On a good rate? Maybe a Loan is an option..

Many of us will review car insurance, home insurance, gas and electricity suppliers to find the best rate on the market.  But it’s astounding how many people just leave their mortgage with their existing supplier.  Most lenders look to attract new customers, but are less likely to offer attractive options to stay with them.  This, in the main, is due to the different fees and charges that can be added to the new mortgage at the outset.  In the current climate, the lenders bottom line tends to be more profitable with new clients, rather than old.  So don’t feel loyal, if a better option is with another lender; think of number one!

That said, we are still stuck with the fact that many lenders do not want to lend in huge volumes. Therefore, you may find that actually getting a mortgage becomes the main obstacle and you may find that you have to stay with your current lender anyway!

The other option, if you’re looking to raise cash for home improvements, to consolidate debt (although not always encouraged) or for another legal purpose, is a secured loan.

A secured loan is a 2nd, or subsequent charge, designed for homeowners and which allows the equity in their property to be used as security. Loans are usually between £3k and £100k. There are also no 'up-front' fees to find.

We tend to find that many customers looking to re-mortgage to raise additional funds are already on an attractive rate with their lender. To move away could be costly and they could end up on a much higher interest rate. Depending on the amount already lent as a mortgage, compared to the value of the property, most lenders will allow a secured loan to be added as additional borrowing.

The secured loan is usually repaid over a shorter term than a mortgage, circa 3-10 years, but the term can be longer, although this will increase the amount of interest repaid.  Rates vary depending on the customer’s circumstances and current level of borrowings.

As with all finance, seek advice and think carefully before securing debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other loan secured on it!

Social network mortgage guru?

I paid particular interest this week to a conversation occurring on Facebook.  The superb Horsham page (linked with visithorsham.co.uk) attracts over 8,000 followers who are frequently updated on requests from individuals seeking assistance or recommendations.

One such request was from an individual looking to update their mortgage and what should they do next.  There were some great recommendations of past experiences with some great local companies (thankfully including AToM!), but then there was a phrase that always scares me - use a comparison website…..

These are everywhere as we know, and they can be good for basic research, but they have a few major flaws.  Firstly, not every lender subscribes to them, so you could be missing out on some products more suited to fit your personal requirements.  Secondly, they cannot plan ahead for your specific future requirements or needs.  What if you want to move in a couple of years or are expecting some additional monies in the future that you will want to use to pay off your mortgage.  Thirdly, they certainly won’t help you with deciphering the plethora of information a lender will bombard you with, or check the mortgage offer for you or, indeed, advise you on the criteria the lender uses to decide if you fit their requirements!  As we’ve seen recently, lenders are finding every way possible to increase rates with some hiking their standard variable rates to existing customers.  Finally, they won’t explain to you that if you’re stretching yourself on this mortgage (they won’t offer you a budget planner review) and bank base rate rises in a year or two’s time, you may not be able to afford it. At this stage, best advice would be to look for something more within your financial reach.

Professional and qualified advisers have access to so much more information and have to stand behind the advice they give. Will you be able to sue your 'social network adviser’ if the advice they give turns out to be faulty or if the comparison site misses some vital information!  I doubt it, so play safe, take advice from the professionals with industry qualifications to back up their recommendations and advice. This advice will only be given after a full and thorough examination of your needs, requirements and circumstances.

Never a dull week in the Mortgage Market!

Never a dull week in the mortgage market!  I was at a presentation from a major lender late last week and who predicted Bank Base Rate won’t move for a good couple of years, but also advised us to ignore their predictions as they have been far from right over the last 3 to 4 years!  Helpful!  We also then saw reports suggesting that the Lloyds Banking Group wanted to reduce their share of the mortgage market from 28% to 25%.  This is a huge reduction.   We also saw RBS publicise a reduction in their share of gross mortgage lending from 14% in Qtr 1 2011 to 11% in Qtr 1 2012.  More signs that although the market is very busy, it is in certain areas, and not necessarily via household names. 

In other news, the Co-Operative Bank decided to withdraw its Interest Only offering entirely from all residential offerings and sadly, after five years of trying, Portillion has decided to call it a day and abandon its lending ambitions.  The latter showing it really is so difficult to launch a new lender in current climates.

Many people ask me “should we fix our mortgage rate now?”  This is a difficult question to answer and one I always answer with a question – are you a gambler?  At some point, Bank Base Rate will increase; I think we are all aware of that and it is just a question of when?  Five year fixed rates are proving popular and competitive in the current climates.  However, if you decided to take an attractively low tracker now with a view to fixing at a later date, be wary that when the BBR does increase, you can almost guarantee that fixed rates will have already been substantially increased! 

Finally, outside AToM we have a box offering ‘Property Today’ papers.  This is a good gauge to the local market and how interested people are in properties each week.  Over the last two weeks, we’ve run out of papers over the weekend (normally they last until Thursday!).  Possible signs of a buoyant local market, or just a lot of people keeping an eye on things?  Who knows…

The process is everything!

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!

Enjoy the long weekend!