First Time Buyer's Guide To Mortgages

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Please everyone remember that this is not a definative guide to mortgages, simply my own interpretation and opinion. Therefore don't start having a go or trying to prove me wrong by saying there are things I have missed etc. Mortgages is such a massive topic that it is impossible to cover everything in a post such as this. Also much of the actual advice on mortgages and the definition of suitability is dependant almost entirely on personal individual circumstances.

OK Rant over

Different Types Of Mortgage

There are many different types of mortgage, I will list the basic ones here and a brief description:

Capital & Interest: More commonly known as a 'repayment' mortgage. You make a payment to the mortgage company each month which consists of Capital and Interest (hence the name). As long as you pay what you are asked, on time, for the term of the mortgage you have an absolute guarantee that you will owe nothing at the end. It does assume however that you will remain with that mortgage for the entire term. In reality most people will change mortgages / lenders / move home etc at which point the balance and repayments will be re-calculated to reflect the payments to date.

Interest Only: As the name suggests, you only make a payment consisting of Interest Only to the mortgage company. It is then your responsibility to ensure that, at the end of the mortgage term, you have the means of repaying the mortgage balance which will NOT decrease throughout the term (unless you make capital overpayments). In the past this would have been via an endowment policy or similar. The monthly payments will be less that the identical repayment mortgage but remember that you are merely 'renting' the money. Most buy to let mortgages are on an interest only basis.

100% mortgages: Quite simply it means that you are borrowing 100% of the purchase price or valuation whichever is lower. It means that you have to put no deposit down, however you will generally pay a higher interest rate for the pleasure.

125% mortgage: This is similar to the above however it works in as much as you will have a total loan amount of 125% of the purchase price divided between a Mortgage and an unsecured loan, with the same lender. Beware of anything offering you over the purchase price. In the case of a 125% mortgage your property must increase in value quite healthily before you can sell with enough to clear the existing mortgage and loan, and have some profit for a subsequent deposit. Personally I very rarely recommend these to clients, and on the occaisins that I do it is in conjunction with in depth discussion and warnings about borrowing more than the property is worth.

Negative Equity: Not a type of mortgage but I think ties in with the last 2. Simply means that you owe more than the property is worth.

Base Rate: The rate set by the Bank Of England from which mortgage rates are calculated. Think of it as a wholesale rate, you cannot go to the Bank Of England for this money. Tracker mortgages are based on this. They will mirror or 'track' the movements of this rate with a percentage difference.

Standard Variable Rate: Each lender has it's own variable rate. It is a no bells or whistles, no tie in, basic mortgage which is variable and can be whatever rate the lender chooses to set. Discount mortgages are based on the individual lenders standard variable rate, where they offer you a 'discount' off their normal rate.

Fixed Rate: Your rate will be set at the outset to a level stated by the lender for a set period of time (2,3,5 years eg). The rate you pay will not change in this period, then at the end it will revert back to the lenders Standard Variable Rate.

Self Certify Mortgages: This is a type of mortgage suited to people who are unable to prove their income. It does not change or increase the amount you earn, merely allows you to declare without evidence. Useful for recently self employed people with no accounts, or an employed salesman paid mainly on variable commission. The penaties for falsely stating your income are severe and may even land you in prison for up to 10 years.

Remember. Capital & Interest or Interest only are the types of Mortgage, to which all the above variations such as Fixed, Tracker, Discount etc can be applied.

Setting Up A Mortgage

Finding a Broker: This can be done in may ways. I usually suggest that it be someone who is know to you or has advised you satisfactorally in the past. You could ask friends and family for a recommendation or look in your local pages. Brokers will either deal face to face or via phone/email/post, or a combination of the two. Either is fine as long as you are fully comfortable with what you are putting your name to.

Usual upfront costs: Depends really on the type of mortgage and which lender you are going through. An average though would be:

Valuation (basic survey) Ј300-600
Booking/Arrangement fee (Charged by the lender and can be added to the loan) Ј300+ (some lenders charge as much as 1.5% of the loan)
Deposit (obviously) if you are using one.
Solicitors fees including all associated costs Ј1000-Ј1500 (based on a purchase of Ј120,000-Ј200,000)
High loan to value fee. If you borrow over 75% of the value, a sinlge premium indemnity policy is required by the lender to protect them against financial loss should they need to reposess. Up to 90% most lenders pay this for you. Over 95% the vast majority will charge it and add it to your mortgage. Varies dramatically from lender to lender but an average on a mortgage of Ј150,000 would be about Ј2600.
If possible I also recommend that you ahve an emergency fund of about Ј1000-3000 to cover misc costs.

What will they lend you: Again this varies from lender to lender, and the individual case (credit history, deposit size, employment history etc) however the average is 3.5-4x single income or 2.75-3x joint income. When calculating the borrowing amount you must first deduct the annual costs of any loans outstanding from your salary before applying the multiples. Ask me if you want examples. Some lenders will work on affordability, where by the look more at your net income monthly and calculate an affordable amount based on that.

Credit Score: This goes hand in hand with credit history, Credit history is how you have conducted your financial affairs over the last 6 years. Credit score is a combination of this along with detailed information regarding payment histories and certain points given for your individual circumstances. You can obtain your credit file at any time from one of the credit reference agencies such as Experian or Equifax.

Information you need to supply:It never hurts to carry out a simple credit search on yourself however just make sure that you dont do it too often.

Prior to my initial meeting with any client I always ask them to provide the following:

Driving License
Passport
3 year address history
3 year work history
3x payslips (latest)
Latest p60
last 3 bank statements
Current mortgage details / original offer
details of any outstanding loans/credit
details of any credit problems in the past 6 years

How long does it take to get the mortgage: Depends again on the lender and the type of mortgage you are getting. As long as the lender/broker has all the info they need you should expect the mortgage offer within 2-4 weeks.

Buying A House

Pretty much all the info you ask for here is in my other post Housebuying Moneysaving Tips

If not then simply ask me for more info

Hows this to be going on with?

Apologies for the length of the post

Anything else you need, just ask me.

Will cover the insurances a bit later.

Cheers (now with RSI)

Andy

Best answers:

• Good work Andy
  This is something I produced / placed a link to a while back, but I took the link off some time ago .. one of the BG suggested I post it .. might need a little updating ( and bits aren't perfect ) which I will try and do as an ongoing project - and will looik at deleting anything that duplicates first post- although B Brother is pending now ( in 2 parts as too long)
  Firstly look at https://www.moneylaidbare.info/ for info from regulator
  -----
  A mortgage is a sum of money borrowed from a bank or building society in order to purchase a property. The money is then paid back to the Lender over a fixed period of time together with accrued interest. There are many different types of mortgages and there will be one out there that best suits you.
  ADVISERS
  Ensure that your adviser is authorised to provide mortgage advice, and you are happy with any panel of lenders and fee scheme (if any)
  BEST BUY TABLES
  Many newspapers, websites and teletext pages show "best buy tables" however even if these sources cover all lenders, you will soon realise that one man's best buy is another man's dog of a deal. Careful regard needs to be given to your individual needs, and the different features of each deal (fees, penalties etc.)
  HOW MUCH CAN I BORROW
  Income multipliers are used by most lenders as one calculation in determining how much they are prepared to lend on mortgage. Traditionally the most common multiplier used was 3 times a single income or 2.5 times joint incomes,however recently more generous multipliers have become available from some lenders especially for customers with a large deposit or equity, or for certain occupations and those with a good credit history Overtime is usually taken at ½ its regular amount. Some lenders use an affordability rule, which can give a somewhat different maximum loan. Regardless to how much they offer you - make sure you only borrow what you can afford to repay.
  Self-employed / anyone who is not paid under PAYE. In addition, for mortgage purposes, most lenders will class controlling directors as self employed or directors with more than a 20% shareholding. If this applies then the lender is likely to ask to see your / the company accounts and to write to your accountant for proof of income.
  Most lenders will lend upto 95% of the value of the property, however some will lend 100%, or even higher! Better rates and lower/less fees are usually available if you have a larger deposit.
  TYPES OF MORTGAGE
  There are essentially two different types of mortgage:
  Repayment only, (capital and interest mortgage) Interest only mortgage, (usually backed with an investment plan- such as endowment, pension PEP or equity ISA)
  Repayment (Capital & Interest)
  Your monthly repayments consist of repaying the capital amount borrowed together with accrued interest. On your mortgage statement which you should receive annually, you will see that the amount borrowed decreases throughout the term.
  Interest only ( investment backed)
  With this type of mortgage, only the interest is paid off every month. The borrower also takes out at the same time, an investment policy.(such as Endowment, ISA Plan or Pension) The monthly repayments therefore consist of an interest payment, together with a monthly payment into the investment policy. At the time the mortgage comes to the end of its term, the policy such mature - hopefully with (but not guaranteed) sufficient payout to repay the debt (potential for surplus):
  NOTE many advisers no long advise on investments, but can arrange interest only mortgages if you wish to use an existing plan, or are taking independent advice on this matter
  Split Mortgages
  Most lenders allow a combination of the different types of repayment methods
  Pure Interest only Mortgages
  These are fairly rare, and often available only to people over a certain age. Interest is paid monthly (but in some cases is rolled up). The mortgage is repaid on death, sale of property or by using other assets.
  Some people seem to want to take interest only mortgages as they can not afford a repayment route, this is potentially dangerous and the practice is often now frowned upon by lenders .
  FOR ALL TYPES OF INTEREST ONLY MORTGAGES - IT IS YOUR RESPONSIBILITY TO ENSURE THAT A REPAYMENT PRODUCT IS IN PLACE AND MAINTAINED FOR THE DURATION OF THE MORTGAGE. FAILURE WILL RESULT IN THERE NOT BEING FUNDS TO MEET THE FINAL CAPITAL PAYMENT DUE AT THE END OF THE TERM. UNLESS ALTERNATIVE ARRANGEMENTS CAN THEN BE MADE THE PROPERTY MAY HAVE TO BE REPOSSESSED.
  INTEREST RATES ON MORTGAGES.
  When you have chosen the right mortgage for you, whether it be a repayment or an interest only mortgage, you will need to consider the main mortgage rate options available.
• STANDARD VARIABLE
• CASHBACK
• DISCOUNT / TRACKER
• FIXED
• CAPPED
• FLEXIBLE

Standard Rate
You pay the lenders standard variable rate- which will alter over time, sometimes in line with Bank of England Rates. Usually no major penalties for redeeming early.
Cashback However some standard rate mortgages come with a cashback (usually 4-6% of amount borrowed, this is usually repayable if loan is redeemed in initial period (often around 5 years). Cashbacks are sometimes available on other types of mortgages, but a rate usually reflects that this benefit applies.
Fixed Rate Mortgage.
The amount you repay the lender each month can be at a fixed interest rate for a certain period of time (often 2, 3, & 5 years but sometimes 10 or 25 year products are available), regardless of the interest rate in the market place. However, it is not unusual usual for some lenders to only offer a fixed rate for say two years, but you contract for a variable rate of interest to apply to your mortgage for a set period of time. Financial penalty payments - early repayment charge may apply if you redeem your mortgage early. It very much depends on the individual lender/product as to whether or not they tie you into this situation beyond the fixed rate period.
A fixed rate mortgage is beneficial in that it allows you the confidence of knowing that your mortgage repayments will remain the same throughout the fixed rate period. If the interest rate is high, then you will be saving money each month because usually the fixed rate is lower than the interest rate. Alternatively, if your fixed rate is higher than the interest rate, you will be paying higher monthly repayments that under a variable rate.
Capped Rate Mortgage.
This is a combination of the above two in that mortgage repayments will vary depending upon the variable rate of interest. The interest charged will not exceed a set amount, known as the capped rate. If the capped rate is 5% but the variable rate is 6%, your monthly mortgage repayments will not exceed the capped rate of 5%. For the time of this capped period. This type of mortgage interest allows you to budget more. Again, with all types of mortgage, there is the risk of "tie in" periods and penalty payments for early redemptions.
Discounted Rate Mortgage.
The Lender offers a discount on the standard variable rate for a fixed period. For example, the variable rate may be 6% with a discount of 1.5%. The rate would therefore be 4.5%. If the variable rate rose to say, 8%, then the rate payable would rise to 6.5%. The disadvantage of having a discounted rate mortgage is that the lender may insist you pay a financial penalty for early redemption. They may also insist that at the end of the discounted rate, you take a variable rate mortgage with them. Trackers usually provide similar initial charge rates but move in line with Bank of England rate rather than mortgage rate.
Flexible & Offset Mortgages
Sometimes known as a Aussie Mortgage - rate is usually a competitive variable rate ( although fixed/capped rates can sometimes be available). Overpayments/ lump sum payments , payment holidays, reborrowing are all features of this type of mortgage. Interest is claculated on a daily basis rather - although the trend is now towards this on most types of mortgages anyway. Some products may combine your savings and current accounts when calculating the amount of interest charged- called offsetting . Redemption penalties are usually less harsh on this type of mortgage
CAT MORTAGGES
CAT standards - fair Charges, easy Access and decent Terms - have been laid down by the Government to help mortgage customers identify mortgages which meet minimum standards. Many lenders now offer a CAT option, often as a flexible/variable type mortgage (but can be fixed/capped) these mortgages may or may not be as competitive as the rest of their product range, which may have conditions/fees that exclude them from being classed as CAT standard.
EARLY REPAYMENT CHARGE / REDEMPTION PENALTIES
As stated sometimes lenders "lock you in" for a period of time - sometimes for longer than the initial incentive period. The cost of breaking this condition (for example redeeming, overpayments, swapping rates or remortgaging) can be very high. Penalties vary between deals from a few hundred pounds up to 12 months interest. Most arrangements are portable if you move house, but even this can cause problems because you can find that the lender's criteria (or top up rates) may not suit your when you move.
No Redemption
Selecting the 'No redemption' option means that the mortgage schemes will allow you to repay the loan in full at any time without
With 'No redemption' mortgages you will not have to pay this redemption fee (although there may still be other costs such as sealing fees and legal fees- usually £100- £300 .)
As a consequence of not tying you down to the offered rate, the rate offered on these schemes will usually not be as competitive as for rates with redemption penalties, making them most suitable for those who are likely to keep track of current rates and wish to remortgage quickly if they find a better rate, or those who may have to repay their loan in the first few years.
No Overhang
Selecting the 'No overhang' option means that the mortgage schemes on screen will allow you to repay the loan without penalty once the intial scheme period has ended.
With 'No overhang' mortgages you will only have to pay this early repayment charge if you redeem the loan or remortgage whilst you are still subject to the scheme's special rate. Once you have reverted to paying the lender's Standard Variable Rate (SVR) you will be able to redeem the loan without penalty (although there may still be other costs such as sealing fees and legal fees.)
As a consequence of not tying you down to the lender's SVR, the rate offered on these schemes will usually not be as competitive as for rates with redemption overhangs, making them most suitable for those who wish to benefit from a lower initial rate without needing a very low initial rate, and who are likely to want to remortgage to another Discount, Fix or Cap once they are no longer benefiting from the initial rate.

• EXPENSES
  There are a number of expenses that are payable when buying a property. For example (but not limited to)
• You will be require to have a valuation or survey conducted on the property(some lenders do not charge for basic valuation report)
  (figures in brackets give example costs for a £150,000 property if lender's surveyor is used.)
  There are 3 main types :
  Mortgage Valuation - This is the most basic form of survey and is the minimum required by lenders in order to ascertain the suitability of the property as security for their loan. Although you will normally receive a copy of this report it should not be relied upon as a comprehensive report on the condition of the property (£300)
  Home Buyers Report - (RICS)A type of survey report which is more detailed than a Mortgage Valuation. A Home Buyers Report can be carried out by the lender's surveyor at the same time as he prepares the Mortgage Valuation. This is usually less expensive than having 2 surveyors. The surveyor is generally deemed to be acting as a detailed report for the borrower. You can of course instruct a separate surveyor (£475)
  Structural Survey - This is the most detailed type of survey report normally undertaken in connection with a House Purchase. If a Structural survey is opted for then the lender will also need to have a mortgage valuation- sometimes this can be the arranged by the same firm -again cutting some of the costs.(£700-£1000)
  Additional "surveys -You may be asked to pay for specialist reports if recommnded by the surveyor.
  
• Mortgage Processing Administration Fee - This is a fee charged by some lenders which is not refundable if the mortgage application does not proceed. The Administration fee will often form part of the valuation fee but will be retained by the lender even if the valuation has not been carried out.

3. Lender's product fee, known under different names, often but not exclusively applied to fixed and capped products - varies - example £0 - £695. Sometimes payable upfront as non-refundable booking fee.
4. Brokers charge- some advisers chargea fee for their advice and processing the transaction, this may or may not be refunded on completion
5. Higher Lending fee ( sometimes known as Mortgage Indemnity Guarantee MIG, Additional Security Fee) -. This is a fee that is payable if a high percentage loan to value is required. The fee is charged by the lender to cover the extra risk associated with higher percentage borrowing and they may use it to purchase insurance to cover them in the event that you default on the mortgage and they make a loss on possession and resale of the property, any policy has no benefit to the borrower and offers no protection - indeed if your property is repossessed and the lender claims on the any Insurance then the insurance company that has paid out the claim to the mortgage lender can still pursue you, the borrower, for repayment of that amount. The terms of the this fee will vary from lender to lender and if you are told that this will apply you should check the details. Some lenders will impose this additional fee if you wish to borrow more than 75% of the value of the property, however most no lend upto 90% without charging this fee. Some even lend over 100% without a fee.
If payable , premiums are usually calculated as a a percentage of the amount you wish to borrow over 75%. Some lenders add the premium to the loan (and charge interest), other require it on completion or over the first few years.
Solicitors costs- if you aretaking a mortgage the lender will insist that you use a solicitor or licensed conveyancer (usually the solicitor will also act on the lender's behalf, but in some circumstances you may need to for the lender's separate solicitor). Some mortgage deals include "free or refund legal costs"
-Example costs £150,000 property , based on low cost solicitor and will vary with property value , loction and between different solicitors.
CARE PLEASE ASK YOUR CHOSEN FIRM IF THE FEES QUOED INCLUDE WORK FOR THE MORTGAGE -
SOME DO, SOME DETAIL IT SEPARATELY- BUT A FEW HIT YOU WITH THIS FEE AT A LATE STAGE.
Buying;
Solicitors costs £500 plus vat = £588
Local search fee 105
Land registry 200 (rises with value)
Bank Transfer(tfr funds to seller) 25
Minor expenses 30
£948 plus Stamp duty - see below
If you are also selling a property - allow another approx £550 solicitors costs for properties around this same value.
Many solicitors now charge a scale, so fees can rise depending on property values , so always get a quote.
Estate Agent Fees - Paid by the vendor, so if you are also selling a property, don't forget this, unless you are arranging a private sale. Costs vary - often 1 to 2% often with a minimum of £1000-£1500.
Stamp duty - This is a tax which is levied on the purchase of property. The tax is paid by purchasers and is currently levied at the following rates:
Upto £125,000 Nil
£125,000 - £250000. 1% (Although some areas are now exempt upto £150,000 please ask for further info.)
£250001 - £500000 ….3%
£500001 and above 4%
Duty is paid on the whole purchaser price and not just the excess applying to that band.
Leasehold - often extra legal fees / costs apply to leasehold properties
Early Repayment Charge / Redemption penalty: If you are repaying an existing mortgage your current lender may charge you this fee . Plus many lenders charge fees for closing your account (£0 - £300 common0 . Check to see if it is beneficial to use any portability option that may be available.
Other costs- Allow for removals, immediate repairs, redecoration, furnishings, utility connection, initial interest (see below) etc…
EXTRA MONTHLY COSTS
Insurance
It is wise to ensure that adequate cover is in place to protect your mortgage:
Property Insurance (Building and Contents)- Mortgage companies will require the property to be covered by a suitable building insurance plan, for a amount no less than their valuer specifies. On certain leasehold properties this may be arranged via the freeholder. You may find it cost effective to take contents cover via the same policy. It is generally worthwhile looking at alternative quotes before just accepting the lender's option - however they may charge a small administration fee if you go elsewhere.
Life cover- some lenders used to make it a condition that life cover is in force, although thats now rare. Endowment plans include life cover, but for most other interest only methods, and repayment method it is a separate mater. It is prudent to consider life insurance to protect cover your mortgage debt, especially if you have dependants. An independent insurance. financial Adviser should be able to advise on a suitable and competitive plan.
Critical Illness Cover- often arranged as an optional add on to endowment or life cover policies, but can be standalone. Pays a lump sum ( to clear your mortgage) if you are diagnosed with one of the specified illnesses.
Mortgage Payments Protection Insurance (MPPI) - also known as A.S.U. - Accident, sickness and unemployment insurance This is an insurance policy which is taken out by the borrower and protects against the borrower being unable to work for these reasons. The policy will usually pay monthly benefit, usually calculated around the mortgage repayment (plus insurance) if the borrower is unable to work due to accident/sickness or unemployment/ redundancy. These payments will normally only be made for a limited period of time - typically 9/12 months or until the borrower returns to work. The terms of these policies and the cost vary considerably from company to company. Also see PHI in general section.
It is your responsibility to ensure that any cover required is in /remains in place.
Extra monthly costs- Other
If you have not previously owned or rented a property, please do not forget that there are other expenses involved in being a property owner. For example (but not limited to):
Electricity , gas and phone bills, water rates and council tax, as well as non property related expenses.
ADVERSE CREDIT
If a borrower has a history of poor credit usage then this is described as Adverse Credit. Poor Credit history can include County Court Judgements(CCJ), Bankruptcy, Mortgage arrears or any late payments on credit arrangements. Some traditional and niche lenders will consider clients with adverse credit history, but rates may not be as attractive those available to clients with a clear credit history.
GLOSSARY OF SOME OTHER TERMS
Annual Percentage Rate - This is meant to show the true cost of borrowing and adjusts the notional interest rate to take account of all the initial fees and ongoing costs to reflect the real cost of borrowing throughout the entire mortgage term. Unfortunately there is currently some disagreement over how this rate should be calculated and some distortions occur. Whilst this could be a good way to compare relative deals care should be taken to ensure that the rates being compared have been calculated on the same basis
Buy to Let - A term used to describe the purchase of a residential property for the sole purpose of letting the property to a tenant (or for investment) Whilst the majority of lenders will not provide mortgage finance for this purpose a number do specialise in this niche area of the market
Centralised Lender - This refers to the group of lenders, other than high street banks and building societies, who operate without a branch network, normally from one location.
Completion - This refers to the time at which the legal ownership of the property changes hands. This date will usually be agreed upon at exchange of contracts. This will also be the date at which the mortgage becomes effective
Conditional Insurance - This refers to insurance products which some lenders will impose as a condition of their mortgage offer. This could mean that the lender insists that accident, sickness and unemployment cover is taken out or that combined buildings and contents insurance is taken. If looking for a fixed or discounted product then these conditions should especially be watched for.
Equity - The difference between the value of the property and the outstanding mortgage(s).
Initially this is your deposit, but it will change as capital is repaid or house prices alter.
Exchange of Contracts-The point when the purchase of the property becomes binding. The solicitor will normally expect a deposit to be placed at this stage. The completion date is usually set - this can then be immediate or up to some months later. Insurance should be in place from this date.
Existing Liabilities - This term is used by lenders to define all other finance commitments apart from the existing mortgage. This will take into account such items as bank loans, HP, credit cards, maintenance payments (to ex-spouse) etc. Most lenders will take these items into account when assessing how much they are prepared to lend and will usually deduct 12 months payments from gross annual income before applying their normal income multipliers
Fast Track- Lenders may be preapred to speed thro' applications if depoist and credit score are favourable
First Time Buyers (FTB) - lenders differ in their definition of a First Time Buyer, some lenders offer "special terms to First Time Buyers, however most lenders now offer incentives to all new mortgage customers.
Freehold This describes the tenure of a property where ownership of the property and land is held indefinitely. This compares with leasehold property where the property is held for a limited period of time
Further Advance - This is an additional loan made by the existing mortgage lender and secured by the first charge on the property.
Guarantor - A guarantor is a person other than the borrower who guarantees the mortgage repayments. A Guarantor can sometimes be used to support a borrower who has insufficient income to qualify for a mortgage in their own right.. The Guarantor becomes responsible for the whole mortgage repayment if the borrower defaults.
Initial Interest - This figure is usually shown on the mortgage completion statement and refers to the amount of interest charged from the date that the funds are drawn down to the first repayment date. This has the effect of increasing the first mortgage payment and the amount of the initial interest payable will depend on the time in the month when the mortgage is completed.
Leasehold - This is the tenure that applies to many houses and most flats and maisonettes in the Engalnd & Wales. As opposed to freehold property the rights to the property are owned only for a fixed period of time, with the freehold being held by a third party.
Mortgagee - The Lender
Mortgagor - The Borrower
MIRAS - Stands for Mortgage Interest Relief at Source. The withdrawal of MIRAS was announced in the 1999 budget and took effect from April 2000, for new and existing mortgages.
Non-Status - Some lenders used to l offer non-status facilities which allow them to lend without proof of income - rates usually reflect the higher potential risk, and are rare these days
Permanent Health Insurance (PHI) - This is a type of insurance which will pay a proportion of normal income in the event that the policyholder is unable to work due to accident, sickness or disability, until a return to work or normal retirement age These policies are normally used to replace a percentage of full income. This type of cover should not be confused with MPPI/ASU policies which will normally only cover the mortgage payment for a limited period of time.
Remortgage - This is the process by which a mortgage on a property is moved from one lender to another whilst remaining in present property. People often remortgage to raise extra cash (maybe for home improvements) or to change rates. If a remortgage is being considered then attention should be paid to the costs payable.
Repossession: If the borrower is in default with their mortgage payments, the lender may apply for a court order to take possession of the property, usually to force a sale. Extra costs are also incurred.
Vendor- The person selling the property.

• Would someone mind giving some advice please. Myself and my partner are both First Time Buyers however we have no deposit and just Ј1k in the bank. We want to buy a house but really scared due to the amount of money that we will have to borrow. I owe Ј6k in cards and also have an Ј11k loan which will cease in 3 years ( I know, I know!). I have looked around and don't know if we should go direct to a bank which is offering 100% +, Ј175k for the property and Ј14k on top to pay off as we see fit ( I think this can also be used for fees as well )plus Ј1k cash back. Or if we should go to an advisor? My partner only has a total of 5k worth of debt I earn Ј28,100 plus a yearly bonus of Ј500 and my partner earns Ј16k plus commission each month of Ј400 on average. Any advice would be greatly received.
  Thanks
• https://forums.moneysavingexpert.com/....html?t=208160
  This thread will help answer some of the points you have raised.
  If it doesn't, come back and ask me for more help.
  Cheers
  Andy
• Andy
  I need some advice on affordability criteria. My daughter wants to buy a place for £125k to be more independant. Currently living with me. She earns about £16k/yr and a financial advisor (friend!) has told her he can get her a self certified mortgage for £120k. She can find a 5% deposit. The "interest only" payments are about £540/mth. I think the rate is ~5.8%. I feel it's just a stretch too far given the rest of her real commitments such as bringing up a baby & running a car etc, although she has no other debts at present.
  What do you think?
  Am I being too cautious?
  thanks
• Hi,
  I don't think you are being too cautious at all. £120,000 on a salary of £16,000 = 7.5x income which in my mind is financial suicide.
  The "friend" financial advisor is being totally irresponsible in making such a recommendation and clearly knows nothing about mortgages to be making such a claim. The only way he would be able to obtain a mortgage by self certify for your daughter is by lying about her income, that's mortgage fraud.
  Self certify does not change the amount you earn. Nor does it change the multiples applied to the income when the lender decides the amount they will offer. Self certify is a vehicle for people who cannot prove their income, ie self employed for say one year thus no accounts, or employed on commission only thus no actual basic salary.
  Also you will not get a self certify mortgage with a 5% deposit.
  Lenders, although generally do not check the income or employment status on self certify, reserve the right to carry out any verification they see fit. It is not unheard of for a lender to contact the Inland Revenue and cross reference the national insurance number of the applicant to verify their employment status. If they smell a rat, they will ask for proof of the income. Also they may wish to see bank statements, this would clearly show insufficient income for a mortgage of £120,000.
  Walk away, tell her she cannot afford it both financially or consequencially. Being prosecuted for mortgage fraud or entering into a mortgage you cannot afford only to have the home reposessed is a price too high for the sake on your own place at this stage.
  I would, if I were you, have a quit word in the ear of this supposed "friend" as he obviously does not have your daughter's best interests at heart, merely sees her as a paycheque for himself.
  Hope this helps.
  Andy
• Thank you, we have the things from IR so presumably that means it wouldn't be self certification. My question about multiples is just that I want to know whether they might allow a larger multiple if you can show that your income is increasing year on year. I ask because my husband's self employed income has increased by 15% the past two years and this year should be double what it was three years ago. We expect it to continue to rise (although not by as much) but based on typical multiples we would not be able to borrow anywhere near as much as we could afford to pay in terms of monthly repayments. I reckon that if we borrowed three times our income (which would be pointless as we couldn't buy anything with it) we'd be paying monthly repayments equal to 1/3 of our current rent. We could therefore easily be able to afford repayments on a higher multiple so I was wondering how we'd convince a mortgage provider to give us more. Would the annual increase in earnings persuade them?
• They will not necessarily increase the multiple however you should be able to get more than 3 x income.
  With increasing profit of such a degree I would be looking to approach a more traditional lender who will assess the case on it's own individual merit, as opposed to a lender who suffers the 'computer says no' syndrome.
  What sort of numbers are we looking at regarding mortgage, property value , income etc?
  Cheers
  Andy
• Will pm you income figures as don't think my husband would appreciate my posting them publicly but I'm happy for you to reply in the forum. We'd probably be looking for something aroung 80k. We have alost 10k in savings but we'd oviously need to keep some in reserve as a back up and use some for all the costs assosciated with buying house so not sure how much we'd have left for a deposit. We currently pay Ј420/month in rent and our total expenditure is equal to our current income.
• I want to buy a flat to be rented out - I'll have to let the mortgage lender know I am planning to do this, dont I? How will this affect the mortgage I can get?
  Thanks
• This all depends on whether it is your first purchase deemed to be your residential property which you live in, and then ask for permission to let from the lender. the lender has a right to say no. if you let it out without their permission you are in breach of the conditions of your mortgage and they can penalise you for this, by demanding full repayment of the mortgage. There are special rules if you plan to let it to a close member of your family which could also deem it as a residential mortgage, or if you let part of it out and you remain in residence. If you would like further clarification on these please ask.
  You also have to be careful you have the correct buildings insurance in place with an extended unoccupancy clause, to perhaps 90 days in the event you end up tenantless. Most policies will only cover you for 30 days unoccupancy.
  To take a buy to let mortgage, which is specifically designed for those wishing to rent out a property, you will need a larger deposit, perhaps 10-15% dependent upon the lender you approach. These mortgages will cost you marginally more than a conventional mortgage and most do not use your income to ascertain the lending amount available to you, but use the rental income to merit this.
  Remember, if you rent out a property you have to declare it to the inland revenue.
• This is my first post after discovering this site 12 months ago when i was still a student, i must say its help put into action alot of money making schemes.
  Anyway now i have saved enough money for a reasonable deposit and to pay the legal fees, stamp duty and all the rest of the over pirced rubbish we are meant to pay, i have decided that i would like to take the plunge to buy a place ( if possible, here's the catch).
  I have been working for 9 months, since leaving uni, got a good job which pays enough. (25-26k), i am 24, always had good credit history, always paid on time.....i have enough for a 10 grand deposit and i am looking to get a morgage for another 140k. I have been told from a morgage adviser that i can get a morgage with the deposit that i have even though my wage does not come in line with high street requirements for a morgage of this size. I have been told it is done on a affordability basis and not just on your salary? Is this correct and what sort of morgage do you think i should be looking at? what are the options and possibilities....can anyone help.... do i need a bigger deposit???
  please help wise people.
  Thanks for you time
• Have a look at this website
  https://www.firstrungnow.com/
• Also possibly of interest, this little FTB story from a friend who worked hard to get on the property ladder. It can be done, its not easy but he bought a three bed semi in London after saving a large deposit over a number of years, thanks to plenty of MSE tips!
• Reading this article on mortgages may help:
  https://www.housebuying-guide.com/how...ight-mortgage/
  tina
• :confused: I'm looking in to purchasing a part buy/ part rent property with my local Housing Association- Shared Horizons.
  But before I go for it, I need some advice.
  Does anyone know if I can put in a lower offer on the asking price (total property value Ј125,00- looking to buy 50%) or do I have to pay what they say?
  I would also be grateful for any other advice relating to part buy/ part rent.
• First Of All, hello to everyone on the site, read through a few of these posts and they have helped me quite a bit, but as an absolute novice just wanted a bit of "clarification".
  Right I'm about to start looking for my first house with my girlfriend - been together 5 years pretty secure (my mates have tried to warn me off it!!!!). We have browsed a few that we like, at the moment just on t'internet and driving past those which took our fancy.
  I am currently a teaching assistant earning 11k a year whilst my girlfriend is a manager in retail earning 17k. Within the next year she will be promoted and will be earning about 22k, and within the next 3 years I will be a qualified teacher (Im currently completing my degree with the OU) - will these payrises be considered?
  Will the fact that I only work 30 hours a week and/or being a part-time student count against me???
  I have a quite a bit of debt (student loans and a credit card or 2) Ive been late with a couple of card payments - but nothing drastic - will this count against me????
  My mum and dad have mentioned mortgages at the moment are about "3 + 1" - does this mean "3 x our combined salaries + 1 of the highest earner"???
  On our current salaries (17k & 11k) what would be a realistic mortgage - by my reckoning of the above "3 + 1" its about 100k-ish...Is this right?
  And finally, I know I may be getting ahead of myself here, but one of the houses we have seen is priced at Ј92k (3 bed, semi, decent-ish area) however it is in need of "modernisation". From what I have seen basically it needs guttin' and starting again. However Ive always fancied a bit of devleopment, and have links with builders, plumbers, sparks and joiners so could get the work at "mates rates".
  I think we could get the house for about 85k - no chain, bad condition and all that.
  Does this sound like a decent investment, or is it too much of a gamble for a mortgage virgin????
  Thanks in advance, you have been a great help already.
  Paul