Income multiples and affordability calculators.

Gone are the days when a lender used to simply calculate the mortgage loan available by multiplying your income by 4 or 5 times.  Today it's so much more intense!  For example, a lender will require to know your monthly budget spend figures, right down to every direct debit on your bank statements, including council tax, insurances, mobile phones, lottery payments and gym membership!  From these monthly outgoings, the lender will look at affordability and decide from there what mortgage amount might be available to you.  However, on the other side, not only can it be restrictive depending on your monthly outgoings, but it can also be very generous depending on what little outgoings you have!   The lender has a duty to make sure you can afford your mortgage today, as well as once rates rise and specifically being affordable over a 5 year period. 

As loans become more and more competitive, this has seen some lenders lending well in excess of an equivalent 5 x income and some even up to 7 times!   For the right loan to value, right affordability and right customer, lenders are willing to offer a little bit more.  And with rates so low, now's a good time to be exploring these options.

What I do believe is that 2017 will be a very competitive year.  There's been a lot of talk about rates increasing, but so far this year, they've actually only decreased.  With a further twenty or more applications in with the regulator for lending licences, this can only mean greater competition and good news for the end consumer.  Don't panic just yet!

However, a lot of people put changing their mortgage to the bottom of the pile or the 'to do tomorrow' list.  Of course, this keeps getting delayed behind the 'save £20 a month on broadband' or 'update the pet insurance' chores.  Yet the mortgage is the biggest debt you'll ever have and probably one of the easiest to save on.  So don't put it to the bottom of the pile.  Rates may be low now, but there's no guarantee they will stay that way. 

Rates are low and delays are across the market...

Following the recent regulatory changes across the mortgage market, specifically in the Buy to Let sector, and with rates currently so low on the Residential side, it was inevitable that delays were going to occur.  A few days can be the norm, but the reality is that some lenders are now advising of delays in excess of a month to process cases.  Yes, a month!  This really becomes an issue if the lender asks you to provide further information as when this is submitted, you will normally go back to the end of the queue!  So bear this in mind if you are in a contract race to buy your dream property and the Estate Agent is badgering you to get the survey instructed.

There have been some fantastic product launches over the last week or so, including some outstanding five year fixed rates.  One example from Santander offers a fixed rate for five years for those with a 40% deposit with a rate of just 1.89%  (APRC 2.49%), which includes a free valuation and free legal costs on remortgages.  Terms and conditions apply etc.  The market is hotting up!

We've even seen a sub 1% fixed rate for two years launched this week, again for those with a 40% deposit.  However, with all things, check behind the marketing headline.  The rate may catch your eye, but if the fees are expensive and it does not include free valuation or legals, it can prove less compelling than a slightly higher rate that includes all of those benefits. 

Some rates have been reduced for those who have had historic issues.  One example, with our friends at Kensington, allows for some historic issues over two years ago and will look at rates starting from 4.34% for those with just a 10% deposit.  

A number of lenders don't use credit scoring systems and prefer a manual approach, so don't think you cannot get a mortgage until you have tried!  Always shop around to find the best deal and always check the small print!  Naturally, I would recommend speaking to a professional who can search the whole market and advise which are the most appropriate deals available to you!

A survey is for the lender, not you!

Some weeks there is just too much news to take in and it can be difficult to assimilate and decide which to report on.  Then there are quiet weeks where nothing much seems to happen.  This week has been the latter and the mortgage market has been quieter than normal.  So, what to discuss?  Surveys!

Valuations on properties to be mortgaged come in various guises.  Every mortgage lender will require a valuation on the property to ensure the property is suitable security for their purposes.  Although, in some cases, they will not actually visit.  This is because they can often access detailed information electronically, normally called an  Automated Valuation Model (AVM).  Of course, this can prompt a borrower, who has paid a fee, to question the reasonableness of this method.  In fairness to the lenders, it is a tried and tested system and rarely proves incorrect.  They have expenses regardless of the visit and this system does have the effect of keeping prices down. 

Remember that this, fairly basic valuation is for the lender, paid for by the borrower, and it should not be relied upon as a guarantee that the property is sound and fit for purpose.  It only responds to the questions lenders ask relating to the property being suitable security for mortgage purposes.  They have no obligation to tell you what is in the report, or give you a copy!  Therefore you should always consider the benefit of an independent survey on the property you are purchasing to ensure that any and all defects are noted before signing contracts. There are two main types of survey available, aside from the mortgage valuation.

Homebuyer Report - a standard format set out by the Royal Institution of Chartered Surveyors (RICS). This will not focus on every aspect of the property as a building survey will (below), but will advise on urgent matters needing attention. It may advise if items (a leaky roof for example) might have an adverse affect on the value of the property, or if further investigations are required.

A Building Survey – an in-depth survey for all properties: listed buildings: buildings that have had extensive alterations, or of an unusual construction. The surveyor will examine all accessible parts of the property and advise on technical information: the condition relative to age: further special investigations required, and provide extensive information on major or minor defects.

Both will comment on whether the agreed asking price is reasonable, whether it reflects the condition of the property and should give you peace of mind whilst making the biggest purchase of your life!