What's the process?

Not too much excitement on the mortgage news round this week so I thought I would recap on the mortgage process.

The mortgage process, regardless of whether you are a first time buyer, home mover or simply re-mortgaging, will be roughly the same. On any new purchase, the selling agent will seek to agree a number of deadlines with you, including the arrangement of mortgage finance. At this point you can shop around and should make sure that you speak to an independent mortgage brokerage who will assess your overall financial position and discuss your mortgage requirements with you. Advisers are required by law to provide you with a Initial Disclosure Document detailing who they are; who regulates them; their scope of permissions; whether they are restricted to a small lender panel or ‘whole of market’; any fees and costs involved including any charged for advice or consultation. This document also advises how to complain if you are unhappy (now or in the future) about the advice provided.

A good advisor will complete a financial fact find ensuring that they fully ‘know and understand their client’s financial position and requirements.’  This is necessary before any ‘advice or recommendation’ can be provided.  Be patient as this process can be lengthy.  It is in your best interests however, ensuring that you receive the best possible advice designed to meet your personal mortgage needs and requirements.

Once you’ve agreed the best mortgage for you, a decision in principle (DIP) will be completed, usually online with the chosen lender. This involves brief personal details, income disclosure and a credit search. Be wary here as too many credit searches will have a negative effect on your credit score. Ensure that the product and lender are right for you BEFORE a DIP is conducted.

DIP decisions are normally instantaneous.  Assuming success, it is then up-graded to full application. Payment for valuation is made (sometimes free) and the valuer confirms to the lender if, in their opinion, the property is suitable security for mortgage purposes. A more detailed in-depth survey (homebuyers report) can be arranged at the same time, but for a slightly higher cost. That said, for older properties it should be considered a worthwhile investment as it could save you thousands in the long run.

The chosen lender will require information on income, identity, proof of residency as part of their due diligence requirements.  Assuming no issues arise, a mortgage offer should be issued. Then, subject to the solicitor’s conveyancing process, you are now on the road to completion and, if it is a purchase, you should soon pick up the keys to your new home

Short Term Loan required?

The ‘Short Term Lending’ market is growing at a rapid pace. Specifically geared at speedily arranged loans, normally with a monthly rate of interest and pre-agreed with an ‘exit’ route, the term ‘Bridging Finance’ is quickly becoming a household name. With many lenders in the market, offering loans up to 75% of the property value (sometimes higher with additional security offered) these types of loan are calculated and charged on a daily/monthly basis, with some even offering to roll up the interest (no committed monthly payment). Interest rates start from 0.75% per month and normally are arranged over a period of between 1 to 18 months. Most will carry a lender fee, an assessment fee, some will include early repayment charges and possibly an exit fee. However, for the right scenario, these loans provide a superb funding line.

Ideal scenarios for Bridging Finance include –

1) Chain breaking or not sold your property yet
When the chain breaks or you have not sold your property but found one you have fallen in love with, bridging finance may enable you to complete on the purchase before you have sold your existing home.

2) Refurbishment – allows you to buy and refurbish property quickly
A loan to support with the purchase of a property and then undertake the refurbishment
before it is eventually presented to a mortgage company or bank for long term re-mortgage finance, or sold.

3) Purchasing properties at auction
Short Term Loans can be arranged very quickly and can be ideal where there are tight deadlines to meet. A typical 28 day completion from purchasing an auction property is usually easily achievable. A pre-auction valuation is considered a must.

These are just some examples, there are many others.

However, where there are positives, there can be negatives! Many lenders have set a minimum term for a property to be owned before they will allow a remortgage to occur. This is usually six months. So please ensure this is factored in to any purchase, budget calculations, etc before committing to any Short Term Funding/Bridging Finance. For more information, or to discuss a specific scenario, please contact AToM.

What a load of PR!

Lenders are lending, mortgages are flying through with little delays and lenders are doing everything in their powers to help the First Time Buyer…..What a load of PR!   Don’t believe everything you read in the papers.  Some lenders are currently 12 working days behind.  Others nearly a month, or two.  The more you shout, the longer the delay, it appears!  However this is not the case with all lenders, just a few.  If you’re in a rush to get your mortgage arranged, make sure you review the lenders service levels first.

A mortgage is the biggest debt you’re likely to ever take on, so you need to do your homework and understand more than just what the national press decide to publish. Advice is crucial and ideally from a company who can offer ‘whole of market’ mortgages, not just products from a limited panel of lenders, like some Estate Agency chains or a Bank/Building Society who only offer their own products.

Most lenders have a set of rules and criteria that need to be met even before requesting a decision in principal (stage at which you are credit searched for pre approval).  Some will not allow a purchase where the vendor has owned the property for less than 6 months.  Some won’t look at unencumbered properties for remortgages, or assist where the customer sold their house within the last year and are renting, so falling between a first time buyer and a residential home owner. Some won’t allow lending in to retirement and so on. 

All of these are little idiosyncrasies that should be known by anyone advising on a mortgage. These save time and probably unnecessary credit searches being carried out.  Remember, the more credit searches you have against your name, the more likely your credit score will decrease, which may affect your ability to obtain finance. Whoever you talk to about your financial requirements, make sure you say at the outset that you do not want to be credit searched, unless you give them the authority to do so.

The computer can still say 'no'

The Bank of England held the base rate for another month and we all breathed a small sigh of relief as some industry pundits had suggested that a reduction may occur.   Obviously it would be good for the consumer, but not so good for keeping the funds moving around the marketplace.   As it is, many are already enjoying a nice base rate tracker and sitting comfortably with no intention of moving, and why would they?  From the business aspect and funding lines, lenders need to turnover customers, attract new business and collect fees.   More money moving around is good news for the market; static money tends not to be!

With this in mind, and as I have not reported on the monthly “creditaction” figures for a while, here are some stark reminders of the state of the economy:
·         Average household debt in the UK (including mortgages) was £55,448 in June. 
·         The average amount owed per UK adult (including mortgages) was £29,687 in June. This was around 121% of average earnings.
·         105 properties are repossessed every day (based on Q1 2012 trends).
·         1,443 Consumer County Court Judgements (CCJs) are issued every day
·         314 people are declared insolvent or bankrupt every day
·         1,607 people a day reported they had become redundant between March and May 2012.
·         The UK population is growing by an estimated 1,342 people a day

Meanwhile, credit scoring is creating havoc for mortgage applications via high street lenders.  Most lenders credit score applications based upon the amount of credit you have, whether you are on the electoral role and your recent payment profile on any existing credit.  If the computer says ‘no’, you will tend to find all high street lenders doors shut to you.  But fear not, if you have a reasonable deposit and can prove all income, there are lenders who do not credit score, but will manually review and underwrite affordable applications on an individual basis.  AToM has access to a number of these lenders so don’t despair if the high street lender’s computer says no. If you fit the above profile, give us a call to see if we can assist.

Competition is a good thing for the end consumer

As the world’s eyes are diverted from the on-going banking and financial issues and redirected to the biggest sporting event in the world, it makes you wonder how much business will be lost due to people sneaking off and watching the Olympics!  I’m sure I’m overdue a sick day or two! 

Competition is also taking place in the mortgage finance arena as we witness some rate wars taking place, which can only be a good thing for the end consumer.

For those on an attractive lender standard variable rate, but who need to raise a small amount of funds, a secured loan might be an option.  Secured loans tend to be a ‘second’ charge on your property and provide an alternative way to release equity from your home whilst leaving your current mortgage in place.  Various lenders operate in this arena and strong competition has bought rates down to below 7%.  Rates are subject to circumstances and terms and conditions, etc.

In the first charge arena, we have seen HSBC promote a sub 3% rate fixed for 5 years.  Santander quickly followed and, through brokers, also offered a free valuation and free legals on their 3 year sub 3% fixed re-mortgage product.  Natwest have also joined the front runners and launched a sub 3% fixed for 5 years, through the intermediary sector.  All subject to terms and conditions and individual circumstances, etc!  Others cutting rates include Accord Mortgages by up to 0.6%, Nationwide by up to 0.4% and Halifax by up to 0.5%.  Great to see!  Definitely worth a review with someone who can access the whole of market, if you’re looking to change your mortgage.

And finally (and I had to end on an Olympic note!) if you are lucky enough to own a property near the main Olympic sites in London, Lloyds research suggests that homeowners have seen the value of their home rise by nearly £70,000 since the winning bid was announced in 2005.  The average house price across the 14 postal districts closest to the main site for the London 2012 Olympic/Paralympics Games stood at £273k in March 2012, an increase of 33% from July 2005s average of £206k.