Category: Mortgages

Are you a first-time buyer looking to get on the property ladder or an existing homeowner looking to move, but you’re struggling to build up a sizeable deposit?

The mortgage guarantee scheme can help you get a mortgage with only a 5% deposit.

Read on to learn more about the mortgage guarantee scheme and how it can help you buy your first home or move.

What is the Mortgage Guarantee Scheme?

The mortgage guarantee scheme is an initiative by the UK government designed to help credit-worthy households struggling to save up higher deposits access mortgages.

The initiative was launched in 2021 to encourage lenders to offer 95% mortgages again after most were withdrawn during the Covid-19 pandemic.

How Does the Mortgage Guarantee Scheme Work?

Under the terms of the scheme, the government guarantees to compensate lenders for a portion of the net losses if homeowners fail to pay or default on their mortgage.

The guarantee applies to the portion of the property over 80%, meaning that with a 95% mortgage, the government guarantees 15%.

The scheme aims to reduce the risk associated with mortgages with small deposits and make lenders more comfortable offering low-deposit mortgages.

The initiative was intended to end in December 2022, but the government extended it until December 2023 to support buyers with smaller deposits and increase high loan-to-value (LTV) lending.

The guarantee is valid for up to seven years after the mortgage is originated, after which it will no longer offer any protection to the lender for any losses if borrowers default on the mortgage.

Related quick help remortgage guides: 

• Remortaging on maternity leave 
• How soon can I remortgage?
• Shared ownership remortgages
• How long does it take to remortgage?
• How to remortgage for an extension?

Who Is Eligible for the Mortgage Guarantee Scheme?

The scheme aims to help those struggling to save for mortgage deposits and is open to first-time buyers and home movers.

Mortgages eligible for guarantees must:

• Be taken out by individuals rather than incorporated companies
• Be residential mortgages and not buy-to-let or second homes
• Be on properties in the UK worth £600,000 or less
• Have a loan to value between 91% and 95%, meaning you’ll need a deposit from 5% to 9%
• Be repayment mortgages and interest-only mortgages
• Meet the lender’s eligibility criteria like the borrower’s ability to pay

Apply for a mortgage today

Is The Mortgage Guarantee Scheme Beneficial?

Yes!

According to HM Treasury, the scheme has helped over 24,000 households get onto the property ladder since its launch in 2021.

The Chief Secretary of the Treasury notes, “Extending the scheme means thousands more have a chance to benefit and get support as we navigate these difficult times.”

First-time buyers often find saving for a large deposit challenging, but the scheme helps them overcome this barrier and secure a home with a deposit as small as 5%.

It’s a lifesaver for many borrowers, making it easier for new buyers to purchase homes and for homeowners to move up to newer properties.

The scheme also helps support the wider housing sector, which has been affected by challenging economic times, by restoring consumer choice and competition in the market.

Does it Mean the Government Will Make Mortgage Payments for Me?

No. You’ll remain responsible for mortgage payments in the same way as a normal mortgage.

The guarantee is only for the mortgage lender and doesn’t protect you, so if you fall behind on repayments, they can still repossess the property.

In such instances, the government guarantees to compensate lenders for losses and reasonable costs suffered in foreclosure.

How Do I Apply for the Mortgage Guarantee Scheme?

You don’t need to apply for the scheme directly to the government.

You only need to apply for a 95% mortgage from a lender participating in the scheme, and you can do this directly or through a mortgage advisor with whole or market access.

Consulting an advisor is recommended to avoid getting declined, since lenders consider such mortgages higher risk.

An advisor can help you make a successful application and give you access to the best deals based on your situation.

Which Lenders Are Eligible for the Mortgage Guarantee Scheme?

The scheme is open to lenders with permission to enter into regulated mortgage contracts in the UK.

Lenders must pay the government a commercial fee for each mortgage in the scheme.

They must also offer five-year fixed-rate products as part of their range of mortgages offered under the scheme.

Some lenders offering mortgages under the scheme include:

• Halifax
• Lloyds Bank
• NatWest
• Barclays
• Santander
• HSBC
• Virgin Money

Apply for a mortgage today

How Does A 95% LTV Mortgage Work?

With a 95% LTV mortgage, you can borrow up to 95% of the purchase price of the property you wish to buy and cover the remaining 5% with your deposit.

You’ll not need to save a huge lump sum, making it easier to become a homeowner.

For example, suppose you want to buy a property worth £300,000. With a 95% LTV mortgage, the lender will lend you £285,000, and you’ll only need a deposit of £15,000.

What Are The Cons of 95% LTV Mortgages?

Lenders consider 95% LTV mortgages higher risk and can feature a few downsides.

Lenders usually increase the interest rates for such low-deposit mortgages to compensate for the additional risk, meaning you’ll need to make higher monthly repayments than mortgages with larger deposits.

You’ll also be at a greater risk of getting into negative equity, where the size of your mortgage exceeds the property’s value.

The home’s value or property prices don’t need to fall by much to leave you in negative equity when you buy a property with a 5% deposit.

It will make it difficult to move houses because the amount you can raise from selling the property will not be enough to pay off the outstanding mortgage and have enough to put down as a deposit for the house you want to buy.

Remortgaging to a better rate when your fixed-rate period ends can also be impossible, meaning you’ll have no alternative but to move to the lender’s more expensive standard variable rate (SVR).

Mortgage Guarantee Scheme Final Thoughts

The mortgage guarantee scheme can help you buy a home or move to a new property with a small deposit, and you can apply through an eligible lender with a deposit of as little as 5%.

An independent advisor can give you access to lenders likely to accept your application and increase your chances of success.

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

You’ve decided to buy your dream home or investment property to secure an income, but where do you start?

How do you apply for a mortgage?

What are the requirements? And is there anything you should know before you kickstart the process?

According to a recent report by Zoopla, not all private homes in the UK are mortgaged.

There are currently 11 million outstanding mortgages out of 29 million homes in the UK.

This means that 11 million people have already gone through the process you’re about to.

This guide provides an overview of everything you need to know when applying for a mortgage in the UK.

With a mortgage checklist, you can ensure you’ve completed all the steps required and know what to expect in every mortgage application process.

You can also catch possible errors and delays before they happen and amend your application to avoid them.

Apply for a mortgage today

Step 1: Prepare for Your Mortgage Application

When you apply for a mortgage in the UK, expect the lender to review your application with a fine-toothed comb.

Every aspect of your daily living and finances will be scrutinised to ensure you can afford the mortgage you’re applying for.

You’ll need to prepare for your affordability assessment, where the lender will require information on your income, employment, spending habits, and credit history.

It’s a good idea to ensure your house is in order at least 3 months before making your mortgage application.

Here’s what you can do:

• Whittle down your spending so that your cashflow is healthy
• Avoid spending money on questionable purchases (such as gambling)
• Do a check on your credit profile and ensure all the information on there is correct
• Gather as much money as you can for your deposit
• Ensure that you have adequate proof of income

Criteria to Apply for a Mortgage in the UK

All lenders have a unique set of requirements, but most require the following from applicants:

• Proof of income (payslips)
• Credit card statements (three months’ worth)
• P60 from your place of work
• Proof of ID
• Proof of address
• Self-employed individuals must provide a year’s accounts and SA302
• If you receive benefits, you must provide proof

Next Step, Understand Your Credit History’s Impact on Your Application

Your credit history can work for or against your application.

It’s important to keep your credit profile as healthy as possible before applying for a mortgage.

There are a few things that can positively impact your credit history in the UK. Some of these are:

• Ensure that the credit bureaus have the correct address for you
• Registering for the electoral role (this provides a good way to confirm your current address)
• If you have unused credit cards and bank accounts, close them
• Set up direct debits for your credit cards and ensure they’re paid in full every month

It’s not just your overall credit score that matters.

If a lender picks up on errors on your credit file, it could count against your application.

Bad credit borrowers can still acquire a mortgage, but the requirements may be stricter, and you can expect to pay a higher interest amount.

Apply for a mortgage today

Next, Select the Right Mortgage Type for You

You’ll find that there are several types of mortgages on the market, each suited to a different scenario or financial situation.

A mortgage advisor can provide you with insight and guidance, but it’s a good idea to have an idea of what type of mortgage you want before you make any initial applications.

Some of the most common mortgage types in the UK include repayment mortgages, buy-to-let mortgages, fixed-rate mortgages, guarantor mortgages, joint mortgages, standard variable-rate mortgages, offset mortgages, to name a few.

To choose the right one, make enquiries with your mortgage broker.

Some aspects to focus on when chatting include the total cost of the mortgage, including interest rates and fees, penalties for early and late payments, whether switching is an option during the mortgage term and any possible incentives.

Prepare for the Cost Implications of a UK Mortgage

You must be fully prepared for the overall cost of a mortgage.

You’ll go through affordability assessments with your mortgage advisor and the lender.

Still, further to that, you should scrutinise your budget to ensure you can afford the additional investment cost.

Some first-time buyers feel caught out by the sudden, unexpected costs involved.

Getting a mortgage means you’ll have to pay additional expenses such as the fees for the mortgage broker, stamp duty land tax, conveyancing, property surveys, and insurance.

Understand Typical Mortgage Terms

The “term” of a mortgage refers to how long the mortgage deal will run for. Most people opt for a 25-year mortgage, which isn’t a strict period.

Depending on your financial situation, you can opt for a longer term or a short term.

Most lenders in the UK offering mortgages allow for discounted rates for the first 2 to 5 years of the mortgage.

This offers exceptional peace of mind knowing that the rate is fixed for a set period – no surprises.

Repaying Your Mortgage

Keep in mind that all mortgages come with their fees, rates, and payment methods.

Some mortgages offer fixed interest rates, while others mirror the base rate of the Bank of England.

It’s best to find out if you’ll be penalised if you try to pay off your loan quicker than the expected loan term.

Some lenders allow it without penalties. Missing payments can result in a poor credit history and, in extreme circumstances, the property being repossessed.

Getting a Property Survey

One question that crops up is about property surveys – do you really need one?

Most lenders will arrange for a property survey to ensure the property is of acceptable value for the requested funds.

A mortgage survey is a basic survey that picks up on the property’s most apparent issues.

This doesn’t mean that the more intricate or harder-to-spot issues are caught. Further down the road, you may find issues cropping up that just weren’t obvious in the initial property survey provided by the lender.

For this reason, getting your own independent survey done before you sign the mortgage is always recommended.

You wouldn’t want to invest in a property with major structural damage, or that will need major repairs and replacements in the near future.

Related quick help remortgage guides: 

• Remortaging on maternity leave 
• How soon can I remortgage?
• Shared ownership remortgages
• How long does it take to remortgage?
• How to remortgage for an extension?

Several survey types are available on the market. The condition report is a basic report that is considered “entry-level.”

The homebuyer report is more expensive but provides a more comprehensive inspection and report on the property.

A building survey is the most highly recommended as it’s the most comprehensive option available but comes with a heftier price tag.

If the building is very old, getting the most comprehensive inspection possible makes sense. New builds can get away with a standard mortgage survey.

Mortgage Checklist UK – In Summary: 

To summarise the checklist:

• Prepare for the mortgage
• Ensure your credit profile is in order
• Ensure you meet the lending criteria
• Choose the mortgage type
• Understand the fees and costs involved
• Familiarise yourself with the mortgage terms
• Have a plan for paying the instalments
• Ensure you have a property survey carried out

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

Most people reach a stage when they’re ready to put down proverbial roots and buy themselves a home.

The process of buying a house in the UK can seem challenging if you’ve never done it before.

Every decision you make during the process could have good or bad financial consequences, so it’s essential to understand the buying process to eliminate possible surprises or confusion.

According to the Office for National Statistics, the interest rates on property in the UK have been steadily increasing since 2022 and will likely make borrowing expensive for many Britons.

Many Brits are jumping on board, trying to invest in the home of their dreams or investment property before another hike.

Part of protecting yourself is being informed and knowing just what to do when the time to buy is right for you.

Apply for a mortgage today

Steps to Buying a New Home

To help you get the most out of the buying process, we’ve compiled a checklist of the steps involved and what to expect at each stage.

Let’s jump right in!

Step 1: Decide if It’s the Right Time for You to Buy

If you decide to buy a house because you’re at “that” age, and it seems the next logical step, stop and think it through.

Not everyone is in the same financial position, so it’s better to calculate if now is the right time for you.

Most mortgages require a 10% deposit unless you’re on the government’s mortgage guarantee scheme, which requires just a 5% deposit.

There are other fees to consider, such as establishment fees, monthly service charges and valuation fees.

Step 2: Decide What to Do with Your Existing Home

If you’re already a homeowner, you need to decide when it’s best to sell your current home if you plan to.

For some, it’s best to sell the home before getting into a new mortgage, as the cash you make can pay off existing debt and help you jump on a property as soon as one catches your eye.

Buying and selling homes is a lengthy process, so it’s best to know your plan of action before you start.

There are certain benefits of selling your property before buying.

For instance, you’ll be in a stronger buying position; you’ll have better control over the sale of your house as you won’t be rushed to accept an offer.

You’ll also find you have more negotiating power and know precisely how much you can afford to spend on a new home.

Step 3: Know How Much You Can Spend

How much you can spend will often be determined by selling a previous property or how much cash you can get together for the deposit.

When trying to figure out how much you can spend, there are a few determining factors to consider as follows:

• Your income
• Your credit score (low credit scores can limit amounts lenders will offer)
• Total projected costs of moving and renovating (if required)
• General living costs and how that impacts your cash flow
• Existing collateral to offer the mortgage company

There are also several online mortgage calculators available to help you determine an affordable amount to spend.

Step 4: Arrange Financing to Buy a New Home

Financing is one of the most important parts of the process. Without it, no property purchase would be possible.

The bigger your deposit, the better your chance of getting financing. Many people borrow money from family and friends to get their deposit together.

You’ll need to investigate the various mortgages available on the market and decide which one is best for you.

Here are some to investigate:

• Repayment or interest-only mortgages
• Fixed rate mortgages
• Tracker mortgage
• Variable rate mortgage
• Discounted mortgage
• Offset mortgages
• First-time buyer mortgages
• Guarantor mortgages
• Green mortgages

Consulting with a mortgage broker can help you better understand the various mortgage options and make the right choice for you.

Apply for the mortgage you’d like and wait for feedback from the lender.

Getting a mortgage in principle before you find the property you want will give you a good idea of what the lender will potentially approve you for.

Apply for a mortgage today

Step 5: Determine What Area You’d Like to Live In

Researching the different areas you can live in is vitally important. If you make the wrong decision, you’ll likely become unhappy but be tied into a mortgage.

If you’re unfamiliar with certain areas but want to buy property there, go online and do your research. Visit the area and spend some time there to see if you like it.

Connecting with locals on their thoughts and feelings on the area is also a good way to determine how you’d feel living there.

Of course, if you plan to live in the same area as you currently do, you may already know all you need.

Making a rash decision on a property because it seems perfect without investigating the area thoroughly could be a poor financial decision.

Step 6: Make a Property Choice

Choosing the right property to buy will take more investigative work. At first, you might encounter a property that catches your eye online or at the property agent’s office.

Make an appointment to see the property, and don’t rush your visit.

Draw up a list of things to check and questions to ask before attending the meeting.

Being prepared will ensure you can do a more thorough investigation of the property.

You’ll want to know how long the property has been on the market and why the owners are selling.

You should also make reasonable enquiries about whether the price has recently changed, what the lowest amount the owner will accept and if there are any other offers, to mention just a few things.

It’s important to visit as many properties as you can so that you can make decent comparisons. It’s time to choose once you’ve found a property that checks all the boxes.

Step 7: Make an Offer

The offer you make can seal the deal or end it swiftly.

Of course, you don’t want to overpay, and while negotiating is expected, being too cheeky with your offer may see you losing out. It’s important to determine a realistic figure and put in an offer.

If the agent says that the owner rejects the offer, chat with them about possible further negotiation.

In some instances, the estate agent will ask you to pay a small holding deposit to see if you’re serious.

This is usually anything up to £1000 and will be paid back to you if the sale falls through. There’s no way to absolutely guarantee that the owner will accept your offer.

Step 8: Set Your Finance in Place

Now that you’re negotiating a price, you can contact your mortgage broker and ask them to action the contract.

This is assuming you have a mortgage in principle. If you don’t, you’ll have to work quickly to sort your finances out as quickly as possible.

You may lose out on the deal if you run into hiccups with finance. You can only exchange contracts with the seller when your mortgage broker offers official financing.

Step 9: Employ a Conveyancer to Handle the Legalities

Once you’ve made an offer on a property and the financing has been tentatively approved, you’ll need to get a solicitor or a conveyancer to handle the legal transfer of ownership of the property.

Some mortgage companies will allow you to choose your own conveyancer, while others have a panel of approved conveyancers that you can choose from.

While the property agent may recommend a conveyancer, you shouldn’t blindly go with it.

A professional conveyancer will handle searches with the local authority and the Environment Agency.

This is to confirm that the property doesn’t suffer any major problems.

Step 10: Order a Property Survey

Most mortgage lenders will require a mortgage valuation which is a quick overview of the property to determine if it’s in a good enough state to finance.

This is not an in-depth survey, and it’s recommended that you get a surveyor to evaluate the property’s condition so that you’re aware of any possible problems before you purchase and move in.

A survey is always highly recommended.

Related quick help remortgage guides: 

• Remortaging on maternity leave 
• How soon can I remortgage?
• Shared ownership remortgages
• How long does it take to remortgage?
• How to remortgage for an extension?

Step 11: Pay Your Deposit

Before you can finalise the deal, you’ll need to hand over your deposit.

Most mortgage lenders require 10% deposit unless you’re on a government scheme that will reduce the deposit amount. The deposit is handed over to your conveyancer or solicitor.

Apply for a mortgage today

Step 12: Go Ahead and Exchange Contracts

Once you have received the report from the surveyor and know whether major repairs need to be made, you can exchange contracts.

At the time of exchanging contracts, you must acquire a completion date from the seller – this is usually one month.

The moment you exchange contracts, your agreement to purchase the property becomes legally binding.

If you have a sudden change of mind, you can expect to be penalised – with the penalty usually being the full deposit.

Exchanging contracts only happens once the solicitor is happy with the searches, a formal mortgage offer is made, and the deposit has been made available.

It’s recommended that you take out buildings insurance from the day of the exchange as this is the moment you’ll become responsible for the property.

Step 13: Finalise the Arrangements

At this stage, you need to wrap up the smaller arrangements of the sale. For instance, if you’re buying appliances from the seller, you’ll need to negotiate that now.

Now, you’ll also need to start planning to have your telephone service, gas, water, and electricity set up.

Your solicitor or conveyancer will also be finalising everything with your mortgage provider at this point.

Step 14: The Sale is Completed

When the mortgage company pays the owner and you take ownership of it, the sale is completed.

At this stage, the deeds of the property are also transferred.

Step 15: Take Official Residence of Your Home

By the time the sale is completed, the seller has to vacate the premises.

You can collect keys and are free to carry out renovations or simply move in. The home is now officially yours!

Step 16: Finalise With Your Solicitor

You must ensure that your solicitor or conveyancer is paid up at the end of the process.

You’ll receive a statement detailing all the costs involved, including the stamp duties you must pay.

When the stamp duty is paid, the change of ownership is typically advised with the land registry.

Apply for a mortgage today

Steps to Buying a House UK Conclusion

Having an understanding of these 16 steps puts you in a better position to navigate the process of buying a house in the UK.

Of course, if you need any assistance along the way, a mortgage broker’s services should be employed.

Call us today on 03330 906 030 or contact us to speak to one of our friendly advisors.

The Bank of England’s Monetary Policy Committee (MPC) recently increased the base rate for the 13th time by 0.5%, taking it to 5%in hopes that it will help tackle high inflation.

Such changes usually influence mortgage interest rates and can ultimately increase the cost of homeownership.

If you’re a mortgage holder or are considering buying a home, read on as we explore how the base rate increase affects the average mortgage interest rates in the UK and how to ensure you get the best rates available.

What are the Current Mortgage Rates?

Assuming a 75% loan-to-value (LTV), the current mortgage rate for a two-year fixed deal in the UK is 6.44%, while the rate for a five-year fixed mortgage deal is 5.79%.

The standard variable rate (SVR) currently stands at 8.29%, and the rate for a two-year variable mortgage with a 75% LTV is 5.59%.

Lenders are increasing rates as the market adjusts to the increase in the base rate, while others are pulling deals advertised before the rise.

If you’re considering mortgaging or remortgaging, now is the time to shop around for the best deals to avoid missing out.

Apply for a remortgage today

How Does the Base Rate Impact Average Mortgage Interest Rates?

The Base Rate usually influences other interest rates in the UK, including mortgage, loan, and savings account rates.

Tracker mortgages directly follow the base rate, so if you have a tracker mortgage, you can expect mortgage rates to go up in line with the increase. However, not all mortgage rates will increase despite the base rate increase.

Interest rates for fixed-rate mortgages usually remain the same, and providers tend to adjust their rates ahead of time to account for increases.

Therefore, the knock-on impact of the base rate increases will not affect fixed-rate mortgages in the same way as tracker mortgages.

If you’re on a fixed-rate deal, your mortgage rate will stay the same for the duration of that deal.

With standard variable rates (the rate you automatically move to when your fixed term expires), there is no direct link with the base rate.

However, you’ll be at the lender’s mercy throughout the mortgage’s lifetime.

They can increase or decrease with the base rate or according to the whims of your mortgage provider.

Related quick help remortgage guides: 

• Remortaging on maternity leave 
• How soon can I remortgage?
• Shared ownership remortgages
• How long does it take to remortgage?
• How to remortgage for an extension?

Are Interest Rates Going to Increase Again?

The Bank of England notes that the future is uncertain.

Although accurate predictions are difficult, factors like economic uncertainty and rising inflation show that further interest rate hikes are likely in 2023 to get inflation back down to the 2% target.

The BOE uses interest rates to manage inflation.

When inflation is low, it lowers the base rate to make loans more affordable and encourage spending and borrowing.

When inflation is high, they raise the base rate, which increases overall interest rates in the UK economy.

Increasing the interest rates makes it more expensive for people to borrow money and buy things. It encourages people to save rather than spend in the overall economy.

When more people spend less on services and goods overall, the prices of commodities will tend to rise more slowly, translating to a lower inflation rate.

The BOE’s Monetary Policy Committee (MPC) decides on the actions to take and is set to meet again on 3rd August 2023 to make the next interest rate decision.

Apply for a remortgage today

What Should You Do if Interest Rates Increase?

Further interest rate increases can be scary as they can translate to higher mortgage costs.

A few actions you can take include:

Fix Your Mortgage

A fixed-rate mortgage can protect you from future rate rises and ensure your mortgage repayments don’t change because of interest rate changes.

A fixed-rate mortgage offers a fixed interest rate for a certain period, and you’re guaranteed to pay the same amount every month.

Fixed-rate mortgages allow borrowers to know exactly how much they pay each month without worrying about unexpected changes.

With rising interest rates and inflation still high, more interest rate rises are likely, resulting in higher mortgage rates that cause your monthly repayments to go up if you don’t fix your mortgage beforehand.

You can choose how long you want to fix your mortgage. Two-year fixes are cheaper and usually provide more freedom and access to the best rates.

They’re suitable if you want to switch deals regularly or are considering moving home soon.

Consider how long you want to commit to an agreement and whether your circumstances are likely to change soon.

Lock in a New Rate

You can lock in a new rate if you’re due for a remortgage in the next six months, then switch when your deal ends and avoid early repayment charges.

Most lenders set an initial lower fixed interest rate for some time as an incentive to encourage you to apply.

If you can get a new incentive period or deal at substantially lower rates than you currently pay, you can save money by remortgaging.

What Should You Do If Interest Rates Decrease?

If the interest rates decrease while you’re already fixed on your mortgage, you can miss out on the benefits of a lower rate.

A few actions you can take to ensure your options remain open include:

Fix for A Shorter Period

Fixing your mortgage for a shorter period is suitable if you suspect the interest rates or your situation will change soon.

It provides more flexibility and makes it easier to remortgage sooner if you want to switch to a new deal, especially if interest rates have reduced by the end of the fixed term.

Choose a Variable Rate Mortgage

Variable-rate mortgages feature fluctuating interest rates that go up and down and are usually influenced by the BOE base rate.

A suitable type is a tracker mortgage, typically linked to the base rate, and any rise or fall has a knock-on effect on your interest charges.

You’ll benefit directly if interest rates fall, but you’ll also face higher rates if they increase.

Apply for a remortgage today

Mortgage Rates Today Final Thoughts

Keeping up with changing interest rates can help you choose the best strategy to keep mortgage costs down now and in the future.

As the base rate and mortgage rates continuously change, getting expert advice from a mortgage advisor or broker with whole-of-market access can ensure you make an informed decision.

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

The Bank of England’s Monetary Policy Committee (MPC) base rate currently stands at 5.25%

Ultimately, the MPC’s base rate does influence mortgage interest rates and can ultimately increase the cost of homeownership.

If you’re a mortgage holder or are considering buying a home, read on as we explore how the base rate increase affects the average mortgage interest rates in the UK and how to ensure you get the best rates available.

What are the Current Mortgage Rates?

Assuming a 75% loan-to-value (LTV), as of June 2024, some lenders are offering a mortgage rate for a two-year fixed deal in the UK as low as 5.69%, while the rate for a five-year fixed mortgage deal can be as low as 5.17%.

The standard variable rate (SVR) currently stands at 8.29%, and the rate for a two-year variable mortgage with a 75% LTV is 5.59%.

Please note that these rates can vary depending on the lender and specific mortgage product.

Lenders are increasing rates as the market adjusts to the increase in the base rate, while others are pulling deals advertised before the rise.

If you’re considering mortgaging or remortgaging, now is the time to shop around for the best deals to avoid missing out.

Apply for a remortgage today

How Does the Base Rate Impact Average Mortgage Interest Rates?

The Base Rate usually influences other interest rates in the UK, including mortgage, loan, and savings account rates.

Tracker mortgages directly follow the base rate, so if you have a tracker mortgage, you can expect mortgage rates to go up in line with the increase.

However, not all mortgage rates will increase despite the base rate increase.

Interest rates for fixed-rate mortgages usually remain the same, and providers tend to adjust their rates ahead of time to account for increases.

Therefore, the knock-on impact of the base rate increases will not affect fixed-rate mortgages in the same way as tracker mortgages.

If you’re on a fixed-rate deal, your mortgage rate will stay the same for the duration of that deal.

With standard variable rates (the rate you automatically move to when your fixed term expires), there is no direct link with the base rate.

However, you’ll be at the lender’s mercy throughout the mortgage’s lifetime.

They can increase or decrease with the base rate or according to the whims of your mortgage provider.

Related quick help remortgage guides: 

• Remortaging on maternity leave 
• How soon can I remortgage?
• Shared ownership remortgages
• How long does it take to remortgage?
• How to remortgage for an extension?

Are Interest Rates Going to Increase Again?

The Bank of England notes that the future is uncertain.

Although accurate predictions are difficult, factors like economic uncertainty and rising inflation show that further interest rate hikes are likely in 2023 to get inflation back down to the 2% target.

The BOE uses interest rates to manage inflation.

When inflation is low, it lowers the base rate to make loans more affordable and encourage spending and borrowing.

When inflation is high, they raise the base rate, which increases overall interest rates in the UK economy.

Increasing the interest rates makes it more expensive for people to borrow money and buy things. It encourages people to save rather than spend in the overall economy.

When more people spend less on services and goods overall, the prices of commodities will tend to rise more slowly, translating to a lower inflation rate.

The BOE’s Monetary Policy Committee (MPC) decides on the actions to take and meets up several times each year to make the next interest rate decision.

Apply for a remortgage today

What Should You Do if Interest Rates Increase?

Further interest rate increases can be scary as they can translate to higher mortgage costs.

A few actions you can take include:

Fix Your Mortgage

A fixed-rate mortgage can protect you from future rate rises and ensure your mortgage repayments don’t change because of interest rate changes.

A fixed-rate mortgage offers a fixed interest rate for a certain period, and you’re guaranteed to pay the same amount every month.

Fixed-rate mortgages allow borrowers to know exactly how much they pay each month without worrying about unexpected changes.

With rising interest rates and inflation still high, more interest rate rises are likely, resulting in higher mortgage rates that cause your monthly repayments to go up if you don’t fix your mortgage beforehand.

You can choose how long you want to fix your mortgage. Two-year fixes are cheaper and usually provide more freedom and access to the best rates.

They’re suitable if you want to switch deals regularly or are considering moving home soon.

Consider how long you want to commit to an agreement and whether your circumstances are likely to change soon.

Lock in a New Rate

You can lock in a new rate if you’re due for a remortgage in the next six months, then switch when your deal ends and avoid early repayment charges.

Most lenders set an initial lower fixed interest rate for some time as an incentive to encourage you to apply.

If you can get a new incentive period or deal at substantially lower rates than you currently pay, you can save money by remortgaging.

What Should You Do If Interest Rates Decrease?

If the interest rates decrease while you’re already fixed on your mortgage, you can miss out on the benefits of a lower rate.

A few actions you can take to ensure your options remain open include:

Fix for A Shorter Period

Fixing your mortgage for a shorter period is suitable if you suspect the interest rates or your situation will change soon.

It provides more flexibility and makes it easier to remortgage sooner if you want to switch to a new deal, especially if interest rates have been reduced by the end of the fixed term.

Choose a Variable Rate Mortgage

Variable-rate mortgages feature fluctuating interest rates that go up and down and are usually influenced by the BOE base rate.

A suitable type is a tracker mortgage, typically linked to the base rate, and any rise or fall has a knock-on effect on your interest charges.

You’ll benefit directly if interest rates fall, but you’ll also face higher rates if they increase.

Apply for a remortgage today

Mortgage Rates Today Final Thoughts

Keeping up with changing interest rates can help you choose the best strategy to keep mortgage costs down now and in the future.

As the base rate and mortgage rates continuously change, getting expert advice from a mortgage advisor or broker with whole-of-market access can ensure you make an informed decision.

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

What is stamp duty? And can you add it your mortgage in the UK?

One topic that confuses many is that of Stamp Duty.

In some cases, when you buy a new home, you must pay a stamp duty.

But what are the exact rules involved? What are the costs?

Let’s find out…

What is Stamp Duty?

What Stamp Duty is now is different from what it used to be. Wait, does that sound confusing?

Let’s explain!

Stamp Duty was originally introduced to the UK in 1694 as a temporary tax to raise funds for the war against France.

At the time, it was also charged on hats, medicines, and newspapers.

Because Stamp Duty proved to be such a successful way to raise funds for the government, it’s still imposed on UK citizens today.

A Stamp Duty nowadays is a tax on property in England and Northern Ireland. It doesn’t apply to all properties but does to some.

In England, it is called Stamp Duty.

In Wales, it’s called Land Transaction Tax; in Scotland, it’s called Land and Building’s Tax. Different regulations apply in each country.

Non-UK residents purchasing UK property can expect to pay Stamp Duty, Land and Building Tax or Land Transaction Tax.

One thing to note is that as a non-UK resident, you will be charged more – usually around 2% more than a UK resident would.

When Is Stamp Duty Required?

There are instances where Stamp Duty applies and other instances where it doesn’t.

This can depend on whether you’re purchasing residential property, commercial property, or new build.

Let’s look at each scenario below:

Stamp Duty on UK Residential Properties

Stamp Duty may apply to your residential property purchase in the UK.

For instance, for any residential property you buy, that’s over £250,000 (in England and Northern Ireland), you will have to pay Stamp Duty.

Unless you’re a first-time buyer, you won’t pay Stamp Duty on residential properties up to £425,000. You will pay Stamp Duty on any amount above that.

This deal only applies to residential properties below the price of £625,000.

In Scotland, you will pay Land Buildings Tax on any residential property that sells for more than £145,000.

However, first-time buyers are exempt from Land Transaction Tax in Scotland if the property is under £175,000.

In Wales, things work quite differently, with all residential properties that cost more than £225,000 demanding Land Transaction Tax.

Stamp Duty on UK Commercial Properties

Commercial property Stamp Duty is the same in Scotland, Northern Ireland, and England. Buyers must pay Stamp Duty on commercial properties that cost over £150,000.

You will only be charged Stamp Duty in Wales if the property you’re buying costs more than £225,000.

Stamp Duty on UK New Build Homes

New build homes in the UK are subject to the same Stamp Duties as residential properties are assigned.

If you’re in England or Northern Ireland, you will pay Stamp Duty on properties that cost over £250,000.

In Wales, you will pay Land Transaction Tax on properties that cost more than £250,000.

What Does UK Stamp Duty Cost?

The amount you will pay in Stamp Duty will depend on the value of the house/property.

For instance, there is 0% stamp duty on properties up to £250,000 in England and Northern Ireland.

5% Stamp Duty applies to properties between £250,000 and £925,000, 10% Stamp Duty applies to properties between £925,000 and £1,500,000, and 12 % Stamp Duty on properties over £1,500,000.

The figures are a little different in Scotland.

There is 0% Land Building Tax on property that costs up to £145,000, 2% Land Building Tax on properties that cost between £145,001 and £250,000, 5% Land Building Tax on properties that cost £250,001 to £325,000, 10% Land Building Tax on properties that cost between £235,001 and £750,000, and 12 % Land Building Tax on properties that cost more than £750,000.

Wales also presents different figures for Land Transaction Tax. There is 0% Land Transaction Tax on properties up to £225,000, 6% Land Transaction Tax on properties that cost between £225,001 and £400,000, 7.5% Land Transaction Tax on properties that cost £400,001 and £750,000, 10% Land Transaction Tax on properties that cost between £750,001 and £1,500,00, and 12% Land Transaction Tax on properties that cost more than £1,500,000.

When Are Buyers Required to Pay UK Stamp Duty Fees?

Stamp Duty must be paid after the completion date within a set time. This period is 30 days in Scotland and Wales, but for those in England, it’s only 14 days.

How can you pay the Stamp Duty?

It’s made quite simple with the help of your conveyancer or solicitor.

If your solicitor or conveyancer can’t help you, you must file and post a paper return to action the process.

Don’t Want to Pay Stamp Duty in the UK?

Here are a Few Tips to Help You Avoid Stamp Duty

Affording Stamp Duty may prove challenging for your budget.

However, if you want to avoid paying Stamp Duty, Land and Building Tax, or Land Transaction Tax in the UK, you can do that in several ways.

Here’s a brief list of ways to consider:

• Rather buy a house boat, caravan or motorhome as there is no Stamp Duty charged on these.
• If you are a first-time buyer, purchase a buy-to-let, as you won’t be charged second home Stamp Duty and can benefit from first-time buyer discounts.
• Buy property under £400,000.
• If a family member will use the home, you can avoid paying second property Stamp Duty by putting the deed in their name and gifting them the deposit money.

Paying Stamp Duty in the UK Conclusion

Stamp Duty is a reality of the property market in the UK.

While Stamp Duty is unavoidable, there are ways around it if you’re willing to purchase a property with a lower value.

Remember to factor the cost of the Stamp Duty into the cost of a property when you’re interested in purchasing it.

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

The time has come to decide about your UK property and finances.

If you’re reading this, you either wish to sell your UK property soon or have more equity in the property you’re paying off.

And you know what that means, right? It means increasing the value of your property.

Increasing UK property value is a worthy investment, even if you don’t have any immediate plans to sell the property.

The good news is that you can take a few simple steps to increase your UK property’s value, and we share those steps with you below.

First, you must be aware that simple home improvement isn’t always the right step.

Often making minor repairs will improve a property’s value, but you can’t expect big ROI (return on investment) – sometimes, it just doesn’t work that way.

The trick is to know which improvements add the most value to a UK property and not to overspend exponentially, or you could lose money in the sale process.

What is the True Value of Your UK Property?

While it makes sense that your home’s value is the value assigned to it by a valuation specialist, that’s not always realistic.

Your property is only worth the amount that a buyer is willing to fork out for it.

If the area your home is in experiences high demand, the value of your property will go up.

Much the same, if your area becomes less desirable to live in, you may see the value of your property fall, even if you spend time and money sprucing it up.

You may advertise your property at a specific price but never get that exact price when you sell it.

If your home is in an excellent area but is falling down or riddled with structural issues, the price will naturally be pushed down.

What Adds the Most Value to a Home?

So, what adds the most value to a UK property?

Where should you spend your money for the best possible returns and, of course, ensure that your UK property value increases?

Unfortunately, for those who don’t want to spend a lot, the most expensive home modifications and improvements will increase the home’s value.

Consider the following for the most value-adding:

• Modernizing the bathroom – you can buy a new shower curtain, install glass shower doors, and refresh the paint or tiles.
• Making the home more energy efficient – many people want an energy-efficient home for two reasons. The first is to do their bit for the environment, and the second is to cut back on energy costs.
• Installing an updated, ergonomic kitchen – adding a kitchen island for added workspace, incorporating kitchen stools, refreshing outdated appliances, or even just giving the kitchen cabinets a makeover can do the trick.
  • Spruce up the garden – there’s nothing more inviting than a lush green garden where the spring and summer months can be languidly enjoyed. A nice-looking garden will improve the value of a property.
• Converting the loft into a study, bedroom, or similar – lofts don’t always require planning permission, but it’s a good idea to ask first. You can convert the loft into extra living space for any amount between £15,000 and £50,000, which will add thousands to the value of your home.
• Adding an extension to increase the living and entertainment spaces – remember that extensions require planning permission before work can begin. Also, ensure that the amount you’re quoted for the work is money you can make back in terms of property value increase.
• Building a conservatory – this adds extra living space to the home. It could become a sitting room, a kitchen, or similar. Unfortunately, conservatories are rarely under £10,000, and there’s no guarantee they will add value to your property.

Simple Improvements Can Still Add Value to Your UK Property

If you’re not ready to go all out on big alterations or need more money to spend, you can make some simple improvements to increase property value.

This is not to say that simple improvements will be cheap, but they will be a little cheaper than major alterations requiring a much bigger financial commitment.

These include:

• A fresh coat of paint – make sure all the doors, walls, and window frames are neatly painted in a modern yet neutral colour.
• Kitchens can be modernized by painting or replacing cabinet doors, installing new cabinet and door handles, replacing tap handles and faucets, changing the old appliances, and so on.
• Bathrooms can be updated by replacing the shower curtain with a glass shower door or updating the tiles, for starters.

Can I Remortgage My Property to Add Value to the Home?

If you remortgage your property, you can use the awarded money to carry out home improvements and alterations that add value to the home.

Keep in mind that remortgaging will come with an interest rate attached.

You will get a fairly good remortgage deal if you have a lot of equity in the home (equity is the amount of the loan you have already paid – this is the portion of the property you already own).

It’s not a good idea to remortgage a home if you don’t have a lot of equity in the property yet.

How to Add Value to Your Property Conclusion

Adding value to your property starts with knowing what your current value is.

You can use a free valuation service such as Zoopla to get a good idea or hire a valuation specialist to assist you.

Once you know what your property is worth, you can take the next step to improve the home.

It’s a good idea to look at what the properties in your immediate neighbourhood are selling for and what condition they’re in before you commit to any improvements or alterations.

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

Your mortgage will likely be one of the biggest investments of your life.

And because you’re spend many years repaying the mortgage about, the mortgage you get and the interest rate attached to it are of the ultimate importance.

Knowing where to find the best mortgage deals UK can make a big difference to your monthly instalments.

By making a wise mortgage deal choice, you can reduce the total amount you’ll have to pay over the span of your mortgage.

If you’re on the hunt for mortgage best buys UK, you’ve come to the right place.

We’ve pieced together some top tips to ensure that you get access to some of the best mortgage rates on the market.

With these pointers in mind, you can compare options and secure mortgage best buys UK for yourself.

Alternatively, working with a mortgage advisor can help you to improve on the options you may find while searching the market for yourself.

How to Get Mortgage Best Buy Rates in the UK

Everyone in the property market wants to ensure they get the best possible UK mortgage rates.

While some do manage to get low interest rates and low fees, it’s not always possible for those who don’t know where to look or what to look for.

Finding mortgage best buys UK can be a challenge for the average Brit, but by following a few simple steps, you can improve your chances of finding the best possible deal so that you can pay off your loan without it crippling your budget or putting you in financial hot water in the future.

Whether you’re using a financial advisor or not, it’s a good idea to educate yourself on mortgage best buys and what’s best to look for.

Below are a few steps you can take to ensure you cut back on mortgage costs without losing out on any perks.

1. Use a Mortgage Comparison Tool

Once you’ve got a property in mind and know how much you need to borrow, you need to look at the interest rates offered as this will determine how much you eventually pay back.

You could start with your bank, but you won’t be able to do much of a comparison as they will only provide their own deals and rates.

To shop around effectively, you should use an online mortgage rate comparison tool.

These platforms provide an overview of deals available, including what to expect for your monthly instalments.

Of course, you won’t be able to see every deal as some mortgages are only offered through certain brokers. But you’ll get a good idea of what’s available.

2. Increase Your Mortgage Deposit UK

Borrowers who are able to put up a higher deposit than the minimum are seen as low-risk and therefore eligible for a reduced APR.

Obviously, when you put down a bigger deposit, you need to borrow less money and your monthly instalments will also be lower.

Most of the mortgage best buys UK offer the lowest rates when there’s a deposit of 20% or 25% put down.

3. Improve Your Credit Score

Your credit history and score will determine what mortgage rate you’re offered in the UK.

If you have a poor credit score, mortgage lenders will view you as a high-risk client.

The better your credit score is, the greater chance you have of getting a good mortgage rate deal.

You can improve your credit score prior to applying for a mortgage by:

• Checking your credit report and ensuring that the details are up to date.
• Register on the voter’s roll as this provides the latest accurate personal information for you, and automatically increases your credit score.
• Avoid applying for credit for some time as every credit check will appear on your credit history and reduce your credit score.
• Ensure you pay all credit bills on time and in full every time.

4. Get Help from a Mortgage Broker When Searching for the Mortgage Best Buys UK

Using an online mortgage rate calculator will help you determine a good rate.

Then, consider if a mortgage broker can help you beat that rate.

The job of a mortgage advisor is to hunt for the best possible deal for you and to advise you on the various home buying schemes that you may qualify for.

During this process, you will find that some of the deals aren’t available through a broker but only through a direct lender.

Mortgage advisors may try to sell you additional products such as life cover, contents insurance, and mortgage payment protection insurance.

While some of these products may be useful to you, keep in mind that they’re not compulsory.

5. Check Your Mortgage Contract for Possible Hidden Costs

Most mortgage borrowers aren’t aware that there are additional feels included in a mortgage, not just the mortgage interest rate.

In some instances, you may acquire what you think are mortgage best buys UK with low interest only to find that there are additional fees that will be applied and increase the total cost of your loan.

One of the biggest additional fees to look out for is the arrangement fee (this can also be called an establishment fee or setup fee) which is often £2,000 or higher.

Of course, there are other fees that you might not expect that might catch you out.

For instance, settling your mortgage earlier than expected could be penalized and if you overpay each month in hopes of reducing your total loan payment time, you could incur up to 5% of the amount you’ve overpaid.

Not all lenders charge these fees, but some do, so it’s best to look for the added fees in your contract or discuss additional fees directly with your mortgage provider.
Conclusion

If you’re on the lookout for mortgage best buys UK, take the time to consider various options before making a final commitment.

You will find that the best mortgages are often provided by a mortgage advisor who can help you scour the market based on your individual requirements and your current financial situation.

To save time and money, follow the steps above or get in touch with your chosen mortgage advisor without delay.

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

If you find your mortgage payments overwhelming and you’re struggling to make ends meet, you could apply for a mortgage holiday (or mortgage payment holiday) in the UK.

In this article, we will discuss mortgage payment holidays, how they work, how to qualify for one, and the expected pros and cons.

What is a Mortgage Holiday UK?

What is a mortgage holiday UK and what does it involve?

A mortgage payment holiday UK is an arrangement that’s come to between a borrower and a lender that allows the borrower to take a temporary break from their mortgage repayments.

Some mortgage lenders provide up to 6 months’ holiday from mortgage payments, but this depends on your previous payment history and, of course, your current financial situation.

Can I Request a Mortgage Holiday as a Result of Coronavirus Impacting Income?

Over 1.6 million mortgage payment holidays in the UK were granted at the start of Coronavirus in 2020. While these holidays made a big difference to those experiencing them, they could not continue to be offered long-term.

It’s important to note that you can no longer request a mortgage holiday in the UK using Coronavirus as a reason.

That said, some mortgage providers still provide mortgage payment holidays at their own discretion.

One of the perks of Coronavirus related mortgage holidays is that they would not show up on your credit history. All other types of mortgage holidays will show up on your credit history and may impact your credit score.

What are the Pros of a Mortgage Holiday?

First and foremost, the biggest pro of a mortgage payment holiday UK is that it gives you some breathing room for a short period to get back on your feet.

Another pro is that avoiding falling behind on your mortgage payments could affect your credit score more negatively than a UK mortgage holiday.

What are the Cons of a Mortgage Holiday UK?

As with all things in life, some cons come with mortgage holidays in the UK.

It’s important to note that a mortgage holiday UK is only suitable for borrowers experiencing a short-term or temporary financial shortfall.

If your income is permanently reduced, there are better routes to take.

The biggest con to remember is that while you’re on a mortgage holiday, your interest is not and will start racking up.

At the end of the UK payment holiday on your mortgage, you’ll face higher monthly mortgage instalments, which could negatively impact your household cash flow.

Of course, your credit score will be affected, and taking a mortgage holiday in the UK could impact your future creditworthiness.

How Do I Qualify for a UK Mortgage Payment Holiday?

Not everyone will qualify for a mortgage holiday, even if the lender they’re with offers them.

Several factors will determine whether you qualify for a mortgage holiday or not, as follows:

• The lender – not all lenders offer mortgage holidays
• Your specific mortgage contract – some contracts don’t allow for mortgage holidays
• Your current financial situation – if you’re going through a temporary financial problem, going on maternity leave or similar, you may be able to get a mortgage holiday
• Whether you have overpaid on your mortgage in the past
• Whether your account is in arrears – if your mortgage is in arrears, you won’t qualify for a mortgage holiday

How Do I Apply for a Mortgage Payment Holiday UK?

The first step you need to take is to read your mortgage contract and pay special attention to the terms and conditions.

If the mortgage provider does offer a mortgage holiday, it will be mentioned in the mortgage contract.

That said, you can also call your mortgage provider and ask them directly if a mortgage holiday is available to you.

Qualifying for a mortgage payment holiday is one of the first steps. If you don’t meet the lender’s requirements, you won’t be granted a mortgage payment holiday.

First and foremost, lenders offering mortgage holidays UK often require the borrower to have been making full payments on time for a certain period. This period will vary from one lender to the next.

The lender will determine how long of a holiday you can have.

They will take several factors into consideration. Mortgage lenders offering payment holidays may approve your request but offer you a shorter payment holiday than you initially asked for.

The value of your mortgage will also come into play.

For instance, mortgage lenders may only grant mortgage payment holidays UK to borrowers with a mortgage that has a loan-to-value ratio of 80%.

What Happens When the Mortgage Payment Holiday Ends?

Once you’ve been granted a mortgage holiday, your monthly instalments will halt for the duration of the holiday as determined by the lender.

You should receive a document from your mortgage provider that states your balance, the new monthly instalment amount, and when the next instalment payment is required.

You can then decide if you will increase your monthly instalment amounts so that you can stay on point with your repayments and still settle the mortgage account on the same date as you originally planned for.

Alternatively, you can extend the term of your mortgage by a few months.

This will keep your monthly instalments at an affordable amount, but keep in mind that while your instalments will become lower, you will pay more money in interest fees in the end.

Chatting with a mortgage advisor can help you find alternative ways to restructure your repayment plan so that it works out best for you financially.

Mortgage Holiday FAQ UK Conclusion

If you’re struggling with your mortgage payments because of a temporary or sudden short-term financial hiccup, a mortgage holiday UK may be just what you need to get some breathing room again and get back on your feet.

Applying for a mortgage holiday is a simple process requiring you to contact your mortgage lender directly or speak with your mortgage advisor.

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

Let’s talk about mortgage terms in the UK. In the not-too-distant past, homeowners would take our mortgages UK over 25-year terms.

Nowadays, a 25-year mortgage term doesn’t seem realistic, especially with the high cost of living crisis and property prices.

More and more home buyers are applying for mortgages over 30 to 35 years.

One in four new mortgages in the UK run over 25 years.

The reason for such extended loan periods is that buyers want to get onto the property ladder sooner while reducing their expected monthly instalments and being able to afford more costly properties than they would on a shorter loan term.

There’s no doubt that extending the term of your UK mortgage can be beneficial, but it also comes at a cost.

This guide looks at the ins and outs of extending a UK mortgage and what to expect should you choose.

Chatting with a professional mortgage advisor is your best chance of making the right decision.

The Draw for Extended UK Mortgage Terms

There are benefits to extending your mortgage in the UK.

For instance, a longer mortgage repayment term will reduce your monthly instalments because you have 10 extra years to pay off the capital.

The lower payments will also ensure you qualify more easily with a lender offering mortgages, as the monthly repayments will be more affordable.

Pros and Cons of Extending Your UK Mortgage

One of the biggest demographic to benefit from the option to extend a mortgage is undoubtedly younger property investors who want to ensure that they pass the affordability assessment involved when applying for a mortgage.

Let’s consider a £200,000 mortgage over 35 years with a 3% interest rate.

Such a mortgage would come with interest rate payments each month of £178.

Now, consider the older way of doing things, where mortgages were paid over 25 years.

In such a scenario, the borrower would face an interest rate payment of £948 monthly!

The difference is remarkable.

This probably looks inviting, and it is! But there’s a flip side: the overall cost of the interest amount you’ll pay back on loan.

Using the example above as a reference, a 25-year mortgage would incur interest of £84,478, whereas a 30-year mortgage presents a whopping £103,495, which isn’t quite as inviting?

What’s the Solution to Avoid Additional Fees?

Many borrowers have found a way around incurring the additional fees.

This is done by starting with a mortgage with a longer loan term.

This will help to keep the initial costs down.

Then, when you have additional money, you can slash your term or overpay on your instalments.

Of course, this will not mean your mortgage extension is free, but you will pay less in fees/interest.

Age is Important to Consider When Extending Your Mortgage

Extending your mortgage is an option if you’re young. Unfortunately, many mortgage providers hesitate to provide funding to those over 65.

Most lenders only allow borrowers to extend a loan until their 80th birthday. If your loan repayments extend beyond that, you won’t be eligible for the extension.

That said, smaller building societies and some lenders are considering more leniency and may even allow repayments up to the age of 90.

A More In-Depth Look at the Pros and Cons of a 20-Year Mortgage and 30-Year Mortgage

Let’s dig a little deeper into the pros and cons.

Pros and Cons of a 30-Year Mortgage

Pros:

• Lower instalments impose less pressure on your monthly budget
• You can purchase more expensive property with a larger loan. And with the money you have left over each month, you can repair and maintain the home.

Cons:

• A 30-year mortgage will take the majority of your life to pay off. If you get a 30-year mortgage at 30 years old, you will be 60-65 years old by the time you pay off the property.
• You will pay a higher interest rate and pay interest over a longer term which means that a 30-year loan is far more expensive even if the monthly instalments appear lower.

Pros and Cons of a 20-Year Mortgage

• You can pay off your mortgage quicker and will have more time to save for retirement or spend on investments. For example, if you take out a 20-year mortgage in your 30s, you’ll be paid up by the time your 50s come around.
• A shorter loan term means you can build equity faster. Equity is the portion of the mortgage that is paid out, meaning it’s the portion of the home you’re now the owner of. An individual’s net worth is calculated with equity. During the term of your loan, you can loan against your home equity, but keep in mind that this is a risky business as the home will serve as security for the loan.

Cons:

• You’ll pay fairly high monthly instalments, resulting in less available cash flow for everyday living. So you’ll have to budget carefully.

Which Loan Term is Ideal?

Now, with pros and cons in mind, you’re probably wondering if you should go for a standard 20-year mortgage or extend your mortgage UK loan term to 30 – 35 years.

Financially speaking, the 20-year mortgage option seems stronger as it will save you money in the long term and also allow you extra time to save for retirement and invest.

That said, if you’re on a strict budget and the 20-year mortgage isn’t a viable option, the 30-year mortgage may be ideal for you.

Can I Extend the Term of My Mortgage in the UK? Conclusion

If you’re considering extending your loan term or want to know which loan term is best suited to your current financial situation, speaking with a professional mortgage advisor could help to provide some clarity and help you make an informed and confident decision.

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