Whether you are a first-time buyer, looking to sell up and move on, purchase a second home or even re-mortgage – no matter what your circumstance - Top House can help. And make things even easier, we will not only liaise with your chosen mortgage provider, but also with your solicitor and estate agent.
Our aim… to make your transaction as stress-free as possible.
We will work with you to fully understand your exacting requirements, enabling us to offer you completely personalised options, ensuring you choose the mortgage that is right for you.
Priding ourselves on our mortgage knowledge, we offer practical solutions and excellent customer service. Our client relationships are long-term; looking after you from start to finish, updating you every step of the way.
Types of Mortgage
There are so many different types of mortgages on the market it can be a minefield trying to determine which is best, so let us guide you through the various options out there.
Standard Variable Rate (SVR)
This varies from lender to lender; each with their own standard variable rate (SVR) that can be set at whatever level they want and change by any amount at any given time - especially if there are rumours of the Bank of England base rate increasing in the future.
In November 2020, the average interest rate on a 2-year fixed rate mortgage was 2.53%, while the average SVR was 4.44% - meaning repayments on a SVR mortgage could be far more expensive.
An SVR is higher than most mortgage deals currently on the market, so if you're currently on an SVR, it's definitely worth shopping around for a new mortgage.
To find out more, get in touch with our team of specialist advisers at Top House.
A fixed-rate mortgage means you pay the agreed interest rate – regardless of interest changes elsewhere - for a set period of time. You will know exactly how much you need repay each month.
There are usually far more fixed-rate mortgages available than any other type of deal, albeit this number of has fallen significantly since the start of the COVID-19 outbreak.
The most common terms are two-and five-year deals. At the end of which you'll usually be moved on to your lender's standard variable rate (SVR).
A discount mortgage means you pay the lender's standard variable rate (a rate chosen by the lender, that rarely changes) with a fixed, discounted amount.
If your lender's standard variable rate is 4% and your mortgage came with a 1.5% discount, you'd pay 2.5%.
Standard variable rate 4% - Discount 1.5% = 2.5%
Discounted deals can be ‘stepped’ – this means that if you take out a three-year deal but pay one rate for six months and then increase the rate for the remaining two-and-a-half years.
Some variable rates have a 'collar' – a rate below which they can’t fall – or are capped at a rate that they can’t go above.
Top House can help you with these features when choosing your deal.
A tracker mortgage, ‘tracks’ the Bank of England base rate, which currently stands at 0.1%.
For example, you might pay the base rate plus 3%
Base rate 0.1% + 3% = 3.1%
In the current mortgage market, you'd typically take out a tracker mortgage with an introductory deal period, usually of 2 years. After that period, you would be moved on to your lender's standard variable rate.
However, there are a small number of 'lifetime' trackers where your mortgage rate will track the Bank of England base rate for the entire mortgage term.
A capped rate mortgage moves in line with the lenders standard variable rate (SVR), but being capped means the rate wont increase above a certain level.
An offset mortgage is where you have savings and a mortgage with the same lender and your cash savings are used to reduce – or 'offset' – the amount of mortgage interest you're charged.
Everyone’s circumstances are different and for some it may mean that you need a specific type of mortgage.
There are two main types of self-build mortgages - arrears stage payment and advance stage payment.
Most commonly, funding will be released in stages after the construction of each section is completed. A valuer will normally visit the site before the payment is released. With an arrears stage-payment you may need a loan to cover the work before your mortgage is released, so you must factor this into your decision.
Sometimes it’s possible to get a self-build mortgage where the lender releases the money before you pay each bill. This is not usually offered by mainstream lenders so you may be limited to specialist providers.
Without an employer to vouch for your income, being self-employed means you’ll need to pass the lender’s affordability tests in the same way as any other borrower by providing additional evidence of your income than other borrowers.
First time buyer
As a first time buyer it can be difficult to save enough money to qualify for a mortgage, so help get on the property ladder, the Government schemes in place to help buy your first home.
‘Help to Buy’ can assist you getting a mortgage with a small deposit – they offer equity loans, meaning that when they lend you money, you can use that towards your deposit and repay it later.
‘Shared Ownership’ offers shared ownership – you buy a share of your homes value (between 25-75%) and pay rent on the portion you don’t own. This enables you to purchase a home with a smaller mortgage, which in turn means a smaller deposit too.
‘Lifetime ISA’ – if you are over 18 and under 40, you can consider a Lifetime ISA – this government incentive helps you buy your first home and save for your future. Under the rules, you can add £4,000 a year into the ISA until you are 50. The government adds a 25% bonus to the money you save yourself, to a maximum of £1,000 per year.
Retirement Interest Only (RIO)
Retirement-interest only mortgages (RIOs) are a relatively new set of products designed to help older borrowers who may struggle to get a standard residential mortgage. They allow you to borrow against your property and only pay back the interest (and not the loan itself) each month.
Buy to Let
Property is a great investment and with the If you are seeking rental yield or capital growth, property is great investment - especially given the lettings market – and a Buy-to-Let mortgage
A bridging loan is a short-term finance option for buying property. It 'bridges' the financial gap between the sale of your old house and the purchase of a new one.
If you're struggling to find a buyer for your old house, a bridging loans could help you move into your next home before you've sold your current one.
This would mean that you'd own two properties for a short time, potentially leaving you with a large amount of secured debt if it takes a long time to sell your existing property, if the buyers withdraw completely, or you sell your home for less than you expect.
If your current deal is coming to an end – or if you haven’t changed lender in a while – now is the time to think about changing to a more cost-effective mortgage deal.
A mortgage is a loan secured against your home. You home may be repossessed if you do not keep up repayments on your mortgage or another other debt secured on it.
Are you struggling with mortgage repayments?
It’s fair to say that we have all been struggling with the financial uncertainty surrounding Coronavirus over the last year. Some have not been able to work. Income has been reduced. Living costs have increased and monthly finances have gone array.
Whatever the reason for you struggling to keep on top of your mortgage payments, you may have started to build up a debt… and you won’t be alone.
You may have missed one or more monthly payments or paid less each month than agreed, but whatever the reason, it is always best to get in contact with your mortgage broker or loan provider as early as possible.
If you know there’s going to be shortfall in your finances for a period of time, your lender may just be able to help – a ‘payment deferral’ would allow you to pause your mortgage payments for three months.
Our advice? Find out what you owe in total – your debt is only likely to increase if you don’t and we are all aware when it comes to mortgage repayments, you could end up being taken to Court and your home being repossessed.
But there are options out there, so don’t give up and hope the problem goes away. It won’t.
Instead, take the time to carefully consider what you could do to get back on top of the debt – draw up a budget to show your monthly income and outgoings, look at ways to cut costs and come up with some ideas of how you may be able to repay what you owe.
Once you've worked out a way of dealing with your debt, you will need to come to an agreement with your mortgage lender.
If you don't have any options for paying off your debt or can't reach an agreement with your mortgage lender, you should get help from an experienced debt adviser straight away.
Further advice on how to repay your mortgage debt follows…
Making extra mortgage payments
If you’ve got some money to spare each month, you may be able to pay back what you owe by making extra payments on top of your usual monthly mortgage payments.
To work out if you've got extra money to spare and how much, you will need to work out how much money you’ve got coming into your household each month and how much you need to pay out on bills and other expenses. This is called working out a budget.
When you've worked out your household budget, including any extra income you can earn, you'll be able to see how much money you have left over to pay off your mortgage debt. You will need to write to your lender and explain what you’re proposing to do.
Looking at your budget
If you've fallen behind with your mortgage payments, you will need to take a good look at your household budget. This will tell you if you've got any money left over which you can use to pay off your debt.
You will need to make a list of all the money you’ve got coming in and all the money going out of your household. This should include any other debts you owe. Make sure that the amounts you put down are realistic.
Think seriously about whether it's possible to increase the money you've got coming in or make cutbacks on your spending.
For example, you may be able to:
There are lots of different ways to boost your income and spend less on your outgoings.
An experienced debt adviser can help you work out how much money you’ve got to pay off a mortgage debt and any other debts you owe. They can also advise you about ways of increasing your income and spending less money.
Adding what you owe to your Capital
You might be able to clear your mortgage payments debt by adding the money you owe to your capital (the amount you borrowed) and paying it back over the remaining period of the mortgage. This is known as capitalising the arrears. You could also ask to extend the term of the mortgage in order to keep your monthly payments down, although you will end up paying a much larger amount in total.
Giving up your endowment policy
If you have an endowment mortgage, you could think about giving up your endowment policy or selling it off to an investor. This will provide you with a lump sum of money which you can use to help pay off the debt. However, you should think very carefully before doing this. You will need to find another way to pay off your mortgage loan and you will also need to find alternative life insurance cover. You will also need to find out whether there would be any penalties or other costs involved in bringing your endowment policy to an end.
Get independent advice first. You will need to write to your lender and explain how you're proposing to clear your debt.
You could see if it’s possible to take out a loan, or borrow money from someone you know, to help you pay off the mortgage debt. Don’t borrow money from someone you know unless you know them well and can trust them. Be careful not to borrow from loan sharks.
You will need to write to your lender and explain how you're proposing to clear your debt.
If you take out a loan, check whether you can afford the repayments by working out your budget. It may also be a good idea to get advice from an expert debt adviser first.
Personal pensions for those over 55
You could take some of your pension money to help deal with your mortgage debt if you’re over 55 and have a defined contribution pension. ‘Defined contribution pensions’ are pension pots that are built up over time through regular payments.
You should consider the following before taking out some or all of your money:
You should speak to a financial adviser before taking money out of your pension pot to pay off mortgage debt.
Mortgage Payment Protection Insurance
If you’ve lost your job or had a temporary loss of income, check whether you have mortgage payment protection insurance (MPPI). You may have taken a policy out at the same time as you got your mortgage or afterwards. The MPPI policy may cover your mortgage payments if you can't work because of unemployment or sickness.
There are lots of circumstances in which, even if you have a payment protection policy, it won't pay out. You will need to check the terms and conditions of your policy carefully to see if you are covered. You may need to get advice about this.
You might also like to read our blog: What is Equity Release?
Source: Citizens Advice Bureau