Build your 'Dream Home'!

We’re in the midst of a rate price war between lenders vying for new customers.  This is obviously great news for the end consumer, but it can’t be profitably sustainable for these lenders, so make hay whilst the sun shines, as they say!   Just be wary that lenders are ‘cherry picking’.  You may be drawn to a superb rate and approach the lender directly, but for whatever reason, they decline your application and offer you a higher alternative or nothing at all.  We’re hearing numerous differing stories from customers currently, and some are quite disturbing.  Especially if the lender has pulled the plug a number of weeks in to processing..

Don’t get me wrong, we are in a very positive era and enjoying a very busy start to the new year.  However, you need to be aware that these things happen and that they can happen at any time right up to the completion of your mortgage! 

There appears to be a lot of building work going on locally, mainly by large property developers.  In addition, we’re seeing a lot more enquiries for those looking to build their own dream home.  Many have been enquiring about mortgages to buy a property, knock it down and build a new one in the same location.  It can be done and these are normally called Self Build Mortgages.  Others are looking at substantially renovating their existing properties.  Again, this can be done.  Either way, have a chat with a local architect first to see if your plans are realistic possibilities.  They will have a good idea as to what the local Council Planning Officers will accept and of course, what they will reject!   Lenders then may look to lend funds on a stage payment basis.  Stage one might be the foundations, stage two might be ground level and so on.  Each stage would require sign off by the buildings inspector and then funds would be released.  The lender may not lend the full build amount, so be prepared to put in a deposit and possibly at each stage.  For extensions and renovations, it would depend on the size of the work and what funds may be required.   Seek professional advice.

Shop around before committing

There seems to be a lot of positive activity in the market currently with many lenders reducing rates.  Just in the last few days, we’ve seen Nationwide, Virgin Money, Accord, Santander, Yorkshire, Newbury and Hinckley & Rugby Building Society reduce rates or launch new products.  In the current climates, you should not be scared to deal with a lender who is not a readily known household name.  As many lenders fight for customers in a tight market, we are seeing some of the smaller lenders offering market leading rates to build up their portfolio and attract new business. 

Of course, this is the beauty of using a mortgage broker.  They will have access to many lenders that you have probably never heard of and products that are not usually visible to the public eye.  On average, a good mortgage broker will have access to over 3,000 mortgage products, from a huge number of lenders.   As with everything you purchase, it’s always worth shopping around as although you might think you have a great deal with your current provider, there may be better products out there that you are missing out on.

This also goes for the Solicitors where they are needed to act for both yourself and the lender in a mortgage transaction.   Remember that on some re-mortgage products the lender will cover the cost of standard legal work and valuations.  But for all other requirements there are a huge number of legal firms in both local and more regional areas.  Prices vary from company to company and you can decide exactly who to deal with (assuming they are acceptable to the mortgage lender).  Shop around before committing and as with everything, make sure you read the small print!

Positive news as First Time Buyer loans increased in 2012 by 11%, for those with deposits of less than 15%, according to Mortgage Monitor from esurv.  This amounted to just fewer than 64,000, compared to 58,000 in 2011 but still a way off the 179,000 in 2007! 

Finally, Castle Trust suggests that the average homebuyer now provides a deposit of £26,500 and this equates to an average of 20% of the property value across the country.  In comparison, those in London need nearer £73k as a deposit.

Review your paperwork and save money!

Happy New Year to you!  Fingers crossed it will be a peaceful, happy, healthy and wealthy one for us all!

I’ve not made any personal resolutions, but I did take time out to review all of the paperwork that’s been cluttering the kitchen for a while!  Life insurance, car and home insurance and even my mortgage was in the spotlight!  It was a worthwhile few hours and it usually saves money…  Start the New Year off with a review of your biggest outlay – the mortgage!  Even though we’re still early in the year, a number of lenders have already cut their rates and now could be a beneficial time to have a chat and review opportunities available to you.

If you are against the idea of moving, but would like to increase the space available to you by way of an extension, or loft conversion, lenders may look to assist in the form of a second charge loan.   Many lenders realise that consumers needs large sums to complete certain types of work on their home and will secure the loan against the value of the property.  This is up to a certain loan to value, normally 85% maximum.  Term and rates depend on the loan required but can be short to medium term, or longer if required and loan sizes can go up to £200k. The second charge also allows you to keep your current mortgage and rate untouched, good in the current climate if you have a low tracker rate.  

Finally, if you are on an interest only loan, be prepared to hear from your lender shortly (if you haven’t already).  With many lenders withdrawing from interest only towards the end of 2012, those who have customers on interest only options will be looking to review how that customer will repay the loan back and may require proof.  I suspect this will be of high priority for 2013 for many lenders.  If you don’t have a repayment plan in place (usually these were endowments, ISA’s or future bonus/lump sum pay out), you will need to review how the lender will get their money back.  Selling your home is no longer a generally approved repayment option, so be aware and seek professional advice if this affects you.