The idea of having one mortgage can stress people out, never mind two! That said, some people weren’t aware that it was possible to have two or more mortgages.
Many various costs come with a second mortgage, and there are many different reasons why someone might want more than one mortgage.
If you have a large amount of equity built up in your home and are looking to release some to fund for a second mortgage to purchase a new home, home improvements or on another property for your portfolio.
Then this is something an experienced mortgage advice team in Derby, like ourselves, can look into for you.
You’ll often find towards the back end of your mortgage that you will be heading onto or potentially already are on a lender’s Standard Variable Rate (SVR).
Our team of advisors may be able to shop around to find you a more competitive deal. Another potential option could be an advance with your current lender.
If you are looking into the possibility of moving house but securing full ownership of your current property to let it out, this is another case where having a second mortgage would be suitable.
Your second mortgage will be a new residential one, taken out on a property after raising funds from renting out the previous home. This particular process is known as a let to buy mortgage.
Some homeowners may look to release the equity sitting in their property, using that income to buy an additional property to add to their portfolio.
We are now seeing more situations where a homeowner may wish to take out a remortgage to release equity to gift their child a substantial deposit.
Gifted deposits are a widely popular option for many first time buyers in Derby who otherwise wouldn’t have gotten on the property ladder any other way.
A second mortgage may apply to other circumstances, such as financial complications present with a divorce or separation.
You may not always be able to get out of your joint mortgage straight away, if at all, but may wish to take out a mortgage on a home of your own once you’ve moved out.
If you have any questions regarding second mortgages, please do not hesitate to get in touch.
You can now book yourself in for a free mortgage appointment to speak with a dedicated mortgage advisor in Derby at a time that suits you and your lifestyle.
The era of 100% and 125% mortgages are now long gone. Now that the credit crunch is but a distant memory, lenders are becoming more confident with their lending, offering more prominent bands of mortgages such as 95%. Using these more significant deals, lenders can maintain the comfort of knowing you have something to lose, should your situation change and you are unable to keep monthly repayments.
It is notably quite challenging to save up for a deposit for many people and thus be a barrier to entering the property market. When customers get in touch, we often find that we receive many questions about deposits. Below we have answered some of them for you.
The more deposit you put down, the lower the lender’s interest rate might be able to offer you. Because, in the lender’s eyes, you pose less of a risk if they lend to you. So the bigger your deposit, the less expensive band you receive. An example of this is if you put down a 5% deposit, you’ll get offered a 95% band.
Under the right circumstances, it can be possible, though it’s limited. The lender will see the monthly payment as an additional credit commitment and grant you a smaller mortgage, rather than the bigger one you might have received had you not taken out a loan. Lenders do not look too kindly on this.
Gifted deposits are common and get widely accepted in the mortgage industry. When going through the gifted deposit route, the person gifting must confirm that this doesn’t need to be paid back and is purely a gift.
You will need to present forms of ID and proof of funds for anti-money laundering. Gifted Deposits have been a godsend for the mortgage industry, and the market would look very different without them.
For the sake of anti-money laundering, all applicants will need to provide bank statements to provide proof of how your funds have to get built up over time. For more extensive deposits, you will need to give the lender with detailed, documented evidence.
Let’s say you have sold a car. Then the amount you have sold it for needs to match the receipt you provide and the amount shown in your bank account. Depositing large amounts of cash can delay the application as the audit trail can be difficult for the lender to navigate. The longer the funds have been in your account, the easier it may all be.
If you are selling a property, then the Memorandum of Sale provided by the estate agent is your proof of funds.
It’s still a 5% minimum if you qualify for the Government’s Help to Buy scheme. It can then be further topped up to 25% via the equity loan, to help you obtain a lower rate mortgage. You must remember that if you opt for this, then the 20% deposit provided by the Government is a loan, not a gift, and will need to pay back.
No, not always. If it is a genuine discounted purchase (say the house is worth £100,000 and you have been offered it for £90,000), then some lenders will accept the discount as your deposit. This can be very helpful if you have the Right to Buy from the local authority or another social landlord.
A Mortgage Agreement in Principle (AIP) is essentially a document which provides an insight to the written estimate you have received from a mortgage Lender. It proves you have a mortgage in place.
To the Estate Agent, it proves you are creditworthy as you have in theory, passed the lenders credit score. However, it is not a guarantee that you will definitely get a mortgage as a full application will require further background checks.
A Mortgage Agreement in Principle is not a guarantee that you will definitely get a mortgage as your full application will require further background checks (such as evidence of income) and a satisfactory valuation of the property itself.
However, it is a good idea to get one done at the earliest opportunity for the following reasons:
When you are ready to make an offer on a new home most Estate Agents will undertake due diligence and ask you to produce evidence that you have funds available to complete the purchase. This will take the form of bank statements and also an Agreement in Principle certificate that we can provide for you. Once you have provided them with all this documentation the Estate Agent will then normally stop marketing the property and put a “Sold” or “Sale Agreed” board up.
If you already have a Mortgage agreed before you make an offer you are making yourself appear as an attractive proposition as this proves you are not making an offer on a “whim”, you’ve thought about how you’re going to fund the purchase and do something about it. This might persuade a seller to accept an offer you put forward on their property underneath the asking price.
When it comes to buying a house some clients have always “put the cart before the horse”. They go full steam ahead and make an offer on a property without first checking that they can actually proceed. This can lead to terrible disappointment if the mortgage application fails. By that time they have really got their heart set on their new family home. This disappointment can be avoided by contacting us at an early stage. Sometimes there are things that are causing a mortgage to decline that can be overcome given a little time.
For example, there may be a niggling issue on your credit report, perhaps a disputed mobile phone bill which can be easily rectified. Maybe you thought you were on the Voter’s roll and you’re not – once again that can be sorted out given a few weeks.
Or maybe you can’t get a mortgage at all! But if that’s the case it’s better than you know now rather than mess people about and we’ll be able to tell you what you need to do to improve your credit-worthiness for the future.
So you know you’ve got a good credit rating because you’ve never been turned down for credit, you’re registered on the Voter’s role and you’ve always made your credit card payments on time and this all good for getting your Mortgage application on its way but there are other potential problems you are yet to have to overcome.
For example, you could approach 10 different Lenders these days and get 10 different maximum mortgage amounts as they all calculate affordability in their own unique ways. If you’re self-employed it can be even harder for you as an applicant: some Lenders take your net profit, others your salary and divided whilst some others use your latest year, others an average over 3 years.
Knowing your borrowing limits is important as then you know for sure what your price range is. We’ll be able to advise you of the maximum mortgage available to you and together we’ll work out how much you can afford to pay back each month.
Our Mortgage Advisors in Derby are available for same-day appointments which is handy if you’re after a Mortgage Agreement in Principle and then you can proceed to make an offer on the property you have spotted. You will then be better placed than other people viewing the property as you have taken the next step already and the Estate Agent can put your offer down as a ‘qualified purchaser’. From this, you’re in a good position to proceed.
When you have an offer accepted on a property your next job is to arrange a property survey. This will establish the condition of the property and ensure that it is worth what you are going to pay for it. If something is found on the survey you are then in a position by law to approach the seller to negotiate a price for the works required.
It’s mostly First Time Buyers in Derby that ask us “what is a property survey?”, we find that not many people have heard of them. Here we have detailed the types of property surveys and what are their differences.
There are 3 main types of property survey available to you:
A basic valuation is the cheapest option and you will be required to have one of these before you receive your mortgage offer. Please don’t confuse this with a full survey. The mortgage valuation confirms to the lender that the property is worth at least what it is lending you.
Your mortgage lender may even offer you a free basic valuation as part of your deal.
A mortgage valuation will not highlight any repairs that are needed. However, it may point out any obvious defects and recommend that you investigate further.
A Homebuyer’s report will cover structural safety and highlights problems, including damp, as well as anything that doesn’t meet current building regulations. This kind of report will give you an independent report of your property by an expert.
To ensure you are not paying for two surveys it is advisable to ask the mortgage companies surveyor to carry out this report for you – it will usually take a couple of hours to complete.
A Full Structural Survey is advisable for older properties and those of non-standard construction.
Depending on the property size and type – a full structural survey can take as long as a day to complete.
A full structural survey provides a detailed report on the condition of the property and highlights issues that should be investigated further before going ahead with the purchase, providing you with peace of mind about the condition of your property.
You can find a surveyor to carry out a Homebuyer’s report or building survey through the Royal Institution of Chartered Surveyors.
Sometimes we receive calls from tenants when they have been notified that landlords are considering selling their properties. For landlords, it is much easier for them to sell to their existing tenants rather than the open market. This leads to tenants being offered the “first refusal”, a chance to buy before the landlord takes it to an agent to sell.
The government has re-evaluated tax reliefs over the years, leading to many landlords paying more tax than before. This in turn has caused many of them sell their properties, something that is very common for amateur landlords.
On the other hand, more serious investors often keep their properties, as they tend to view it as a long-term arrangement and a sound investment, despite legislative changes.
There is a variety of reasons as to why a landlord might choose to sell their property to you rather than an estate agent.
1) They avoid paying commission with estate agents.
2) It avoids ‘loss of rent’ due to not having tenants in the residence until the sale goes through.
3) No refurb costs: If a tenant moves out then the property will have to be prepared for sale. With potential expenses needed to redecoration e.g. new flooring.
Not only are there advantages to landlords but there are potential advantages to sitting tenants who are considering buying:
1) You know the property inside out if there are any faults, you’ll already be aware of them. No nasty surprises for you!
2) You won’t be caught up in a chain. You aren’t waiting for the owner of a property you’re after to finish their own process meaning a deal can be done faster.
3) Discounted price when purchasing. Given all the advantages listed above, it’s normal for a Landlord to sell to a sitting tenant at a discounted price. More commonly known as a ‘sale undervalue’.
Some lenders will allow discounts which are offered by the landlord as part of your deposit. If the price that is agreed turns out to be well below the open market value it may even be possible for a tenant not to have to put down any deposit at all.
The ‘gig economy’ has an ever-growing portion of the general public working within it. These people are working over short term contracts because of this it means they are not entitled to some benefits which employee’s might be such as sickness or holidays. The professions within this economy are varied ranging from both skilled and unskilled workers, with the highest percentage being in professional services.
Because of the basis of the gig economy, it’s marginally harder for these workers to get a mortgage as lenders perceive these people to be self-employed. If you’re working within this type of economy to give yourself an increased chance of gaining a mortgage is to build up a track record of self-employment. You’ll most likely need one year’s history to qualify for a mortgage unless your contract has gone on for a longer duration.
If a lender decides to view you as a sole trader you will then need to produce evidence of your net profit – this is the amount you have earned minus your expenses in which you may need an Accountant to help you with this.
If you have set up your own Limited Company then most Lenders will focus on the salary that you have paid yourself plus any dividends that are declared.
In contemporary times, Lenders are now becoming more flexible in the way they assess contract workers now that there are so apparent within the economy. If you have been operating this way for a while and are currently in a contract then they will consider your ‘day rate’ as a way to assess your income, depending on the industry.
The way in which Lenders will assess day rates will typically be that they will times the given rate by 5 then 46 weeks. They won’t include a full 52 weeks as Contract usually don’t work the full year and neither do they get paid holidays. This method works really well for IT contractors who tend to have a selection of contracts which they want to take.
Additionally, it is a good idea for any gig workers and self employed in Derby applicants to get organised ahead of time before they start the mortgage application process. Tax can be a bother, but lenders like to see a healthy level of sustainable earnings.
It’s also possible to get a mortgage on zero-hour contracts. Again, lenders will want 12 months’ earnings before you can apply and will consider taking an average of your earnings over a full year.
The majority of high street mortgages which are on the market are portable. A portable mortgage is simply a mortgage that you are able to move from one property to another without paying a penalty. This works out well if you are considering Moving Home in Derby and are currently in the middle of a fixed rate deal because you can potentially avoid an early repayment charge.
It’s important to remember that not all mortgages are portable. If you are with a specialist lender then you may not have the opportunity to port your mortgage. The best way to find this out is to drop a quick call to your lender to confirm whether or not this is allowable.
Even with the availability of porting being available, not all customers choose to do so. Some reasons as to why customers don’t port could be due to factors including lenders not lending the extra money that a person needs to move or that the additional funds will be on a different rate to the one you have on your current deal. Depending on what new deal you are offered you might decide to overlook the repayment charge and swap to a different lender.
A sub-account will be created onto your mortgage when you port your mortgage and the additional monies end up being on a different deal to the original one. This means that although you only have one mortgage and one direct debit, two different rates of interest apply.
Down the line having sub accounts will lead to the different products overlapping which could get annoying. To get them back aligned at some point will mean one of the sub-accounts having to go onto the lenders’ standard variable rate for a period of time.