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Getting Prepared For Your Mortgage in Halifax

Mortgage Advice in Halifax

So, you’ve saved up for your deposit (or got the green light from “Bank of Mum and Dad”) and made the decision to move home. What’s the next step? Put simply, and in the best boy scout traditions, it’s time to get prepared.

Know where you stand

I’d recommend speaking to an experienced local Mortgage Broker in Halifax as early on in the process as possible, so you know how much you can borrow for a mortgage and how much it will all cost. Obtaining an up to date credit report should also be at the top of your list, you don’t want a meaningless squabble with your mobile phone provider holding you back from buying a home. Taking the above two steps will give you a meaningful expectation of how possible this is going to be and what your budget is.

Getting organised

Your Mortgage Broker in Halifax will obtain a fully credit-checked Agreement in Principle on your behalf but you’ll have to prove who you are, where you live and how much you earn. There really is loads of paperwork for you to get together so it’s a good idea to open a file for yourself and start collecting everything in advance.

Proof of ID

In terms of proving who you are you’ll need to produce some photo ID such as a Driving license or passport, if you’re a non-UK national working over here on a Visa you’ll need that too.

Proof of address

In addition to the above, you’ll need to prove where you live. You’ll need to produce a utility bill or original bank statement dated within the last 3 months.

Last 3 months’ bank statements

The analysis of your spending habits has become one of the most important determining factors in whether you’ll qualify for a mortgage or not. Your bank statements should evidence your income and regular expenditures. Lenders will not be happy to see gambling transactions on your account. Nor will they like it if you go over an agreed overdraft limit or if your direct debits bounce regularly.

Proof of deposit

You will have to prove you have the funds in place for the deposit and also evidence this for anti-money laundering purposes. Try not to move monies around your various accounts too much as it will make evidencing the audit trail more difficult. Lenders like to see your savings building up so you’ll need to account for any large credits into your accounts.

Quite often money for deposits has been gifted by family members. These funds need to be evidenced also and the “donor” will need to sign a letter. This is to confirm it’s a non-refundable gift, not a loan.

Proof of income

In terms of affordability, the most important thing is to be able to prove your income. If you are employed this tends to be by way of your last 3 months’ payslips and most recent P60. Lenders can take into account regular overtime, commission, shift allowance and bonus.

If you are Self Employed then you’ll need your Accountant’s help. This will be to request your last 2 or 3 years’ SA302 documents from the Revenue. Following that, they will get the accompanying tax year overview.

A list of your expected outgoings

It’s a good idea to do your homework. Write down an estimate of your anticipated 1outgoings after you move house. You can work out an idea of how much the council tax and utility bills will be. In addition to that, you can work out your regular expenditures, such as food and drink. This will demonstrate how much disposable income you have available to pay your mortgage from.

As you can see from the above, it’s a real paper trail when you are applying for a mortgage but if you want your application to run like clockwork you’ll need to put the time aside to get everything together.

My own view is that it’s better to get all this at the outset and collate everything that the lender could possibly ask for. As this saves time and frustration later down the line if you’re subsequently asked for paperwork you could have had ready at the outset.

Confused About the Help to Buy Schemes?

Mortgage Advice in Halifax

Whilst it is widely accepted that there is a national housing shortage, the Government has launched several schemes over the years. These have been under the “Help to Buy” banner, designed to get people onto the property ladder.

Unfortunately calling all the schemes Help to Buy has caused confusion amongst consumers! Here’s my take on what’s out there right now.

Schemes Currently Available

Help to Buy ISA

This is a savings scheme available from most high street banks aimed to help First Time Buyers with their deposit. If you meet the criteria, your savings will be boosted by 25% by the government. Your Solicitor will apply for this bonus at the end of the house buying process so somewhat bizarrely you can’t use the bonus towards your deposit as it’s paid shortly after completion.

Help to Buy Equity Loan

This is the most popular scheme and is available on new build properties only. The government will lend you up to 20% of the purchase price. Usually, my customers put down a 5% deposit and take out a 75% mortgage for the rest. Remember, it’s a loan not a gift and the government have a stake in your new home until you pay them back.

Forces Help to Buy

If you’re in the armed forces, you can borrow up to 50% of your salary, up to a maximum of £25,000 interest-free towards a new home.

Some FAQs about the Help to Buy Schemes

What if I’m Self Employed?

There are lots of options available to you. It’s a good idea to get hold of your last SA302 from your Accountant and speak to a local mortgage broker for advice.

Do I have to buy a new build house?

Yes and no, the Help to Buy Equity Loan is for new build properties only. The Help to Buy ISA and Forces Help to Buy can be on new or old.

Do you need a good credit rating?

There may be options available to you even if you have a poor credit score. Mortgage lenders are becoming increasingly competitive on criteria and many challenger banks are entering the market. Again, please seek mortgage advice from a local expert!

How much deposit do I need?

A minimum of 5% as a rule.

Can my deposit be gifted by my parents?

Yes, family members and sometimes friends can gift (not a loan). This is a popular way for First Time Buyers to get on the property ladder. It’s also popular for home movers moving to a bigger home. In a recent government Survey, 27% of such buyers relied on family and friends to help with a deposit.

Do I need to pay the government back?

Yes, with the Help to Buy Equity Scheme the Government loan is interest-free for 5 years. After this, you’ll pay fees. Hopefully, the property will have increased in value and you can potentially remortgage the property at any time. This likely would be to raise funds to increase your share. Remember, the government will also receive their share of any profit made.

Is Help to Buy just for first-time buyers?

The Help to Buy Equity Loan and the Forces Help to Buy Scheme are for both first-time buyers and home movers. However, the Help to Buy ISA is designed specifically for those who have never owned a property.

How do I use the Help to Buy Scheme?

The first stage would be to have a free mortgage consultation. This is to work out your maximum borrowing and also to get a mortgage agreement in principle certificate. This puts you in a strong position to make an offer. Once you have this in place you’ll be a “qualified buyer”, the next step is to go and view houses!

For more information and further terms and conditions about any of the above schemes please refer to the helptobuy.gov.uk website.

The Different Types of Mortgages Explained

The Different Types of Mortgage

When you start out looking for a mortgage you will soon realise that there are lots of different options available. If you are a First Time Buyer in Halifax, you will probably be shocked to how many there are.

Below you will see a list of the most popular types of mortgages available on the market and hopefully.  If you have any questions regarding any of the below mortgage options, then please do not hesitate to contact us.

What is a Fixed Rate Mortgage?

A fixed rate mortgage means that your mortgage payments are going to stay the same for a set period of time. You can set the length of which you want to fix your payments for, typically this being 2, 3 or 5 years or longer. No matter what happens to inflation, interest rates or the economy you know that your mortgage payment, usually your biggest outgoing, will not change.

What is a Tracker Mortgage?

A tracker mortgage means that your interest rate will track the Bank of England’s base rate. So in other words, the lender that you are with does not actually set the rate themselves. You will be paying a percentage above the Bank of England base rate. In an example, if the base rate is 1% and you are tracking at 1% above base rate, that means you will be paying a rate of 2%.

What is a Repayment Mortgage?

When you take out a repayment mortgage this means that each month you are paying capital and interest combined. So as long as you keep your payments going for the full length of the mortgage term, the mortgage balance is guaranteed to be paid off at the end and the property becomes yours.

This is the most risk-free way to pay your capital back to the lender, in the early years it is mainly the interest that you are paying and your balance will reduce very slowly especially if you have taken out a 25, 30 or 35-year term. This situation switches in the last ten years or so of your mortgage, where your payments are paying off more capital than interest and the balance will come down much faster.

What is an Interest Only Mortgage?

Whilst many buy to let mortgages are set up on an interest-only basis, it is much more difficult to get a residential property on an interest-only basis.

It is much less likely for lenders to offer an interest only product now.  However, there are certain circumstances where this can be an option. These include downsizing when you are older or have other investments what you will use to pay the capital back. Lenders are very strict when it comes to offering these products now and the loan to values are a lot lower than back in the day.

What is an Offset Mortgage?

With an offset mortgage, the lender will set you up a savings account to go alongside your mortgage account. How this works is that let’s say you have a mortgage balance of £100,000 and £20,000 is deposited into your savings account, you only pay interest on the difference, so in this case £80,000. This can be a very efficient way of managing your money, especially if you are a higher rate taxpayer.

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