aren’t entirely sure what is and what isn’t green belt land.

People often get confused because they believe that green belt land has agricultural or ecological value or protects wildlife.

This, however, is not the truth. Green belt areas are purely to limit development and don’t have to have any value to offer other than that.

Green belt development regulations should be understood before you think about carrying out any property development in those areas.

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Building on Green Belt Land – Rules & Regulations

The first thing to be aware of is that you cannot build on green belt land on a whim.

For local planning authorities to authorise it, the circumstances must be exceptional.

In most instances, any development in green belt land is banned.

• Sports and recreation facilities (outdoor)
• Agricultural buildings
• Replacing an existing building for the same use
• Alterations or extensions to current structures
• Provision of affordable housing

The Ministry for Housing, Communities and Local Government published the expected guidelines for protecting green belt land in 2018.

These guidelines stipulate that the need for affordable housing in a community is not a suitable enough reason to get building approval.

An official assessment will be carried out with the following in mind:

• Flood risk
• National parks
• To provide sites for scientific interest
• Areas of outstanding natural beauty
• Heritage coasts and heritage assets
• Protected sites

It must be stated that it’s no easy feat getting planning permission to build on green belt land, especially if you’re hoping to build multiple properties.

It’s interesting to note that the guidelines state that one-off, isolated homes may be allowed if they are of exceptional quality that deems them outstanding or innovative.

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Quick help mortgage guides: 

• Best offset mortgage rates UK
• Can you get a mortgage 7 times your salary?
• Contractor mortgages
• Best lifetime tracker mortgages
• Expat mortgages
• Mortgage repayments on a 300k a month mortgage

Increase in Building Projects Approved in the UK Green Belt Land Areas

The local authorities received applications for 35,000 homes in the green belt area in 2020.

While not all were approved, it is good to note that 24,000 structures have been constructed in green belt land in the UK over the past 10 years.

However, 35% of the green belt is still reserved for agricultural operations.

There’s a bit of controversy over approving some building permissions in the green belt land areas.

Some believe that the Government is trying to keep up with new build property targets and the “exceptional circumstances” clause makes it easier to get approval – in some instances.

In most instances, “brown field sites” are prioritised for development. Brown field sites are areas that were previously used for industrial purposes.

Green belt boundaries previously set in place seem to have been extended to create a little—more room for housing development.

And this is where it benefits investors who want to invest in property development in a non-mainstream way.

Building on the Green Belt Last Word

Property investors interested in new investments and opportunities for unique developments should consider looking into building on green belt land.

Despite the hassle it can be to set the planning permissions in place, it may be well worth your time.

Call us today on 01925 906 210 or contact us. One of our advisors can talk through all of your options with you.

Further reading: 

• How much does the average mortgage cost?
• Modern method of auction 
• What mortgage can I get for £500? 
• Mortgages for discharged bankrupts

Mortgages aren’t just intended for the purchasing of property.

Borrowers can use them to purchase land.

That said, it’s important to note that getting a mortgage to buy land is an entirely different ball game from purchasing a property.

This guide explores the details of buying land and how to get quality mortgage advice.

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Can I Apply for a Mortgage Purely to Purchase Land?

Yes, this could be possible via a land mortgage, a financial product designed to purchase plots of land.

How Does Getting a Mortgage to Purchase Land Work?

Land mortgages are loans for raw, undeveloped, or lease-hold land parcels.

They’re most commonly secured by agricultural land but exist on everything from rural land to commercial use plots and industrial buildings.

If you already own a parcel of undeveloped land – or don’t – but want to build commercial real estate, you’ll need to get a mortgage.

Therefore, there is a huge variety in land mortgages depending on where you’re buying and what you propose you have in mind for the developed land.

Land mortgages are a lot like standard residential mortgages, but there are a few differences that you should be aware of.

That’s because this corner of the market is more specialised, and fewer lenders offer land loans than those offering typical mortgages for the property.

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What Deposit is Needed When Purchasing Land?

For land mortgages, the minimum deposit is usually much higher than that for typical residential property.

The minimum deposit required will vary depending on the type of property you are buying and what kind of use you intend for it.

In general, those buying a plot for building a home will typically be charged a higher minimum deposit than those buying a plot simply as an investment, for example.

The exact sum will depend on various factors related to you and your plans – the lender’s policy, the value of your land, the type of property you wish to use the plot for, and so on.

In most instances, the deposit is a 30% minimum.

Is it Possible to Get a Mortgage for Land without a Deposit?

It is sometimes possible to get a mortgage without a deposit, but that doesn’t come without its downsides.

It’s worth remembering that some lenders will require you to have some sort of security, including personal assets like property.

If you’re able to, use it! Otherwise, you may have to borrow against your assets, leaving you more vulnerable.

What Do Land Mortgages Cost?

There are several factors that affect land mortgage interest rates.

This includes your credit history, the amount borrowed, amount of equity in your property, closing cost, and reverse mortgage option, just to name a few.

• Location – more sought-after areas come with higher costs.
• The industry you operate in.
• The applicant’s credit history.
• The intended purpose of the land – will the intention be considered risky to the lender?
• Trading history of the business.
• The loan to value rations and the status of the land – whether there is an outline or full planning permissions in place.
• The amount you wish to loan.

Tips to Ensure You Get the Best Rates on Land Finance

•  Work on Your Credit Status

Take the time to improve your credit score by reducing costs, managing your accounts according to the agreements in place and always paying on time and in full.

•  Apply for Secured Finance with Collateral

If you have a valuable asset such as property or a vehicle and opt to use it as security for your loan request, the lender will see you as less risky.

Of course, if you default on your repayments, your asset will be sold by the lender.

•   Offer a Larger Down Payment than Required

If you offer a decent deposit amount, your risk level will be perceived as lower.

•   Reduce Your Monthly Expenses

Affordability assessments are the norm, and lenders typically test to see if your finances will survive future rate increases.

You can improve your creditworthiness by looking at your current expenses and cutting unnecessary ones.

•   Consult with a Land Mortgage Broker

A great deal of value can be derived from speaking with an industry specialist with specific interests and experience in land mortgages.

This is the best way to ensure you get the best possible rates on a land mortgage.

Is it Possible to Get a Land Mortgage if You Don’t Have Planning Permission?

Yes, but you may find it a lot trickier to borrow money, as some lenders just won’t lend for land purchases without planning permission at all.

A bank will usually lend you money to buy a property only if it has planning permission.

Moreover, certain types of property people consider hard to get permission for.

The fact that getting approval for planning can be complicated can be problematic for buyers who are looking to get a mortgage.

A mortgage can be denied to a home buyer if the building plans aren’t approved or if there is a condition attached by the local authority that an owner must live up to before permission can be granted.

Planning permissions in place usually provide lenders with more certainty.

Most lenders, particularly traditional banks, will expect you to put up collateral, and for them, this is usually the most valuable asset you own—your home.

In most instances, borrowers are offered a smaller LTV – around 65%.

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Getting Planning Permission

It’s always best to check with the local authority if planning permission is required.

You can apply online through the UK government website for planning permission.

You won’t be able to do a lot with your property until you have planning permissions in place.

In most instances, planning permission is required for:

• Buildings on the property.
• Carrying out modifications to the existing property.
• Changing what the land is currently being used for.

Alternative Options When Looking for Land Finance

You can try several alternative funding options when looking to finance land – these include:

• Bridging loans – high rates and lenders require an exit strategy.
• Development finance – 70% to 75% of the purchase cost offered and 100% of construction costs covered.
• Commercial mortgages – capped at an LTV of 50%.
• Self-build mortgages – specifically for buying property and building houses–usually have higher interest rates.
• Agricultural mortgages – reserved for purchasing land that’s set to be used for agricultural purposes.

Land Finance Last Word

Finding the right finance for land purchase or redevelopment can be hard, time-consuming work in a small, specialised sector.

Simply put, there are fewer land mortgage lenders; many are harder to find, and some only operate through mortgage brokers.

Whether you need a bridging loan, a mortgage or both – the best way to succeed with your financing is to work with a mortgage broker who knows all there is to know about land mortgages.

They can find the perfect lender for your needs and circumstances.

Give Mortgageable a call today at 01925 906 210 or contact us to speak to one of our friendly advisors.

Developing property can be an exceptional investment if you’ve done your homework and got the right funding.

That said, where do you go for funding and which professionals in the finance industry are best suited to assisting you?

If you have no prior experience with seeking funding for development, you may think that you should acquire the services of a regular mortgage broker, but it’s not that simple.

If you’re considering development finance, always get expert advice first. The market is tricky, and most brokers are inexperienced with this area of lending.

This can lead to you missing out on the best deals available.

Even after you’ve looked at all the options, you may still be unsure which would be the most suited to you, which is why you should speak to a professional to gain more clarity.

Development finance loans from top whole-of-market advisors can be assessed and recommended based on individual circumstances and the loan provider with the relevant experience and know-how to offer the best deal.

There are both residential and commercial development finance brokers on the market.

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Property Development Finance Brokers Guide

What You Need to Know About Residential Development Finance Brokers

As most development finance loans are organised on an unregulated basis, you need to be able to tailor the loans to meet the needs of each company or project involved; that is, they often involve a combination of loan types.

Many mortgage brokers specialise in arranging different types of finance – such as investing in property – but do not have experience in the more complex deals required where there’s a combination of mortgages, loans and deposits due to how each is set up.

Specialist advisors can provide the assistance you need in complex situations, giving you peace of mind that you don’t have to stress and fret over the details.

Simply take the advice of your specialist development finance broker, and the process will go forward smoothly.

As a consequence of tougher FCA rules governing residential development mortgages, the lenders who provide them often require caveats (or guarantees), including a maximum term of one year.

If you’ve found a residential lender, ask them about whole-of-market options.

A lender specialising in this area may offer the flexibility you’re looking for. Just make sure that you have an exit strategy in place that’s viable.

In addition, should you choose to build the property yourself, homebuyers who find a property with the desired features or one with the potential for compelling future development may also find that a self-build mortgage is an equally valid option.

If not more valid. Take the time to chat with industry experts to help you find the best possible lender for your specific situation and circumstances.

What You Need to Know About Commercial Development Finance Brokers

‘Unregulated’ lending is essential for commercial loans, as they usually need to be bespoke and structured according to the needs and financial situation of the borrower.

If you know that you need to acquire funds to construct a business property, then it’s highly recommended you source commercial development finance brokers.

These specialists can help you obtain the funds and secure a highly competitive deal while providing expert advice and paring you with lenders specialising in the required products.

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Several Types of Development Finance Brokers You Might Find Useful

You can get development finance brokers for:

• Bad credit brokers

If bad credit puts the exit strategy at risk, it may be a deal breaker for your development finance deal.

A specialist development finance broker can assist you in getting the right deal without your level of risk being incorrectly assessed.

• First-time development brokers

Lenders may turn you away if you have a poor credit score.

However, a strong credit record is often the way to secure the best rates.

Specialist advisors can help first-time developers access competitive rates if it’s your first development.

• 100% LTV brokers

Most development funding providers will cover  70-75% of the funds for the initial purchase of an empty property and then offer to lend 100% of the costs required for the development, with the funds released at certain stages.

Specialist brokers can often arrange 100% funding outright if they’re approached by borrowers who can provide additional security in the form of an asset, and even sometimes in cases where borrowers are willing to strike a profit share deal with the funds provider.

• International

If you’re hoping to develop in Australia, the US, and some places in Europe, you will be happy to discover that some development finance providers offer to fund internationally.

This is why you want to work specifically with development finance brokers who can connect you with the right finance providers for your unique development

What Do Development Finance Brokers Charge?

It’s important to understand that in addition to interest, arrangement, valuation and other costs, development finance borrowers will also charge you broker fees.

In most cases, this broker fee will be a percentage of the total facility – usually between 1% and 2% of the loan amount.

Some brokers charge a fee to list a property on their books, but the fee is non-refundable, make sure you discuss that with them at the outset.

The last thing you want is to pay fees for a service they cannot provide and never get your money back.

Expert development finance brokers are also in your corner by ensuring that you’re not surprised by hidden charges.

In addition, they will ensure that the charges are entirely transparent throughout the process.

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Development Finance Brokers Last Word

Just like you wouldn’t take your car to get fixed at a lawn mower repair centre, you shouldn’t try to apply for finance with the assistance of the wrong type of broker.

Property development finance can be quite complex, and if you want to ensure that the process is simple and drama-free for you, using a specialist development finance broker is the way to go.

In a perfect world, spray foam insulation is a great way to protect your home from the cold.

Unfortunately, as it has been on the market for about 30 years, many people rely on it to keep their homes warm.

But, it can cause serious issues when you want to finance your property, whether you want to remortgage, buying a new home, or applying for an equity release product.

It is often sold as a higher-performing insulator than mineral wool; spray foam is used in thousands of homes, in wall cavities, lofts, and flooring.

The problem is that some mortgage lenders and most equity release lenders won’t touch properties with spray foam insulation because of all the problems it can cause.

Now I’ll explain why mortgage lenders won’t approve an application if it’s a property with spray foam insulation and how to solve this home loan problem.

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Getting a Mortgage with Spray Foam Insulations

To understand why your potential buyers get put off when trying to buy a property that has spray foam insulation, first, we’re going to look at what spray foam insulation is.

Spray foam insulation is a chemical product made from two materials called isocyanate and polyol, which react when mixed. It expands to 30-60 times its liquid volume after spraying.

Here are some concerns as to why it’s difficult to get a mortgage if a property has to spray foam insulation:

• Spray foam can cause roof timbers to rot.
• The lack of airflow can cause mold to form, and it can have toxic release odours.
• Spray foam can also devalue your home because you would have to buy a new roof since the spray foam can cause so many problems to the roof.

It can cause a lot of problems, and it can affect your mortgage.

Whether it is closed or open, cell foam is found in your roof; most mortgage companies and banks may not consider lending on a property with spray foam insulation.

Different Spray Foam Insulation

Not all is lost if you want to remortgage your home with spray foam insulation or take out an equity release mortgage.

Here is the first step to identifying the spray foam insulation type.

• Open-cell spray foam insulation, known as half-pound foam, ocSPF, or light-density open-cell SPF, has a sponge-like appearance. The SPF expands during the installation, so the ocSPF can fit in most cracks and crevices.
• Closed-cell spray foam, commonly known as medium-density closed-cell foam insulation, ccSPF, often referred to as two-pound foam, sets rigid, preventing air or moisture from entering your home. It is more stable but more expensive to remove than the original insulation.

If you want to remortgage, removing spray foam insulation is possible.

It’s still important to note that some lenders might still not approve your application, depending on how long the insulation has been installed.

Removal isn’t an easy job because the spray application gets into every nook and cranny.

If the insulation has been installed for a few years, a mortgage lender might decide that it’s too much of a risk and, likely, the damage has already been done.

It’s important to seek professional advice before making such a big decision.

A limited number of lifetime mortgage lenders will consider properties with more impressionable open-cell spray foam.

This includes a requirement for the open-cell spray foam insulation to have been applied during construction, as long as it is the Icynene product, with a guarantee and BBA approval.

Before applying for any mortgage, it is worth investigating exactly what spray foam you have installed in your home and check back on your contractor’s paperwork.

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Mortgaging a Property With Spray Foam Insulation

Now we understand the problem, let’s see what solutions there are.

Because contractors still recommend spraying foam insulation, it’s not a very uncommon issue but one that needs a careful approach.

Since a lot of people still make the mistake of installing SPF, here are an indication of potential strategies:

• If you have open-cell SPF, then it is best to consult an experienced broker. Some lenders will reconsider mortgage lending or offer an equity release on this type of property. The choices are extremely limited, so they must approach this very carefully.
• Closed-cell Spray foam insulation can be removed – but note that this will be typically more expensive than the original insulation and may not cause the financing issue completely.
• Replacing the whole roof can solve your problem, but it’s not a low-cost solution. However, a roof doesn’t last forever, and replacing the spray foam at the same time is a good bet.

If you are interested in buying a house with spray foam, there could also be less common alternatives you can use.

For example, if a mortgage lender will not consider approving a mortgage application against the property, even with mortgage retention, but a bridging finance lender might.

On the other hand, Bridging loans are expensive, meaning it has higher interest rates, but they’re also a lot more flexible.

For example, developers use bridging loans to cover the cost of purchasing and renovating properties that aren’t eligible for a standard mortgage product.

But you would need to demonstrate how you plan to repay the loan through a remortgage once the spray foam has been removed, so you would need an agreement to support your application.

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Equity Release, Mortgages, and Spray Foam Insulation

Lenders rarely give any definitive guidance on their policy toward spray foam insulation, so it is impossible to know whether they are going to approve a mortgage or equity release without advice from a broker.

Most mortgage lenders rely on the survey to identify the insulation present and use that evaluation to make a decision; some lenders and Equity Release providers refuse to lend against properties with spray foam insulation.

We would still strongly advise against ever-fitting spray foam insulation in your home because of all the disadvantages that can come with it.

However, suitable mortgage options are available to meet your requirements, although Equity Release can be a problem, especially with the closed-type spray foam.

Going through the entire mortgage process is not easy, especially if you are a first-time home-buyer.

That said, a mortgage broker can help save you time and money.

From finding the best rates and lowest fees to completing the application and closing the loan on time, mortgage brokers have a good command of the mortgage process.

By working with a broker, you will benefit from their extensive knowledge in the market, helping you land the best mortgage deal available.

However, mortgage broker fees can vary significantly and not all provide the same level of service.

Are you wondering how much a mortgage broker costs in the UK?

After reading this guide, you will have the answer to all your questions and more in this article. Read on!

Do Mortgage Brokers Charge A Fee?

Some mortgage brokers do not charge an upfront fee for their service and only profit from a commission from the lender.

The majority of mortgage brokers, however, will charge a fee for their different services, such as:

• Assessing your financial situation.
• Searching the entire market to find the best deal available.
• Negotiating your mortgage terms and conditions.
• Taking care of your paperwork.
• Managing the entire application process, from submission until settlement and beyond.

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How Much Fee Do Mortgage Brokers Charge?

The pricing structure from one mortgage broker to the next can vary significantly, so you should discuss and research the costs before agreeing to use your mortgage broker and ask for their fees in written form.

There are various pricing models that brokers work with, including fee-free, hourly rate, fixed charge, percentage, or combination.

Some mortgage brokers do not charge any fee for their service and benefit only from the commission from the lender.

Costs in hourly rates can quickly escalate in case of complications, so you should try to estimate how many hours you will be charged for.

A typically fixed charge would range from £300-£600.

In the percentage model, the broker will charge a percentage of the mortgage that you are taking out. So, for instance, if you take out a loan of £193,000 and they are charging 1%, you will be paying them £1,930.

Finally, some brokers use a combination of these pricing structures.

For example, they may charge a fixed fee and get a commission from the lender. It’s also worth knowing that all brokers receive a commission from the lender.

Here, the majority of brokers we work with are only paid through lender commission. The ones who charge an upfront fee will refund the costs if they fail to get you a mortgage.

Fees For Extra Time

Some cases are more complicated, requiring brokers to spend extra time and effort finding a lender.

The broker may charge for the additional time needed to secure a mortgage in this situation.

For example, the borrower might have initially refrained from fully disclosing their actual financial situation.

This can result in delays, and the broker might have to do extra paperwork and research.

To avoid running into extra fees, you should always take the time to understand your broker fee disclosure form before signing anything fully.

Is There A Difference In Second Charge Mortgage Broker Fees?

Whether you’re applying for a first or second charge debt shouldn’t make a difference.

The 0.3-1% is a standard fee, and your broker will charge you the same way.

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What’s A Mortgage Referral Fee?

Some banks and lenders offer mortgage referral fees as an incentive for mortgage brokers to recommend certain lenders.

However, in today’s market, lenders normally pay brokers a commission, so referral fees are rare, if not virtually non-existent.

Should I Expect Any Other Fees?

When applying for a mortgage, you need to be aware that there may be more costs involved than just the monthly payments.

Some brokers charge extra fees like stamp duty, removal costs and financial advisor mortgage fees.

While fee amounts vary from lender to lender, they could include the following extra charges:

• Mortgage broker finder fees.
• Underwriting fees.
• Mortgage broker application fees.
• Cancellation fees.

Get in touch with our expert advisors to ensure you won’t run into hidden or surprise fees.

The brokers we work with are transparent about the fees they charge, or we can refer you to a fee-free broker if your case allows it.

Are There Fee-Free Mortgage Brokers?

Fee-free mortgage brokers do exist, which is a cost-effective solution.

These brokers earn a commission payment from your lender once the mortgage completes and won’t charge you a fee on top of this.

Fee-Free Or Paid Broker – Which Is Better?

It all depends on your mortgage broker, and there is no simple yes or no answer to this question.

Unfortunately, not all brokers are equally ethical, and some may take advantage.

For instance, a fee-free broker may guide borrowers to take out an unsuitable mortgage with a lender with whom they can earn a greater commission.

This is why fee-free brokers are best reserved for simpler cases and complex issues may require a more experienced broker.

Fee-free or not, the main objective is to work with an experienced, competent, trustworthy mortgage broker.

You can learn more about your broker by researching feedback and reviews through third-party review sites such as Trust Pilot or getting recommendations from friends and family.

That way, you will know who to stay clear from and whom you can work with confidently.

It’s also important to ensure that your broker is fully qualified by the FCA (Financial Conduct Authority), as they are in the safest place to give you trusted advice.

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Can I Use An Online Mortgage Broker Fee Calculator?

Online mortgage broker fee calculators can provide a quick picture of what you might expect to pay.

But unfortunately, online mortgage broker fee calculators can’t assess your unique circumstances and financial situation.

On the other hand, an advisor will know what type of mortgage you need after speaking with you.

Having a well-versed broker to work with can make the difference between a successful mortgage application and rejection, so it’s always best to find the right broker for your situation.

When Do I Pay A Mortgage Broker?

You may be required to pay your fees upfront or once your mortgage application has been approved.

Can I Negotiate Mortgage Broker Fees?

Yes, borrowers can negotiate mortgage rates and fees. If there are fixed fees, you can still compare them with multiple lenders.

Can I Get A Refund On My Broker Fee?

Yes, you can get a refund in several cases.

For instance, if you change your mind about an agreement you signed with a credit broker online or over the phone, you have the right to cancel the contract at any time within the first 14 days and get a refund of the money you’ve paid.

You can also get a refund if your broker misled you, shared your details with third parties, or took fees you had not agreed to.

Do Mortgage Brokers Offer Cashback?

Although not every lender will offer this, some brokers can arrange a cashback for you.

If you get a cashback mortgage, you’ll be given a lump sum upon mortgage completion to cover any necessary expenses such as legal fees, stamp duty, removals, home repairs or even new furniture.

Can I Find An Independent Mortgage Broker in the UK?

Independent fee-free mortgage brokers will put you at the centre of every decision, providing you with an all-rounded service.

Our advisors can put you in touch with independent no-fee mortgage brokers throughout the whole UK market in:

• Coventry
• Liverpool
• London
• Leeds
• Huddersfield
• Bristol
• Manchester
• Sheffield
• Nottingham
• Worthing
• Northampton
• Edinburgh
• Glasgow
• Exeter
• Scotland
• Leicester
• Bolton
• Wirral

Make an inquiry online and speak with one of the best fee-free mortgage advisors in the UK.

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Get Help From An Expert

If you’re still unsure about how much mortgage broker fees cost and who is going to pay them, call us up or make an inquiry to talk with an advisor.

The advice you will receive will always be kept between us. What’s more, it’s free!

Whatever your circumstances, we believe that a mortgage shouldn’t stop you from getting your step on the property ladder to finding your next home.

A rise in the interest rate causes financial knock-on effects in several areas, including mortgages, borrowing, pensions and savings.

Lowering interest rates means cheaper borrowing; rising rates mean borrowing gets more expensive.

The Bank of England recently raised the bank rate from 0.25 to 1% for the UK.

As a result, we could experience an increased cost when loaning money.

What Is An Interest Rate Rise?

The interest rate at which banks borrow from the Bank of England is determined by the Monetary Policy Committee (MPC) within the Bank of England.

The Bank of England has been increasing interest rates to prevent the inflation rate from continuing to grow to critically high levels.

When the Bank of England’s MPC votes to raise the Base Rate, banks, in turn, raise their interest rates to maintain profits.

When borrowing costs increase, people spend less, dampening economic growth and slowing inflation.

So, when we hear that interest rates have gone up, it means the MPC has decided to increase the base rate.

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What Does Rising Interest Rates Mean For Me?

The impact rising rates have on you depends on your personal financial situation, such as how much you owe and how much you have in savings.

Rising interest rates generally mean savers earn more interest, and borrowers pay more on financial products such as loans, mortgages and credit cards.

Will Rising Interest Rates Affect Mortgages?

Whether or not rising interest rates will affect your mortgage repayments depends on the type of mortgage you have and when your deal terminates.

For example, if you are on a standard variable rate mortgage, you will most likely see an increase in your rate.

However, situations may vary as each lender decides how much to increase.

To be sure, go through the mortgage terms and conditions in your mortgage paperwork.

If you have a fixed rate mortgage, you’re signed up for a fixed pay rate for a fixed period.

As a result, your interest rate won’t go up until your fixed term ends. However, rising interest rates always make remortgaging more expensive.

Your repayments will be immediately impacted if you have a tracker mortgage, also called a variable mortgage.

These mortgages track the base rate, so whenever the Bank of England rate rises or falls, the mortgage payments will do the same.

Have A Financial Plan In Place

With looming interest rate changes, it’s a smart idea to have a robust financial plan in place.

A 0.25% rate rise might not sound like a huge difference, but when we calculate things out, there’s much more interest to pay each month and throughout the mortgage.

Take a look at the table to see how much more you’d pay on a £200,000 mortgage if interest rates rise from the current 1%. The monthly repayments are set to £897.

–	1%	2%	3%	4%	5%
Monthly Payment	£1,001.25	£1,111.66	£1,228.17	£1,350.41	£1,477.98
Monthly Increase	£104.02	£110.41	£116.51	£121.83	£127.57

Steps To Manage An Interest Rate Rise On Your Mortgage

Check Out What Mortgage You’re On

First things first! Find out what mortgage deal you are on and the interest rate you are paying.

This is important because how the interest rise will affect you depends on the type of mortgage you’re on and when your deal ends.

If you aren’t sure, go through your mortgage paperwork or call your mortgage provider to help find out.

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Calculate How The Interest Rate Rise Will Affect You

Once you know the deal you’re on, you can now find out how and when the rise might affect you.

The MoneySavingExpert Calculator is a great tool that helps work out the numbers.

Look For Ways To Cut Spending

If your mortgage costs are likely to go up, it’s a great time to look at the family budget and identify ways to save money.

Then, you can use the money you save to start building a buffer so you’ll be able to afford your mortgage.

Get Help

If you’re worried about how to afford the mortgage, you can get the advice and peace of mind you need by consulting a financial expert.

A financial adviser can help you budget, assess your income, and guide you with your financial planning to keep you from running into roadblocks.

Work On Building Your Credit Score

If you have a less-than-good credit score, now is a great time to improve it, as it will help you get a better deal when you remortgage.

So, use a credit score check to find out where you can improve your score, clear out any debts, and avoid taking out any more credit in the coming months.

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Shop Around For The Best Deal

Whenever your deal ends, it is a smart idea to shop around to find the best deal on the market.

So, if your current mortgage deal is coming to an end, you should check whether any better rates are available.

You might encounter early repayment fees, but if you can find a better deal, they might be totally worth it.

Overpay On Your Mortgage

If interest rates are prone to increase in the future, making additional payments towards your mortgage now can be a great idea.

It might be some time until the rate increase comes into play, so cut back on personal expenses to take advantage of the current rate and pay a bit extra.

Check out your mortgage provider to ensure that you can overpay and if there are any charges.

How Will Rising Interest Rates Impact Borrowers?

Non-mortgage loans, secured or unsecured, can be affected by an increase in interest rate.

For example, your credit card lender might increase their interest rates and pass this on to you; however, you will be notified first and given some time before the interest rate hits your pockets.

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Already Borrowing?

In general, unsecured loans are agreed to at a fixed interest rate.

Are you on a fixed deal? If so, the amount of interest during the fixed rate term will remain the same regardless of whether interest rates rise.

However, there is a possibility for the rate on your credit card or overdraft to rise. In that case, you will receive notice beforehand.

Are You Planning To Borrow?

Borrowing after an interest rate rise means more expensive borrowing.

So, if you are looking to borrow and have found a good deal, it’s better to hurry as the best deals tend to disappear quickly if there is a hint that rates will rise.

How Will Rising Interest Rates Impact Savings?

To the saver, rising interest rates can be good news! If interest rates on savings accounts move up, savers will benefit by earning more money.

Banks often compete to offer the best interest rates, so if your provider isn’t passing on a rate increase, it might be time to shop around to find the best deal.

How Will Rising Interest Rates Impact Pensions?

Rising interest rates might mean growth in your pension pot. As many pension funds are invested in bonds, the value of bonds could increase when interest rates rise.

Higher interest rates are also good news for those looking to take out an annuity, an insurance that offers you a set income after you retire.

Since annuity rates are linked to returns from gilts, higher interest rates could mean rising gilt yields and annuity rates.

Mortgage down payments are one of the biggest hurdles for first-time buyers getting on the property ladder.

Typically, there is a 10% down payment for your mortgage, and the average UK price is at £255,535 now. This means that you’ll need to have around £25,500 to make the deposit.

Most of the time, people ready to purchase a home won’t have this sum in their pockets.

So if you’re pinching and scraping together a deposit, a gift deposit can be a breath of fresh air.

Parents, grandparents, or siblings will often step up and help make the down payments with gift funds.

They will gift a part, or all, of the deposit sum to help them achieve eligibility for the mortgage.

Read on to know everything you need to know about deposit gifts!

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What Is A Gifted Deposit?

A gifted deposit is money given to a homebuyer as a contribution towards the deposit or equal to the whole deposit.

Gift deposits are growing increasingly popular as a way of helping first-time buyers get a step on the property ladder.

They are usually given by parents, and sometimes by grandparents or siblings.

A gifted deposit is a gift; it’s not a loan and must be given with no strings attached.

The money must be given freely, and the giver should have no stake in your property.

Who Can Gift A Deposit?

Almost anyone can give a deposit, from family members to partners to even friends.

However, most mortgage lenders prefer gifted deposits from an immediate relative, for example, a parent, grandparent or sibling. A partner can also make a gift deposit.

More distant relatives who are not related to you by blood, such as aunts and uncles, or friends, may not be approved by many lenders.

On the other hand, some lenders only allow parents to gift the money.

Although it’s not a common scenario, you should also keep in mind that most lenders will not accept a gifted deposit from a person who is also the one selling the house.

So, for instance, if you’re purchasing a property from your parents and they’re also the ones helping you fund it, it could be harder to get a mortgage (since that’s just a price reduction on the property).

So if you’ve received a gifted deposit offer from a loved one and are wondering what to do next, it’s a good idea to check with an advisor first to see if a lender will accept it.

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What Are The Rules On Gifted Deposit To Buy A House?

Rules on gifted deposits vary from lender to lender. They will all have their own qualifications and criteria around gifted deposits.

Here are the basic rules that most will agree on:

1. Confirmation that the money is really a gift and not a loan.
2. Confirmation that the gifter has no financial stake or legal right to the property.
3. Confirmation That The Money Is Really A Gift And Not A Loan.

Mortgage lenders see gift and loan deposits as two completely different things.

So before approving a gifted deposit, your lender will want the gifter to confirm in written form that the sum is indeed a gift with no expectation of repayment.

If you have to pay the sum back, it will be considered a loan, and your lender will either reduce to accept it or add it to your monthly outgoings to determine whether you can afford the mortgage repayments.

How Do You Prove That The Money Is A Gift?

To prove that the money is a gift, you will need a Gifted Deposit Letter.

While larger banks and lenders will give you a form to fill in, smaller lenders might require a lawyer’s letter.

The Gifted Deposit Letter needs to include the following:

• Gifter’s name.
• Your name.
• The total amount given.
• The source of the money.
• The relationship between the gifter and the receiver.
• Confirmation that it’s a gift with no obligation for repayment.
• Confirmation that the gifter has no financial or commercial stake in the property.
• Proof that the gifter is financially solvent.

The Gifted Deposit Letter needs to be signed by you, the gifter, as well as a witness.

Does The Gifter Need To Provide Anything Else?

Yes, the person giving the money will need to provide:

• Proof of funds: The person giving the money will need to prove that they actually have the money to give you and the source of the funds. If the gifted sum comes from an expected source, such as a property sale, it will be easier to prove. If the money was saved over time, bank statements and payslips would be needed to pass the anti-money laundering checks.
• Proof of ID: The person giving the money must show a photo ID, such as their passport or citizenship. They will also need to provide two proofs of address.

Confirmation that the gifter has no financial stake or legal right to the property.

If this isn’t included in the Gifted Deposit Letter, your lender may require a separate signed letter.

This letter will need to state that the person making your deposit expects no legal interest or equity in your property.

How Big A Sum Can Gifted Deposits Be?

There is no limit on how big a gifted deposit can be, but some lenders only accept a gifted deposit up to a percentage of the property’s value.

It’s also important to note that a large gift could be subject to inheritance tax.

What About Gifted Deposits And Inheritance Tax?

Anyone can gift up to £3,000 a year, exempt from inheritance tax – the tax on the estate of someone who’s died.

Any unused allowance from the previous year can be carried over.

So, for example, if your parents have not given away any money in the last year, they could give you £6,000 this year.

And they could gift you £12,000 if they haven’t gifted anyone in the previous two years.

However, if the sum they give exceeds this, the money would be liable for inheritance tax.

This is because if the gifter dies within seven years of handing it over, it would still be viewed as part of their estate for inheritance tax purposes.

So if the person’s real estate, including the gift, is more than £325,000, up to 40 per cent tax would be due on the excess. The tax on the gift goes down as the seven years elapse.

Alternatives To A Gifted Deposit Mortgage 

There are other options if your loved ones want to help you purchase a house but can’t gift you a deposit.

For example, they can be the guarantor on your mortgage, where they would be liable for the payments if you fail to make a payment.

You can also take out a joint mortgage with them, where both of you would be responsible for paying the loan.

If friends and family can’t help, there are also government schemes like shared ownership or Help to Buy.

These will require a much smaller deposit, usually 5%, for first-time buyers.

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Have You Been Offered A Gifted Deposit?

If you aren’t confident enough to take the next step, reach out to our team of mortgage brokers to get expert advice on your gifted mortgage deposit.