Author: Kristian Derrick

Family Springboard Mortgages Explained

by Kristian DerrickPosted on

Is a Family Deposit mortgage an option?

So, as a First -time buyer who wants to own their own home, you’ve started house-hunting, but you are struggling to get that all important deposit together.  What options do you have? One realistic option may be a family deposit mortgage.

That is of course if realistically you have family members who want to help you get that deposit together? Something you may need to check first before you go feet first into this!  It’s different than a Gifted Deposit because they get the money back and in effect, you are getting a 100% mortgage on the property you are buying.

Not all family members are in the financial position to gift away thousands of pounds but if they do have savings themselves and they are comfortable with saving it with a mortgage lender using an alternative account and way of investment, they could still provide the help that you need on the understanding they get that money back.

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What is a Family Deposit Mortgage?  

The principle of the Family Deposit Mortgage is quite simple, with the assistance of your family member(s), this means you could apply for a mortgage even if you haven’t managed to save any deposit yourself. Therefore, you can still get your all important foot on the property ladder.

However, the criteria of the scheme differs from lender to lender and it is also worth considering that not all lenders actually offer this type of product.  The helper of the deposit provides their contribution which is held in a savings account with the lender and they earn interest on the money.

This needs to be held for a certain time set out by the lender and after that time period, they get their money back with interest.

With some lenders, the Family Deposit may have to be 10% and with some lenders, their criteria may be 20%.  1 lender may need the money to be held in a savings account for 3 years and another may require it be held for 5 years.

The mortgage product you have will tend to be fixed for the duration of the time the helpers money needs to be tied up for.  So if it’s 5 years, you would have a 5 year fixed product.

A mortgage application can take some time to be approved, so make sure you are well prepared, that means ensuring you have your credit score meeting requirements of your lender. Also, it’s a good idea to familiarise yourself with the fees involved when buying a property.

There are different types of mortgages too, some other common types of first time buyer mortgages include the following:

Things for the person providing the Family Deposit to consider.

The amount of deposit as a % of the property being purchased is set out by the lender and as already mentioned lenders have different requirements.  This money is invested in an account with the lender and interest will be earned at a certain rate.

Again, these rates of interest will differ depending on the lender.  What is really important is the person who is providing this deposit will be investing it for a set period of time and will not be able to withdraw this money before the end of that fixed agreement.  This is usually either 3 or 5 years, depending on lender.

Very importantly, some lenders have restrictions on the amount of investment being returned or interest earned. i.e there must not have been any missed mortgage payments for example.  The Person providing the deposit money should seek independent advice once they have the full terms of conditions from the lender regarding their investment.

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Do they have a legal interest in the property?

The property is owned by the borrower.  Only those that are named on the mortgage have any legal right over the property. The person who is assisting with the Family Deposit, has no legal interest in the property.

Does the property I am buying affect a Family Deposit Mortgage?

In some scenario’s yes it may do.  Some of the lenders offering these types of mortgages, for example, may not lend on new build properties.

I have a family member that wants to help, what are the next steps?

This is where talking to an independent Mortgage Broker will certainly bring you added value and save you lots of time. We have access to over 90 lenders currently and the products that they offer differs from Lender to Lender.  As I have mentioned earlier on, Family Gifted Deposit mortgages are only offered by a handful of lenders and their criteria is different with each one.

We want to establish what your individual circumstances are, discuss with the person who is wanting to assist with the Family deposit mortgage how much they are happy to invest and for how long and then we will discuss the best options with you.  It is a regulatory requirement that we get from you all the information we need in order to give you the best advice possible.

This means, we will go through your personal details, income, credit commitments, monthly outgoings, check affordability and also consider your overall credit worthiness.

Our expertise will mean we will ensure we place you with the right lender for your individual circumstances.

Find a Family Deposit Mortgage Today

I own my house outright and want to buy another UK

by Kristian DerrickPosted on

Reasons for remortgaging to buy additional property.

There are a number of popular reasons why people would want to remortgage their current residential home in order to purchase an additional property. These could be:

  1. Raising money on your current property to be an investment property on a Buy to Let basis.
  2. You may want to raise money to buy a Holiday Let, which again is an investment but differs from a Buy to Let as this is aimed at short-term letting for people to use as a holiday rental property.
  3. You may fancy that holiday home by the sea and want to remortgage your current property to help you achieve that by way of a 2nd residential mortgage.
  4. You could remortgage your existing property for a Let to Buy purpose. This is where you would rent out your current home to purchase another property for yourself as your main residence.
  5. You may want to remortgage your current residential property to buy a family member property for their use.

How do I go about remortgaging to buy another property?

The first step is to speak to us and get the best advice. This is something we help many customers with on a regular basis and will know the best route for you to go down depending on your individual circumstances and requirements.

We have access to over 90 lenders and each lender’s criteria can differ significantly so we want to ensure we place you with the right lender for you in order for you to be successful in remortgaging to buy another property.  For whatever your reason is.

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Things to consider?…

Equity

You will need to understand how much equity you have in your current property. In other words, the value of your current home less any mortgage or secured loans you have against it. This is known as “LTV” (Loan to Value)

I am going to give you a realistic example…Let’s say your current residential property is valued at £350,000 and you have checked your balance on your existing mortgage and you owe £105,000. This equates to 30% LTV and the amount of equity you have in your home is £245,000.

We go through your individual circumstances and affordability checks and establish exactly what your reason is for the remortgage and then from our research, we find a lender for you that would be happy to remortgage you with a 90% mortgage of your current property.

Your new mortgage amount would be £315,000, your existing mortgage is cleared of £105,000 and you would then be left with £210,000 for your additional property purchase.

Rates being offered by a lender will usually lower the more equity you have in your property. You may therefore get a better rate in this example if you were to remortgage on 80% of your current property. Your new mortgage being £280,000, but this would then mean you had the lower amount of £175,000 remaining for your additional property purchase.

Stamp Duty

We don’t want this to come as a nasty surprise when buying an additional property so we always ask you to check what your Stamp Duty Land Tax liability will be when considering purchasing a property, especially an additional property.

By doing this research at the early stage in the process may have an impact on the price of the property you are looking to buy as you may want to keep some of the money back to pay for such a cost.

For the most up to date information, we advise you to visit the Government website below. In addition to this, it is always worth checking what Stamp Duty Land Tax will be due with your conveyancing solicitor as this is paid to them upon completion so they can offer advice on what you will need to pay depending on the reasons for the additional property purchase.

https://www.tax.service.gov.uk/calculate-stamp-duty-land-tax/#/intro

As a guide please see the table below** This is correct at the time of printing but may be subject to change so please do not rely on this. Please check independently before committing to any property purchase as to what the stamp duty Land tax liability is for yourself and your individual reasons for the additional property purchase.

Property PriceNormal RateAdditional Property Rate
Less than £125k0%3%*
Between £125k and £250k2%5%
Between £250k and £925k5%8%
Between £925k and £1.5m10%13%
Over £1.5m12%15%

*If you are purchasing an additional property that is less than £40k, this will not attract additional Stamp Duty Land Tax. For any purchases which are between £40k and £125k for an additional property, the Stamp Duty Land Tax would be 3% of the full purchase price.

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Related reading: 

Affordability and personal circumstances

These go hand in hand and a mortgage broker will do the very same checks whether you are a first-time buyer or if in fact, you are looking at remortgaging to buy additional property. It is a regulatory requirement that we get from you all the information we need in order to give you the best advice possible.

This means, we will go through your personal details, income, credit commitments, monthly outgoings and also consider your overall creditworthiness. Depending on the reason as to why you are looking to remortgage to buy an additional property, we may also need to consider future monthly costs that will come with owning that particular property.

The affordability checks would be different if you are remortgaging to purchase a Buy to Let Investment property as the lender, amongst other factors, will look at the rental income that the property being purchased is likely to achieve.

However, if you were remortgaging to buy yourself that lovely holiday home you would need to also cover monthly running costs of both properties, so a lender is likely to include these to check you meet their lending criteria.

The bottom line for them is why are you remortgaging to purchase an additional property? Do you have enough equity in your current home to do this and are you able to afford it? Ruban Selvanayagam from Property Solvers also adds that, other times, people look to remortgage to fund an auction or investment property. The lender may then want to know more about the specifics here.

We are here to check if you meet the criteria, find the best lender for you, and provide them with the evidence that will support your application.

Should you have any further questions about a Remortgaging to buy an additional property, whatever the reason may be, please get in touch and we will do our best to help.

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Mortgages for Part-Buy Part-Rent (UK Guide)

by Kristian DerrickPosted on

What is a Shared Ownership Property?

When searching the property websites, there will be Shared Ownership properties which catch your eye as they are often very reasonably priced compared to similar properties within that area.

Read that property advert in a little more detail and in fact you see in the write-up that the price advertised on the property is for “Shared Ownership” and the sale price will be for a percentage share. Usually between 25% and 75%.

The remaining percentage will be owned by a housing association.  It’s a kind of somewhere in between buying and renting which appeals to some people who want to get on the property ladder.

The property may very well be a new build property where the developer is working in conjunction with a housing association and offering the Shared Ownership properties as a way of affordable housing.  There are also re-sale Shared Ownership properties, in other words, used or 2nd hand properties.

Who can buy a Shared Ownership Property?

Shared Ownership properties are often attractive to people who may not be able to afford to buy a property in the usual way with a deposit and a mortgage and own the property outright. You will still need a deposit though and I will go through this a little further on.

The Government set out guidelines for local housing associations as to who is eligible to purchase a Shared Ownership property. The current guidelines are as follows.

The Household income is £80,000 or less.  (This is different in London where this figure is £90,000 or less).  In addition to this earnings cap, the following also applies.

You are either a First Time Buyer or a current non home-owner who cannot afford to buy a new home in the standard way.

You are an existing shared owner.

If you are over 55 there is a slightly different scheme called the Older Persons Shared Ownership Scheme.  The difference with this scheme is the maximum percentage you can own of the property is set at 75%.

If you’re wondering how long a mortgage application takes to be approved, the answer is that it depends, you can improve your chances by ensuring you meet your lender’s credit score requirements.

It’s also a good idea to familiarise yourself with the different types of mortgages and the fees involved with buying property.

Types of First Time Buyer Mortgages

For a more in-depth look into some common types of first time buyer mortgages, check out our following guides:

Get a Shared Ownership Mortgage

Can I buy a bigger percentage of the property?

Yes, you can! This is known as “Staircasing”. However, you will have needed to have had your Shared Ownership property for a specific amount of time before you can look to buy a further percentage.

This qualifying time period will be set out in the terms of your lease.  If you want to buy an additional share in the property, the share value will be based on the current market value of the property.  Each time you want to buy a bigger share, you are likely to incur the cost of the valuation fee.  Your mortgage requirements are likely to change also so you will need to get advice from your mortgage adviser on this.

Of course, one benefit of buying a bigger share is that your rent will reduce with the housing association.  If you get to the stage where you own 100% of the property, then you will have no rent to pay at all and you will be a fully-fledged homeowner!

Pros and Cons of Shared Ownership?

If you are fed up with renting or the prospect of owning your own home seems a million miles away, then it can help you get on the property ladder. Also, as it is just a share of the property you will own, then your mortgage amount will be much smaller, your deposit amount is likely to also be smaller.

You do have the option to buy the property outright as I mentioned earlier by Staircasing, so as your financial position changes this can be something that is achievable in the future.

Although you do not own 100% of the property, you are responsible for the full maintenance costs of the property, whereas if you rented you are likely to have your landlord to deal with these.  As mentioned earlier the valuation fees incurred should you wish to increase your percentage share can be seen as a downfall.

The staircasing share will depend on the market value of your property at that time, which may mean it is beyond your affordability to buy that extra share.  The rent charged by the housing association can also mean, in addition to your mortgage payment – it could work out less attractive cost-wise as you initially thought.

 Get a Shared Ownership Mortgage

How does a Shared Ownership Mortgage work?

You will own a percentage of that property using your deposit and a mortgage to purchase it and you will pay rent to a housing association on the remaining amount.  The percentage share that you own is usually between 25% and 75%.

An example being:

  • Property advertised £75,000 which is a 50% shared ownership property. (Full value of the property being £150,000).
  • You have 10% deposit to put down (10% of your share price) £7,500
  • Your mortgage borrowing amount is £67,500
  • You will pay a monthly mortgage amount to your mortgage lender and in addition, you will pay a rent to the housing association.

It is worth noting, the rent can differ greatly on property to property and it is set out by the housing association.  One of the first questions you should ask when considering a Shared Ownership property is the monthly cost of this rent.  Also, as the property is likely to be leasehold you will also need to know how much the ground rent and the cost of any service charges applicable.

How do I look into a Shared Ownership mortgage?

Not all lenders offer Shared Ownership Mortgages, so this is another area where a Mortgage Broker will offer added value and save you lots of time. We will discuss your requirements and very early on in the process discuss your deposit, the percentage share you are looking to obtain a mortgage for and assess your affordability.

To accurately do this and to avoid disappointment further down the line we will need to include accurate costs such as rent, ground rent and any service charges so the more information you can obtain from the housing association the better as it helps us paint the clearest picture to the lender with the aim of getting your mortgage accepted.

These will all be included as monthly commitments and will form part of the affordability check.  There are some lenders that will require a larger deposit than others so this is certainly one key factor that we will look at to ensure we place you with the right lender for your individual circumstances.

Should you have any further questions about a shared ownership mortgage, please get in touch and we will do our best to help.

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Gifted Deposit Mortgages & Tax Implications

by Kristian DerrickPosted on

Why do we need to know where your deposit has come from?

As your Mortgage Broker we want to do our very best to get to know you, establish your mortgage needs and help you to take the next step on the property ladder.  To do this, we will go through your requirements, discuss your circumstances, and establish your ability to lend the money you need.

(you could start this journey by completing our simple form here) Part of this is us needing to know what your deposit is made up of and understanding where it is coming from.

I do just need to point out we aren’t just being nosey, honest! This is a regulatory requirement and it is something that your lender, whoever that may be, will need from us when we submit your mortgage application.

Your deposit could be in your savings, a Help to Buy Isa, Equity from your existing property, a divorce settlement, a lottery win (we don’t get many of these needless to say) or in fact a Gifted Deposit.

We ask this early in the process as we want to make sure we are placing you with the right lender.  I’ll go into this in further detail a little further on.

What is a gifted deposit mortgage?

One of the most difficult stages of getting on the property ladder, or even upsizing as your family grows, is having that money to put down as a deposit.  Saving that amount can be hard to do and a challenging, lengthy and sometimes the most frustrating part of the house buying process, especially for first time buyers.

However, all is not lost, and help is out there if you are lucky enough to have somebody in your life who thinks enough of you to want to give you a leg up on the property ladder.  That’s what a Gifted Deposit will help do for you.

It is an amount of money that will either enhance your own deposit or can be gifted to you as your full deposit to help you get the mortgage for the property you want to buy.

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Is it a Loan??

No… absolutely not and it’s really important to emphasise the word “Gift”!

If it were a loan, then it would be calculated as a monthly commitment that will need to be repaid and could affect your affordability in borrowing the amount you need to buy the property.

The Gifted Deposit is given to you on the understanding that it is exactly that, a Gift and will not need to be repaid.

What evidence of the Gifted Deposit will be needed?

The donor of the Gift will need to provide written confirmation of this, confirming that the Gifted Deposit does not have to be repaid nor do they hold any legal charge or legal interest in the property being purchased.

The donor will confirm in writing the amount of money they wish to Gift and what relationship they have with you, the applicant.  They will also need to provide evidence of the Gifted Deposit Funds by way of a Bank Statement as proof of where the monies are coming from.

It can differ from lender to lender how this information is captured, some lenders have their own Gifted Deposit templates which you will be provided with by your Mortgage Broker and other lenders will ask for a written letter from the donor.

It’s also worth noting your conveyancing Solicitor will do their own checks regarding the source of the deposit for Anti-money laundering procedures so don’t be surprised if you have to provide additional evidence to them further down the line when they are preparing your legal work.

They are likely to need ID from the donor amongst other evidence of where the gift is coming from. However, if we already have a lot of what they need on file which we have obtained to support your mortgage application and with the authorisation from the donor, we will do our best to help you in dealing with your solicitor to progress things as quickly as possible.

Does the Gifted Deposit have to be a certain percentage of the mortgage amount?

The Gifted Deposit amount can be as much or as little as your donor is happy to Gift you.  It can top up what you already have, even if your deposit on your new property is coming from the equity in your current house and you are upsizing for example.

It’s worth talking through with your Mortgage Broker the current rates depending on Loan to Value (The amount of deposit you have as a % of the property you are buying. For example a £20,000 deposit on a property of £200,000 is a 10% deposit, therefore, LTV is 90%.)

The more deposit you have, the better rate you get and often it can be a difference of a very small amount that will get you into that next LTV bracket and possibly a better rate so definitely consider this when thinking about how much Gifted Deposit you may be able to receive in addition to what you may already have or be able to contribute yourself.

Are there any Tax Implications regarding a Gifted Deposit?

A Gifted Deposit could have Inheritance Tax implications.

You, the home buyer and recipient of the Gifted Deposit may have to pay Inheritance Tax on the gift if the donor was to die within 7 years of gifting you that money.  If, however they live beyond the 7 years of you receiving the money, then there will be no Inheritance Tax due.  It is always advisable for the donor providing the Gifted Deposit to seek further advice from HMRC or their financial adviser regarding this.

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Who is able to provide you with a Gifted Deposit?

This is another area where a Mortgage Broker will certainly bring you added value and save you lots of time.  I mentioned it briefly at the very beginning and it is why it is important for us to understand early on in the process the source of your deposit.

We have access to over 90 lenders currently and their criteria on various aspects of Mortgage borrowing differs from Lender to Lender.  One of them certainly being Gifted Deposits.

Some lenders will only accept a Gifted Deposit from an immediate family member.  Others view this differently and will accept from a third party such as a family friend.  Some lenders will accept the Gifted Deposit from more than one donor if you are lucky enough to have a number of people wanting to gift you the money.

Our expertise will mean we will ensure we place you with the right lender for your individual circumstances.

Remortgaging To Release Equity From Your Home

by Kristian DerrickPosted on

Equity is the amount of your property you own outright. If you paid a deposit when taking out your mortgage, then your equity is automatically that amount.

So, for example, if you paid a 5% deposit, then you have 5% equity. The remaining 95% is made up of your mortgage.

The more you pay off your mortgage, the more equity you will accumulate as the balance of the mortgage decreases.

Also, if the value of your property increases, then so too does your equity share.

There are numerous reasons why you might want to remortgage to release equity and this varies from person to person.

Some decide to remortgage to make home improvements, remortgage to buy new property, while others may want to use the money pay off other debts, and some even remortgage to give the money to their kids to put down a deposit on a property.

One thing you can be certain of is that the lender will always ask the reason for the remortgage.

How does remortgaging to release equity work?

The calculation to see how much equity you hold is simply subtracting your outstanding mortgage amount from the current market value of the property.

For example, if you purchase a house for £200,000 with a mortgage of £150,000 5 years ago.

In those 5 years, you have paid £20,000 off your mortgage, leaving it at £130,000.

If the value of your home has increased to £250,000 and the amount you owe on your mortgage has reduced this means you have increased equity.

Your equity was initially £50,000 but is now £120,000.

Remortgaging to release equity may prove difficult the less equity you have, and you may run into complications if you have had a change in personal circumstances since you applied for your initial mortgage.

However, for many, the process is straightforward.

  • If you are remortgaging for the purpose of releasing funds, then your first step in the process is working out the loan to the value of your property. To do this you divide the loan amount by the current value of your property and multiply that number by 100.
  • Your broker will start the application process by gathering all the information your lender will need and in turn, will submit your application.
  • Many lenders offer a free valuation and free legal fees.
  • On completion of the remortgage, the solicitor will pay the lender and any remaining money will be placed into your bank account.

Contact us to discuss remortgaging to release equity

Can I borrow more than I need?

It is important when remortgaging to work out exactly how much you want to borrow.

If you want to borrow a bit more then usually it isn’t a problem if you meet the lender’s criteria and pass their eligibility assessments.

Most lenders will consider the following when reviewing your remortgage application:

  • Your affordability (Income vs Outgoings)
  • Reasons for borrowing

Your affordability has a major impact on additional borrowing. The lender will want to ensure that you can afford to repay what you borrow.

They will take other debts etc. into consideration when assessing your eligibility.

In most cases, to give a rough estimate of what you can borrow, the lender will take your income and multiply that by four.

Equity in this instance is your biggest asset. The more equity you have the more you may be able to borrow.

Remortgaging and borrowing a little extra is usually a good way to release some of the equity you have accrued over the years.

If you would like to discuss your affordability or just remortgaging in general, contact one of our advisors who will be only too happy to assist you with any queries you might have.

It’s a good idea to familiarise yourself with the costs of remortgaging, especially remortgaging with bad credit since you are likely to be offered a higher interest rate.

Remortgage or secured loan for additional borrowing?

Other options may be available to you, i.e a further advance with your existing lender or a secured loan as a remortgage it is not always the most cost effective.

Remortgaging isn’t the only solution to raise capital from your property.

Recommended article: Check out the main reasons for remortgaging.

Should I go for a remortgage or equity release?

This depends solely on what you want to get out of the remortgage. If you wanted to just take out a different mortgage on the property you currently own, then remortgaging is the way to go.

This can be as easy as swapping your mortgage to one with a better rate, sometimes even with the same lender (a product transfer). It is also possible to release equity by remortgaging.

However, if you are looking to swap lenders then please be aware that there can be early exit fees as part of the terms of your current mortgage.

Please check the terms and conditions of your mortgage before making any decisions.

It is always worth factoring in the cost of these added fees to ensure that the process doesn’t leave you in a detrimental position.

Related reading: 

Will I be eligible for remortgaging in order to release capital?

Most lenders have an eligibility assessment that they will carry out to determine if you are suitable to remortgage to release equity.

The assessment is often carried out based on the following factors:

  • Credit history
  • Employment status and Income
  • The amount of equity you currently hold
  • Type of property you have
  • Your age

Contact us to discuss remortgaging to release equity in your home – our expert team of mortgage advisors will be able to provide more information and start your application.

Contact us to begin your application

How To Remortgage to Buy Another Property UK

by Kristian DerrickPosted on

Yes! It is possible to remortgage to buy another property and quite often, this is the best reason to remortgage. Whether you want to buy to let or buy a second home, then remortgaging is for you.

All remortgage applications are assessed based on your individual circumstances and your affordability.

However, there are other elements that the lender will consider such as the purpose of the remortgage, type of property you are purchasing, how much equity you have in your current property and the loan to value ratio.

Not everyone will remortgage to buy a new home.

We have listed the most popular reasons for remortgaging to buy a second property below:

  • Buying a holiday home – Purchasing a property for holidays, in addition to the one you already own
  • Buying a holiday let – Buying a property to rent to holidaymakers on a short-term lease
  • Invest in Commercial Property – Purchase property to use as a small business hub or office.
  • Investing in a Buy to let – This helps you to release capital on your current property to buy a second property with the aim of renting it out
  • Let to Buy – Renting your home in order to purchase another one
  • Home improvements – maybe you want an extension or new roof?

How can I remortgage to buy another property?

When you apply for remortgage to purchase another property, lenders will carry out the same assessments and checks as they would if you were applying for any other mortgage.

Factors such as income, affordability, other debts, credit rating and loan to value will all be assessed.

However, lenders will also consider the reasons for your application at this point.

So, if you are remortgaging to purchase another property, then the lender will also consider this in their evaluation.

To discuss rates, fees and eligibility, contact one of our specialist advisers who are on hand to help you get the best deal available on the market to suit your needs.

It’s a good idea to familiarise yourself with the costs of remortgaging, especially remortgaging with bad credit since you are likely to be offered a higher interest rate.

How important is Equity when remortgaging to buy another property?

Equity is a very important factor in the lender’s assessment. Firstly, it is important that you know what equity you have in your existing home.

The calculation to see how much equity you hold is simply subtracting your outstanding mortgage amount from the current market value of the property.

If you have already paid off your mortgage in full and own your property outright then it is ‘unencumbered’.

There are mortgages available for customers with unencumbered properties.

Basically, lenders will lend against your equity in a remortgage so that is why it is such an important part of the process.

You cannot remortgage if you have no equity however, in some cases you can remortgage if you have a little equity. It may be more difficult to find a lender if you have a higher LTV.

If you only have a small amount of equity, you may pay higher rates.

The lower your LTV ratio, the more likely you are to qualify for the better rates and deals available on the market.

Related reading: 

How much can I borrow?

This depends on your affordability. If you want to remortgage in order to purchase a second property, then you must remember that you will be paying more than you are currently paying due to the fact that your new mortgage will be significantly larger than your current mortgage.

Your affordability has a major impact on borrowing. The lender will want to ensure that you can afford to repay what you borrow.

They will take other debts etc into consideration when assessing your eligibility.

In most cases, to give a rough estimate of what you can borrow, the lender will take your income and multiply that by four.

Please note that this is only an estimation. There are lenders out there who will lend in excess of four times the amount of your income.

To give an example:

You earn £25,000 a year and the lender is willing to lend you 4 times your salary

£25,000 x 4 = £100,000 Maximum Loan Amount

Some lenders will take bonuses or overtime into consideration which could see you eligible to borrow more.

If you would like to discuss your affordability or just remortgaging in general, contact one of our advisors who will be only too happy to assist you with any queries you might have.

Contact us to discuss remortgaging to buy another property

Can I remortgage to buy a second home if I have a poor credit history?

The answer to this question is yes, you can remortgage to buy a second property even if you have a less than perfect financial past.

However, there are certain things that the lender will need to know about your credit issues.

Whilst some credit issues weigh heavier on your credit report than others, it is worth mentioning here that the type of credit issue you have experienced may determine the success of your application.

Below is a list of issues that may make remortgaging to buy a second home a bit more difficult:

  • Bankruptcy
  • CCJs (County Court Judgments)
  • Defaults
  • DMPs (Debt Management Plans)
  • History of mortgage arrears
  • IVAs (Individual Voluntary Arrangements)
  • Poor credit score
  • Previous Repossession

Bankruptcy, for example, has a bigger impact than say a missed or late payment but all these things are carefully considered by the lender when reviewing your mortgage application. The length of time since the adverse credit issue will also determine how much of a risk you are to the lender.

For example, if your credit issues are older than 6 years then you may be seen as less of a risk. Adverse credit mortgages often carry higher interest rates, but this doesn’t necessarily mean that you won’t

qualify for a competitive deal. Lenders will also look at the amount of outstanding debt you have on credit cards or loans.

When the lender calculates your affordability, they consider the repayments you are making to your creditors when examining your outgoings.

If you have a high balance on a credit card for example, then it might be in your interest to reduce that amount before you apply for a remortgage.

For example:

You earn £25,000 a year but have credit card debt. The monthly repayment on those cards is £200. The lender will likely take these repayments into consideration when calculating how much they are willing to lend you.

If you feel that your poor credit history may hinder your chances of a remortgage, then do not hesitate in contacting a member of our expert panel to discuss your circumstances.

All of our advisors are professionally trained and have the expertise to answer any questions you may have about the remortgaging process.

Related quick help remortgage guides: 

I have early repayment charges to pay on my current mortgage. Can I still remortgage to buy another property?

If you will be penalised financially for paying off your mortgage early, then you have to consider if it is better to pay the charges or stay in the mortgage until you will no longer incur a penalty for remortgaging.

Everyone’s circumstances are different, but our advisors can help you understand these charges better and assist you in weighing up your options.

A further advance or secured loan may be available to you.

Mortgaging for a Buy to Let Property

You can fund the purchase of another property through remortgaging and quite often people do so for the purpose of letting that property out to tenants. You may also be more beneficial to have a buy to let mortgage.

In this instance, lenders will look at your affordability based on the rental income you can achieve on the property.

In the past, lenders would calculate the mortgage based on rental income but with newly introduced guidelines, lenders have to consider other factors and carry out a more stringent assessment.

There are now minimum stress tests as well as changes in the amount of tax that has to be paid.

In addition to this, there are new procedures in places that impact how lenders approach applications from landlords who already have 4 or more buy to let properties.

In cases like this, the lender has to consider the landlord’s portfolio in its entirety in order to calculate the total income, LTV and earnings involved will all the properties as a whole.

Contact us to start your remortgage application

Unencumbered Mortgages – Remortgage a House You Own

by Kristian DerrickPosted on

If you own a property outright and want to secure a mortgage, the process is usually straightforward.

The risk to the lender is considered low, so it’s typically easier to secure a remortgage on an unencumbered property than it is to secure a mortgage to buy a new property.

Although, even though an unencumbered mortgage is usually very easy to secure, it shouldn’t be something you rush into. Similar to a normal mortgage, it’s a financial commitment.

If you are certain you want to pursue an unencumbered mortgage, it’s a wise idea to look for the best deals (which Mortgageable can help you with).

What is an unencumbered mortgage?

Put simply, unencumbered is a word that is used for a property that is mortgage-free. Any outstanding loans and charges have been cleared on the property.

If you have paid off your mortgage or if you paid cash for your home, then your property is now unencumbered.

There are many reasons why people would want to remortgage on an unencumbered property.

Some may wish to buy another property, others may want to renovate their current home, or make a considerable purchase in the form of a car. Some people even remortgage to consolidate any other outstanding debt they may have.

Unencumbered mortgage lenders

If you own your property outright, then you will likely have some very good deals available to you. Yet, it’s important to bear in mind that some lenders will consider it a new mortgage rather than a remortgage.

This doesn’t really have much of an impact, but it’s still important to familiarise yourself with the process.

In practice, the term ‘remortgage’ is defined as replacing an existing mortgage with a new one. As your home is mortgage-free, a true ‘remortgage’ is not actually available. Ultimately, the process is very similar, which is why many lenders refer to it as a remortgage.

Since you have paid off your mortgage in full and now own your property outright many lenders will view you as low risk. As a result, you should face minimal barriers to securing an unencumbered mortgageable and the team at Mortgageable will be more than happy to assist you.

Raising capital from a mortgage free property 

Those who own their property outright are in a much stronger position from a lender’s perspective as you have no outstanding debt left to pay on that property.

However, just like with any other mortgage, the reasons for wanting to remortgage and your individual circumstances will determine the likelihood of your acceptance for a mortgage.

Related reading: 

You might wish to consider the following when deciding whether or not you want to remortgage on a property you already own outright:

  • Why are you applying for the mortgage?

This might be for a number of reasons. Perhaps you wish to purchase a larger home or even consider a buy to let.

Home improvements, holidays, new cars, paying off debt are all popular reasons however, it is worth noting that your reason must make financial sense.

  • Can you afford it?

You own your property outright. Do you really want to enter into a new financial commitment? Can you afford the monthly repayments?

These are the types of questions you can expect a lender to ask you when determining your affordability got the new mortgage, so it is worth considering the answers to these questions before you apply.

If you already have a lot of debt then remortgaging an encumbered property might not be the best thing to do however, this will depend on your individual circumstances.

There are other options available if you need to release some capital to pay off other debts. Contact one of our advisors if you are in this position to discuss a debt consolidation mortgage.

  • Can you take the risk?

With every mortgage comes risk. If you have already paid off your mortgage you own your property outright then you are in a very secure position.

Taking out a new mortgage will increase your risk. Even if you are financially stable, it is worth remembering that if you do not keep up your monthly repayments then you may lose your home due to repossession.

Need more help? Check our quick help guides: 

Apply for a mortgage on an unencumbered property today

I own my property outright, can I remortgage?

A mortgage you take out on a property you own is not much different from a normal mortgage. That means lenders will be carrying out a thorough analysis on all the usual criteria including your income, affordability, loan to value (LTV ratio), and take into account any debts.

Other factors can also have an influence including the purpose of the remortgage and your age. There are many different factors that can come into play, but if you would like to find out exactly what you can expect, feel free to contact one of our advisors for a no-obligation chat.

Can I remortgage a property I have inherited?

Difficulties may take the form of family members or estate restrictions and charges that you were otherwise unaware of. There is the matter of transferred ownership that has to be considered.

This can be a lengthy process, but your solicitor will represent you during the process and advise you of what you have to do within the regulations of the law.

Sometimes, when people inherit a property, they want to remortgage to release some capital however this is not always simple due to the fact that most lenders will want you to have owned the property for at least 6 months before submitting your remortgage application.

We have access to many specialist lenders who deal with inherited property remortgages. Contact one of our advisors today to discuss your options.

Can I remortgage for investment?

There are many investors who buy decrepit properties for cash then make the necessary repairs and refurbishments before putting the property on the rental market.

These investors usually buy the property with cash. The reason being, some properties are considered non-mortgageable due to a state of disrepair.

Cash purchases also tend to go through the process much quicker than a mortgage. Through renovation or refurbishment, the investors are increasing the value of the property and can then opt to remortgage if they wish to release funds for their next venture.

If you purchase the property with cash, then it is deemed unencumbered. However, if you want to move into the property yourself,  or if you wish to rent it out to others, then remortgaging may be a better option for you.

You can contact one of our expert advisors for professional advice.

Unencumbered mortgage with bad credit

If you have experienced difficulty in the past obtaining credit due to a poor financial history, then it may be challenging to obtain a mortgage although having adverse credit does limit the number of lenders available to you, there are specialist lenders on the market who can help.

The age of your credit issues will have a major impact on your level of acceptance. For example, if your credit issues occurred more than six years ago and your financial conduct since then has been excellent, then you should be eligible for a competitive deal from the lenders.

The type of issue you faced will also have an impact on your eligibility for acceptance, and or a good deal. For example, if you have a default or late payment recorded on your credit file, whilst this will have a negative impact on your application, it is less severe than a notice of bankruptcy on your record.

Our advisers are available to help you with any questions you may have about your credit score. Contact us to find out how to maximise your chances of obtaining an encumbered mortgage even with adverse credit.

How can I better my chance of qualifying for an unencumbered mortgage?

If you apply for a mortgage on an unencumbered property, lenders will carry out the same assessments and checks as they would if you were applying for any other mortgage. Factors such as income, affordability, other debts, and loan to value will all be assessed.

Lenders will also consider the reasons behind your application at this point. If, for example, you are remortgaging for a buy to let, then lenders will also consider this in their evaluation.

The list of factors that may have an impact on the deals you will be eligible for is ongoing, however, some of the most common are, employment status, age, credit rating, and other debts.

Related guides: 

Contact us to find out more about unencumbered mortgages

Give us a call on 03330 90 60 30 to speak to an advisor, or contact us for mortgage advice that’s personal to you and takes your credit history into account. That way you’ll know where you stand in the mortgage market and we can guide you on your route to securing a suitable mortgage.

Remortgaging for Home Improvements UK

by Kristian DerrickPosted on

In order to carry out and pay for home improvements, many homeowners wish to release equity in their property by remortgaging.

The funds are then used to make improvements to the property inevitably, increasing the value of the estate.

This is just one of the many reasons for remortgaging, some other common reasons people remortgage their homes include releasing equity or to buy new property.

Is it a good idea to remortgage for home improvements?

All mortgage applications are assessed based on your individual circumstances.

It is at this point of assessment where the lender will tell you if a remortgage for home improvements is feasible.

For many, renovating their current property seems less of an expense and hassle than moving home.

For example, you may wish to add a bedroom to your property.

In this case, it would be more viable to build an extension than move to a home with an extra bedroom.

You also need to consider if there are any early repayment charges on your current mortgage.

Call us today on 03330 90 60 30 or contact us to speak to one of our friendly advisors.

Remortgaging to fund home improvements

What factors will be taken into consideration?

Lots of customers want to remortgage their property to fund home improvements whether it be an extension, renovations or a loft conversion.

The list of home improvements is vast and depends on what you want to get out of the remortgage.

There are a few things that are taken into consideration when you are remortgaging for home improvement.

We have listed a few below which we will explore in more detail:

  • Affordability
  • Cost of the Home Improvement
  • Credit History
  • Equity
  • Financial Circumstances
  • Type of Property

Affordability

You will have to prove to the lender that if you remortgage, you can afford the repayments.

The lender will consider all aspects of your financial position past and present. They will look at income vs expenditure including any other debts you may have.

The amount you can borrow totally depends on the lender’s criteria.

Contact us to discuss remortgaging

There are some lenders on the market that are willing to lend more than others but this is dependant on your income and personal circumstances.

To give an example:

You earn £30,000 a year and the lender is willing to lend you 4 times your salary

£30,000 x 4 = £120,000 Maximum Loan Amount

Some lenders will take bonuses or overtime into consideration which could see you eligible to borrow more.

Cost of the Home Improvement

The lender will consider the cost of the home improvements in their assessment to give you an idea of the amount you will need to get from remortgaging.

There is a lot to consider when calculating the amount of money, you will need for home improvement.

These range from planning permission, builders, materials etc. It is sometimes best to anticipate that you will need a little extra in the event that an unforeseen cost should occur.

Once your lender approves the total cost needed from the remortgage, they will help you search for the best rates available on the remortgage market.

It is important that you make the remortgage work for you in a cost-effective way.

Example Scenario for Remortgaging for Home Improvements:

Your home is worth £300,000 and your current mortgage is for £150,000.

You want to build an extension onto your property that will cost £25,000.

When remortgaging, you can switch to a brand-new mortgage for £175,000.

This will pay off your current mortgage and leave you with the £25,000 you need for the home improvement.

Our experts will tell you that there are many things to consider before remortgaging as it may be more beneficial financially for you to do a further advance with your existing lender.

All options will be considered.

We take the hard work out of the process by considering the following for you:

  • Is the home improvement viable?
  • How much equity do you have in comparison to the amount you owe on your current mortgage?

Related quick help remortgage guides: 

Your Credit History

If you have a poor financial history, there are specialist lenders on the market who deal specifically in mortgages for customers with adverse credit.

The age and type of your credit issues will have an impact on interest rates.

Another thing to factor into the process is the amount of outstanding debt you have on credit cards or loans.

Call us today on 03330 90 60 30 or contact us to speak to one of our friendly advisors.

When the lender calculates your affordability, they consider the repayments you are making to your creditors when examining your outgoings.

If you have a high balance on a credit card for example, then it might be in your interest to reduce that amount before you apply for a remortgage.

Get in touch with our expert advisors if you have adverse credit and are considering a remortgage for home improvements.

It’s a good idea to familiarise yourself with the costs of remortgaging, especially remortgaging with bad credit since you are likely to be offered a higher interest rate.

Contact us to discuss remortgaging

Equity

The amount of equity you will have depends on how long you have owned your property.

You should accrue some equity if you have owned the property for a number of years, especially if the value of property in your area has increased.

This will mean you have even more equity to work with.

Personal Circumstances

Most lenders will consider the applicant’s age in their assessment.

The minimum age for most applicants is 18 and some lenders now don’t stipulate a maximum age.

This emphasises the importance of affordability however, the lender will want to make sure that whatever age you are, you can afford the repayments.

Types of home improvements that you may remortgage for:

Remortgage for an extension

A standard extension can cost anywhere in the excess of £30,000 so it isn’t unreasonable to remortgage to front the cost of the extension.

You may need planning permission, it is a good idea to check this with your local planning office before you begin any work.

Remortgage for loft conversion

Many people covert their lofts to create an extra room in their home.

This can be a bedroom or an office space. Either way, the cost can run into an excess of £15,000 at best.

Remortgaging to carry out a loft conversion is a great way to borrow the funds you need whilst maintaining a low-interest rate, depending on your lender.

Loft conversions may add value to your home so it is worth thinking about remortgaging after the conversion to avail of even lower rates as you will have more equity in your property.

Remortgaging for property renovation

It is possible to remortgage even if your property is in need of significant repair.

Ideally, your remortgage would enable you to carry out the necessary renovations to the property to bring it up to a standard considered habitable by the lender.

To be considered habitable, a property must have a functioning kitchen and bathroom as well as a sealed and secure roof.

It may be case that your property is already habitable, but you would just like to modernise it. Either way, you may be considered for a remortgage.

Contact us to discuss remortgaging

You can run into issues with a renovation mortgage if, at the time of valuation, a serious problem is detected. This could be an issue with electrics or plumbing.

If this happens, the lender may ask for a retainer. Basically, the lender will agree to the mortgage but will hold the amount of money they think is required to fix the issue.

Once they are satisfied that you have made the necessary repairs, the rest of the money will be released.

Related reading: 

Should I remortgage after making the improvements or before?

If your improvements will add value to your property, then it might be a better idea to remortgage after the home improvements have been carried out should you need to release equity in the property.

You may also be eligible for lower interest rates if your loan is for a lesser amount of the value of the property.

Are there any alternatives to remortgaging for home improvements?

Yes, there is also the option of a secured loan. Put simply, a secured loan is a loan set against your current assets, i.e. your home.

This is a riskier option though and you must be aware that if you cannot keep up with the loan repayments, you might lose your home through repossession.

You really should weigh up the cost of the home improvements against the risk of potentially losing your home before making your decision.

It is also worth noting that if you do go down the secured loan route, that you have to make the repayments as well as your current mortgage payments.

Affordability and responsibility play a major role in a secured loan application.

You may also be eligible for a further advance with your current lender.

Related quick help remortgage guides: 

Will I be able to afford a remortgage for home improvements?

This is entirely up to you. When you make your application for a remortgage for home improvements, the lender will heavily assess your affordability.

You need to be able to demonstrate that you can afford the repayments.

The amount that you can borrow based on your earning varies from lender to lender with some permitting 3 or 4 times your income and others permitting more.

Our aim is to find you the best remortgage deal available on the market if this is the best option for you. If you need a specialist lender, we can also help with that.

We want to secure the remortgage that is right for you and your circumstances.

Call us today on 03330 90 60 30 or contact us to speak to one of our friendly advisors.

Remortgaging a Buy-to-Let Property UK

by Kristian DerrickPosted on

Can I remortgage a buy-to-let property?

The answer to this is ‘yes, you can’. However, qualifying for a Buy-to-let mortgage is very much dependent on your circumstances which we will outline in the article below.

Can I remortgage my home to a buy-to-let?

It is possible to remortgage your home to a buy-to-let depending upon the circumstances as you would not be able to live in the property.

Alternatively, you may need consent to let from your existing provider.

Impacting factors on the best Buy-to-let deals

People decide to remortgage their buy-to-let property for various reasons.

Some remortgage to release equity to put towards a deposit on a different property, some remortgage to make home improvements and others remortgage to get a better interest rate.

Your eligibility to remortgage will be dependent on your reasons to do so, the equity in your property may have an impact on rates available to you.

Before a lender will accept your application, they will look at the specific reason for the remortgage before deciding if they will lend to you or not, and if so, how much they are willing to lend you.

To discuss any of the options mentioned below, please get in contact with one of our specialist advisers. We can talk you through the best option for you.

Make an enquiry for a no-obligation chat with one of our remortgage specialists.

Contact us to find the best buy to let remortgage deals

Remortgaging for a Deposit

Buy-to-let remortgaging is useful if you are trying to release equity in order to cover a deposit on another property.

This is common amongst landlords who are trying to increase their property portfolio.

If you have many Buy-to-let mortgages, the lender will examine your entire portfolio to ensure that when it comes to borrowing, you are not overstretched.

Where the lease revenue is not enough, the maximum available loan may be reduced to suit the calculation.

Some lenders, however, enable you to supplement the achievable rental revenue with your own personal income.

Remortgage for Debt Consolidation

Some lenders will consider remortgage applications for debt consolidation but due to the increased risk involved, quite often the amount they are willing to lend is limited.

Typically, a remortgage to clear unsecured debts is typically offered at poor rates than those used for other purposes.

However, in many cases, this can still be advantageous, especially if the interest rate is lower than the interest on your debts and monthly repayments.

Improving your Interest Rate

Similar to a residential mortgage, improving your repayment terms is a sufficient reason to seek a remortgage.  At Mortgageable, we can help you find the best deals on offer for your circumstances.

Converting your buy-to-let to a residence

It’s relatively common for buy-to-let owners to eventually want to move and live in the property they rent, in which case you will need to convert from a BtL mortgage into a residential mortgage.

You have the option to do this via your current lender or seek out a better deal with a new lender.

Changing from a buy-to-let mortgage to a residential mortgage will result in fees, so if you only require somewhere to live for a short period of time, it may be worth seeking a property to rent short term instead.

Factors that will affect your buy-to-let remortgage

Your personal income and buy-to-let remortgages

As with a standard mortgage, lenders may take your personal income into consideration when applying for a buy-to-let remortgage. It is important for the lender to look at your income and assess it against the buy-to-let remortgage criteria. They will use this analysis to decide upon how much they are willing to lend you.

Some lenders have a minimum income requirement that must be met but the level of the requirement is subject to the lender. Some are less than others.

Typically, lenders will consider the following aspects of your personal income when considering your application:

  • Basic Income (Wage)
  • Benefits you are in receipt of
  • Bonuses or Commissions
  • Investments that you may have elsewhere
  • Dividends

Issues you may face when remortgaging for a buy-to-let property

As with any financial decisions, make sure you do your research before jumping at the first deal you see.

There are a few disadvantages to remortgaging.

Fees can be incurred for switching to a new mortgage which can end up costing you more money than you had anticipated.

You may incur an early repayment settlement fee with your existing lender if you are tied into a rate and pay the mortgage off. Again, this can be an added cost that you perhaps were not expecting.

You can see why it is important that you check through all the conditions on your current mortgage and find out in advance exactly what fees/costs you will incur if you remortgage.

The equity in your property will also determine what monies you could borrow.

Need more information? Read our related quick help guides: 

I have a poor credit history; can I apply for a buy-to-let mortgage?

Arranging a buy-to-let remortgage for customers with bad credit can be difficult.  Below are a few of the issues that may make obtaining a buy-to-let remortgage harder:

  • Poor credit score
  • History of mortgage arrears
  • CCJs (County Court Judgments) IVAs (Individual Voluntary Arrangements) and DMPs (Debt Management Plans)
  • Bankruptcy
  • Previous Repossession
  • Defaults

If you feel any of the issues outlined above may affect your application for a buy-to-let remortgage, then do not hesitate in contacting one of our expert advisers to discuss your circumstances.

All of our advisors are professionally trained and have the expertise to answer any questions you may have about the buy-to-let remortgage process.

Will the type of property I am purchasing affect the buy-to-let mortgage deal I will get?

Most lenders prefer to deal with the ‘standard’ bricks and mortar houses with a slate roof.

The reason being, deviations from this can have a higher risk for the lender, however, there are lenders that will consider non-standard construction.

Below is a non-exhaustive list of properties deemed to be outside of the ‘standard’ construction:

  • Properties with a thatched roof
  • High rise flats
  • Properties with Stone or Felted roofs
  • Timber-framed homes

Buy-to-let remortgage rates and how to get the best deal

The list of remortgages available on the market is extensive but the level of interest you will pay is very much dependent on the lender and your personal and financial circumstances.

Those with a good credit history will quite often qualify for a better rate than those with a poor history. Deposit/Equity also has a lot to do with the rate you will get.

So, those with more deposit may end up with a lower rate buy-to-let remortgage deal.

Again, the same applies to the amount of equity you have.

It is important to note here that there are fees that come with the set up of a new mortgage and a lower rate doesn’t always mean that you are getting the best deal.

It is important to look at the cost of the buy-to-let remortgage overall before accepting any deal.

To discuss rates, fees and eligibility, contact one of our specialist advisers who are on hand to help you get the best deal available to suit your needs.

Call us today on 03330 90 60 30 or contact us. One of our advisors can talk through all of your options with you.

Remortgage to Interest Only Deals UK 2023

by Kristian DerrickPosted on

What is an interest-only remortgage?

If you decide to remortgage an interest-only mortgage, then chances are you will be able to save some money if you switch to a better interest rate.

There are two usual scenarios for remortgaging an interest-only mortgage.

First is finding and switching to a better rate whilst retaining your interest-only agreement.

The alternative is switching completely from an interest-only mortgage to a repayment mortgage.

Repayment mortgages are the most popular mortgages presented by lenders these days.

It is worth noting that on an interest-only mortgage, you don’t make capital repayments on the amount you borrowed.

Instead, you are only paying off the interest. At the end of the lending term, the full amount that you initially borrowed is still payable.

It is for this reason that repayment mortgages are more popular with borrowers and lenders alike.

Recommended article: Check out the main reasons for remortgaging.

What is a repayment mortgage?

Put simply, with a repayment mortgage you repay the amount you borrowed over a number of years.

You make payments each month which are made up of capital repayment plus interest on the amount you borrowed to begin with.

The beauty of a repayment mortgage is that over time, the interest will reduce and your investment in the property will increase.

Are there any advantages to an interest-only mortgage?

The benefit of an interest-only mortgage is that the repayments are significantly lower than if you had a repayment mortgage.

This is attractive to many property investors.

However, whilst the lower payments may seem more attractive in the beginning, borrowers must have a plan to pay off the capital in full at the end of the lending term.

This is called an investment plan/vehicle.

For some people, this may involve putting the property on the market and selling up if no alternative method is available.

On the other hand, some investors have the misfortune of being left with a property in negative equity at the end of the borrowing term.

It may be possible to remortgage at the end of the preliminary rate period on an interest-only mortgage depending on certain criteria.

Many people opt for this as it is a means of raising money by borrowing against the value of the property.

Speak to one of our mortgage experts about interest only remortgages

Related quick help remortgage guides: 

How do I repay an interest-only mortgage?

As mentioned before, an interest-only mortgage is just that, interest-only. No repayments are made on the capital.

The full amount borrowed at the beginning of the mortgage term is still owed and must be paid in full at the end of the mortgage term.

Some owners, mostly investors, rely on the sale of the property to repay the outstanding capital however others use savings or investments, even the sale of another property to settle the mortgage.

Most lenders will require a repayment strategy from you as proof of how you plan to gather the funds to clear the capital at the end of the mortgage term before agreeing to an interest-only mortgage.

You will have to prove to the lender that you have a repayment vehicle in place to pay back what you owe at the end of the mortgage term.

These repayment vehicles include:

  • Stocks and shares ISA
  • Endowment policies
  • Investment bonds
  • Pension schemes
  • Stocks and shares
  • The sale of another property
  • Unit trusts

Each applicants’ circumstances are different and as a result, the lender may agree on alternative arrangements to those outlined above.

If you have any concerns about interest-only mortgages or have any concerns about your remortgage then please contact one of our specialist advisors who are on hand to answer any questions you may have.

It’s a good idea to familiarise yourself with the costs of remortgaging, especially remortgaging with bad credit since you are likely to be offered a higher interest rate.

Are the applications the same for interest-only remortgage and repayment remortgages?

An interest-only remortgage application is the same as a repayment mortgage application.

The only dissimilarity is that with an interest-only remortgage, you have to prove to the lender that you can repay the capital.

Some lenders will restrict what they lend you on a % LTV ratio. There are lenders on the market who no longer lend on an interest-only basis.

Related reading: 

Interest-only remortgage rates

As with any mortgage application, the rates you will be offered on an interest-only remortgage will depend on a number of factors:

  • Affordability and income (Lenders will take your earnings into account when making their decision)
  • Credit History (Poor credit history may limit your options with some lenders)
  • LTV ratio
  • Repayment vehicle
  • The lender
  • Property Type (non-standard builds such as studio flats, or ex council builds may require a specialist lender)

Your Age, Property, etc may also have an impact on the mortgage you will be offered.

There are many comparisons for the best interest rates available online but if you would like to discuss todays current rates, make an enquiry with one of our interest rate specialists.

Switching from an interest-only to repayment mortgage

You may find that one of your repayment’s vehicles (e.g ISA, endowment) isn’t performing as well as you had expected it to.

If this happens, all is not lost, you may be able to renegotiate on an existing mortgage or even switch from an interest-only to repayment.

This is very much dependent on the lender though. Granted, your monthly payments will be higher, but you will be paying off the mortgage monthly. This should lessen the lump sum you are left with at the end of the mortgage term.

You don’t have to stay with your current lender. You can easily switch if you prefer. This is the best option for some, especially if you want to make any changes to your current mortgage terms e.g. borrow more money, switch from interest-only to repayment or simply renegotiate on any of the terms of your current mortgage.

If you meet the eligibility criteria to refinance your interest-only mortgage with a new lender it might be the best option.

You may qualify for a better deal than what you have with your current provider. Get in touch with us today to find out if you could be benefitting from a better deal.

Are part repayment and part interest only an option?

There are many options available to individuals on the mortgage market today and fortunately, this is one of them.

It is possible to have a part repayment, part interest-only mortgage. This is known as a ‘part and part’ mortgage and is suitable for many applicants.

Reason being, you will be paying off some of the mortgage and some of the interest resulting in lower repayments than if you were in a repayment only mortgage and also less of a lump sum due back to the lender at the end of the term.

Interest-only mortgages for the Over 65’s

Age is most definitely a factor in the mortgage process. However, don’t let that put you off as there are also lenders that have specialist interest-only remortgage options.  Borrowing is such a large part of life now and as life expectancy increases, there are more senior clients hunting the market for interest-only deals.

If you are approaching or over the age of 65 and would like to find out if you are eligible for an interest-only remortgage, contact one of our experts who will be able to help establish the right deal for you.

What if I have been declined for an interest-only remortgage?

If your application for an interest-only remortgage has been declined or if you haven’t been able to refinance on your current mortgage, whatever the circumstances, you can always discuss your options with a member of our team who will help you find the best option available to you on the current market.

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