14 Oct Mortgage – Trick or Treat?
In the spirit of Halloween, Lee Howard of Howard Mortgages explores trick-or-treating around some of the mortgage options available. He takes 5 mortgage questions that home buyers and sellers commonly ask and decides whether they are tricks or treats to prevent a mortgage horror story.
Your Credit Report – Trick or Treat?
First things first, when you’re even considering any mortgage/ remortgage process you need to make sure that your credit report is in good order. Your credit rating and credit reports directly affect your ability to get a good mortgage rate, and even a mobile phone, a Netflix subscription, credit card etc. Rejection can badly harm your credit rating, and so keeping on top of your credit report and borrowing history, ensures that you aren’t heading for any nasty surprises. Reviewing your credit reports also helps you to catch signs of identity theft early.
We’d recommend that you get a copy of your credit report every 12 months from each credit reporting company so that you can ensure that the information on all of your credit reports is correct and up to date. You can check your file online and the statutory reports are available by law for £2 each which give a basic overview.
If you want a more in depth look with instant access, the main agencies to approach are Experian, Equifax, & Transunion. All of these can be accessed in one place by clicking HERE to register for a trial of ‘Check My File’.
This service is free for 30 days but please make sure you cancel before this ends, as they will charge you £14.99 a month after the 30 days.
House Prices 2021 – Trick or Treat?
House prices have been turbo-charged in recent months, with buyers keen to complete deals after lockdown and save up to £15,000 off their stamp duty tax bill. The Land Registry’s data shows house prices are up nearly 9% year-on-year, while figures from HMRC show that more than 100,000 transactions have been completing each month, well in excess of pre-pandemic levels. However, market experts predict that house prices have been rising at an unsustainable rate, and it’s highly likely that the market will slow down in the second half of the year, resulting in house price growth slowing. Market sales have already dropped slightly since the tax relief ended.
We’re getting a clearer picture of the impact that coronavirus has had on house prices, but continued uncertainty over what will happen next with the pandemic means that house price figures could continue to fluctuate. There remains a great deal of optimism around the property market, with buyers still competing over homes in the most sought-after areas. We’re still witnessing lots of desire in the market to move home based on lifestyle changes and the search for green space. Remortgaging is also popular. Working from home in a home office and having more flexible living arrangements are trends that are likely to continue in 2022.
Mortgage rates remain competitive, and this will help to continue to boost borrower affordability and confidence.
Mortgage Guarantee Scheme – Trick or Treat?
The mortgage guarantee scheme, launched on 1 April 2021, involves the government ‘guaranteeing’ 95% mortgages for buyers with 5% deposits. The scheme was announced in the March 2021 Budget and was designed to encourage banks to start offering 95% mortgages again, after almost all were withdrawn during the pandemic.
Under the terms of the scheme, the government guarantees the portion of the mortgage over 80% (so, with a 95% mortgage, the remaining 15%). This might sound complicated, but in practice it just means the government will partially compensate the lender if a homeowner fails to pay their mortgage.
The scheme is quite similar to the Help to Buy mortgage guarantee scheme, which ran from 2013 to 2016 and was used by 105,000 people on lower incomes afford to buy a home. Since the scheme’s launch in April, we’ve already seen rates start to drop. If this trend filters down to 90% and 95% mortgages in the coming Winter months, first-time buyers will be able to access more attractive deals and cut the cost of home ownership.
As will all schemes, the amount that you can borrow and the mortgage rate that you can apply for depends on your personal circumstances and so the key is getting expert advice from a mortgage broker.
Additional Borrowing – Trick or Treat?
Many people want to borrow more against their property. Whether you’re looking to consolidate debt or to make some home improvements, it’s vitally important to understand all of your options and seek professional financial advice.
If your financial situation has changed and things take a turn for the worse, please do not panic. Even if paying your mortgage becomes a problem, you may still have options and there will be actions you can take. However, do seek professional financial advice quickly. It won’t affect your credit score, unless it results in you missing monthly payments.
A mortgage and additional borrowing (known as a second mortgage) is a loan that is secured against your home and so in the worst-case scenario, if you fall behind with your repayments, your lender might want to sell your home to get recover their money.
Your advisor will discuss your loan requirements, income and spending commitments, and ensure that you can afford any higher repayments, alongside researching the market to ensure that you get the best deal for your circumstances.
Extending Your Mortgage Term (up to 40 years) – Trick or Treat?
An increasing number of borrowers are asking for loans of 30, 35 or 40 years, rather than the traditional 25-year repayment mortgage. Extending your existing mortgage loan for up to 40 years could give you a more manageable monthly repayment than those over 25 years. But be very careful with these because taking the mortgage over a longer period will ultimately increase the amount of interest you pay over the term of the loan and could mean you end up paying much more in the long run.
Every personal situation is different so it is best to seek professional advice relating to your own circumstances and find out about the mortgage options you can choose from when mortgaging.
Never before have mortgage rules been so confusing – yet financial advice so critical as it is today. An expert mortgage broker will be able to guide you through the options for you and your circumstances. For advice on the right mortgage to suit your personal circumstances, please contact the team at Howard Mortgages on 01803 554455 or contact us here.