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Different Types of Mortgages Explained in Middlesbrough

Mortgage Advice in Middlesbrough

In the beginning of the mortgage process, you’ll very quickly realise that there are lots of different options available to you as a customer. Below we have put together a list of the most popular types of mortgages available on the market, hopefully answering any questions that you may have. If you would like to speak further with a mortgage advisor in Middlesbrough regarding any of these, please do not hesitate to Get in Touch.

What is a Fixed-rate Mortgage?

What is a Fixed-Rate mortgage? | MoneymanTV

A fixed-rate mortgage is a simple form of mortgage wherein your monthly payments are going to stay the same for a set period of time. You are able to set the length of which you want to fix your payments for yourself, with standard choices being 2, 3 or 5 years or sometimes longer. Even if there happen to be any major changes to inflation, interest rates or the economy, you know that your mortgage payment, usually your biggest outgoing, will stay consistent.

What is a Tracker Mortgage?

What is a Tracker mortgage? | MoneymanTV

A tracker mortgage will follow the Bank of England’s base rate. What this means is that the lender that you are with does not actually set the interest rate themselves, thus making it potentially unpredictable due to the potential for it to change.  You will likely be paying a percentage above the Bank of England base rate. An example of this would be if the base rate is 1% and you are tracking at 1% above base rate, that means that you will be paying a rate of 2%.

What is a Repayment Mortgage?

What is a Repayment mortgage? | MoneymanTV

By taking out a repayment mortgage, this means that each month you will be paying back a total combination of capital and interest. Providing that you keep your payments going for the full length of the mortgage term, the mortgage balance is almost certainly going to be paid off at the end and the property will become yours.

This is widely considered to be the most risk-free way to pay your capital back to the lender, especially as in the early years it is mainly the interest that you are paying and your balance will reduce at a slightly slower pace, especially if you have taken out a term over 25, 30 or 35 years. Your circumstances will change within the last ten years or so of your mortgage, as your payments will be paying off more capital than interest and the balance will come down at a quicker pace.

What is an Interest-only Mortgage?

What is an Interest-Only mortgage? | MoneymanTV

Whilst many Buy to Let mortgages in Middlesbrough are set up on an interest-only basis, taking out a regular residential mortgage in the form of interest-only is a lot more difficult and not seen as often.

It is a lot less likely for lenders to offer an interest-only product to applicants these days.  That being said, there are very particular circumstances where this can be an option. These options can include downsizing later in life or to use the capital to pay off other investments. Lenders are very strict when it comes to offering these products now and the loan to values are a lot lower than they used to be.

What is an offset mortgage?

What is an Offset mortgage? | MoneymanTV

With an offset mortgage, the lender will set you up a savings account to run in tandem with your mortgage account. This is quite in an interesting one in how it works. Let’s say you have a mortgage balance of £100,000 and £20,000 is transfered into your savings account; you would only be paying interest on the difference between the two amounts, so in this case it would be £80,000. This can be a very efficient and financially savvy way of managing your money, especially if you are a taxpayer with higher rates.

What is a 95% Mortgage?

A 95% mortgage is as simple as the name would suggest; you are borrowing against 95% of the price of a property, and then you are covering the remaining 5% with your deposit. An example of this is if you looked at buying a property that was worth £150,000 with a 95% mortgage, you would be putting down £7,500 as your deposit and borrow the remaining £142,500 from the lender. 

95% Mortgage Advice in Middlesbrough

Off the back of the March 2021 Budget, Boris Johnson announced a Mortgage Guarantee Scheme for mortgage lenders, making 95% mortgages more readily available from the bigger high street banks.   

This is fantastic news for First-Time Buyers and Home Movers alike, as this scheme will continue running until December 2022. Certain terms and conditions will apply though, which is something your Mortgage Advisor in Middlesbrough will be able to look at, to see if you qualify.    

All our customers who opt to Get in Touch will receive a free, no-obligation mortgage consultation where one of our dedicated mortgage advisors will be able to make a recommendation on the best possible route for you to take.

Can I get a 95% mortgage?

95% mortgages are usually accessible by both First-Time Buyers in Middlesbrough & those who are Moving Home in Middlesbrough. Whilst saving for a 5% deposit sounds like a pretty straightforward concept, you’ll still need to have an acceptable credit score and prove that you are able to afford your monthly mortgage repayments, in order to access a 95% mortgage.

Improving your credit score

A good credit score is essential in the process of obtaining any mortgage, especially a 95% mortgage. Things like paying any current credit commitments on time, ensuring your addresses are updated and checking that you’re on the voters roll, can all help with your credit score.

Affordability 

Affordability is another one that is important to take note of. By giving the lender details of your income and monthly outgoings (things like your bank statements will be necessary for this) and any pre-existing credit commitments, your lender will be able to get a general overview of whether or not you are able to afford this type of mortgage.

Can my family help me get a 95% mortgage?

Nowadays we see lots of family members helping each other get onto the property ladder, especially parents looking to further their children’s lives. The way this usually happens is by gifting the person looking to find their home, the deposit required. Known through the industry as the “Bank of Mum & Dad, Gifted Deposits are only intended to be a gift, and not as a loan. The lender will need proof that this has been agreed, before it can be used towards your mortgage. 

How do I choose the right 95% mortgage?

When looking for a 95% mortgage, you want to make sure you have the right type of mortgage. Each mortgage type works differently, with that choice allowing you to find one that is most appropriate for your personal and financial situation. 

Some homeowners and home buyers prefer Fixed Rate or Tracker Mortgages, mortgage types which mean you either keep interest rates at a set amount for the term given or have your interest rates tracking the Bank of England base rates.

Alternatively, you might find that Interest-Only or a Repayment Mortgages are more your style. Interest-Only allows cheaper payments until you need to pay a lump sum at the end (mostly now used for Buy-to-Lets), whereas a Repayment mortgage (a normal mortgage if you’d like) means you’ll be paying interest and capital combined per month.

How can a bigger deposit help with my mortgage? 

Seeing as a mortgage is such a large financial outgoing, you need to be prepared and need to be aware. You might find things like higher interest rates, remortgaging difficulties due to less equity and then negative equity all cropping up if you’re not. 

There is no need to worry though, as all these can be avoided if you’re savvy enough with your process to begin with. The more deposit you put down for a property, the less risk the lender will see you as. 

A larger deposit, of say 10-15%, would not only reduce the rates of interest by a noticeable amount, but would also give the property more equity and reduce the risk of negative equity, thanks in part to you borrowing less against the property. 

So, whilst the risks may seem intimidating, planning ahead and saving for a bigger deposit to access something like a 90% or even an 85% mortgage will be a massive help in your mortgage journey and something you’ll be able to reap the rewards from in the future. 

How to Improve Your Credit Score in Middlesbrough

Way to improve your credit score | moneymanTV

It’s crucial to any first time buyers in Nottingham when applying for a mortgage; having a high credit score is a helpful factor. It ideally means a higher chance of you getting accepted and being successful with your application.

Although this doesn’t mean you’ll be guaranteed acceptance, though, each lender has their internal scoring systems.

Each lender has their criteria that they have developed over the years. Suppose you’ve failed with one lender not to worry. Mortgage lenders may be inclined to be more lenient, and it is down to your Mortgage Advisor in Middlesbrough to match you with the lender that’s right for you.

There are multiple credit reference agencies in the UK; we recommend Experian and Equifax. It is a good idea to look into many of these agencies as possible in advance, to give you a more specific idea of your credit score.

Furthermore, it is also plausible that some of these agencies hold inaccurate information. So, by checking with multiple agencies, you can be sure that this information gets appropriately amended.

Keep Credit searches to a fair amount:

Multiple credit searches can have adverse effects on your credit score. Be on guard of using price comparison websites which are known to be significant credit culprits searching on individuals.

If you are applying for a mortgage soon, it may be wise to apply for additional credit afterward.  Whilst having some credit and paying it back is a good thing for your score in the long run.

Lenders prefer to see you leverage your borrowings right before setting up a mortgage application.

Are you registered on the Voter’s Roll:

Making sure you’re registered on the electoral roll increases your credit score. It indicates stability which lenders like. Ensure your name gets spelt correctly and that it’s your current address which is registered online.

If you aren’t registered, it’s simple and easy enough to do this online.

Know your Maximum Limit:

If you max out your card each month, your credit score will get lowered. Utilizing a credit card to keep on top of your payments each month is a preferred method. It’s a good indicator of your lender that you are good at managing your money.

The main red flag in a lender’s eyes is if you exceed an agreed card limit or overdraft. The reason lenders watch over this is because they want to know you’re able to take your finances responsibly.

Check your Address History gets keyed correctly:

Sometimes it can get perceived on your credit report that you are living in two places at the same time if providers have yet to get told that you have moved houses.

It is pivotal that the addresses which you’re updating get spelled correctly; If you have been residing in a flat, this can be a bit more complex as the address can get formatted in different ways.

Keep up to date with Credit Accounts:

If you no longer use individual store/credit cards, you should get into contact with the providers to close the account for extra security. In the short term.

This could get seen as having a brief impact on your score as the lender can’t tell who’s closing the account, e.g. you or the provider, but this will be for the better and an advantage to you in the long run.

It’s a great thing to do to reduce your chance of becoming a victim of fraud if you don’t notice you have a lost a card which you may use regularly.

Many consumers feel that credit scoring is an unfair way of applications getting assessed through lenders themselves are indifferent to this idea as it makes their overall job more manageable.

It is more cost-efficient for them to operate this way and computers give more consistent outcomes. On the other hand, some lenders do still do it the old-fashioned way but still apply the same rules about the number of defaults and CCJ’s they will allow.

When setting up your application, be sure your report is up to date to increase your chances of being accepted the first time. The more in-depth information which your Specialist Mortgage Advisor has at hand, the better.

Mortgage Advice in Nottingham

Getting Prepared for a Mortgage in Middlesbrough

Mortgage Preparation | Mortgage Advice in Middlesbrough

After you’ve done the hard part of saving up the money for a deposit, the next step is to get prepared for your mortgage application. Included are a few tips and tricks in terms of what documents are needed and how best to get them organised.

Up to Date Credit Report

An up-to-date credit report should be at the top of your list, even before you approach a Mortgage Broker in Middlesbrough. You will not want hang-ups such as a late payment for a mobile phone contract consisting of a small fee of something like £50 to be holding you back from progressing with your mortgage. When your Mortgage Advisor in Middlesbrough looks at your credit report, this will be a deciding factor as to which lender they fit you with.

Another factor that will be a drastic advantage is making sure you’re on the voters roll as it will help in terms of your credit score, along with closing down old credit card accounts.

Proof of ID

You’ll need to produce photo ID to prove who you are. Most customers use a driving licence or passport for this. However, if you are using photo ID such as a Driving Licence for a proof of address, then you can’t use this for Photo ID.

If you are a non-UK national working in England on a Visa, it will be necessary to bring this along too.

Proof of Address

As mentioned beforehand, you’ll need to prove your current address. In order to do this, you will need a utility bill or validated bank statement dated within the last 3 months or a Photo ID such as your driving licence if it isn’t being used for other parts of the application.

Last 3 Months’ Bank Statements

Your bank statements should correlate with your income and regular expenditures. It is important that you plan ahead with your bank statements as lenders will not be pleased if; they see gambling transactions present; if you’ve gone over on an agreed overdraft limit; or direct debits bounce frequently.

Not all lenders will ask to see your bank statements, but most reserve the right to ask and want to be confident that you are not a financial risk to them and that you’re able to take your finances seriously.

An ideal Bank Statement is one where your salary goes in and your bills come out.

Evidence of Deposit

You have your deposit saved up which is a great milestone accomplished but that isn’t where the involvement of the deposit ends. You may have the funds in place but these will need to be audited for anti-money laundering purposes. The best advice for this is to not move finances around too often which will speed up the audit process.

The way to help convince a lender that you’re the best fit is to make a show that you’re able to build your finances up such as finances, though any large deposits will have to be accounted for.

If the deposit is gifted perhaps from a family member or friend then these funds will need to be evidenced as such and the ‘donor’ will need to sign a letter to confirm that it’s ‘non-refundable’ – in other words, not a loan.

Proof of Income

The most important thing when it comes to affordability is to be able to prove your income. If you’re employed this comes in the form of three months payslips and some may want your most recent P60.

Lenders can also take into consideration regular overtime, commission, shift allowance and bonuses, and others may accept wages from more than one employer if you have more than one job.

Though nowadays a lot more applicants tend to be Self-Employed in Middlesbrough. If you’re a self-employed applicant then you’ll need your Accountants’ help to request your last two or three year’s proof of earnings. If by chance you submit your own earnings then one of our Mortgage Advisors in Middlesbrough can advise you on what to download from the Government Gateway.

Budget Planner

One of the best ways to prepare for your mortgage is to put pen to paper and start writing down an estimate of your anticipated outgoings before you plan to be Moving Home in Middlesbrough. From doing this, you are able to work out an idea of how much the council tax and utility bills will be whilst also adding on regular expenditures e.g. food and drink. By planning your budget, you should be able to gain a rough estimate on how much disposable income you will be left with.

Before one of our Mortgage Advisors in Middlesbrough carries out an appointment with you, our Mortgage Broker in Middlesbrough team is able to send over a Budget Planner to help you in advance.

It can be seen that preparing for a mortgage is not an easy task but our Mortgage Advisors in Middlesbrough are able to help guide you. Feel free to get in touch with us for Mortgage Advice in Middlesbrough and see how we can help you today.

Self-Employed Mortgages in Middlesbrough

Self-Employed & Contractor Mortgages | Mortgage Broker in Middlesbrough

People are becoming increasingly more self-employed as time goes by due to working patterns changing. It’s not unusual for a person to move on from their first employer for another job. Self-employed individuals are rising in many departments such as Digital and Engineering, which offers more freelance roles. It’s natural that if you’re not receiving a guaranteed basic income then applying for a mortgage can be daunting. 

But lenders are becoming more lenient these days, opening the possibility for self-employed and freelance applicants to have more of a chance to apply successfully for a mortgage. However, it still remains as a specialist area. Within this article there are some helpful tips on how to prepare yourself is you are self-employed for buying a home.

How many years’ Books do I need?

The minimum is one. It is normal self-employed specialist lenders who will work off a single year, though most high street lenders will want to be provided with two years’ accounts. Lenders know that sometimes a persons’ business will fall through so they want to see a good track record. 

How will a Lender assess my income?

The average of your last 2 years’ worth of your earnings are usually the ones that are assessed. However, if your business is expanding then lenders may only work off the latest year.

I’m a Director of my own Limited company

Despite you technically being an employee of your own business, lenders do it to assess under this title unless you own less than 25% of the shares. Most lenders would add the dividend you have drawn to your annual salary to calculate your annual earnings. From this will come the amount that you can borrow and will be a multiple of this figure. However, there are lenders who will use your net profit as opposed to the salary/dividend for Directors who keep their drawings low.

My Accounts don’t reflect the true success of my business | What can I do?

A common question. It’s understandable that conversations with your accountant will consist of minimising your tax bracket. The opposite will apply when it comes to taking out a self-employed mortgage. Ultimately the more income that you declare, the bigger that your allowed mortgage. 

How much deposit do I need to put down?

The deposit for a mortgage is the same for most applicants which is 5%. However, if you only provide one year’s accounts, you may need to put down more. 

Contractor Mortgages

Mortgage options for contractors are plentiful, especially as more and more people are working under short term contracts these days. If you’re able to show a good track record the lenders will consider your ‘daily rate’ instead of your net profit. Contractors have it a lot better due to lenders allowing to treat them as Self-Employed in Middlesbrough

The lender will also go on to ask you about the remaining time that is in your current contract. They need to be able to have confidence about your income remaining ongoing to make sure that you are able to upkeep payments on your mortgage. It is possible depending on circumstances that you obtain a mortgage even if it’s your first contract. 

Can I still get a Self-Cert mortgage?

Unfortunately, ‘self-cert’ mortgages were taken for granted in past years and so they may not return anytime soon. 

Getting a mortgage can often be a lot more problematic if you’re a sole trader, partner or Company Director can be more complicated than it is for a person who’s employed. As always some lenders are more lenient than others and it’s advisable to gain Mortgage Advice in Middlesbrough from a Mortgage Broker in Middlesbrough from the start of the process as this will make the process more efficient from the start. 

Middlesbroughmoneyman.com & Middlesbroughmoneyman are trading styles of UK Moneyman Limited, which is authorised and regulated by the Financial Conduct Authority.
UK Moneyman Limited is authorised and regulated by the Financial Conduct Authority.
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