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Must I clear my loan by a certain age?
A UK mortgage is usually designed to finish no later than the borrower's normal retirement age. That age is taken as 65 for employed people (male and female). Some lenders will consider a longer term providing the borrower has enough income after retirement.
Can I get a mortgage offer before I find my property?
The Online Financial Solutions Ltd will help you find the mortgage that suits you before you have found a property, and then to get an "Agreement In Principle" from a lender. This can be helpful in getting the mortgage process underway, but the lender won’t make a formal mortgage offer until a valuation has been carried out on the property you wish to buy or remortgage.
What is "buy to let"?
Buy-to-let deals are specialist mortgages designed for people who want to purchase a property in order to rent it out to tenants.
Buy-to-let is becoming an increasingly popular investment method. Properties provide income for the investor from the tenant's rental payments and growth from any increase in the property's value.
What is a flexible mortgage?
Many people talk about “flexible” mortgages without being 100% sure what they are referring to – no wonder, it’s not immediately obvious what is meant. A truly flexible mortgage should have all of the following 5 characteristics:
Even mortgages marketed as “fully flexible” often have different features.
For example, some flexible mortgages may allow a draw down of extra funds, a payment holiday or underpayments from day one of the mortgage. Others will only make funds available for these options from overpayments already made, or will require the mortgage to be satisfactorily conducted for a specified period, say 6 months, before some or all of these options become available. The most common requirement people have is simply the ability to make Early Repayment Charge free overpayments. If this is the only flexible feature you want, a Early Repayment Charge free mortgage will be just as suitable as a flexible mortgage and so you should consider both options.
Who is likely to benefit from a flexible mortgage?
You might find a flexible mortgage beneficial if you fall into any of the following categories:
Why do the best discount deals vanish so quickly?
When a lender offers The Online Financial Solutions Ltd a special mortgage, it allocates only a certain total of money to be lent on that particular product. With market leading deals, this allocation may be “used” up very quickly.
In this instance, lenders generally raise further funds to cover the demand. By the time they have raised the funds, economic or competitive circumstances may have changed to the extent that it is no longer possible or valuable to them to offer the original product. They may release a new special offer or product (which would then appear “different” on our site). Or they may choose to use these funds elsewhere, in which case you won’t see the product again.
In some cases they may withdraw the product in between the time that you apply online and your application is finally submitted, e.g. overnight. In these instances we will endeavor to match you to a similar product which is just as suitable.
Do County Court Judgments always disqualify me?
If a County Court rules against you for defaulting on a debt, that ruling is listed on your credit record. Having such a judgment listed against you may mean it is difficult to obtain a mortgage through most lenders. However there are an increasing number of specialist lenders who will lend to people with a CCJ or other credit problems. The Online Financial Solutions Ltd online carries a number of products which cater for those whose lending circumstances are unusual or difficult.
Alternatively, if you don’t find products that suit you, you can contact The Online Financial Solutions Ltd, and their team of professional financial advisers, who will scour our panel to find products that are suitable for your circumstances. The Online Financial Solutions Ltd have years of experience in finding mortgages for everyone – and particular strength in finding products or deals for those who haven’t been able to find a mortgage anywhere else.
Should I rule out mortgages with Early Repayment Charges?
Most cashback, fixed and capped rate mortgages, and also many discount mortgages, have Early Repayment Charges. With fixed, capped and discount mortgages these Early Repayment Charges will usually last at least as long as the special rate but quite often they also apply after the special rate has finished. Mortgages with Early Repayment Charges extending beyond the special period are said to have a “tie in“ beyond the special rate”. On cashback mortgages, Early Repayment Charges will typically last for 5 or 6 years.
As a general rule, the cheapest initial interest rates will be available on mortgages with a “tie in“. This is because a lender can subsidise the rate if it is tying you in to paying a higher variable rate after the initial special rate. Likewise, mortgages with Early Repayment Charges during the special rate period will normally have a lower rate than a mortgage with no Charges.
However, because the mortgage market
is so competitive there can often be exceptions
to this rule, in particular with discount mortgages
and on shorter term deals of 2 to 3 years.
For most people it is best to avoid a mortgage with a “tie in". This allows you to keep your options open at the end of the special rate period to look for another deal without incurring what may be a very expensive charge – it can be as much as 5% of the mortgage loan or higher.
How are Early Repayment Charges calculated?
Early Repayment Charges can be calculated in several different ways. The charge will be based on the amount of the mortgage redeemed and will usually either be a percentage of the amount redeemed or a number of months interest.
If the latter approach is adopted by the lender, the rate of interest used in the calculation may be based on the lender's Standard Variable Rate (SVR) or the actual fixed/capped/discount rate being paid, or the higher of the two.
Sometimes the charge remains the same during the whole period of the special rate; for other mortgages it decreases over the special rate period.
However, there are some mortgages, usually discount mortgages, where the charge actually increases during the special rate period.
It is worth bearing in mind that most
lenders will allow you to move your mortgage with
you to a new home without incurring an Early Repayment Charges (commonly known as a portable facility).
These will typically be limited to around 10% per year of the outstanding mortgage or, say, 25% of the total mortgage. This part repayment flexibility is particularly useful on a fixed or capped rate mortgage, as it leaves most people with sufficient flexibility to repay some of the loan if interest rates are low, and they have some spare cash.
Details of the flexibility each lender offers around such part repayments are laid out in the Mortgage Details section for each mortgage on our site.
How do I repay capital with an interest-only loan?
If you have an interest-only mortgage, your monthly
payments will pay off the interest on your loan,
but not the money you borrowed in the first place.
You can pay off the original money you borrowed
in any way you choose, but you often have to inform
the lender at the start how you intend to do so.
People often save in a separate plan. The proceeds
from this plan go to pay off your capital when the
mortgage term is complete.
If you need advice on capital repayment methods, we can put you in touch with an Independent Financial Adviser (IFA) who will discuss your circumstances with you and recommend an alternative savings method.
Do I always need life insurance?
If you were to die, your family may be unable to keep up with the payments on the mortgage.
How often do lenders adjust my interest bill?
Historically, most lenders have calculated interest annually. This means that the interest you pay during a year is based on the amount of the loan that was outstanding at the beginning of that year. However, most lenders will make an adjustment if you repay a lump sum during the year (subject to a minimum payment of £250 - £1,000; this minimum does vary by lender).
Using an annual interest calculation is a potential issue for repayment mortgages because you don’t receive the benefit of lower interest costs for the repayments of the capital you make during the year. In practice, for the early years of a standard term repayment mortgage (25 years), it doesn’t make much difference because you are repaying very little of the capital, in the early years.
Conversely, for shorter term repayment
mortgages (e.g., 10 years), and towards the end
of longer term repayment mortgages, there can be
significant disadvantage to you from the annual
calculations. This is because the proportion of
the monthly payments which represent repayment of
capital increase as the mortgage term gets shorter.
Many of the newer lenders, and increasingly the traditional lenders, calculate interest daily or monthly. To make matters more complicated some lenders charge annual interest on some mortgages and daily or monthly interest on others. The difference between monthly and daily calculations is usually small and is likely to be much less important than other differences between mortgages.
However, you need to bear in mind that some of the best interest rates are available from lenders that only offer annual interest calculations (often because they have been unable as yet to change their computer systems to allow daily or monthly calculations). The differences in the interest rate and other aspects of the deal will often outweigh differences between interest rate calculations.
What is a Higher Lending Charge (HLC) and will I have to pay it?
Although this is the term most commonly used, different lenders use different names to describe it. It is a one-off premium paid by the lender to an insurance company on high Loan To Value (LTV) mortgages so that in the event of the property being repossessed and sold at a loss, they can recoup any losses they incur from the insurance company.
This premium is sometimes passed on to the borrower, either by adding it to the mortgage or by requiring the borrower to pay it on completion or over a specified period: usually 12 months or by the end of the lender’s financial year.
The majority of lenders only charge HLC to borrowers where the mortgage is over 90% of the value of the property (LTV of 90%). However, there are a lot of variations on this, with some lenders not charging it at all, even on 100% loans, and others charging it on over 70% of the value of the property. Also, some lenders who would normally charge HLC have special mortgage deals on which they do not charge it.
When HLC is charged, most lenders charge it by reference to both the actual LTV and the amount they are lending in excess of 75% of the property value. For example, a lender may make no HLC charge on a 90% loan but if you borrow 90.1% HLC will be charged on 15.1% of the property value (90.1% minus 75% = 15.1%). Thus a small additional amount of borrowing over 90% can become very expensive.
Whilst it is sometimes worth paying HLC because the rest of the deal is so good, in general you will get better value from mortgages that do not charge HLC. As an example a 100% mortgage from a lender who charges HLC will typically include a HLC cost of 3% of the mortgage amount, i.e. £3,000 on a £100,000 mortgage! Similarly, the typical charge for HLC on a 95% mortgage is about 1.5% of the loan value.
Furthermore, some of the most competitive interest rates on 100% mortgages are usually from lenders who do not charge HLC.
Illustrations on our site will always show you if HLC is charged and if so how much it will be.
However, if the surveyor values your property at less than the asking price, watch out for one potential trap. The lender bases its calculations on whether HLC is payable on the lower of the purchase price and the mortgage valuation.
If the valuation comes out at less than the purchase price (or your estimate of value if it is a remortgage), a small reduction in value (as determined by the surveyor) may mean that your mortgage is pushed over the threshold at which HLC is charged. In these circumstances you should try to renegotiate the purchase price down to the valuation.
If you can’t do this, but still want to proceed with the purchase, another route to consider is to reduce your borrowing to keep it below the HLC threshold (if you can afford to increase the deposit).
Alternatively you may want to search our site for another mortgage that will allow you to avoid HLC. In most cases, valuations can be used for a different lender, very often without any additional fee being payable.
What other costs might I incur in taking out a mortgage?
The costs related to taking out a mortgage will be clearly shown when you apply for your mortgage. These costs exclude legal costs, but we can provide an estimate of legal costs for you (which tend to vary in line with the cost of the purchase). Generally, the other costs you will, or may, have to pay are:
For some remortgages, legal costs are paid by the lender and on some purchases the lender makes a contribution towards legal costs. Some mortgages give a cashback of, say 0.5% – 1%, which can be used to pay some of the house buying costs, although the cashback is not specifically earmarked for this purpose.
Whilst it is obviously helpful to have some or all costs paid by a lender you will sometimes find that offers which include no or low fees have a higher interest rate than another mortgage on which you have to pay all the costs. The costs of setting up a mortgage are more important on a small mortgage, whereas the interest rate is more important on a larger mortgage.
For a small mortgage on a valuable property a free valuation is particularly beneficial.
Bear in mind that on the purchase of properties over £125,000 the biggest single cost will normally be the stamp duty.
What is the difference between a Standard Variable Rate (SVR) and a tracker rate?
Each lender decides what SVR they will charge. Although this is set taking account of interest rates generally and based on how competitive they want their SVR to be with other lenders, it is not specifically related to any other interest rate. And, although lenders normally change their SVR as a result of Bank Base Rate changes they don’t always change them by the same amount.
When Bank Base Rates dropped from 0.5% from 5.5% to 5.0% in 1999 most lenders only reduced their SVR by 0.1%. Mainly as a result of this tracker rates have become more popular and many lenders now offer at least one tracker mortgage. A tracker mortgage is simply a mortgage that tracks an independently set interest rate, usually Bank Base Rate but sometimes the LIBOR rate. (LIBOR stands for London Interbank Offered Rate and it is the rate at which banks lend to each other.)
The benefit of having a tracker mortgage is that you are guaranteed that any falls in interest rates will be passed on to you. Tracker mortgages have the theoretical disadvantage that when interest rates are rising these rises are also guaranteed to be passed on to you. However, as lenders have generally been increasing their SVRs in line with Bank Base Rates the reality is that both SVR and tracker mortgages have increased by the same amount – so a tracker mortgage with exactly the same terms and conditions as an SVR mortgage is likely to be a better bet.
Most Base rate tracker mortgages reflect any change in Base Rate from the beginning of the month after the Base Rate has changed.
What is APR?
APR stands for Annualised Percentage Rate. A lender is always required to quote the APR when advertising a loan or borrowing rate.
The lender will usually quote the headline rate and the APR next to it. The headline rate states the rate of interest you pay per month or per year on the mortgage, while the APR calculates the total amount of interest that will be paid over the entire period of the loan. It should also take into account any charges which the borrower has to pay during the loan period.
Office of Fair Trading has the following to say
However, APR is the only standard measure which allows the borrower to compare the charges being made for the credit provided.”
What is a Divorcee Mortgage?
A Divorcee Mortgage is a new, innovative and exclusive product from The Online Financial Solutions Ltd designed to cater for the needs of divorcees who depend on their former spouse for income.
For all UK mortgage enquiries please call us on 01604 439930 or Click Here to contact us.
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