The financial markets represent an ever-changing entity, responding quickly to the ups and downs of national and international economies. The mortgage sector is often just as changeable and sometimes just as unpredictable, and in 2020 things are no different. As well as the usual financial ebbing and flowing that occur in any other given year, in 2020 we’re living with the effects of Brexit and the developing coronavirus pandemic. In an uncertain world, it’s not always easy to tell the facts from the fiction, but here are 41 questions and answers that can help.
Early indications are that it will, despite the uncertainty. Mortgage approvals in January were 4% higher than in 2019 according to the Bank of England. Many experts predict this trend will continue.
There’s also an increase in the number of first-time buyers stepping on to the first rung of the property ladder. The number of newbies in 2019 was the highest for any year since 2007.
Having a sizable deposit will give you a wider choice of properties to purchase, of course. It will also help you gain access to some of the better mortgage deals from providers.
Your credit score is hugely important, and without a decent score your options will be limited. In short, the amount you can spend on a property will reduce if it’s deemed too low.
Yes. Lenders will often use this to verify your details, in some cases mortgages will be refused if they can’t ascertain your identity.
A repayment mortgage works if your overall intention is to gradually pay back the debt, but it’s worth noting monthly repayments will be higher.
Interest-only deals are cheaper, but you have to remember the whole amount needs to be paid back at the end. Only do this if you’re sure you’ll be in a position to do so.
A fixed-rate mortgage locks you into a stated monthly repayment for a period of time, often two or three years. This can help to make budgeting easier.
Mortgages with a variable rate are more unpredictable, as they will go up or down depending on things like the over-riding base interest rate.
A tracker mortgage usually follows the ups and downs of the Bank of England’s base rate. They can be cost-effective when the rate is low and expensive when it’s high.
Brokers often have access to special deals, and of course it helps to have specialist advice when making such a large purchase. Most charge a fee, but some don’t.
The Help to Buy scheme enables many people to buy a home with a low deposit of only 5% of value. You can contact an appointed agent to find out more.
They can be, but not for everyone. You’ll be able to see deals that are available but bear in mind you may not qualify for them in the first place.
There are a number of factors than need to be taken into account. Monthly payments on a loan of £200,000 will tend to be around £750-£800 at the moment.
Mortgage prisoner refers to borrowers who have had to pay far more for mortgages, often due to the actions of companies that bought their mortgages then put the rates up.
The housing gap is the difference between the number of available properties in the country and the number that society needs.
A property valued up to £125,000 has no stamp duty. It’s 2% up to £250,000, 5% up to £925,000 and 10% or more over that price.
Additional Property Rates stand at 3% up to £125,000, 5% up to £250,000, 8% up to £925,000 and 13% or more above that.
It can be profitable to do so, but it will depend on your circumstances. Switching mortgages is common nowadays, but make sure you do your homework first. If in doubt, it might be best to do nothing.
This is a secondary loan taken out against the equity you have in your property. In effect, it means you’ll have two mortgages on the go at the same time.
With a lifetime mortgage, you borrow money secured against your main home and remain there until you either pass away or go into long-term care. It’s then sold to pay off the loan.
Equity release enables you to unlock some of the value of your home for cash. It can be extremely useful, but it can also be expensive. Speak to the experts first.
Yes. The main difference when applying is that you’ll need proof of income. Most lenders will ask for accounts or tax returns for the previous two years.
Without a doubt. There are so many mortgage products on the market, each with their own plus and minus points.
There was a time when high street lenders were the only ones on the market, but that’s all changed now. There’s a wide variety of lenders in the UK, so thinking outside the box can be a good idea.
This is a way for family members to help relatives get on the property ladder. It involves borrowing against an existing property and gifting that sum to another family member.
No. Other term lengths are available, including for 30 years or more, although these are relatively rare. Shorter terms are also on the market, but repayments will be higher each month.
Your mortgage is a very large and expensive investment, and a survey will help to protect your outlay. Surveys often uncover serious issues, and this can save you from losing a significant amount of money.
According to the UK House Price Index, the average cost of a UK home was just over £234,000 in December 2019.
House prices vary wildly in Britain, but the cheapest regions in terms of house price to earnings ratios tend to be in Scotland and in the north-west of England.
It’s no surprise to hear that London is the most expensive. First-time buyers face great difficulties in getting on the ladder the capital.
If you can afford to overpay a little each month, it can be a sensible strategy. It can help to increase your equity more quickly, but only do it if you have the disposable income to make it workable.
As a general rule, you need to obtain a buy to let mortgage if you plan to rent a property out to others.
The short answer is no. Buy to let mortgages tend to have higher arrangement fees and a higher rate of interest.
Yes. Mortgage protection insurance is available from a number of providers, and in many cases is a legal requirement.
An IRO mortgage is an interest-only mortgage that’s usually for the over-55s. Payments continue until borrowers die or move into long-term care. It’s similar to a lifetime mortgage.
The main criteria for this will be your income, as well as the amount you can offer as deposit. If you have a partner buying with you, their income will also be taken into account.
As a combined total, UK borrowers still have just under £1.5 billion to pay on their outstanding mortgages.
Yes, you can get 100% LTV (loan to value) mortgages with no deposit, but it’s worth remembering they can be expensive and you might not qualify.
Lenders repossess homes as a last resort, but of course it can and does occur. In January 2020, Blackpool had more repossessions than anywhere else in the UK.
There’s no doubting the fact that interest rates are very low, and therefore mortgages are relatively cheap. If you’re looking to get a mortgage for the first time or perhaps switching from one lender to another, this could be the time to do it.