300 articles later...

As I pen my 300th column for the paper, I do wonder where the years have gone and what a totally different market we are now in compared to my first column in 2008!   In fact, that actual column highlighted the 'stormy waters ahead' and that 'this would be a journey we wouldn't forget in a hurry'.  What I, like most, didn't realise is that seven years on, we would still be in such a financial retraction!

However, the positives are that we are in the midst of a very competitive high street price war which has just seen a high street lender launch a sub 2% five year fixed rate deal.  This will spur on further reaction over the coming days. 

We've also seen lenders looking at assisting those with just a 5% deposit and having minimal or very small fees, to help First Time Buyers and Next Movers.   

We're also seeing lenders look at criteria to attract business, rather than just a low rate.  This could be a key part of the mortgage market moving forward.  A huge number of people will be ignored by computer technology and credit scoring decision making systems. But this does not mean they should not obtain mortgage finance, it just means they don't meet all of the rules entered to make that particular decision!

I often wonder if we are on the way back to as it was in 2007/8.   Rates couldn't go much lower then either and criteria played a huge part.  Fast forward to today and again rates can't get much lower and lenders are looking at gaps in the market where a criteria change or tweak might give them the competitive edge.

However this time, we also have a housing shortage problem.  The demand for houses is outstripping supply and this could lead to an increase in house prices.  First Time Buyers are already finding it tough enough without the additional stress of a lack of properties.  Let's hope someone is looking at addressing this issue and has a balanced approach to the market. 

Which leaves one last thought - I wonder what the market will look like in another 300 articles time?

Uninhabitable property, self build or full refurbishment required?

Just because a property is run down or even classed as 'uninhabitable', does not mean you cannot get a mortgage on it.   Or if you are intending to purchase a property to let out, but it's currently in an 'unlettable' condition.  Lenders will cater for these scenarios (dependant on the exact type of works required!).  In the main, the work required needs to be cosmetic - a redecoration, maybe a new kitchen or bathroom.  Many now offer 'refurbishment' loans where the work must be carried out within a period of time after purchasing the property, normally three months.  Others will allow the works to be completed, revalue the property and lend based on the newer property value.  Each lender will work on the valuers comments once they have visited the property and adjust their offerings accordingly.  Just because the high street or your current lender says no, does not mean that it can't be done!

As the local area continues to become a 'new homes exhibition', there are a number of lenders also assisting customers with more private projects such as development and self builds.  Normally the customer will purchase a property in need of work, knock it down and rebuild, or extensively renovate their existing.  Either way, the lender who funded the original purchase will need to be advised and aware of all works as you will be altering their security!

On a self build, the lender will issue the funds on a stage basis. Normally once the foundations have been laid, property built to eaves level, made watertight and so on.  At each stage a valuer will review and advise the lender of progress and to release payments.  If the property has increased in value as a result, you will tend to find the lender may lend on the Gross Development Value (the end value).

On a full refurbishment, again, the lender will want to know the plans and may lend in stage payments against the end value of the property, depending on the extent of the works involved.

The lender will require sight of all planning permissions and estimates of costs involved before lending any funds.   Seek out a local architect to assist you with plans and costs and always make sure you set out your budgets from the outset.

Lenders are targeting the Self Employed..

Mortgages for the Self Employed have been sparse over the last few years.  Despite providing a huge part of the economy, lenders have been reluctant to lend to this area.  However,  lenders have now recognised this and are looking more positively to assist the 4.5m self employed (figures as at end of 2014).  A few lenders will now even offer mortgages to those with just one years accounts (up to 85% of the property value), although, in the main, the normal requirement is to have two years audited accounts.  In all instances the lender will need to prove suitable affordability and a deposit will be required, but this is a huge step forward from just a few months ago. 

There are also lenders lending in this arena that will cater for customers who may have a missed mortgage payment in the last 12 months or may have Defaults and/or County Court Judgements (CCJs).   Terms and conditions apply, and lenders must prove ‘responsible lending’, but where there is demand, there will always be supply.

The other area that continues to be on the increase and something of a headache for lenders is ‘lending in to retirement’. As we all know, life doesn't end at age 65-70 and neither should it on the high street!  Often, retired people have managed their finances successfully over the years and enter retirement mortgage free.  At the same time, many, whilst having no mortgage, also suffer from reduced income and there is a saying in our profession that it is not always wise to have everything tied up in bricks and mortar and yet have nothing to spend.  Others may wish to continue their mortgage past normal lender retirement age, whilst they may still be working.  There are schemes where equity can be turned into a mortgage (not equity release) and where off-spring may be able to assist with the repayments in order to secure and protect their inheritance whilst also ensuring a comfortable retirement for their parents.  This is not right for everyone but it is certainly worth talking to a qualified advisor to review all possibilities.

You will be asked to prove you have finance in place.

When buying a property, one of the most important things an estate agent will require is proof that you can actually afford to purchase the property. Usually this evidence is required early in the process and it can be via any legitimate source (ie it DOES NOT have to come from the agents internal mortgage advisers). In most cases the initial confirmation will be in the form of a decision in principle (DIP) from a mortgage lender which is where all your details have been input on to the lenders systems, a credit search completed and, subject to normal underwriting, the lender (based on the information provided thus far) has agreed to lend you the money to assist with the purchase.

The next step, once you have had your offer accepted, is to fully apply for the mortgage. This will include the lender underwriting your mortgage application, reviewing payslips/accounts, bank statements, ID and other documentation as required. The lender will also move to instruct the valuation. This is where a surveyor will go out to the subject property and confirm it is suitable security for mortgage purposes , fundamentally acting as the lenders eyes.

Once the lender is happy with the underwrite and the valuation, a mortgage offer is issued and a solicitor appointed to deal with the legal process through to completion.

In the main the process is pretty straight forward, but it can be daunting . You should be prepared for any lender to request as much information on you as possible . This enables them to make an informed decision whether or not to lend you such a large amount of money. The lender may also calculate that you can afford the mortgage over the next five years, as they anticipate rates may rise!

Finally, make sure you ask questions and are comfortable you understand everything you are signing. As you would expect there is quite a lot of paperwork involved in the mortgage process and it can be quite a read! However, this is the biggest debt you are likely to take on. Some rates will have early redemption penalties to change or switch products, so you need to get it right first time. Don't be shy to ask and if in doubt, seek independent advice.