Frequently Asked Question

FAQ

Mortgages

There is no definite answer. It will depend on your income, your savings, credit score, your outgoings and your family situation. The simple rule is to multiply your gross income by 4.5 times. The sum will be the mortgage amount that you might be able to borrow. However, you might be able to get more or less. Check our handy Mortgage Affordability Calculator for a quick answer.

The monthly payment on your mortgage will depend on several factors: how old you are and how long you can have the mortgage for, your affordability (see How much I can borrow?), and the interest rate that the lender is willing you to offer. For a simple calculation, check our handy Mortgage Repayment Calculator.

The minimum deposit you will need is 5% of the value of the property. However, this might be restricted to the lower value properties and older houses (not new-builds). We would recommend having at least a 10% deposit for the property.

Yes, you can. However, if you are still within your initial fixed rate, you might need to pay an Early Repayment Charge (EPC) if you decide to pay it off early. Most mortgages are ‘portable’ so you can take your existing mortgage and move to the new property. If you would like to change your repayment term, you can do it at the time of remortgaging.

A credit score is a numerical value that you are assigned based on your credit history and creditworthiness. There are three main Credit Scoring Agencies: Experian, Equifax and TransUnion. These agencies are completely independent of each other and would have a different scale and criteria to assess your score. Most lenders would credit score you at the time of application so knowing your credit score is important. You can download your full credit report from all three agencies through CheckMyFile.

A repayment mortgage is a mortgage (home loan) that your monthly payment will repay a portion of the capital borrowed and interest. Over the term of the mortgage, you will completely repay the amount borrowed.

An interest-only mortgage means that you only pay interest on the amount borrowed. At the end of the term, you will still need to repay the whole amount borrowed. An interest-only mortgage is mostly used for buy-to-let properties but can be used for residential purchases if there is a viable repayment strategy in place.

LTV stand for Loan-To-Value ratio and describe how much borrowing there will be against the value of the property. For example, 75% LTV means there will be a 25% deposit and 75% mortgage.

The mortgage interest rate will depend on several factors: the amount of deposit you have (LTV), your credit score, your particular circumstances. The interest rate you will be quoted from the mortgage adviser will be the rate you will be offered by the lender if you are approved for the mortgage. If you apply to the lender directly, you might be offered a different rate than you apply for.

Help to Buy is a government scheme helping first-time buyers to get on the property ladder by offering equity loans. Find out more in our blog post here.

Shared Ownership Scheme offers individuals on a low income the chance to purchase a share of the property. You will purchase from 25% to 75% of the property and have at least a 5% deposit of the share of the property. You will pay rent on the remaining share of the property that you do not own.

Yes, in most cases you can but it will depend on the severity of your adverse credit history. There are specialist mortgage providers that offer mortgages for people who had CCJ’s, defaults, or bankruptcy orders. However, not all situations might be accepted and we will advise you on the best course of action. You can read more about bad credit mortgages on our blog post.

Yes, in most cases. However, there might be some restrictions due to Covid and people who have been severely affected Yes, in most cases. However, there might be some restrictions due to Covid and people who have been severely affected might need to prove that the business is back on track and income sustainable. Otherwise, they might need to wait for the business to be profitable again to apply for a mortgage. You will need at least 12 months of trading history and at least one self-assessment document (SA302).

There could be several reasons why your mortgage application was declined but it doesn’t mean you would not be able to get a mortgage at all. Sometimes, lenders will impose limits on borrowing or decline due to the credit score but another lender would still be willing to lend. Check out our blog post 10 Reasons Why A Mortgage Can Be Declined to find out more.

A Green MortgageA Green Mortgage is a mortgage specially designed for properties with a high energy efficiency rating. The property will require a rating of A, B or C. A green mortgage will be more attractive and will either have a lower interest rate or additional incentive, for example, a cashback.

A property survey is a report compiled by a property surveyor to determine the state of the property you are willing to buy. There are three main types of survey: condition report (RICS Level 1), homebuyer survey (RICS Level 2), and building survey (RICS Level 3). You can read more about them in our blog post here.

The best time to remortgage is as soon as you move from the fixed-rate mortgage to a Standard Variable Rate. To achieve this simultaneously, we would recommend starting the process at least 3 months before the end of your fixed term. The mortgage offer is valid for up to 6 months.

Buy to let

An investment buy-to-let mortgage is when a person buys property as an investment, rather than a place to live. This type of mortgage is more likely to be interest-only and will require a higher deposit, at least 20%. There is also a requirement for the rent to cover the mortgage payment and other fees associated with the property.

A consumer buy-to-let mortgage is when a person becomes an ‘accidental landlord’. This is due to circumstances, rather than intentional investment. This can happen in several situations: inheriting a property, moving abroad for work and leaving the house to be rented out, intending to sell but it is difficult to sell the property. These mortgages are regulated mortgages (unlike investment buy-to-let mortgages) and fall under the same regulations as residential mortgages. If you think you fall in this category, give us a call and we can discuss your requirements.

The minimum deposit for buy-to-let property is 20%. However, we would recommend a 25% deposit to achieve a better interest rate.

The rental cover ratio shows how much the rental income covers the mortgage payments. A rental cover ratio of 1.5 or 150% would cover the mortgage payment by 150%. The minimum rental income calculation is based on the annual stress rate (typically 5.5%) and depends on your taxpayer status. We have developed a simple Rental Income Calculator to give you indicative minimum rental income required to cover your mortgage payment.

Yes, you can purchase an investment property through a limited company, which is called a Special Purpose Vehicle. This limited company needs to be registered with Companies House, have at least one director and be a non-trading company. This means the company has no other purpose just to own the property and rent it out for profit. There are many tax benefits to owning a buy to let property through a limited company. You can read more in our blog post here.

An SPV, or a Special Purpose Vehicle, is a way of investing in property through a limited company. The company owns the properties and pays dividends to directors. The biggest advantage of holding properties in SPV is tax treatment. This allows a company to offset mortgage payments against income tax. It is also allowed to buy and sell shares in an SPV to raise capital, rather than sell the property itself. Find out more in our blog post here.

An HMO, or Houses in Multiple Occupation is a property rented to at least 3 tenants that share common areas, like kitchen and bathroom. A large HMO is when at least 5 tenants occupy a property. Many councils introduced HMO licences, so please check with your council about the rules and obligations as a landlord.

We would strongly recommend a landlord’s home insurance. The landlord insurance not only covers the walls, roof, permanent fixtures and fittings but also can cover the loss of rent in case of an insured event, change of locks if keys are lost or stolen or malicious damage caused by the tenants to the buildings.

Insurance

It depends on your circumstances. In any case, we strongly advise having life insurance in place if you have a mortgage. This can be a decreasing policy that only covers the amount owed and the sum will decrease over time. We would also recommend a Critical Illness Policy, Income Protection and Home Insurance. Please note that home insurance is required at the time of the exchange of contracts (not the completion). You can find out more about different types of protection here.

We would strongly recommend a life protection policy, especially if you have family and young dependants. The FCA want all mortgage and protection advisers to offer the life insurance policy and if you decide against it, we would normally ask you to sign a disclaimer that you are aware of the consequences of not taking up one.

It is required that you have home insurance in place at the time of the exchange of the contracts. At this point, you will legally be responsible for the property even though you do not officially own it yet. If anything happens to the property, for example, a fire, you are obliged to bear the costs of the repairs.

Critical illness policy can prevent financial hard times in case of a serious illness. It will pay out a lump sum, that can be used for any purpose. This is a term policy and is often offered combined with a life insurance policy but a claim will only pay once. Read more.

Income protection insurance is long-term insurance that will pay out a monthly benefit in case you lose your income, due to illness or injury. It will replace part of your income (usually 50-60%) and payout until you are fit to go back to work or retire. Read more.

Book your free consultation

Contact us