Category: Mortgages

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

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

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What Is a Zero Deposit Mortgage?

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

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

Do All Lenders Offer Zero Deposit Mortgages?

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

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

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

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

How Do You Get a Mortgage with No Deposit?

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

Skipton’s Zero Deposit Mortgage

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

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

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

Incorporating A Guarantor

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

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

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

• Using property as security

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

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

• Using savings as security

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

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

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

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

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

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

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Using A Gifted Deposit

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

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

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

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

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

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

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

Final Thoughts

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

Sources and References

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

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

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

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

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

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A Low or Small Deposit

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

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

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

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

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

Affordability

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

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

Strategies you can use to improve affordability include:

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

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

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

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

Bad Credit

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

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

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

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

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

Property Issues

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

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

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

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

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

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Failing to Prove Your Income

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

Things you can do to improve your chances include:

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

Final Thoughts

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

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

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

Rising living costs are still impacting many people in the UK. Recent data shows that 49% of households reported an increase in living costs as of September 2024, making a mortgage with flexible features to navigate uncertain times an attractive option.

With a flexible mortgage, you can pay more when you can, pay less when money is tight, or take a payment holiday to ease financial distress when necessary. However, flexible mortgages also feature various limits and restrictions you need to be aware of.

Here is everything you need to know about flexible mortgages in the UK.

What is a Flexible Mortgage?

A flexible mortgage is a mortgage with a greater degree of flexibility around repayment than a standard mortgage. It’s sometimes called a flexi mortgage and can allow you to clear your mortgage in less time than the full term and save money on interest or pause and reduce your repayments.

A flexible mortgage can be a suitable choice if your income fluctuates and you want the freedom to decrease or increase your payments as necessary. It can also benefit people who frequently travel or take time off work with less or no income or those planning to overpay without penalties.

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What are the Features of a Flexible Mortgage?

A flexible mortgage can offer various features depending on the lender and product. These include:

Overpayments

Flexible mortgages allow you to make more significant overpayments without early repayment charges (ERCs). Overpaying can involve paying more than your regular monthly repayments or paying a lump sum in addition to the monthly repayment. It can help reduce the time it will take to pay off the mortgage and the interest you pay in total.

Some lenders can set caps on how much you can overpay each year, so ensure you check the terms and conditions of the mortgage before overpaying.

Underpayments

Underpayments allow you to pay less than the standard monthly amount for a set period. Such a feature can be helpful in periods when you’re particularly pressed for money, but it can vary depending on the lender. Some lenders can limit how much you can underpay, while others will only allow it if you have previously overpaid on your mortgage.

Payment Holidays

A payment holiday allows you to take a break and skip monthly payments for a set time, usually one to six months. It can come in handy when you need some time to get back on your feet. You’ll not face any penalties, but you’ll need to catch up with the payments before the end of your term.

The interest will also continue accruing throughout the payment holiday, so your repayments can be higher when you resume. Some lenders may require to have overpaid or made a certain number of payments to qualify for a payment holiday.

Drop-lock

If you’re on a tracker or discount mortgage with a variable deal, a drop-lock feature allows you to switch to a fixed-rate deal without facing early repayment charges or remortgaging to another lender. It can be helpful when interest rates start increasing and you want the security of a fixed rate.

Reserve Account

Lenders offering this feature will let you make overpayments to a reserve account. It will offer all the benefits of making overpayments but with the additional advantage of allowing you to withdraw the cash later if your situation changes.

Related reading: 

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

What Are the Advantages and Disadvantages of Flexible Mortgages?

Advantages

• More freedom to overpay, underpay, or take a payment holiday when you want or need to.
• Lenders calculate interest daily. Any overpayment you make is immediately deducted from your debt instead of monthly or yearly for the purposes of calculating interest, allowing you to pay less interest.
• Makes it easier to switch to better deals if the interest rate changes.
• It can help you clear your mortgage quicker and save money

Disadvantages

• They usually feature higher interest rates and fees than mortgages without flexible features.
• They’re difficult to compare since different lenders will set different terms, conditions, and restrictions.
• You may still face limits on how much you can overpay or underpay.

What Should You Consider When Choosing a Flexible Mortgage?

Things to consider when choosing a flexible mortgage include:

Additional Charges

Like other mortgages, flexible mortgages can feature various charges, including arrangement fees, exit fees, or valuation fees. The lender can also charge you when you exceed their cap on overpayments, so you must consider the cost to ensure you’re still saving money.

You must also consider the standard variable rate (SVR) that applies after the initial period to get a complete understanding of the comparative costs.

Identify Relevant Features

Ensure you consider your situation and the features you want in a flexible mortgage. Many people choose flexible mortgages so they can get the option to overpay and decide how much they overpay. Ensure you check how much the lender allows you to overpay without additional fees.

Since all lenders are different, look for lenders offering the specific features you desire while also considering other factors like the rate, term, or needed deposit.

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Can You Get a Flexible Mortgage on A Buy-to-Let Property?

Yes. Some lenders offer flexible features on buy-to-let mortgages but they can differ from those of a residential mortgage. Mortgages for investment properties are usually interest-only mortgages where the capital amount remains the same throughout the term, and you only pay off the interest monthly.

You’re then required to pay off the capital amount at the end of the term using a repayment vehicle. A lender can set up a flexible mortgage for a buy-to-let property to include allowing capital repayments that reduce the debt amount. This can help reduce your overall interest and the due amount at the end of the term.

Final Thoughts

A flexible mortgage is an excellent choice if you’re looking for freedom in mortgage repayments. Ensure you consult a mortgage broker specialising in flexible mortgages when making your decision. They can help you determine whether it’s the best choice based on your situation and give you access to the best deals available on the market.

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

Sources and References:

• https://www.statista.com/statistics/1300280/great-britain-cost-of-living-increase/

Today, many people live and work overseas as international expatriates (expats). According to the Foreign and Commonwealth Office (FCO), over 5 million Britons currently reside abroad.

Securing a UK mortgage while living and working overseas can be a smart financial move, whether you’re looking to invest in UK property, generate rental income, or plan a future return to the UK.

Although it can be challenging to obtain a mortgage under such circumstances, it’s certainly achievable with the right preparation and guidance.

Here’s everything you need to know about how to get a UK mortgage while living and working abroad.

Can You Get a Mortgage While Living and Working Abroad?

Yes! If you’re a UK national living and working overseas and need a mortgage to purchase a property in the UK, you can apply for an expat mortgage. Expats are individuals who live and work outside their home country.

An expat mortgage can be used for various purposes, including buying your first home, purchasing an investment property, or acquiring a holiday home for consistent visits to the UK.

Considerations for Getting a Mortgage While Living and Working Abroad

While expat mortgages work similarly to standard mortgages, they come with additional requirements and conditions due to the perceived risks lenders associate with overseas income and absence from the UK. Here are some key factors to consider:

1. Deposit Requirements

Expat mortgages typically require a larger deposit. Lenders have stricter loan-to-value (LTV) caps, meaning you’ll need a deposit of 25% to 40% of the property’s value, compared to 5% to 10% for domestic borrowers. This higher deposit reduces the lender’s risk.

In addition, lenders will scrutinise the source of your deposit due to anti-money laundering (AML) regulations.

Acceptable sources include savings, property sales, investments, or inheritance, and you’ll likely need to provide proof of where your deposit originates.

2. Current Country of Residence

Your country of residence can impact your mortgage application. Lenders prefer applicants residing in countries with robust financial regulations.

If you’re living in a country considered a higher risk due to factors like political instability, war, or economic sanctions, you may face additional scrutiny or find fewer lenders willing to offer you a mortgage.

3. Currency

Certain currencies pose greater risks due to potential fluctuations that may affect your ability to meet mortgage payments.

Lenders favour more stable and widely accepted currencies and may be more cautious if you earn in a currency with high volatility.

4. Credit History

Your UK credit history is a crucial factor in the approval process. Many expats have limited or outdated credit histories in the UK, which can pose challenges.

Some lenders may not consider your overseas credit history and may require at least six months of UK credit history.

To improve your chances, consider maintaining UK financial ties, such as a UK bank account, phone contract, or postal address.

5. Employment and Income

Lenders will typically require proof of full-time employment and a stable income, which may need to be paid into a UK bank account.

Verifying overseas income can be complex, particularly if it’s earned in a foreign currency or from a country with different financial regulations.

Lenders may ask for documentation such as employment contracts, payslips, and tax returns.

For self-employed ex-pats, the process is even more stringent, and you’ll likely need an internationally recognised accountant to verify your income and accounts.

How Much Can You Borrow with a Mortgage While Living and Working Abroad?

The amount you can borrow depends on several factors, including your income, the strength of your application, and your overall financial profile. Lenders typically use income multiples to determine the maximum loan amount.

For expats, the income multiple is generally 4 to 4.5 times your annual income, although this may vary depending on the lender and your specific circumstances. Some lenders may set lower multiples to offset the additional risks involved.

Consulting a broker who specialises in expat mortgages can give you a clearer idea of how much you can borrow based on your unique situation.

How Can a Broker Help You Secure an Expat Mortgage?

Using a mortgage broker who specialises in expat mortgages can significantly improve your chances of securing a favourable mortgage. Here’s how they can help:

Expertise: Expat mortgage brokers understand the unique challenges expats face, such as verifying overseas income, dealing with currency fluctuations, and navigating differing tax regulations.

Access to Specialist Lenders: Brokers have access to a wider range of mortgage products, including lenders who may not be available on the open market.

While mainstream lenders may hesitate to offer mortgages to expats, specialist brokers have relationships with niche lenders who cater specifically to expatriates.

Simplified Application Process: A broker can streamline the application process, helping you gather the necessary documents and submit them correctly. They also guide you through each step, making the process less stressful.

Personalised Service: Expat mortgage brokers provide tailored advice based on your unique circumstances and goals. They work to find the best mortgage solution that fits your needs.

Final Thoughts

Securing a UK mortgage while living and working abroad might seem challenging, but it’s entirely possible with the right approach.

One of the best ways to improve your chances of approval and obtain favourable terms is by consulting a mortgage broker experienced in arranging expat mortgages.

They’ll simplify the process, offer personalised advice, and connect you with specialist lenders who can meet your needs.

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

Sources and References:

• [Foreign and Commonwealth Office Teabags or Travel Insurance](https://www.gov.uk/government/news/teabagsortravelinsurance)

Saving enough for a deposit is often one of the biggest obstacles to homeownership, especially during the ongoing cost of living crisis.

According to Statista, 45% of UK households reported an increase in living costs by the end of July 2024.

5% mortgage options aim to tackle this challenge by reducing the upfront financial burden and making homeownership more accessible.

These mortgages allow you to borrow up to 95% of the property’s value, meaning you only need to save a 5% deposit.

Read on to learn more about 5 per cent mortgage options and how they can help you get onto the property ladder.

What is a 5% Mortgage?

A 5% mortgage, also known as a 95% loan to value (LTV) mortgage, allows you to purchase a property with a deposit as low as 5% of the property’s value. The lender covers the remaining 95% with a mortgage loan.

For example, if you’re buying a house worth £200,000, you would need a £10,000 deposit (5% of £200,000), while the mortgage covers the remaining £190,000.

This is the lowest deposit most lenders will accept, but not all lenders offer 95% LTV loans. Various low-deposit options are available, and the best choice for you will depend on your personal circumstances and the property you wish to buy.

Which 5 Percent Mortgage Options Are Available in the UK?

You can access a 5% mortgage through several different schemes and avenues:

1. The Mortgage Guarantee Scheme

Launched in 2021, the Mortgage Guarantee Scheme is a government initiative designed to encourage lenders to offer 5% mortgages.

The government guarantees a portion of the loan in the event of borrower default, providing lenders with more confidence to offer 95% LTV mortgages.

The scheme is set to run until 30 June 2025 and is available to first-time buyers, previous homeowners, and home movers.

These mortgages are similar to standard 95% LTV mortgages and require no extra paperwork.

To qualify, the following criteria must be met:

• A deposit of 5% to 9% of the property’s value
• The property’s value must not exceed £600,000
• You must be buying a primary residence, not a buy-to-let or second home
• The property must not be a new build
• You’re applying as an individual, not a business
• The mortgage must be on a repayment basis, not interest-only

2. Shared Ownership

The Shared Ownership scheme allows you to buy a portion of a property and pay rent on the remaining share, offering an affordable route to homeownership with a small deposit.

Typically, you can buy a share of between 10% and 75% of the property and take out a mortgage or use savings for the portion you purchase.

With shared ownership, you only need to pay a deposit on the share you’re buying, making it easier to afford. For example, a 5% to 10% deposit on the portion you own may be enough to secure a mortgage.

Eligibility criteria for Shared Ownership include:

• A household income of £80,000 or less (£90,000 or less in London)
• Being unable to afford a deposit and full mortgage payments for a home that meets your needs

One of the following must also apply:

• You’re a first-time buyer
• You previously owned a home but can’t currently afford one
• You’re moving due to changes in circumstances, such as a relationship breakdown

3. First Homes Scheme

The First Homes Scheme offers first-time buyers the chance to buy a home at 30% to 50% below market value, depending on the local council’s discretion.

This discounted price makes it easier to access a 5% mortgage, as the lower purchase price improves the LTV ratio.

The scheme applies to both newbuild homes and properties sold through the scheme by previous owners.

The homes must be located in England, and eligibility requirements include:

• You must be a first-time buyer
• Be 18 years or older
• Earn no more than £80,000 a year before tax (£90,000 in London)
  The discounted property must cost no more than £250,000 (£420,000 in London)

4. Guarantor Mortgage

A guarantor mortgage can make a 5% mortgage more viable by reducing the lender’s risk. A family member acts as a guarantor, stepping in to cover repayments if you’re unable to.

In some cases, a guarantor can even help you access a 100% LTV mortgage, meaning no deposit is required.

The guarantor may secure the loan against a property they own or deposit a lump sum into a savings account held by the lender.

The guarantor must prove they can afford the entire mortgage and will be liable for payments if necessary.

What Are the Interest Rates for 5% Mortgage Options?

Since 5 per cent mortgages involve the lowest deposit that lenders will approve, they typically come with higher interest rates.

Lenders see low deposit mortgages as higher risk, so they increase the rates on these products to protect themselves.

Final Thoughts

A 5% mortgage can be an excellent solution for those struggling to save for a large deposit, especially with the various schemes available in the UK.

Whether you opt for the Mortgage Guarantee Scheme, Shared Ownership, or the First Homes Scheme, there are multiple avenues to make homeownership more achievable.

If you’re unsure which option is best for you, consulting a mortgage broker experienced in low-deposit mortgages can help you navigate the process and find the best deal based on your unique situation.

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

Sources and References:

• [Statista Cost of Living Increase](https://www.statista.com/statistics/1300280/greatbritaincostoflivingincrease/)
• [First Homes Scheme GOV.UK](https://www.gov.uk/firsthomesscheme)

According to data from the Office for National Statistics, over a third of UK households were struggling to afford rising mortgage and rent costs by the end of 2023.

With the cost of living continuing to rise, it’s crucial to understand the costs associated with a mortgage before making a long-term financial commitment.

If you’re considering a £100,000 mortgage, knowing how much you’ll need to repay over time is vital for financial planning.

Mortgage costs can vary greatly depending on the interest rate, repayment period, and type of mortgage.

In this guide, we’ll break down the cost of a £100k mortgage over 15 years and explore how different factors influence those costs.

What Is the Monthly Cost of a £100k Mortgage Over 15 Years?

The cost of a £100k mortgage depends largely on the interest rate. To estimate monthly repayments, you can use the following formula:

M = P × (r(1+r)n​) ÷ ((1+r)n -1)

Where:

• M = Monthly payment
• P = Principal loan amount (£100,000)
• r = Monthly interest rate (annual interest rate divided by 12)
• n = Total number of payments (15 years × 12 months = 180 payments)

Using an example interest rate of 5%, the monthly payment would be:

M = 100,000 × (0.00417 (1+0.00417)180) ÷ ((1+0.00417)180 – 1) ​= £790.79

The total amount you’ll pay by the end of your mortgage term would be:

(790.79) x 180 = £142,342.20

That’s £42,342.20 in interest over 15 years.

For those who prefer not to deal with manual calculations, there are several online mortgage calculators available to estimate monthly payments based on interest rates and loan terms.

Factors That Affect the Cost of a £100k Mortgage

Mortgage costs aren’t fixed—they can vary based on a number of factors. Here are the most significant ones:

1. Interest Rates

Interest rates have the biggest impact on both your monthly payments and the total amount paid over the life of the loan.

Lower interest rates result in lower payments and less interest paid overall, while higher rates increase both the monthly and total cost.

Interest rates are affected by both market conditions and your personal financial profile.

If you have a strong credit score and a substantial deposit, you’re more likely to secure a competitive interest rate, lowering your overall costs.

2. Mortgage Term Length

The term length of your mortgage also influences your costs. A longer term means smaller monthly payments but more interest paid over time, making the loan more expensive in the long run.

Conversely, a shorter term has higher monthly payments but significantly reduces the interest burden.

• Example: A 15-year mortgage will have higher monthly payments but cost less in interest than a 25-year mortgage.

3. Repayment Type

There are two primary types of mortgage repayment:

• Capital Repayment Mortgage: You repay both the interest and a portion of the principal loan with each payment. By the end of the term, the loan is fully repaid.
• Interest-Only Mortgage: You only pay the interest during the term, and the principal remains untouched. This results in lower monthly payments but leaves a large sum to be repaid at the end.

Most homeowners opt for capital repayment mortgages because they ensure the loan is paid off in full, but interest-only mortgages may be appealing to those with a solid plan for repaying the principal later.

4. Type of Mortgage Product

Different types of mortgage products can affect the cost:

• Fixed-Rate Mortgages: These offer a stable interest rate for a specific period, usually 2, 5, or 10 years. Once this period ends, the rate reverts to the lender’s Standard Variable Rate (SVR), which is often higher. Fixed rates provide stability, but they can be slightly more expensive upfront.
• Tracker Mortgages: These move with the Bank of England’s base rate, meaning your monthly payments can fluctuate. If the base rate rises, so do your payments, and if it falls, your payments decrease.

5. Additional Fees and Costs

Beyond the interest rate, several fees and costs can affect your total mortgage expense:

• Product Fees: Some lenders charge fees for setting up the mortgage, including arrangement, booking, and valuation fees.
• Stamp Duty: This tax is required for properties in England and Northern Ireland if their value exceeds £250,000. First-time buyers may be exempt or subject to lower rates.
• Legal Fees: You’ll need to hire a solicitor or conveyancer to manage the legal side of purchasing the property.
• Insurance: Lenders may require building insurance, and you may also want to consider life insurance or income protection to safeguard your mortgage in case of unforeseen circumstances.

How Can You Reduce the Cost of a £100k Mortgage?

If you’re looking to save on mortgage costs, here are a few strategies to consider:

1. Improve Your Credit Score

Lenders use your credit score to assess risk. A better score means lower risk and can help you qualify for more competitive interest rates. Review your credit report regularly and take steps to improve it if necessary.

2. Save a Larger Deposit

The larger your deposit, the less you need to borrow, and the less interest you’ll pay. Additionally, a larger deposit can help you secure a lower interest rate, further reducing the overall cost of the mortgage.

3. Shop Around for the Best Deals

Don’t settle for the first mortgage offer you receive. Different lenders offer different rates, and a slight difference in interest rates can result in significant savings over time. Use comparison tools and consult with mortgage brokers to explore all your options.

4. Make Overpayments

If your lender allows it, making overpayments—even small ones—can reduce the principal faster and lower the total interest paid.

Be sure to check for overpayment limits, as some lenders impose penalties for exceeding them.

Final Thoughts

The cost of a £100,000 mortgage over 15 years depends on several factors, including the interest rate, term length, repayment type, and additional fees.

By improving your credit score, saving a larger deposit, and carefully selecting the right mortgage product, you can reduce your overall costs and make homeownership more affordable.

While calculating mortgage costs can seem overwhelming, free online mortgage calculators can quickly help you determine the best plan for your financial situation.

Proper planning and research will help ensure your mortgage fits comfortably within your budget.

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

Dreaming of homeownership but struggling to save for a deposit? A Rent to Buy mortgage could be the solution that turns your property ownership dream into reality.

High rent rates continue to be a significant barrier for many potential homeowners, preventing them from saving for a deposit and transitioning from renting to buying.

According to Statista, the average cost of rent stood at £2,101 in London and £1,113 outside London as of July 2024.

Rent to Buy offers an alternative by allowing you to rent certain properties at a reduced rate, making it easier to save for a deposit and eventually become a homeowner.

Here’s everything you need to know about Rent to Buy mortgages in the UK.

What is Rent to Buy?

Rent to Buy is a UK government-based initiative designed to help individuals who cannot currently afford to buy a home but wish to do so in the future.

It allows you to rent a property at a discounted rate, typically 20% below market rent, for a specified period.

The savings from this discounted rent can be used to build up a deposit to buy the property.

Once you’ve saved enough for a deposit, you can purchase the property outright using a mortgage or through a shared ownership scheme, where you buy a share of the property while continuing to rent the remaining portion.

How Does Rent to Buy Work?

To begin with, you need to apply for a property that falls under the Rent to Buy scheme.

If you’re eligible and the property is available, you can move in under a tenancy agreement. The rental period typically ranges from 6 months to 5 years, depending on the property.

The scheme is primarily run by housing associations, meaning private landlords cannot offer Rent to Buy properties.

During the discounted rental period, you’ll be expected to save for a deposit, with the ultimate goal of purchasing the property, though there is no obligation to do so.

You can buy the property or a share of it at any point during the rental period. If you reach the end of the agreed period and still can’t afford to buy the property, you can request an extension or choose to move out.

Eligibility Criteria for Rent to Buy

To qualify for Rent to Buy, you must meet the following criteria:

• First-time buyer: You should not already own a property.
• Employed: You must be employed full-time or part-time.
• Capable of saving: You need to demonstrate that you can pay your rent and save for a deposit at the same time.

Even previous homeowners who have returned to renting (perhaps due to a separation) can qualify.

Your credit history and income will likely be checked to confirm your eligibility. The exact criteria may vary between housing associations, so it’s worth checking with your local authority.

It’s important to note that failure to adhere to your tenancy agreement, such as missing rent payments, could result in being removed from the scheme.

Is Rent to Buy Available Across the UK?

The Rent to Buy scheme is available in England, excluding London, where a separate scheme called London Living Rent operates.

London Living Rent is targeted at middle-income households who are looking to build savings for a deposit while living or working in London.

In Northern Ireland, a similar scheme called Rent to Own is available. However, in Wales, the Rent to Own scheme is closed to new landlords, though some properties may still be available to applicants. Scotland does not have an equivalent Rent to Buy scheme.

Advantages of Rent to Buy

Affordability: You benefit from lower monthly rental payments, typically 20% below market rent. This allows you to save for a deposit more easily while continuing to live in the property.

Try before you buy: Renting the property before purchasing gives you a chance to experience living there and assess whether the home and area meet your long-term needs.

Enhanced access to properties: Rent to Buy gives you access to properties that might otherwise be unaffordable. It also enables you to save a larger deposit, improving your chances of securing a favourable mortgage.

Security: The scheme guarantees you the opportunity to buy the property, so there’s no risk of another buyer purchasing the property during your tenancy.

The scheme is government-backed and run by social landlords, offering more support and stability compared to private renting.

Flexibility: There is no obligation to purchase the property. If your circumstances change, you can decide not to buy at the end of the rental period.

Disadvantages of Rent to Buy

Limited property choices: The Rent to Buy scheme only covers specific properties, mostly new builds. This could limit your options in terms of location and type of property available.

Rising house prices: You will have to purchase the property at its current market value, not the value when you first moved in.

If property prices rise significantly during the rental period, the house may become less affordable by the time you’re ready to buy.

Limited availability: The number of Rent to Buy properties varies between local authorities, and availability can be limited. There may be long waiting periods in some areas.

No guarantee of mortgage approval: Even after saving for a deposit, securing a mortgage is not guaranteed. Approval depends on your financial circumstances and creditworthiness at the time of application.

Final Thoughts

Rent to Buy mortgages offer a valuable stepping stone for individuals struggling to save for a deposit while paying high rent.

The scheme makes homeownership more accessible by offering reduced rent and giving you the chance to save towards buying a home at your own pace.

However, Rent to Buy is not the perfect solution for everyone, and it’s important to weigh the advantages and disadvantages based on your personal circumstances.

If you’re unsure whether Rent to Buy is the right choice for you, consulting a mortgage advisor or broker with experience in Rent to Buy mortgages can help you make an informed decision.

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

Sources and References:

• [Statista Average Rent in the UK](https://www.statista.com/statistics/752203/averagecostofrentbyregionuk/statisticContainer)
• [London Living Rent Scheme](https://www.london.gov.uk/programmesstrategies/housingandland/improvingprivaterentedsector/londonlivingrent)

A flat above a commercial premises like a shop can be an attractive location with certain benefits.

It can give you great value for money since they’re usually available at lower prices than other flats in the area.

They appeal to renters who like central locations near amenities and can be a good option for landlords.

Here’s everything you need to know about getting a mortgage on a flat above a shop, how to submit a robust application, and how to ensure you get a good offer.

Can You Get a Mortgage on A Flat Above a Shop?

Yes. Many lenders, although not all, will approve your application for a mortgage on a flat above a shop. Various specialist and mainstream lenders will consider this type of home loan.

However, you’ll have a limited pool of potential lenders since most will be concerned about the property’s saleability in the event of repossession.

Lenders ideally want properties that can sell quickly and easily to recover their investment if you default, which can be hard to do if the property is less desirable.

Factors that can make flats above commercial premises harder to sell include

• High risks of loud noises
• Smells
• Unsocial operation hours
• Drunken behaviour in case of takeaway shops or drinking establishments
• Increased risk of fire from commercial properties like restaurants

Some lenders reject applications for such properties because they fear the property will lose value.

Most flats above shops also feature leaseholds. The lender would need to invest additional time and money examining the lease terms to pre-empt possible changes, so they simply choose not to lend on such properties.

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How Much Can You Borrow with A Mortgage on A Flat Above a Shop?

The amount you can borrow will depend on your income and expenditure. Since the property is above commercial premises, it can also indirectly impact how much lenders are willing to offer.

Lenders usually offer up to 4.5 times your income for residential mortgages, with some offering as much as six times your income.

However, you may be limited on the income multiples you can access for a flat above a shop since there will be fewer lenders for such properties than a standard residential mortgage.

Different lenders have their way of calculating income and affordability to determine how much you can borrow.

Some will consider any supplementary income you have, while others will only consider your regular income or self-employment accounts.

What Are the Eligibility Factors for Getting a Mortgage on a Flat Above a Shop?

Each lender can have different eligibility criteria, but most usually consider factors like:

• Your employment status
• Your credit status – Lenders can view you as a riskier borrower if you have bad credit, limiting those willing to lend to you.
• Your deposit level

Most lenders will require a deposit of at least 15% for a flat above a shop due to the resale value concerns.

The deposit can be higher for other commercial premises like cafes, offices, bars, and restaurants.

Lenders will also look at other factors, including:

• Access and security of the flat
• The location of the flat. Some locations are more desirable than others.
• Whether there is at least one floor between the flat and the shop or if it’s directly above it.
• The types of shops adjacent to the one underneath the flat.
• Whether the shop and the flat have separate title deeds.
• Whether the property is self-contained.
• The length of the lease.
• The operating hours of the shop.

Can You Get a Mortgage for the Flat and Shop?

Yes. If you’re looking to purchase both the flat and shop below it, there are a couple of options you can consider.

These include:

• Semi-commercial Mortgage – Also called mixed-use or hybrid mortgages, semi-commercial mortgages can help purchase or refinance any building or land used for residential and commercial purposes. Applications for such mortgages are assessed on their own merits and the operating profit the property will generate.
• Taking out two mortgages – If you plan to let out the shop and live in the flat upstairs, you may want to consider getting two separate mortgages. You can get a residential mortgage for the flat and a commercial mortgage for the shop. It can be a complex process involving splitting the title deeds and affordability calculations. You’ll want to consult an experienced mortgage advisor or broker to help manage the applications and offer guidance on your options.

Related reading: 

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

Can You Get a Second Home Mortgage for A Flat Above a Shop?

Yes. Getting a second home mortgage for a flat above a shop should be similar to any other residential second home mortgage.

However, lenders consider second homes as a higher risk.

They may require you to put down a higher deposit or interest rate if you’re still paying a mortgage on your primary home.

This is because people are more likely to default on the mortgage for their second home if they face financial difficulties.

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Can You Get a Buy-to-Let Mortgage for a Flat Above a Shop?

Yes. A buy-to-let mortgage will be necessary if you want to mortgage a flat above a shop as a rental opportunity.

Most buy-to-let mortgages are interest-only.

This means you pay the interest on the loan monthly and pay off the original loan amount at the end of the term.

Lenders will determine your affordability for the buy-to-let mortgage by looking at the projected rental income of the property.

The lender will require an estimation of the rental income to determine whether you can afford monthly payments.

Most lenders require the rental income to be between 125% and 145% of the monthly interest payments.

They also examine your non-rental income and conduct stress tests to determine if you can cover any fluctuations.

Final Thoughts

A mortgage on a flat above a shop is similar to a standard residential mortgage.

However, it can be more challenging, depending on your circumstances. Working with an experienced mortgage broker can increase your chances of finding the best deal possible from a suitable lender.

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

Auctions are naturally fast-paced and competitive, so finance options must be quick and efficient when buying a property at auction.

Standard mortgages don’t work for auction finance since they take too long, typically a few months, to arrange, process, and finalise.

Auction finance is more suitable for buying a house at auction since it’s usually quicker to arrange.

Here’s everything you need to know about how to get finance for an auction property.

What Is Auction Finance?

Auction finance is a bridging loan that can help you buy a property at auction. It’s usually quick to arrange and can be faster than a regular bridging loan agreement.

Auction finance offers a much quicker turnaround, making it ideal for buying at auction where timing is crucial.

The sale is usually agreed upon when the hammer falls if your bid is successful, meaning you’ll not have much time to raise the necessary funds.

When buying an auction property, you must immediately put down a 10% deposit and pay the remaining 90% within 28 days.

It would help if you had your finances in place before the deadline to avoid losing your deposit. Auction finance is well suited to meet these deadlines.

How Does Auction Finance Work?

Lenders offer auction finance on a short-term, monthly, interest-only basis.

You can get a decision in principle within 24 hours when you apply and have the funds in your account within 7 to 14 days.

You can arrange the funding in advance so you know how much your budget is before the hammer falls.

Auction finance lenders will require you to have another asset or property as security or enough deposit and evidence of a clear exit strategy.

An exit strategy involves how you plan to repay the debt at the end of the loan term. It can include selling the property or remortgaging.

The term for auction finance is usually shorter than a standard mortgage and can range from 1 to 24 months or up to 36 months among some lenders.

What Interest Will You Get with Auction Finance?

Auction finance usually features higher interest rates than mortgages, but they can be similar to what you’d get on a regular bridging loan.

The exact interest amount will depend on how the lender charges interest and the quality of your auction finance application.

Lenders offering auction finance can charge interest in various, including:

• Rolled up – The lender can tally up the monthly interest and add it to the loan amount at the end of the term. You’ll then pay the cumulative total in full at the end.
• Monthly – You pay the interest monthly, and the total debt is due at the end of the term.
• Retained – At the beginning of the term, the lender adds the monthly interest payments to the loan amount to calculate how much you will owe. You’re then required to pay for everything at the end.

How Can You Get the Best Deal on Auction Finance?

You can take various steps to put yourself in the best position to secure auction finance.

These include:

Getting Your Documents in Order

Lenders will need to see various documentation as proof, including:

• Proof of ID – A passport or driver’s license and proof of address or residency.
• Proof of Exit Strategy – You’ll need an agreement in principle if you plan to remortgage. If you use a non-standard exit strategy like inheritance or investments, the lender will require proof that the funds will enter the account in a set timeframe.
• A Valuation Report – Getting the property valuation in advance may not be necessary, but some lenders may require you to pay for the costs.

Checking Your Credit Profile

Download your credit report to correct any inaccuracies and have outdated information removed.

Bad credit isn’t a significant issue, provided it doesn’t interfere with your exit strategy. However, improving your credit can increase your chances of getting a good deal.

Speaking to a Specialist Auction Finance Broker

Consulting a broker specialising in auction finance can help boost your chances of success. The broker can offer bespoke advice, help you find the best lender, and negotiate the best deals.

They can guide you on the proper steps, including making a winning application.

What Are the Eligibility Criteria for Auction Finance?

Lenders will assess your eligibility based on the following factors:

• The deposit – Most lenders will require you to put down at least 10-25% of the loan amount as a deposit. The larger your deposit, the lower the interest rates you will have to pay.
• Your exit strategy – A strong exit strategy will increase your chances of getting an excellent auction finance deal. Lenders will want to see evidence of the value of the property you’re buying, its saleability, or an agreement in principle from a mortgage lender as proof that you have a viable exit strategy in place.
• Your credit rating – Your credit rating won’t affect an offer as long as any outstanding debts or adverse credit doesn’t impact your ability to repay the loan. However, good credit can boost your chances for a good deal with lower interest rates.
• Your experience in property – Having experience with similar property purchases and a strong track record can boost your eligibility. However, you can still qualify for auction finance as a first-time buyer. You can also use any other property you own as security to increase your creditworthiness.

You can still qualify even if you don’t meet all the above criteria. Lenders offering auction finance are very flexible and can assess applications on a case-by-case basis.

Related reading: 

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

What Properties Can Buy with Auction Finance?

You can use auction finance to buy various property types at auction, including:

• Commercial
• Residential
• Unmortgageable properties
• Mixed-use
• Land (with and without planning permission)
• HMOs
• Agricultural properties

Final Thoughts

Once you’ve identified a property you want to bid on, consult a qualified and experienced auction finance broker.

They can assess your needs and circumstances and have the expertise to help you land a good deal.

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

A chancel repair search is essential if you’re considering buying a property in England or Wales.

It ensures you’re aware of any obligations that may affect the property and can help protect you from legal issues or unexpected costs that can run into hundreds or thousands of pounds.

Here’s everything you need to know about chancel repair searches.

What Is a Chancel Repair Search?

A chancel search, also called a chancel repair liability check, allows you to know whether a property is liable for contributing towards repairing the chancel of a parish church.

The chancel is the space around the altar at the east end of the church.

Chancel repair liability originates from an ancient medieval law that made property owners, instead of monasteries, responsible for church repairs.

Under the law, parishes in England and Wales can demand money from owners of particular properties on former monastery land to fund repairs, with costs reaching thousands or millions of pounds.

For example, in 2009, a couple was found liable for £230,000 worth of repairs to the church.

A chancel repair search is a crucial due diligence step that can help protect you from significant and unexpected costs linked to this ancient liability.

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Which Properties Are Liable for Chancel Repair?

Chancel repair liability places an obligation on the owners of specific parcels known as glebe lands. These are parcels within an ecclesiastical parish initially granted to support a parish priest.

Although the liability was forgotten or overlooked over the centuries as the land was sold, bought, and divided, it can resurface during modern conveyancing processes.

Around half a million properties in England and Wales can be liable, even if it’s not mentioned in the title.

It’s relevant to old and new properties since it applies to the land on which the property sits, and homeowners may be liable if a local church is nearby.

Such homeowners are called lay rectors, and whether they know it or not, are responsible for repairs and upkeep of the chancel.

Can Non-Parishioners Be Liable for Chancel Repair?

Even if you’re not a parishioner, you can still be liable as long as you’re the land or property owner.

Liability is joint and several, meaning you can be responsible for the total cost of repairs to the local church as a landowner.

The liability is still enforceable unless it has been expressly abolished by statute or substituted for an annual payment. The church can claim the full payment from one or any number of liable property owners.

Homeowners facing such a claim are also legally entitled to claim contributions from other liable property owners in the parish.

Who Can Enforce Chancel Repair Liability?

Before 1932, the liability was only enforceable through the ecclesiastical courts.

Today, the jurisdiction of ecclesiastical courts is in civil cases concerning church buildings and cases where clergymen are accused of ecclesiastical crimes.

The Chancel Repairs Act 1932 abolished the jurisdiction of ecclesiastical courts to enforce the repair of chancels.

The legislation passed the responsibility to the county court and named the authority responsible for enforcing the liability as the parochial church council of the parish church.

Related reading: 

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

How Did Chancel Repair Liability Change in 2013?

Some people think the chancel repair liability was abolished in 2013, but it wasn’t.

The chancel repair liability only ceased to be an overriding interest, meaning it’s no longer automatically enforceable against property owners and their successors in title.

For the liability to continue to affect a property, it must be registered at the Land Registry and stated on the title as a potential liability to homeowners.

The new status doesn’t abolish the liability because the church can still protect its right to enforce chancel repair liability by registering a notice at the Land Registry against affected properties. Once it is registered, the right is protected forever.

In addition, the right to register a notice still exists after 13 October 2013 against properties with no change in ownership since that date.

Even if a notice has not been registered at the Land Registry, the chancel repair liability still binds the property owner after 13 October 2013 until the property is sold ‘for value’ to a new owner (when the liability falls away).

The term ‘for value’ means that property transfers by way of gift, inheritance, divorce settlement, or at undervalue may not qualify for exemption.

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When Should You Order a Chancel Repair Search?

You should order a chancel repair search when you appoint a conveyancing solicitor. The solicitor can commission one of two chancel searches:

• A Chancel Check Search – This search reveals whether the property is located within a parish that could charge for repairs to the chancel. However, it doesn’t show whether or not the actual subject property is located on land with this responsibility. This type of search can show you whether there is a certain level of risk.

• A Full Chancel Search – This search is much more expensive but will reveal whether the actual subject property is liable. The solicitor must register this liability with the Land Registry if it is.

What Can You Do to Protect Yourself?

If a potential liability exists on the property, it’s highly recommended that you take out chancel liability insurance from a reputable insurer.

Although the premiums vary, you can expect to pay a one-off premium of around £25 or more depending on the circumstances for a standard residential property.

It will cover you against claims for up to 25 years after you’ve purchased the property.

Some policies last for however long you own the property, while others can last forever, even if the property changes hands.

Generally, the cost of the policy required for the property will depend on the level of cover required, the amount of land involved (from less than 1 acre to 10 acres), and whether the policy is for 25 years, 35 years, or in perpetuity.

Final Thoughts

A chancel repair search is an affordable way to determine whether the property you’re buying in England or Wales is liable for chancel repairs.

It can provide you with peace of mind against unexpected large bills and help you take appropriate action like insurance to protect you from legal and financial issues.

Call us today on 03330906030 or contact us to speak to one of our friendly advisors.

Sources and References

https://www.legislation.gov.uk/ukpga/Geo5/22-23/20/section/1