Mortgage Payment Holidays, Rates, Home Working, Valuations and more.....seek advice

What a difference a week can make!  Testing times for us all.  I want to review a few key issues this week, hence the slightly bigger column than normal!

Let’s start with Mortgage Payment Holidays:

As mentioned by the Chancellor last week, everyone may be entitled to a mortgage payment holiday of three months.  The holiday allows a borrower to DEFER mortgage payments for an agreed period of time.  At the end of the holiday, the normal monthly payments resume.  HOWEVER, you will still need to repay the money owed and you WILL incur interest on your mortgage during the holiday. Please note that you will need to speak with your lender first and they will decide whether you are eligible for the payment holiday.

You should certainly not stop your direct debits but do continue with your normal mortgage payments until the lender agrees your payment holiday.

If you don’t need to, don’t take the payment holiday! This may sound strange, but behind the scenes, and despite saying it won’t affect your credit score, it will possibly affect your ongoing ability to borrow. No one knows exactly how these holidays will be accounted for when you go to re-mortgage or buy another property.  Lenders want to see that you have consistently paid your last twelve monthly mortgage payments.  If you take the payment holiday, you will have only paid nine.  With the onslaught of technology making decisions, a computer may not be able to decipher that you’ve had an approved payment holiday for three months. It will only see that the mortgage has not been paid.  In the interim, this is may seem small beer in the grand scheme of things. The reality is that, for onward future finances, it could be huge.  We know this as in more normal climates, you can take one mortgage payment holiday and it is usually registered as a ‘U’ on your credit reports and we can sometimes have trouble getting these through lenders current systems.

Rates - are fluctuating hourly, with some resemblance to the crash in 2007/8.  Some lenders have withdrawn rates at midnight and tell everyone the day after, so they won’t receive a spike of business. We all understand why bank base rate (BBR) changed but this has resulted in a huge number of Tracker rates (tracking the BBR) being withdrawn. Existing customers charging rates obviously reduce with the changes, but these great rates are not open to new clients.  Fixed rates haven’t changed too much, but some have increased.  It’s mainly criteria where we have seen changes.  Some lenders have withdrawn high loan to values, so 95% deals and for Buy to Lets, many lenders have mainly dropped to 75% loan to value.  In short, if you find a great deal, be quick!

Home working – Most brokers, lenders, surveyors are now fully functional from home.  This is causing problems for some lenders.  One major high street lender has already confirmed that it can only handle so many bits of business each day in the new format and as such, once it reaches its quota, it will stop taking further business for that day!  Business continuity plans at their best!  

Valuations – Although it’s a slightly different business as usual, the one part of the market we all rely on is the valuation of the subject property.  The surveyor is the eyes of the mortgage lender and relies on their feedback to confirm suitable security.  If the valuer cannot assess the property, the mortgage market will grind to a halt. This is the one bit I’m really concerned about and keeping a close eye on developments.  Many lenders have already stopped physical valuations of properties to protect their employees.  Watch this space.

Finally, we, at Impact SF are fully functional and working from home during normal business hours.  We continue to offer our free advice service, so speak to the team, pick our experienced brains and we’ll help you wherever we can.  Stay safe.

"Tested in a way we've never been tested before"......and Bank Base cut by 0.5%

We’re being tested in a way that our generation has never been tested before.  These are uncertain times and no one can predict what the future days, weeks, months will bring.  The Bank of England has cut interest rates by a significant 0.5% to just 0.25% and at the time of writing, this is predicted to be cut even further.  Especially seeing that the Federal Reserve (FED) in America have just cut their rates by a full 1%.  All countries are trying to prevent a global recession, avoiding 2007/8 all over again.

All I can say at this time is keep safe and look after number one.  Get your house in order quickly.  Impact will inevitably be shutting both of our offices in Horsham to protect our staff and families, but we will continue to work from home and be available on phones, online and by webinar facilities (Microsoft Teams, etc).  Not everyone will get this horrible virus and lenders still want to lend.

Yes, it might take a little bit longer to arrange things, as home working takes effect and some, especially the banks and building society security systems and such, will experience new challenges with all of their staff working from home.  But lending will go on and right now is an ideal time to take advantage of the amazing rates and deals on offer.

Remortgaging should be a very simple process and we can guide you through the requirements and deals on offer. 

Even staying with your current lender once your current fixed rate has expired and transferring to a new rate is pretty straight forward.  We can assist with all of these, remotely and quickly.

Finally, I’ll say it again, look after number one. You will probably have some time on your hands, you have the paperwork at home and you have the superb team at Impact online and available to help you throughout the whole process.  Or just even to give you some free advice.  No one knows how long this unprecedented experience will last, so just make sure you’re in a good position to see it through.  Stay safe.

Completing a fact find and be mortgage ready!

First time buyer or home mover?  Either way know the process and be mortgage ready!

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 to provide you with an 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.

A good adviser 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.  We’ve had a few customers contact us for a mortgage recently who have been totally unaware that they have had a number of credit searches carried out having recently searched for competitive renewal quotes on their home or car insurance via comparison sites.  This, in a small amount of time can have a marked affect on your credit score, and as such, affect your ability to obtain finance, so read the small print and be aware! 

DIP decisions are normally instantaneous.  Assuming success, it is then up-graded to a full application. Payment for survey 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 completing your mortgage process!

Bridging finance can be much quicker to arrange than a normal mortgage

Bridging finance (also known as Short Term Lending) is a solution that can be used to provide fast access to funding for a number of different circumstances.

Often, bridging finance can be much quicker to arrange than a normal mortgage. However, bridging finance should not be considered a replacement for more traditional mortgage lending which is normally more cost-efficient.  It can be a complicated process and each case is written on a bespoke basis according to the requirements of each individual transaction.

Initially, this type of finance was used as a way to mend a broken link in a housing chain and typically used to ‘bridge’ the gap between a house sale and completion.

However, bridging is often also used for people buying at auction, to meet strict deadlines (usually of 28 days), for people wanting to carry out refurbishments to boost the value of their homes or where the property would not met the requirements of a traditional mortgage lender as well as for numerous business purposes. Some lenders will also help with short term VAT requirements subject to strict controls.

In more recent years, the market has seen a broader number of uses for short-term loans as their popularity has increased. For example, many commercial premises are now being converted into residential houses or flats, because of the expansion of permitted development rights, and bridging loans can be used in the initial stages of the conversion with longer term funding provided once the building project has started.  Short-term finance can be used to buy new equipment, to build up stocks ahead of an expected rush on seasonal orders, or for buying shares in another business.  It’s becoming increasingly popular, mainly because of its speed and flexibility.

The best way to look at this is as a means to an end.  Lenders will need certainty on the exit route (how will they get their money back?) and they will always insist on an agreement being in place from a traditional mortgage lender to provide a mortgage, at a given time and once any requirements have been fulfilled.  Alternatively, the exit route might be from the sale of the same or another property. So, short term lending is designed to fulfil the need or desire to act quickly.

Finally, this type of funding has become more competitive over the years with some now offering rates as low as 0.43% per month for the right customer.  Obviously, individual terms and conditions apply and with these types of offerings always seek professional advice!

The 'Boris Bounce' is having an effect!

The ‘Boris Bounce’ really seems to be hitting positively as activity in the mortgage market is booming.  We’ve seen an amazing first two months of the year, with February exceeding expectations (thank you to all who are dealing with us and well done team!).

But also for you, the consumer, this is a fantastic time to be looking at your finances.  Rates are low and lenders are looking at many different ways to attract new customers and keep existing (which I would not have said only a year ago).

Whether you want to fix your monthly payments for a period of time, or you fancy a low rate tracker mortgage, or maybe both - a tracker rate with the option to fix later on, there are plenty of great products currently available.  Many lenders are offering superb remortgage opportunities with minimal costs to change, including free standard valuations (lender survey on your property) and legal costs (solicitors or conveyancer to register the charge in the new lenders name).  Rates are competitively low and mortgage product choice is at its highest for some time.

It also surprises me how many people don’t think they can get a mortgage.  Pepper Money recently carried out some research that suggested 93% of people surveyed did not know they may get a mortgage with a CCJ registered as recently as 6 months ago. 

Another example, with our friends at Kensington, allows for some historic issues over three years ago and will look at rates starting from 4.69% for those with just a 10% deposit and no lender completion fee.  Terms and conditions obviously apply, but good to have options.   

Finally, a number of lenders don't use credit scoring systems (computer says no!) 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.

Age should not be an issue when getting a mortgage.

Just because you’re over 65, it doesn’t mean you can’t have a mortgage!  But sometimes it can be harder to get a mortgage that is right and affordable, due to age restrictive terms, once you reach a certain milestone with the high street lenders.

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.  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 necessarily 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 adviser to review all possibilities.

According to some industry reports, there are an estimated 100,000 people due to come to maturity on their interest only mortgage in 2020, aged over 60.  Many will probably have no way of repaying their interest only mortgage.  Some will have endowments that didn’t meet expectations, or maybe the house has not increased in price as much as hoped.  Stricter mortgage rules and lending criteria has made it harder for those over 65 wanting to re-mortgage.  However, despite the high street being almost a closed entity, there are plenty of other options (not that your current lender is likely to advise them - they just want their money back!).

The lender has the right to request repayment of their loan at end of the mortgage term.  If the customer has no way of repaying this and has just continued to pay the interest over the last twenty-five years or so, they face the possibility of having their home repossessed or being forced to move out.  On the high street, the end of the loan term will normally hit those aged between 65 to 75.  This is not new news but does highlight that many people are still burying their head in the sand and hoping this will go away or the lender may be lenient.

There are a number of lenders that recognise that 'normal retirement' age is no longer set in stone and people continue to work long into later life. These are not high street names and as such, are not known to everyone.  But with some having no maximum age at all, at least they will consider helping out and could keep you in your family home for years to come.

Visits to property website up 7% on January 2019.

I’ve just read that visits to Rightmove surpassed 150 million for the first time in January, making it the busiest month ever recorded. There were said to be over 152 million visits to the property portal in January, a 7% increase on January 2019. The top five busiest days ever on Rightmove were all said to be between 21st and 29^th  January, with Wednesday 29^th topping the list. There were reported to be over 5.7 million visits on that day, up 9% on the previous record set back on 24^th April 2019. Time spent by home hunters on the site was up 4%, with people spending a total of 1.17 billion minutes on there.

These are pretty remarkable numbers and ones that will hopefully relate into the prospect of rising activity levels, especially in the lead up to a usually active late Winter/early Spring period.

Unless you are incredibly lucky, you’re probably going to need a mortgage to buy your dream home.  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 about the Bank of England base rate being held at 0.75% again, or how much profit the banks are currently making! Or what a mate says in the pub!

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 or a limited set of products.

I guess what I am saying is think before you agree to use any in-house service of this type as overall, it may not always be in your best interests, and as this is the largest financial transaction you will be involved in at the time, it is important to feel comfortable about it.  Also, to have some independence in the event of any concerns or disputes makes great sense.

Finally, make sure you ask questions!  For example, if you’re not being offered ‘whole of market’ products and instead are being offered mortgage products from a ‘limited panel of lenders’, you may be missing out on the best product available to you. You are, after all, in the driving seat.