FAQ
FAQ - Mortgage Broker in Bromley
What is a deposit?
Very few home buyers have the cash available to buy a home outright. Most of us will turn to a financial institution for a mortgage. However, even with a mortgage, you will need to raise the money for a down payment.
The down payment is that portion of the purchase price you furnish yourself. The amount of the down payment (which represents your financial stake, or the equity in your new home) should be determined well before you start house hunting.
The larger the down payment, the less your home costs in the end. With a smaller mortgage, interest costs will be lower and over time, this will add up to significant savings.
How much do I need for a deposit?
At the present time one must have a minimum down payment of at least 5% of the total cost of the prospective property.
What is the minimum down payment needed to purchase a property?
A minimum down payment of 5% is required to purchase a home, subject to certain maximum price restrictions.
Regardless of the amount of your down payment, at least 5% of it must be from your own cash resources or a gift from a family member. It cannot be borrowed.
Can I use gift funds as a down payment?
Most lenders will accept down payment funds that are gifted from family as an acceptable down payment. A gift letter signed by the donor is usually required to confirm that the funds are true gift and not a loan.
How does bankruptcy affect qualification for a mortgage?
Depending on the circumstances surrounding your bankruptcy, some lenders will not consider providing mortgage financing.
How will child support affect mortgage qualification?
Where you pay child support to another person, generally the amount paid out is deducted from your total income before determining the size of mortgage you will qualify for.
Where you receive child support and or child maintenance from another person, generally the amount paid may be added to your total income before determining the size of mortgage you will qualify for, provided proof of regular receipt is available for a period determined by the lender.
What is a fixed rate mortgage?
The lender will fix the interest rate for a set period of time - usually between one and five years, although it can be longer. After the fixed period ends, your payments will revert to whatever the lenders standard variable rate is at the time.
What is a variable rate mortgage?
A mortgage in which payments are fixed to bank prime rates, which can fluctuate in line with the Bank of England Base Rate. If interest rates go down, more of the payment goes towards reducing the principal; if rates go up, a larger portion of the monthly payment goes towards covering the interest.
What is a Tracker Rate mortgage?
This tracks the Bank of England Base Rate, for example, Bank of England base rate, plus *1%, for either a fixed term or the term of the mortgage, (*rates may vary).
What is a Discounted Rate mortgage?
This is a variable rate, with a discount applied for a period of time, for example, a *1% discount off the standard variable rate for two years, (*rates may vary).
What is a Cash Back?
This is a variable rate, but when the money is lent to you, the lender will also pay you a cash bonus.
What is a Capped Rate Mortgage?
This is a variable rate with a specified maximum interest rate that your payments cannot exceed, for a set period of time usually one to five years, although can be longer. You know at the outset what your maximum monthly payments will be (the capped rate). However, if the variable interest rate falls below the capped rate, your mortgage payments will go down. At the end of the capped rate period, your payments will revert to whatever the variable rate is at the time
What is the difference between Pre-qualification, Agreement in Principle and Mortgage Offer?
If you are just getting started in the hunt for a new home, it is important to know the difference between pre-qualifying, pre-approval and a loan commitment. It is not enough to simply begin looking for the home of your dreams. It is critical that you determine the price range that you can afford, get qualified for a loan, and understand all of the steps to assist you in securing that perfect property when you find it.
Pre-Qualification
Pre-qualification does not mean that you have been approved for a loan, but it is an important component of the home buying process. You have to know what you can afford before you look. Pre-qualification will save you time and ultimately money.
A mortgage professional can help you determine your qualification. You should candidly discuss your financial situation with him or her and not withhold any information.
Most likely, your mortgage consultant will want to know your yearly household income as well as your assets and liabilities. If you can discuss your finances candidly and determine what you can reasonably qualify for a loan, then no one's time will be wasted. Otherwise, your agent may end up being a tour guide, showing you beautiful houses that you will never be able to get a mortgage for rather than helping you find an appropriate property to make an offer on.
However, pre-qualification does not mean that much to sellers. It is more of a tool to help potential buyers figure out their price range.
Agreement in Principle
Agreement in Principle is a firmer commitment that is based on more information than pre-qualification. A mortgage broker or lender will need to do a thorough credit investigation and it is particularly important that you disclose all financial information that is requested. The amount that you are approved for will be the amount that the lender is committed to loan for the purchase of a house. Getting pre-approval may give you more bargaining power when you are negotiating the price of a home.
If the seller and or Estate Agent knows that you are approved for the loan, already you may have more leverage. In fact, it is a good idea to plan to get pre-approved. Some estate agents will not waste their time showing homes to potential buyers who do not have a pre-approval, especially in a hot market. However, pre-approval does not necessarily mean that you will ultimately get the loan. The final approval will still depend on verification of the information provided and approval of the home you wish to purchase.
Mortgage Offer
A Mortgage Offer is a letter that is issued by the lender that states that they will fund your mortgage. This letter will include details of the maximum amount of loan they will offer. This sort of commitment means that that both you and the house have been approved. This means that the home will have been valued at the sale price or higher and has met the lender's guidelines.
Points to Note
Regardless of what stage of home buying you are in, it is very important that you keep a few things in mind. Remember that just because you are approved for a large loan, does not necessarily mean that you should borrow at the upper limit of your loan approval. Homeownership involves more expenses than renting and some properties need more work than others need. Make sure you leave a financial cushion for repairs and upgrades to your new home.
Once you are approved, do not make any big changes to your finances. Changing jobs, banks and taking out other loans can lower your credit rating, change your debt-to-income ratio and ultimately keep you from getting the loan.
Now is not the time to buy that new car, big screen television or to take an expensive holiday. The mortgage company may make one last credit check even if you have a loan commitment. If you are prepared, you may find that the home buying process is easy and stress free.
What is title insurance?
Protecting purchasers against loss is accomplished by the issuance of a title insurance policy, which states that if the status of the title to a parcel of property is other than as represented, and if the insured suffers a loss as a result of title defect, the insurer will reimburse the insured for that loss and any related legal expenses, up to the face amount of the policy.
Title insurance differs significantly from other forms of insurance. While the functions of most other forms of insurance is to guard against future events (such as death or accidents or in the case of property, fire or flood), the primary purpose of title insurance is to eliminate risks and prevent losses caused by events that have happened in the past.
To achieve this goal, title insurers perform an extensive search of the public records to determine whether there are any adverse claims to the subject of real estate. Either those claims are eliminated prior to the issuance of a title policy or their existence is exempted from coverage.
What is a Valuation Report
A valuation report is carried out on behalf of the mortgage lender, and is a basic report examining the structure and systems: heating and or air conditioning, plumbing and electrical, roof, attic, insulation, walls, floors, ceilings, windows, doors, foundation, and basement. If the inspector finds problems, it does not mean you cannot buy/sell your house, but you can be certain a buyer inspection will find them too.
You may or may not want to make the repairs and you can always adjust the selling price or contract terms if the problems are major. This information will also help you determine what type of financing will or will not be available for your home.
What is a Homebuyers Report
A homebuyers Report is carried out on behalf of the borrower, and gives a much more detailed report of the property.
What is a Valuer?
A Valuer is an impartial, independent third party who provides a valuation of the property - an objective report on the estimate of value of real estate. The appraisal is supported by the collection and analysis of data.
Should I wait for my mortgage to mature before renewing?
Most lenders send out their mortgage renewal notices offering existing clients their posted interest rates. The rate you are being offered is usually not the best one. Always investigate the possibility of a lower interest rate with the lender or another lender. If you do not you may end up paying a much higher interest rate on your renewing mortgage than you need to.
How can you pay off your mortgage sooner?
There are ways to reduce the number of years to pay down your mortgage. You'll enjoy significant savings by:
- electing a non-monthly or accelerated payment schedule
- Increasing your payment frequency schedule
- Making principal prepayments
- Making Double-Up Payments
- Selecting a shorter amortization at renewal
What are the costs associated with buying a home?
Primarily, you have to make sure you have enough money for a deposit - the portion of the purchase price that you furnish yourself.
In the current market you will need a minimum deposit of 5%.
Secondly, you will require money for solicitors and stamp duty (up to 4% of the basic purchase price).
If you want to have the home inspected by a professional building inspector - which we highly recommend - you will need to pay an inspection fee. The inspection may bring to light areas where repairs or maintenance are required and will assure you that the house is structurally sound. Usually the inspector will provide you with a written report. If they do not, then ask for one.
You will be responsible for paying the fees and disbursements for the solicitor or conveyancer acting for you in the purchase of your home. We suggest you shop around before making your decision on whom you are going to use, because fees for these services may vary significantly.
Finally, you will be required to have Buildings Insurance in place by the closing date. In addition, you will be responsible for the cost of moving.
Remember, there will be all kinds of things you will have to purchase early on - appliances, garden tools, cleaning materials etc. So factor these expenses into your initial costs.
What is an Early Repayment Charge (ERC)
An ERC is the charge that is incurred if you redeem your mortgage prior to the fixed rate term, as set out in your mortgage offer.
What should the length of my mortgage product be?
The length of mortgage product varies widely - from 6 months right up to the life of the mortgage.
While twenty or twenty five year mortgages are what most home buyers typically choose, you may consider a short-term mortgage if you have a higher tolerance for risk, if you have time to watch rates or are not prepared to make a long-term commitment right now.
Before selecting your mortgage term, we suggest you answer the following questions:
- Do you plan to sell your house in the short-term without buying another? If so, a short mortgage product term may be the best option.
- Do you believe that interest rates have bottomed out and are not likely to drop more? If that is the case, a long mortgage product term may be the right choice for you. Similarly, if you think rates are currently high, you may want to opt for a short to medium length mortgage product term hoping that rates drop by the time your product expires.
- Are you looking for security as a first-time homebuyer? Then you may prefer a longer mortgage product term, so that you can budget for and manage your monthly expenses.
- Are you willing to follow interest rates closely and risk their being increased mortgage payments following a renewal? If that is the case, a short mortgage product term may best suit your needs.
What are the monthly costs of owning a home?
You will have financial responsibilities as a home owner.
Some of them, may not be billed monthly, so do the calculations to break them down into monthly costs.
Below you will find a list of these expenses:-
The Mortgage Payment
For most homebuyers, this is the largest monthly expense. The actual amount of the mortgage payment can vary widely since it is based on a number of variables.
Council Tax
Council tax can be paid in two ways - either monthly or annually.
Utilities
As a homeowner, you will be responsible for all utility bills including heating, gas, electricity, water, telephone, and cable.
Maintenance and Upkeep
You will also have to cover the cost of painting, roof repairs, electrical and plumbing, walks and driveway, garden care, etc. A well-maintained property helps to preserve your home's market value, enhances the neighbourhood and, depending on the kind of renovations you make could add to the value of your property.
How can I save money on my mortgage?
The simplest way to accomplish this is to decrease your principal; thus, decreasing your interest obligation. There are a number of very feasible approaches to performing this task:
The following examples assume that you have a capital repayment mortgage.
Increase Payment Frequency - Instead of paying monthly, consider paying bi-weekly.
It can cut your mortgage amortization by up to five years, and can save you tens of thousands of pounds. Not all lenders will allow overpayments during the fixed product term, so you will need to check your mortgage offer to see if this can be done without incurring Early
Repayment Charges.
Increase Payments - Round up your monthly payment. For example, if you have a monthly payment of £731.59p, round your payment to an even £750.00. This will have a profound effect on the interest paid, and the amortization of the mortgage.
Privacy Concerns
Do You Sell Our Information to Anyone Else?
We will not sell your information under any circumstances.
What happens if I am not satisfied with a mortgage offer?
Do not accept it.
You have no obligation to accept any of the offers that are made to you by any of our affiliated lenders.