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Category: Mortgages

Mortgages For Professionals – A Complete Guide

by Dax McLeanPosted on

If you are are considered a professional, the mortgages available to you may include exclusive deals and rates you can get if you’re in particular lines of work.

Such professions can range from medical and critical workers to legal practitioners and business executives.

In this guide, you’ll learn what a professional mortgage is, professions considered, the benefits and how to find lenders specialising in mortgages for professionals.

What is a professional mortgage? 

Mortgages for professionals aren’t necessarily types of products. Mortgages for professionals refer to borrowers classed as professionals applying for mortgages and lenders offering them bespoke deals or exclusive rates.

It involves special treatment when a professional applies for the same mortgage product as everyone else.

Professionals can get such special treatment because they’re considered lower-risk borrowers, making lenders more lenient or flexible with their deposit requirements or eligibility criteria.

As a professional, you can get different rates among different lenders because not all lenders view professionals favourably.

To ensure you get an appropriate lender, you may have to speak to a mortgage broker experienced in arranging mortgages for professionals.

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Need more help? Check our quick help guides: 

Which professions are considered? 

Professions considered by mortgages lenders to be lower risk include the following:

Key workers:

  • Teachers
  • Police
  • Civil servants
  • Military
  • Firefighters

Medical professionals:

  • Nurses
  • Doctors
  • Optometrists
  • Pharmacists
  • Vets
  • Dentists

Other professionals:

  • Architects
  • Accountants
  • Barristers
  • Solicitors
  • Surveyors

High earners: 

  • Business executives
  • Investment bankers
  • Individuals with a high net worth or asset-rich may also qualify

Mortgage lenders will offer borrowers in such categories better deals. Their predictable career progressions, qualifications, and reliable income statistically make them a much safer bet than other borrowers.

Lenders are more willing to advance the mortgage at better terms to attract more of these borrowers.

You can even get an exclusive product range from some lenders for high earners and professionals, while others provide an enhanced discretion level or discounts.

Related guides: 

Advantages of a professional mortgage

Benefits of borrowing through mortgage lenders who specialise in professionals include:

  • Lower Fees and Superior Rates

Borrowers in qualifying professions can get fee discounts and favourable interest rates from some mortgage lenders.

  • Lenient Deposit Requirements

Lenders often ask for higher deposits when risk is present. Working in any safe profession will help offset any risk, and your chances of getting a low deposit mortgage will be higher as a professional.

  • Higher Multiples in Income

While average mortgage customers can only borrow from 4.5 to 5 times their salary, the salary or income of higher earners and professionals can be stretched 5.5 or even six times by some lenders.

  • Overpayment Facilitation

Mortgage lenders usually allow borrowers to overpay on their mortgages by 10% annually without any penalties. However, they’re more flexible for those in certain professions, and the limit may go as high as 20%.

With the right circumstances, some mortgage lenders will not impose an overpayment capo at all.

  • Options To Borrow Back

Professional borrowers have higher chances of coming across investments and making more enormous expenditures when opportunities arise. In addition to overpayment flexibilities, some lenders will also offer facilities for borrowing up to particular defined limits at any time.

The mortgage lender can allow you to borrow the total capital payments you’ve already made. Others will let you borrow additional funds without an entire application process, and others can provide instant cash withdrawals straight into your bank account up to a predefined limit.

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  • Mortgage Repayment Breaks

Professionals are more likely to get approved for mortgage repayment breaks or holidays by lenders than non-professionals in the same circumstances. Generally, borrowers in high-earning professions are less likely to run into difficulties with their mortgages after they’ve postponed a few payments.

  • Fewer Proofs for Income

To prove your income as a self-employed borrower, lenders may require you to provide two to three years of your account’s history. In contrast, professionals are more likely to get approved for mortgages with only a 12-month trading history, which can be helpful for those who haven’t been in their current roles for long.

  • Specialized Treatment

Lenders who specialise in offering mortgages to professionals provide personalised services which translate to VIP treatments and smoother mortgage setups.

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Mortgage lenders that favour professionals 

You can find exclusive deals for professionals among various high street banks. Some may offer discounts that include additional borrowing and offset facilities, among other perks. Others may allow you to borrow up to 5.5 times your salary.

Private mortgage lenders, challenger banks, and specialist lenders offer special deals for high earners and professionals. Such lenders don’t always advertise themselves, and you m unlikely to find them while searching on Google.

This is where mortgage brokers specialising in arranging finance for professionals come in. They can provide you with access to all lenders in the market, and the right advisor knows the exact lender who is suitable to your employment type and income. It ensures you get an appropriate lender the first time, which helps you avoid wasting time and gives you peace of mind.

How to Find Lenders Specialising in Mortgages for Professionals

Some brokers specialise in matching professional borrowers with lenders who cater to professionals. They understand the mortgage requirements for those in such lines of work and know the exact lenders to approach for the best deal and rates.

Therefore, if you’re looking for exclusive mortgage deals for high earners and professionals, the best place to start is with mortgage brokers experienced in arranging them. They have access to lenders who offer such arrangements, and they’ll negotiate the best terms and rates on your behalf.

They’ll also help with your mortgage application while providing you with bespoke advice you can’t find anywhere else.

Frequently Asked Questions

Can You Apply as a Newly Qualified Professional?

Yes. Some mortgages offer newly qualified professionals up to 5.5 times their salary. Such borrowing can allow you to borrow up to 95% of the property price provided you qualify and have a minimum salary.

Such competitive offers can benefit new professionals who are first-time buyers and have a small deposit at hand. And although the name only mentions newly qualified professionals, the deals remain open to those who’ve qualified for longer, even up to five years.

Therefore, some applicants can get an advantage since they’ve had time to see increases in their salary, which can boost how much they can borrow.

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Are there any mortgage schemes for professionals?

Yes, there are schemes available. For military and ex-military people, there is Forces Help to Buy. The First Homes scheme is also availble for NHS staff – you can read more about this initiative on the government’s website.

Finding the Best Rate

Remember, all loans, including mortgages for professionals, are subject to affordability assessments, and not all favoured professionals are guaranteed to qualify.

It’s vital to work out exactly how much you can comfortably afford before looking for a mortgage. You can use tools like mortgage calculators to get a ballpark of what your repayments may be at different rates. They’re usually free to use when you visit broker and lender websites and will not affect your credit score.

Also, consider the mortgage rates and look at a range of mortgage lenders to see if you can get a better deal based on your financial and personal circumstances.

Mortgages For Professionals Final Thoughts

As mentioned before, a whole market mortgage broker is your best bet for finding the best lenders and mortgages for professionals. They’ll also support you in the application process and in making realistic financial plans for your mortgage.

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: 

Can I Buy My Council House While On Benefit?

by Dax McLeanPosted on

If you’re on benefits and have dreams of owning your very own council house, you may wonder if it’s even a possibility.

Being on benefits means less access to credit for many people, but does that really come into play when applying for funds to buy a council house?

The short answer to the question is “yes, you can buy a council house while on benefits!” In most instances, your benefit will be added as a form of supplementary income when the mortgage company carries out the required affordability assessment.

Of course, you will need to prove in most instances that benefits are not your sole income stream.

Which Benefits Allow You to Buy a House?

You may be able to buy a council house while on any of the following benefits.

  • Working tax credit
  • Widow’s pension
  • Severe disability allowance
  • Maternity allowance
  • Industrial injuries
  • Incapacity
  • Disability living allowance
  • Child benefit
  • Carer’s allowance
  • Attendance allowance

What’s the Catch?

One clincher is that you will no longer be allowed to claim housing benefits when you buy a house while on benefits – you certainly won’t be able to use a housing benefit to pay for mortgage costs.

Keep in mind that you’re only eligible for housing benefits if you have savings of less than £16,000.

If you have savings greater than that and are claiming housing benefits and applying for a mortgage while on benefits, you may find that your local council takes a closer look at your situation, and you may find yourself in a spot of trouble!

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Need more help? Check our quick help guides: 

Can I Get a Mortgage if My Only Form of Income is Benefits?

Most mortgage companies will require you to have additional income streams in addition to your benefits. That said, if your benefits are your sole income stream, there are still options available for you to get a mortgage and acquire housing cost payments.

Government Schemes That Will Help You Buy a Council House on Benefits

If you’re looking into government schemes that do more than pay off the interest element of your home loan, you’re in luck. Several government schemes will assist you with purchasing a council home on benefits.

  • Right to Buy Scheme

This Scheme is aimed at individuals already living in a council house. It aims to help tenants purchase their homes at a considerable discount.

It is said that this Scheme will also become available to housing association tenants in the near future. The discount amount fluctuates depending on the location of your home.

You have a right to buy if the council house is your only home and is self-contained. However, you also need to be a secure tenant.

In 2019 the maximum discount was set at £82,800 in England, with a slightly elevated discount allowed in London of £110,500.

That said, discounts may increase annually, so it’s best to check with your council. Factors that influence the discount offered would include your tenancy term and, of course, the property’s value is placed on the market.

If you have been a tenant for 3 – 5 years, you can expect a discount of around 50% with an increase of 2% per additional year of tenancy, capped at a max of 70% discount.

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Related guides: 

  • Preserved Right to Buy Scheme

In instances where the council-owned your home but sold it to another landlord while you were an occupant, you could be eligible for Preserved Right to Buy. The Preserved Right to Buy is a legal right extended to former local authority tenants, provided they were secure tenants.

Preserved Right to Buy works very similarly to the Right to Buy Scheme, where discounts range from £84,600 across England to £112,800 in London.

The best way to find out if you’re eligible for the Preserved Right to Buy scheme is to check with your current landlord. If you’re not eligible, there is an additional scheme that may assist you – this is called the Right to Acquire Scheme.

You could be eligible if you were a secure council tenant and living in your home when it was transferred from the council to another landlord, like a housing association.

You could also be eligible if you then moved to another home owned by the new landlord. But not if you moved to a home owned by a different landlord.

Your landlord will be able to tell you whether you have the Preserved Right to Buy. If you’re a housing association tenant and you’re not eligible for this Scheme, you may be eligible for the Right to Acquire Scheme instead.

The Right to Acquire Scheme is aimed at tenants of housing association homes with a public sector landlord for no less than three years. You can then buy your home at a discount of £9,000 – £16,000, depending on the home’s location and value.

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Related guides: 

Buy a Council House While on Benefits Final Thoughts

As you can see, there are several avenues you can take when wanting to buy a council house on benefits. Chat with your mortgage broker and your landlord to determine which option is best suited to your needs and financial situation.

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: 

Steps to Getting a Million Pound Mortgage

by Dax McLeanPosted on

Properties valued at £1 million and over have continued to increase across the UK, and so has their demand.

More and more buyers are searching for large properties with more space, luxury, extra bedrooms, and gardens.

As a result, a million-pound mortgage isn’t as rare as it used to be.

Before, you could only get a £1 million mortgage from private banks, but more high street banks provide this level of borrowing or more today.

Here are the typical steps to getting a million-pound mortgage:

Choose Between a Private Lender and a Bank

The first step involves finding a suitable lender with an appetite for this particular market. The choice always comes down to a private or high street bank.

Private banks usually have the lion’s share of the million-pound mortgage market because of their flexibility, but you shouldn’t rule out high street lenders.

Let’s go over the benefits of each type of lender to ensure you make an informed decision.

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Need more help? Check our quick help guides: 

Private Banks

  • More Flexibility

Private banks are more flexible in their acceptance criteria, and this is why they’ve traditionally dominated the high-value mortgage space. They’re more willing to take on risks and consider you holistically.

They’ll look at more than your income and factor in things that a regular lender may not like your assets, bonuses, or shares. You can even get a mortgage on pension income from some private lenders.

Therefore, if you’re self-employed, have unusual income streams, or are looking to use your foreign income for a UK-based mortgage, a private lender is a better option than a high street bank.

  • More Specialized In £1 Million Mortgages

Private banks are often more experienced in this area of the market. You may have to pay a premium, but it may reflect in the services you receive.

They offer a more tailored customer experience with customized approaches that may suit you better.

They’re also generally more efficient in pushing the deal through because it’s what they specialize in.

Some specialize in rural area properties with more acreage and the home plus rental units or additional outbuildings.

Others focus on prestigious properties in locations that will always be desirable for high-end investors.

  • Better Terms

Flexibilities of private lenders often extend to the kind of terms they offer. You may have a higher chance of obtaining a better loan to value (LTV) ratio or an interest-only mortgage.

While high street lenders may have competitive rates, it won’t be helpful to you if you can’t get the loan to value ratio you’re looking for, or they can’t consider your range of earnings or assets when deciding the terms.

Instead of using a standardized decision-making procedure, private banks take a more bespoke approach.

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Related guides: 

High Street Bank

  • Easy Access

High street lenders are easier to access compared to private lenders, who may sometimes require an introduction.

Others may also have exclusive criteria you have to fulfil before you can even get an audience. High street lenders are more open, and it doesn’t diminish their competency.

Some feature specialized teams that only deal with large mortgages like a million-pound mortgage.

  • More Straightforward

With a high street lender, you either fit the criteria, or you don’t. Such a standardized and rigid methodology can also be a strength.

The process of applying for a mortgage is easy to understand, and they’re transparent about their acceptance criteria.

Therefore, you’re likely to get approved provided you fit the criteria and apply correctly.

  • Fewer Fees and Commitment

Some private banks don’t want to work with y0u on a one-off basis they often want to establish long-term relationships.

They may request to put your ‘assets under management (AUM)’ or take over your current day-to-day account or banking needs.

However, ‘dry lending’ is now commonly available among private banks, and you’ll not be obligated to transfer assets if it doesn’t suit you. With high street lenders, much less of a commitment is required to move the deal forward.

To ensure you make the right choice and get the finance you need, the advice of a mortgage broker can be invaluable.

They’re always looking across the whole property finance lending market as part of their job, including large and small lenders and private and high street banks.

Related guides: 

How Much Income Is Required For A Million-Pound Mortgage?

It may depend on whether you go private or choose a high street lender. Conventional lenders will often base their affordability calculations on your salaried income i.e 4.5 times your income, some offer more some offer less.

They may also conduct stress testing where your fixed expenses like childcare are factored in.

An FCA regulatory change in 2014 also capped the number of high loan-to-income mortgages that lenders could issue. No more than 15% of a lender’s mortgages can be over 4.5x income.

Following the regulation, some lenders took action to restrict all loans over 500,000 pounds under this level.

Some high street lenders even impose caps on higher-value loans, and they’ll not lend beyond 75-80% LTV for £1 million and above.

In contrast, private lenders are much more flexible. Applications are considered on a case-by-case basis.

They will look at your income plus the yearly bonus and any other income streams you may have when assessing your application.

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Monthly Cost Of A One Million Pound Mortgage

The amount you pay per month will depend on the interest rate. You can get a £1 million mortgage on an interest-only or repayment basis with repayment periods of typically 5 to 35 years.

Like all other loans, your perceived risk profile can be a major factor in your monthly payments. It can affect the loan to value (LTV) the lender is willing to offer.

Things that can affect your risk profile include your credit history, deposit size, and the type of property you’re eyeing.

What Deposit Is Needed For A Million Pound Mortgage?

Most high street lenders will need substantial down payments for a million-pound mortgage and above to reduce their loan exposure and risk.

The majority look for deposits of at least 25%, and you can get the cheapest deals with 40% deposits and above. Only a small number of high street lenders will go as low as 10%.

Private banks are more willing to stretch the LTV and may offer up to 95% LTV for lower-risk borrowers.

You can also get a good deal if they want to build a longer-term relationship with you and you have a strong prospect of future earnings.

For illustrative purposes, the table below outlines different LTVs relating to your perceived risk level that can affect the required deposit.

Risk LTV Needed Deposit Mortgage Amount
Lower risk 95% £50,000 £950,000
Lower risk 90% £100,000 £900,000
Lower risk 85% £150,000 £850,000
Lower risk 80% £200,000 £800,000
Medium risk 75% £250,000 £750,000
Medium risk 70% £300,000 £700,000
Medium risk 65% £350,000 £650,000
Medium risk 60% £400,000 £600,000
Medium risk 55% £450,000 £550,000
Higher risk 50% £500,000 £500,000

Steps to Getting a Million Pound Mortgage Conclusion 

If you are considering a Million Pound Mortgage, the best starting point is to seek professional advice and explore the options available to you.

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: 

What is a Fixer Upper Mortgage?

by Dax McLeanPosted on

If you’re in the property market to make some money, you probably already know that buying a fixer-upper property can provide an opportunity for great profits.

Fixer-upper properties are also great for people who want to get a property with potential at a low price and take their time fixing it up – for their own occupation.

Getting a property that’s not in prime condition often comes with reduced rates attached, and if you’re savvy enough to get it at a great price point, you can flip the property and make the most of price reductions where renovations are needed.

In a survey done by Buildworld in 2021 in the UK, it was found that 72% of respondents would be willing to buy a home that’s ready to move into, whereas 41% of people said they would be interested in buying a fixer-upper property.

So it all really comes down to money, time, and of course, what sort of skills you have when it comes to home renovation.

For many, the concept of renovating a fixer-upper home is exciting because they initially get to save on the cost of the home, and they have more opportunity to create a space for themselves that caters to their personal taste and style.

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Of course, the money aspect of fixer-upper properties can be daunting. How do you fund the purchase of the property and the renovations?

The good news is that fixer-upper mortgages are designed to help you do just that. With a fixer-upper mortgage, you can borrow enough for the property plus renovation costs.

This article will explain how fixer-upper mortgages work and how you can take advantage of them.

Getting Buy-to-Renovate Mortgages

The first thing you need to understand is that not all mortgage providers will jump at the opportunity to mortgage a fixer-upper.

If the property is considered inhabitable, you won’t get the cash you need to buy the property and fix it up.  Property checks need to be done, and then the type of property may also affect the final decision.

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Instances Where a Bank or Mortgage Provider Says “No”

In some instances, banks and mortgage providers will reject your mortgage application for a fixer-upper property if:

  • The property is in a dire state as a result of neglect.
  • The property is deemed inhabitable, which can happen if certain aspects of the building aren’t up to standard.
  • The property requires a conversion.

Working with a specialist mortgage broker could help you overcome this challenge, though. In some instances, you may still find the funding required to purchase the property and fix it up.

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Standards Required to Get Fixer Upper Mortgages in UK

If the property isn’t in the best state, but your heart is set on it, you may need to refer to the most basic standards a home has to meet in the UK for it to be considered habitable and therefore worthy of a mortgage. These include the following:

  • The home must be watertight, which means that the roof must be in good condition.
  • There must be a basic kitchen or food-making facilities.
  • There must be a bathroom with a toilet inside the house.
  • The house must have a working water supply (good plumbing).
  • The property must be secure.

Mortgage providers find these details quite important, so it’s best to do a thorough property check before putting in a mortgage application.

Post-Renovation Property Values

When shopping around for fixer-upper mortgages, you will find that most offer the full amount to buy and renovate the property.

Let’s say that the post-renovation property value is considered to be £200,000 and you’re offered a loan on an 80% ratio of the expected property value once renovated. This means you can take out a mortgage of £160,000.

If the property that you’ve got your eye on is a bit run down but isn’t considered inhabitable, you will probably be offered 80-90% of the property value as it stands.

Related guides: 

Can I Use a Conventional Mortgage for a Fixer-Upper Property?

You may be wondering if you need to seek out a specialist fixer-upper loan or if you can simply apply for a conventional mortgage. The answer is a simple yes. You can use a conventional mortgage to buy a fixer-upper property, but first, give some thought to your financial situation.

Conventional mortgages will provide funding to purchase a property that you plan to occupy, but it won’t pay for renovation costs. This can be the ideal option if you have money set aside that you can use for renovations or if you plan to take out a second loan to cover the renovation costs specifically.

Things to be Aware of When Buying a Fixer Upper Property

If you’re buying your first home and want to opt for a fixer-upper, there are several things to be aware of. Before you start your application, here are a few things you should pay attention to.

  • Pay for a full property survey to bring to light any problems that may not be immediately obvious. This gives you a clearer idea of how much the renovations will cost and how much you need to accumulate before you can start your renovation project.
  • Work with a mortgage provider that takes your personal finances and current situation into consideration.
  • Before you plan the renovations, ensure that you are fully aware of the building regulations and required planning permissions.
  • Set a further 15% of the expected costs aside because renovations are rarely as clear-cut and affordable as they initially seem. Unexpected expenses have a habit of simply cropping up.
  • Renovations don’t just cost money; they take time too. Make sure that you have enough time to manage the project or you may find yourself wasting more money on unnecessary services along the way.

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Related guides: 

 Fixer Upper Mortgage Final Thoughts

While the prospect of buying a fixer-upper is exciting and of course, alluring, always keep in mind that banks and mortgage providers do their checks for a reason.

If a bank is dead set on not approving a fixer-upper mortgage for your required property, it may be time to move on and look for a different property.

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: 

Mortgage On Timber-Framed House

by Dax McLeanPosted on

Timber-framed buildings have become increasingly popular in commercial and residential properties since their introduction to British architecture.

They have the advantage of cheaper building materials, quicker and easier construction methods, and superior energy efficiency characteristics.

Despite their popularity, some mortgage lenders in the UK still consider such properties as non-standard. This can make getting a mortgage, buying, or selling timber-framed houses challenging.

However, it’s very much possible with the correct advice and guidance. Let’s explore timber-framed house mortgages so you can learn how to get one and the potential issues to avoid with these properties.

Getting A Mortgage On A Timber Framed House

Various lenders can provide you with a mortgage for a timber-framed house. However, unlike mortgages for traditional homes, many variables can affect whether the mortgage will be approved and the terms the lender will offer you. These include:

The Age And Type Of Property

Although newer is not always better, the property-built period can be a significant factor. Lenders view modern timber frame houses more positively because the more recent the build, the more stringent the building regulations and methods used.

Few lenders will consider a mortgage for a frame built before 1970.

Additionally, there are many types of timber used in manufacturing timber frames. Some are more reliable than others, but unfortunately, they’ve often painted with the same brush without considering the comparative strengths and weaknesses.

This makes a detailed survey very important when you’re looking for a mortgage for a timber-framed house.

Impartial assessments from surveyors like the Royal Institution of Chartered Surveyors (RICS) can provide a comprehensive report on the frame’s condition to assure lenders of the mortgage suitability.

Lenders will want to know the specific kind of timber frame in the property. If surveyors can’t inspect or access the timber frame, lenders may require a hidden defects insurance.

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Other Materials

Lenders will also look at other building materials like the exterior or cladding on the timber-framed house. Exteriors made from stone or brick are preferred.

It can be challenging to get a mortgage on a timber-framed home with an exterior made of more brittle materials like plastic or metal.

Lenders may also be reluctant to offer mortgages for timber-framed houses depending on the cladding.

Cladding secured directly to the frame is considered less weatherproof, less secure, and more susceptible to fire risks. The cladding must be easily maintainable to avoid depreciation and damage that can affect the house’s value.

Lender Choice

All lenders are not the same. Each will have their criteria to decide whether they’ll offer a mortgage for a timber-framed house. Some lenders are more open to financing timber-based properties at excellent rates.

This is where the services of a mortgage adviser are invaluable. Their experience and knowledge can simplify selecting lenders with the best rates for non-standard properties.

You may even be lucky and get access to specialist lenders with great deals not available to the general public.

Credit History, Deposit, And Security

Lenders will look at your credit history to determine how risky a borrower you are. Your chances of securing a mortgage can be negatively affected by recent defaults, missed payments, or repossessions.

It may be a barrier, but it’s usually not a deal breaker, and you may be eligible for bad credit mortgages.

Lenders may also ask for a larger deposit because a timber-framed house is considered a non-standard property with higher risk.

You’ll also find it easier to sway lenders in your favour when you offer security like another property against the mortgage.

Local Demand

As a non-standard property, a timber-framed house may be in lower demand than other properties, which can affect your chances of getting a mortgage.

Lenders will need reassurance that it’s possible to get a quick sale in case of foreclosure so they can make back their money. This is another situation where a mortgage adviser can save a lot of time and effort.

They can help you reassure lenders by showing that the local housing market has many non-standard houses that consistently sell well. Thanks to their knowledge of local demand, they can also help you find local lenders who are more amenable.

Self-Build Mortgage for A Timber Framed House

If you’re looking to construct a timber-framed property, a Self-Build Mortgage can be suitable. Lenders will require that you have the expertise and means to build it or at least be able to oversee its construction.

Timber frame is often preferred among self-build mortgage borrowers because it’s a relatively quick method of construction and it has energy efficiency benefits.

With a Self-Build Mortgage, funds are released to you in staged payments or drawdowns as the construction work progresses. Many lenders will undertake site inspections before releasing the funds at each stage to ensure the job is going as planned.

Related guides: 

Buy To Let Mortgage On A Timber Framed House

You may get a Buy-To-Let Mortgage on a timber-framed property if you meet the lender’s eligibility criteria. The variables that affect whether the mortgage for a timber-framed house will be approved are the same for residential and commercial properties.

However, the affordability assessment will likely be different. Lenders can base their lending decisions on the viability of the investment and whether the forecasted income from rent payments can adequately cover the monthly repayments.

Mortgage For A Timber Framed Extension

Most lenders will be cautious about the type of external finish they permit, and you may have to find a specialist lender for a timber-framed extension.

Timber frame extensions require less labour and can be less expensive than traditionally built ones. However, it’s advisable to ensure the value the extension adds to your home exceeds the amount it will cost.

Related guides: 

Mortgage For A House With Timber Cladding

Some lenders may accept decorative cladding over blockwork, but others will turn you away outright if the property doesn’t have any blockwork underneath the cladding. Timber cladding may scare away lenders because of the maintenance required.

You have to maintain timber cladding regularly, and if you fail to keep up, the home’s value will quickly depreciate.

This can make it difficult or even impossible to resell it. Your choices may be restricted by the extend of timber cladding coverage on the property.

Some lenders may only consider you if it’s limited to the first floor and the ground floor is block and brick. Others will still lend to you even when the entire property is covered.

Mortgage On Timber-Framed House Final Thoughts

An independent mortgage adviser is your best bet in getting the financing you need for the property you want regardless of whether it’s standard or non-standard, like a timber-framed house. Consult with an advisor before making an application.

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: 

£200,000 Mortgage – What are the repayments?

by Dax McLeanPosted on

A mortgage is among the most significant commitments you’ll make in your financial life.

It’s essential to know whether you can afford it before arranging your mortgage.

To help you get an idea of what you need to save towards your mortgage, we’ll explore the £200,000 mortgage in this article, including the kind of deposit you’ll need, what the repayments may cost you, and other cost considerations.

Deposit For A £200,000 Mortgage

The amount you’ll need as a deposit for a £200,000 mortgage will depend on the lender’s loan to value (LTV) ratio, your income, credit rating, and if you’re after a buy to let or residential mortgage.

You’ll find the LTV expressed as a percentage, referring to the mortgage to property value ratio.

Generally, you may get a mortgage amount of up to 95% of the property value in the UK. Therefore, to qualify for a mortgage, you’ll need to save at least 5% of the property value as a first-time buyer.

A 20% deposit is the standard for attractive mortgages and interest rates, and the deal generally gets better every time you move up 5% in deposit size, however this depends on the lender rates available.

The higher the amount you can put down as a deposit, the lower the interest and mortgage loan amount you’ll have to repay.

It’s wise to aim for 5%, 10%, 15%, 20% milestones as you save for a mortgage. Lenders will consider you lower risk when you have a high deposit.

Related reading: 

Deposit For Bad Credit £200,000 Mortgage

With a history of bad credit, lenders will consider you a higher risk, although it’s not a deal-breaker. The worse it is, the greater the risk which translates to a larger deposit and less favourable terms.

Keep in mind that not all lenders are the same, and generally speaking, each application is regarded on its own merit. Your unique situation may mean that you can get the loan you want, even with bad credit.

Lenders will ask for different deposit sizes and offer different rates for a bad credit £200,000 mortgage as lender criteria can differ from one to another.

Generally, lenders will consider issues like a few late repayments or a low credit score as low risk and offer you better rates and LTV ratios.

However, problems like recent repossessions or bankruptcy may make them more cautious, resulting in a higher interest rate or deposit – or possibly even a loan application rejection.

Recommended: Learn more about the different types of mortgages and the fees involved in buying a home.

Deposit For £ 200,000 Buy-To-Let Mortgage

A £200,000 buy-to-let mortgage will require a higher minimum deposit than a residential mortgage. Most lenders often require a deposit of 25%, while others can accept 15% as long as you fit other criteria.

Buy to let mortgages also have other strict criteria, and a common factor to consider is minimum income requirements. Some lenders may insist that you have to be making at least £25,000 annually.

Others will look at the rental income forecasted and request that the rental payments you project cover 125%-130% of the £200,000 mortgage monthly payments.

It’s also worth noting that most lenders don’t offer buy-to-let mortgages to first-time buyers who don’t own their own homes yet. However, you can get specialist lenders who will consider you provided you meet their criteria.

Repayments For A £200,000 Mortgage

The term of the £200,000 mortgage and the interest rate you get from a lender are the main factors that will affect how much the repayments will cost you.

Remember that every lender is different, and various factors like your credit history or circumstances can affect your monthly repayments.

Interest Rate For A £200,000 Mortgage

As with any other loan, the interest rate for a mortgage loan is essential to consider. Generally, you can get an interest rate between 1% and 5% among mortgage lenders in the UK.

The table below can give you an estimate of the total repayments you would make monthly for a £200,000 mortgage at various interest rates over a term of 25 years.

  • Interest Rate 1% 2% 3% 4% 5%
  • Monthly Repayment £753 £848 £948 £1055 £1170

Interest Only Repayments

Some lenders can offer an interest-only repayment plan for a £200,000 mortgage. You only repay the interest on the loan each month and nothing off the amount you borrowed, which becomes due at the end of the term in one huge lump sum.

Because of the risk of accumulating a huge debt that may be hard to repay, lenders will require that you have a plan for repaying the total balance at the end of the mortgage term.

The Term For A £200,000 Mortgage

Mortgages can take 5 to 40 years to pay back, and the length of the term will have a significant effect on how much you’ll ultimately pay. More extended periods will have cheaper monthly payments but will have an extra cost.

A £200,000 mortgage paid over 35 years will cost you thousands more than when you repay it over 20 years or less.

The less the term of your mortgage, the less the total amount you’ll pay for the loan.

Check out the table below to get an idea of how the term affects the total and monthly repayments of a £200,000 mortgage based on a 3% interest rate.

Term Monthly Repayment Interest Total Repaid

  • 30 years £843 £103,495 £303,495
  • 25 years £948 £84,478 £284,478
  • 20 years £1106 £66,169 £266,169
  • 15 years £1381 £48,853 £248,853
  • 10 years £1931 £31,729 £231,729
  • 5 years £3594 £15,616 £215,616

It’s wise to base your decision on how much you can realistically afford to repay each month. Mortgage loan advisers can help you decide which is the best option for your circumstances.

For a more in-depth look into some common types of first time buyer mortgages, check out our following guides:

Other Costs To Consider

While the deposit will take up a large chunk of your savings, other fees you’ll need to consider when getting a £200,000 mortgage include:

Valuation Fees

A valuation to ensure the property you’re buying is worth the amount you’re planning to pay is necessary. Lenders can arrange for this, but you’ll usually have to pay for it, and the costs can vary depending on the property’s value, location, and terms of the deal.

Solicitor Fees

You’ll also have to pay the fees for a property solicitor who will handle the legal aspects of your property purchase. They can charge a flat fee or a percentage of the property price. There may also be other additional fees like getting the property registered as a new owner in the Land Registry.

Insurance Fees

Mortgage lenders may require that you have the property insured from the moment you enter into a contract. This ensures coverage in case of any damage to the structure of the property. Some insurers offer home insurance with property and contents insurance that covers your belongings against theft or damage.

How Much Is A £200,000 Mortgage A Month? Final Thoughts

When considering what mortgage amount to apply for ask an expert to assist you. Affording the repayments each month comfortably should be a number one priority.

If you’re ready to take the leap, we’re ready to help you with your first time buyer mortgage application.

As a first time buyer, it’s natural to have a lot of questions. Ask away, one of our friendly advisors would love to talk things through with you.

Call us today on 01925 906 210 or complete our quick and easy First Time Buyer Mortgage Application.

How Much Is A £150,000 Mortgage A Month?

by Dax McLeanPosted on

Before taking out a mortgage, it’s advisable to find out how much it will cost you to pay back monthly.

Mortgage repayment will probably be your most significant outgoing expense every month, and it’s vital to know whether you can afford it now and in the future.

In this guide, we’ll break down how much a £150 000 mortgage could cost you per month, the factors that influence monthly costs, and how you can get the best rates available.

Monthly Repayments For A £150 000 Mortgage

How much you pay every month for a £150000 mortgage will depend on various factors.

The most important ones are the length or term of the mortgage and the interest rate you’re given.

Keep in mind that every lender is different, and they’ll have their criteria to determine the rates they give you.

Factors like your profile or credit history and your level of deposit can influence the interest rate a lender is willing to offer.

Interest Rates For A £150,000 Mortgage

The interest rate affects the monthly repayments on any loan, and you typically you may get a rate ranging between 1% to 5% for a £150000 mortgage in the UK based on current rates.

The interest is usually added to a portion of the capital or amount borrowed and paid back each month for the loan duration.

Here’s an illustration of how the monthly repayments can differ on a £150000 mortgage with a 30-year term based on different interest rates:

  • Interest Rate 1% 2% 3% 4% 5%
  • Monthly Repayment £482 £554 £632 £716 £805

Interest Only Repayments

You may also get the option to repay only the interest every month for a £150000 mortgage. In such an agreement, the total amount of capital borrowed becomes due at the end of the term, and you only repay the interest each month.

However, to qualify for an interest-only £150000 mortgage, you must show the lender evidence of a viable repayment strategy. This is because you risk piling up a huge debt that can be difficult to repay without a good plan.

The repayment strategy assures the lender that you can cover the entire balance at the end of the mortgage term.

You’ll also need a larger deposit to qualify. With an interest-only mortgage, you’ll have lower monthly costs since you’re not paying anything off the capital amount.

Related reading: 

The Term For A £150 000 Mortgage

Typically you may get a term of between 5 to 30 years to repay a £150000 mortgage depending upon your circumstances. The term will have a massive effect on your monthly repayments as well as the total amount you’ll ultimately pay.

With a more extended period, you’ll have cheaper monthly payments. However, the total amount you’ll repay for the loan will be higher than a shorter period. You can save thousands by repaying your loan over a shorter period.

To give you an idea of how the term affects monthly and total payments of a £150 000 mortgage, check out the table below, which is based on a 3% interest rate.

Term Monthly Repayment Interest Total Repaid

  • 30 years £632 £77,621 £227,621
  • 25 years £711 £63,358 £213,358
  • 20 years £832 £49,627 £199,627
  • 15 years £1,036 £36,437 £186,437
  • 10 years £1,448 £23,796 £173,796
  • 5 years £2,695 £11,712 £161,712

The less the loan term, the less the total amount you’ll pay, but the higher the monthly payments. Keep in mind that the period you get will depend on your circumstances, and it’s wise to base your decision on the amount you can realistically afford each month.

Recommended: Learn more about the different types of mortgages and the fees involved in buying a home.

Deposit Amount Affects How Much You Pay Monthly

The deposit you’ll need for a £150000 mortgage will depend on the lender’s loan to value (LTV) ratio. It describes how much a lender is willing to offer you compared to the value of the property you’re buying and is expressed as a percentage.

For example, with a £15000 deposit, you’ll own 10% on a property worth £150 000 and borrow 90%. This makes the LTV ratios 90%.

With a low deposit, you’ll be seen as a riskier borrower, which may translate to higher interest rates from lenders. Lenders in the UK can offer you a mortgage of up to 95% of the property value depending upon lender criteria.

The higher the deposit, the lower the interest and loan amount you have to repay monthly and in total.

Bad Credit Effects On A £150 000 mortgage

There are bad credit £150 000 mortgages available in the UK, but lenders may require a higher deposit and charge you higher interest rates to offset the risk. This will ultimately translate to higher payments every month.

It’s important to remember that every lender is different, and each borrower is treated as an individual on a case-by-case basis. Each may offer different rates and ask for different deposit sizes for a bad credit £150 000 mortgages.

You can still get reasonable rates and LTV ratios depending on the severity and recency of your bad credit issue. Lenders will favour borrowers with older credit issues compared to those with more recent misdemeanours. Consulting a mortgage adviser can help you get the best rates for your circumstances.

For a more in-depth look into some common types of first time buyer mortgages, check out our following guides:

Monthly Payments For A £150 000 Buy to Let Mortgage

Your monthly payments and deposit will be different depending on whether you’re eyeing a residential or buy to let mortgage. Many buy-to-let mortgage providers require a 25% deposit, and others can ask for 15% provided you meet their criteria.

The monthly payments may be lower because most buy to let mortgages are on an interest-only repayment basis. Also, unlike residential interest-only agreements, you don’t require a viable repayment strategy in buy to let mortgages.

Lenders gladly accept the sale of the property at the end of the period to cover the amount with a buy to let.

Other Fees That May influence How Much You Pay

In addition to the interest and capital percentage, other fees may influence how much you pay each month i.e. broker fees, lender fees, buildings insurance.

How Much Is A £150000 Mortgage A Month? Final Thoughts

When considering what mortgage amount to apply for ask an expert to assist you. Affording the repayments each month comfortably should be a number one priority.

If you’re ready to take the leap, we’re ready to help you with your first time buyer mortgage application.

As a first time buyer, it’s natural to have a lot of questions. Ask away, one of our friendly advisors would love to talk things through with you.

Call us today on 01925 906 210 or complete our quick and easy First Time Buyer Mortgage Application.

Investment Property Mortgages

by Dax McLeanPosted on

Investment property mortgages include various types of loans such as commercial mortgages, buy-to-let loans, and everything in between.

If you’re hunting for info on investment property mortgages, this guide will tell you everything you need to know.

Below, you will learn about what type of finance is categorised as investment property mortgages, how to invest in one, what rates to expect and how to make the right decision for you.

There’s no time to waste let’s jump right in.

What is an Investment Property Mortgage?

Most people apply for a mortgage to buy a personal home – the home of their dreams. But there are scenarios where you might want to invest in property purely for profit.

You might want to spruce up the property and resell it, or you might want to use the property to earn rental income.

You can even include the purchase of property for commercial use. The only exclusion is property bought for personal use.

The category that your property falls under will determine what type of mortgage you will apply for. The mortgages we will cover include:

  • Buy to sell mortgages
  • Buy-to-let mortgages
  • Holiday rental properties
  • Commercial property mortgages

While all of these mortgages fall under investment property mortgages, it’s important to note that each of these categories may have subcategories within them.

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Before we move on, let’s first point out that second home mortgages are not the same as investment property mortgages.

Instead, second-home mortgages are properties for personal use; this includes your own private holiday home and secondary residence in which you only intend to spend some of your time.

Investment property mortgages are strictly for people who wish to buy a property they will never inhabit themselves (or their family). The purpose is for the property to generate an income.

While the investment property mortgage may be a second mortgage for you, it is not a second property mortgage for personal use.

Related guides: 

Investment Property Rates vs. Second Home Rates

A residential home of a similar size to a commercial property will come with a lower interest rate.

Why? Firstly, there’s a higher risk to the lender. You won’t be personally inhabiting the property, which means that you’ll have tenants.

And while tenants can be vetted, there’s no guarantee that your tenants won’t miss payments or damage the property. There’s a risk for you and the lender. When there’s increased risk, interest rates increase.

Investment Property Mortgage Options

Let’s consider the options:

  1. Commercial Investment Mortgages

If you plan to invest in property that will be used for commercial business, this mortgage type is a good option. There are several criteria for getting a mortgage for commercial property as follows:

  • Proof of viability of the earning potential backed by a strong business plan
  • Your credit history (some mortgage providers will assist bad credit borrowers)
  • Your track record in a similar commercial market
  • The deposit – you need to put down a minimum of 25%, but in some cases, as much as 50% is required
  1. The Buy-to-Let Mortgage

Mortgage lenders offering this type of mortgage will need evidence of a viable investment from you.

With this type of loan, the lender will determine if you are a viable loan candidate primarily based on the property’s earning potential (usually rental earnings).  Mortgage providers will decide on your application outcome based on:

  • Your credit history (some mortgage providers assist bad credit borrowers)
  • Income to debt ratio
  • The deposit – you need at least a 15% deposit
  • Experience as a landlord
  • The projected earning potential of the property

If you want to get this mortgage, typically you will need to illustrate that the income possible will cover the mortgage repayments by no less than 125%.

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  1. Holiday Rental Properties

These mortgages are very similar to the abovementioned buy-to-let mortgages. To get a mortgage for a holiday property you plan to rent out, the decision will come down to the projected rental income.

Most lenders expect applicants to show that the expected property income is realistic and cover at least 140% of the total mortgage. Holiday rental mortgage providers typically expect deposits of no less than 25%.

  1. Buy-to-Sell Mortgages

If you’re a property flipper, then you already know about finance on these. These loans are offered to borrowers who plan to purchase property, spruce it up, and then resell it for a profit.

These are designed to offer much shorter terms, usually no more than a few months or years, depending on the work needed.

Related guides: 

Expected Rates for Investment Property Mortgages

Here’s the clincher. The interest you pay on a residential mortgage will be less than what you pay on an investment property mortgage.

For example, buy-to-let mortgages may have an interest around 1% higher than a regular mortgage.

That said, each mortgage provider deals with each case separately. The interest rate you’re offered will be determined by the loan’s affordability, credit history, and the amount of money you have available as a deposit.

To get the best rates, it’s important to consider all of your options. Working with a broker can save you time and money as they have the industry know-how to find just the right deal for your needs and financial situation.

The best way to ensure you get the best rates is to make sure you meet all the mortgage qualifying criteria and work on your credit report.

Ensure that you reduce your monthly expenses (debt to income ratio is important), pay your bills on time and in full, and check your credit profile to ensure all the details are correct.

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Are There Other Options

Some borrowers wonder if there are other options they can consider when they wish to buy a property using a mortgage. The following may be worth looking into if you’re trying to raise funds:

  • Remortgaging existing property
  • Second charge mortgages
  • Development finance
  • Bridging loans

Tips for Getting a Mortgage for Your Next Investment Property

Of course, each mortgage is different depending on the type of property you want to buy, your intention for it, and your financial situation.

If you’re ready to find a mortgage for your investment property, here are a few tips for getting a mortgage:

  • Research, research, research!

Do thorough research into the type of mortgage you want to apply for before you apply. Know the rules, know what documents you need, and familiarise yourself with the limitations. This will save you time and possible disappointment in the future.

  • Seek out the help of a broker.

Investment property mortgage brokers will take a lot of guesswork out of the process for you.

They can consider your situation and present you with the best possible options instead of leaving you to wade through the options and taking your chances with possible application rejections.

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Final Thoughts

Investment property mortgages are designed for holiday properties, commercial buildings, and similar.

If you’re looking for funding to buy a property that you don’t intend to personal inhabit yourself, an investment property mortgage might be the right choice for you.

Call us today on 01925 906 210 or feel free to contact us. One of our advisors will be happy to talk through all of your options with you.

Further reading: 

Joint Borrower Sole Proprietor Mortgages

by Dax McLeanPosted on

If you’re worried that your financial situation will mar your chances of getting the mortgage you’re after, you may benefit from a joint borrower sole proprietor mortgage (JBSP).

This type of mortgage is a breath of fresh air for the first-time buyer, particularly as a family member or parent steps up to the plate, ready to support them financially and co-sign the mortgage with them as a financial contributor.

In this guide, we will cover everything you need to know about JBSP, so you can decide if it’s the right option for you. We’ll touch on the following topics:

  • What joint borrower sole proprietor mortgages are and how to use them
  • Where you can get JBSP mortgages in the UK
  • How JBSP mortgages can be used for tax purposes (stamp duty implications)
  • Getting the lowest possible interest rate

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Joint Borrower Sole Proprietor Mortgages – What Are They?

Unless you’re involved in the mortgage industry, you probably don’t know everything there is to know about mortgages, least of all JBSP mortgages.

This type of mortgage enables more than one person to contribute to mortgage debt while just one person’s name appears on the property deeds.

This type of mortgage is often used by families helping each other get their first properties, for tax purposes or to protect assets.

Need more help? Check our quick help guides: 

If you’re a prospective first-time buyer who is struggling to get approval on a home loan, this may be the option for you, as JBSP mortgages are ideal for borrowers who:

  • Have a low income
  • Are newly self-employed
  • Have no credit history to speak of
  • Are very young buyers
  • Don’t have a hefty deposit saved

Most JBSP mortgage providers will accept up to four applicants on such a home loan, but keep in mind that most only consider two incomes as a deciding factor on the mortgage approval. If you have bad credit, your co-applicants will need to have good credit and be financially stable.

The approval process on a mortgage application will vary from one lender to the next, but in most instances, lenders are looking for a good credit score, affordability, and financial stability.

Adding an extra source of stable income to your application may be the difference between getting the dazzling home you’ve been eyeing out and staying in that one-bedroom apartment.

This type of loan is a stepping stone for people who want to have only their name on the deed but need a financial helping hand from partners, spouses, parents, or siblings to get property repayments well underway.

Lenders find these types of loans more appealing because co-signatories typically have a higher income to fall back on, or they have savings or a pension intact, making it a less risky option.

Of course, the clincher is that your co-signatories will have to pick up the slack if you can’t make your monthly instalment payment – they will have to pay it for you.

Related guides: 

UK Lenders Offering JBSP Mortgages

Several financial institutions in the UK offer joint borrower sole proprietor mortgages in the UK, ranging from specialist lenders and high street banks to even building societies.

Several lenders offer JBSP mortgages, but with restrictions imposed, so be aware of that.

It’s a good idea to speak with a mortgage broker who specialises in JBSP mortgages who can find the best possible deal with the best home loan provider for you.

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Using a JBSP Mortgage

There are several ways that borrowers can use joint borrower sole proprietor mortgages to their advantage, as discussed below:

  • To borrow more

Based on your debt-to-income ratio, there are limitations placed on how much you can borrow as a sole applicant. Most lenders cap their lending at 4.5 times the borrower’s income. If you have 2 to 4 applicants stated in the affordability assessment, suddenly, you can borrow more than if you applied on your own.

What are the Stamp Duty Implications of JBSP Mortgages?

Stamp duties for first-time buyers purchasing a home of up to £300,000 were done away with in the UK in 2017.

This means that if you’re a first-time buyer and apply for a JBSP mortgage and you have never owned a freehold property or have a residential leasehold in the UK (or abroad, by the way), then you can save stamp duties of up to £5,000. This can be put towards the deposit!

Also, if your partner takes out a JBSP mortgage, you can avoid the stamp duty too within the limit.

This means that if you own a property already, but your partner doesn’t, you can put your partner’s name on the property deeds while taking out a JBSP mortgage.

You can be a contributor to the mortgage, but as long as your partner’s name is on the deed and he/she hasn’t owned property before, the mortgage is exempt from the stamp duties.

Related guides: 

Getting the Lowest Possible Interest Rates on JBSP Mortgages

You won’t notice much of a difference when it comes to interest rates on joint borrow sole proprietor mortgages vs. regular mortgages – they are mostly the same.

However, if there are better deals out there, you will usually come across them with the help of a professional broker. There’s no secret to getting a better interest rate than anyone else.

The best thing you can do is work towards being the type of borrower that lenders want to offer low-interest rates.

Here are a few tips:

  • Consider many options so that you have a full scope of the best deals you qualify for – this may require the help of a broker.
  • Ensure you have a decent credit history (pay your debts on time and in full).
  • Apply for a JBSP mortgage with contributors who are financially stable and have a sound credit history.

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Final Thoughts

Joint borrower sole proprietor mortgages may not be for everyone, especially those who want the names of all parties to appear on the property deeds.

However, for those just getting into the property market and those who have poor credit, want to save on stamp duties, protect their property, or just can’t get home loan approval, the JBSP mortgage is a great option.

It is always advisable for all parties on the mortgage to seek Independent financial advice before entering into a mortgage or similar contract.

Call us today on 01925 906 210 or feel free to contact us. One of our advisors will be happy to talk through all of your options with you.

Further reading: 

Short Term Mortgages

by Dax McLeanPosted on

One discouraging factor about mortgages is the length of time it takes to pay one back.

The excitement of investing in the perfect home can dwindle under the knowledge of the 25-40 long years of repayments that stretch out before you.

A mortgage isn’t a short-term thing – it’s somewhat of a life-long commitment.

If that has been a financial phobia for you, you might want to explore short-term mortgages. Yes, they do exist.

What is a Short-term Mortgage?

In contrast to its long-term counterpart, which you can pay off over 25 to 40 years, short-term mortgages range between six months and five years.

And you will find that the length of the mortgage will vary from one provider to the next.

Lenders impose their own minimums, which can be anything from no minimum to as much as 15 years.

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Short-Term Mortgages vs. Long Term Mortgages

Here’s a brief look at how short-term and long-term mortgages stack up against each other.

Short-Term Mortgages: Long-Term Mortgages:
Less interest over the term More interest due to the long term
High monthly instalments Low monthly instalments
Pay off the mortgage quickly Saddled with debt long-term
Fluctuating interest rates (may rise) Less affected by interest rate changes

The Allure of Short-Term Mortgages

Short-term mortgages are undeniably alluring for many reasons, which are listed in brief below.

  1. Quick Ownership

For some, there’s a sense of urgency when it comes to owning a property. No one really wants to be saddled with debt for the rest of their lives, but it’s about more than that.

With a short-term mortgage, you’ll be able to pay off more monthly, leading to the loan being paid off quickly and the property ownership a lot quicker too.

Then there’s the matter of interest. The longer the loan term, the more interest you pay. While a short-term mortgage may cause you to pay a higher amount each month, it relieves you of the cumulative cost of a long-term loan.

Mortgages that stretch over 25 years or more may require smaller monthly instalments and interest costs, which aggregate into a large total at the end of the term.

Related guides: 

  1. The Feeling of Running Out of Time

A person’s age may make the concept of a long-term mortgage unappealing.  Not only will the loan run well into old age and present a financial strain on a limited retirement budget, but retirees or near-retirees pose a higher risk to lenders than actively working and earning individuals.

Lenders will find the prospect of lending money for a few years far more viable than giving a hefty lump sum to someone who is recently retired.

  1. Delaying the Sale of Existing Property

When getting a new mortgage, there’s the pressure of having to sell your existing home before you get into another long-term mortgage. With a short-term mortgage, you can start paying off your new property while waiting for your existing property to sell. There’s no immediate rush.

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Qualifying Criteria for Short-Term Mortgages

Eligibility for a short-term loan will typically require you to meet with the mortgage provider’s specific terms.

These terms can change from one provider to the next, but the following factors are generally considered during the decision-making process. Not all lenders offer short terms.

  • Affordability (this involves comparing your monthly income vs. expenses)
  • Credit history
  • Current earning bracket

Related guides: 

The Complexities of Getting the  Best Short-Term Mortgage Rates

Getting the best short-term mortgage rates in the UK depends on your unique financial situation.

It’s important to note that while each lender has its own terms and conditions in place, you may receive different mortgage deals and offers from different providers.

You won’t struggle for lenders if you’re considered a favourable candidate by meeting all the qualifying criteria.

If you’re earning enough money, have a good credit history, and can prove affordability, you will undoubtedly get better interest rates than poor credit borrowers.

If you happen to have poor credit, it doesn’t necessarily mean that a short-term mortgage is off the cards for you.  Mortgage providers will consider your unique financial situation before coming to a decision.

If you’ve got poor credit but can afford to repay the monthly instalments, you may still find that lenders are willing to provide you with the loan.

The options will most likely be limited, and the interest rates will be considerably higher than someone with excellent credit and better affordability.

That said, there are always options out there, and by using a broker, you may find the ideal short-term mortgage for you.

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Types of Short Term Mortgages

Typically, a short-term mortgage requires that you pay a higher monthly sum over a shorter period. In this section, we examine different short-term mortgages and what they mean for you:

Short-Term Fixed-Rate Mortgage

Getting a fixed rate short-term mortgage will largely depend on your credit history and your overall financial circumstances. With these mortgages, the interest rate you pay will stay the same for two, five, or ten years.

Short-Term Offset Mortgage

In an offset mortgage, the loan is linked to your savings account. The interest due is calculated by deducting the amount in your linked savings account from the mortgage balance. As a result, completing payments in an offset mortgage is relatively quick.

Short-Term Tracker Mortgage

Tracker short-term mortgages are a type of variable mortgage following an external interest rate. In most instances, a mortgage provider will use the same base rate as the Bank of England and then determine the interest rate they will offer borrowers.

Mortgage providers may also add or deduct a percentage of interest on top of this. Tracker mortgages aren’t for everyone, and it’s best to understand that if the Bank of England’s base rate increases, your mortgage rate could increase too.

Benefits of a Short-Term Mortgage

Short-term mortgages offer borrowers some great benefits, which are listed below.

Short-Term Mortgages are Flexible

Unlike long-term mortgages, where you are open to future financial risks, short-term mortgages allow you to pay the amount back quickly.  Interest Rates

Interest rates are a big factor in a mortgage – the amount of interest you will pay on a home is substantial – there’s no getting around it. That’s what makes short-term mortgages so attractive.

If you’re in a fixed-rate mortgage, you will lose out when the interest rates drop, but if you’re only paying a short-term mortgage over two to three years (which is typical), the interest rate is less of a worrying factor than if you’re paying off a loan over 25 to 40 years. Shorter mortgage terms translate to less interest paid on a property.

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Last Word

It’s important to note that mortgages, short-term or long-term, are considerable financial commitments, and you shouldn’t blindly walk into one.

Always consider your options and chat with professionals in the field to ensure you’re choosing the mortgage option that’s best suited to your financial situation and affordability.

Call us today on 01925 906 210 or feel free to contact us. One of our advisors will be happy to talk through all of your options with you.

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