100% mortgage. What’s the catch?

100% mortgage. What’s the catch?

Last week Halifax released a 100% mortgage. They are not the first bank to do this, but its a good indicator that lenders are more keen to encourage people to take mortgages.

So what does a 100% mortgage mean? Well essentially you get a mortgage for a home without having to put down any money for a deposit. Usually lenders are looking for 10% or 20% of the value of a house and they will then lend you the rest. That is the more traditional way of getting a mortgage. So 100% mortgages means that a potential house buyer needs not to put down anything at all and the lender will provide you with the full amount. Saving a deposit can often be a huge part of stalling the buying for a house. Bearing in mind there are always other costs to put on top. So if you are looking for a house around £200,000, just for 10% you need £20,000. Plus all the additional fees, estate agent fees, solicitors etc. So this is an offer on the table from the lenders to get people to purchase a house. Ease the pressure.

So 100% mortgage is a good right? Well it comes with a few downsides.

  • Its not completely 100% most of these mortgages need you to provide a family member to provide you with a deposit. They don’t lose the money but if the the people with the mortgage miss payments then this “deposit” is potentially at risk. It’s a guarantor really but with a huge pledge in the home. With the Halifax deal, the family member, or guarantor does get their money back but only after three years. (this could change, so please check with someone you trust before embarking on this deal)
  • You don’t own any part of your house at all. When it comes down to it, there are a few advantages of putting down a deposit. Firstly if you can put down 20% you will have a better rate of mortgage. Meaning the repayments back will be less each month and the length of your mortgage will be less. Not everyone can afford 20%, but even if you have 10% it means you own 10% of your home. It is yours. So that’s a big advantage too.

It always not as easy as that. A house down in London, even a modest one can be £300,000, so 10% deposit is £30,000. This is higher than the average annual wage. So not really a obtainable amount for a lot of people.

100% mortgage then could be the only option for some people. So in that respect it is a good thing. But as mentioned above, you need a reasonably well off family to fork out the guarantee. With someone who has this option to get on the property ladder, has a family member willing to give up the money for 3 years as a guarantee, then great, As always with these things, if it works for you. It works for us.

Remember please speak to someone you trust and make sure the decision is right for you.

Your home may be repossessed if you do not keep up repayments on your mortgage.

A new 15 year fixed rate mortgage released. What could go wrong?

A new 15 year fixed rate mortgage released. What could go wrong?

Is security the most important thing?

Security is a strong feeling, its something you want for your job, for your health and for your family. And a big part of managing your security is making sure you can manage your money. To be able to do that is knowing what you are going to spend each month. What your food will cost, your savings, petrol costs etc. But the biggest and most important one is your roof over your head. Your mortgage repayments! And a fixed rate mortgage can ensure what you are going to pay each month.

Fixed rate mortgage means that the interest on your mortgage doesn’t increase over a certain amount of time. Which means your mortgage repayments don’t increase or decrease.

Most fixed rates have a set time until they go onto the lenders standard interest rates. This is usually set by the lender or the Bank of England. To find out more about interest rates and variable mortgages and how they effect your mortgage payments, read more here.

Most fixed rate mortgages have a fixed rate of around 5 years, last week both Virgin Money and Yorkshire Building society have released a 15 year fixed rate mortgage. And that’s a good thing?

Thing is 15 years fixed rate mortgage means that your mortgage payments will be exactly the same for…well…15 years. Pretty self-explanatory. So for all you security lovers, you have payments, you know what they are, and they are set for 15 years. And that’s great.

There are some drawbacks though, firstly quite often the general interest rates are a little higher than usual. Meaning over that long time you will be paying back quite a lot. At the moment with the economy being so up and down, that may be a safe bet. Yes you are paying back more over time. But with variable rates you could be paying back even more.

The other issue is fixed rate mortgages always have a early repayment charge. Quite often it’s the length of the fixed rate period or there and thereabouts. For a 15 year fixed rate mortgage, it is a much longer period. And the cost of leaving is often higher than usual too. So if you choose to leave the mortgage it will be a costly endeavour

Virgin Money’s 15 year fixed rate mortgage has a early repayment time of up to 2025 at 8%. That means that at a mortgage of £400,000. That’s a cost of £32,000. Which is quite a chunk of change. But if you are in your “forever home” and you don’t need to leave earlier than 15 years then there really is not an issue. As you have that security.

But if the rates go significantly down over the years then you could be out of pocket.

It really is about what is important to you. What do you value more?

As always make sure you speak to someone you trust, when applying for a mortgage. Get the right advice and ensure that you understand the decision you are making.

Your home may be repossessed if you do not keep up repayments on your mortgage.

What is the advantage of a variable rate mortgage.

What is the advantage of a variable rate mortgage.

Making sure you make the right choice for your mortgage.

Mortgage’s can be very different from one to the next. They can have different lengths, for different amounts, different interest rates and different payments. There are lots of factors that affect this, your income, your outgoings, if you are married, where you live, how much you want to lend, how old you are. Lenders need to be so much more understanding and insightful to who they are lending too.

There are, however, generally two types of residential mortgage you can get. There is a fixed rate mortgage, and there is a variable rate mortgage. Fixed rate mortgage, is usually a set amount of time where on your mortgage you pay exactly the same amount. Hence the fixed rate. For example you may have a fixed interest rate on your mortgage for five years. Meaning all your mortgage repayments each month will be exactly the same for five years. No change.

The other is a variable rate, a variable rate mortgage means the interest rate on the mortgage can vary during the mortgage. This means that the cost of your mortgage monthly repayments can change throughout the time of your mortgage or agreed time. This doesn’t sound great but there are some advantages.

Within variable rate mortgages there are two subsections of mortgages. Tracker rate and Standard Variable Rate (SVR). A tracker rate mortgage follows the Bank of England base rate, so if they increase this rate then your mortgage rate goes up. But if the base rate drops then so does your mortgage. On a SVR you are at the behest of the lenders interest rate. So this can go up or down completely based on the lenders whim, quite often it follows the trend of the base rate set by the Bank of England. But it really is up to the lender.

With an SVR there are some additional advantages, and these are based on the market, as with the tracker rate they can go up and also down. But usually what ends up happening is if there is a high demand for mortgages, then the rate can go up, as its in the lenders best interest to do this. But if demand is low then the rate can be low. Which means a lower mortgage repayment.

The final advantage is that, it’s generally easier to get out of a variable rate mortgage. Most fixed rate mortgages have a set time you have to remain on the deal, or you will incur a fee. We are not saying there is no earlier charge on all variable rates, but they are usually shorter if they are there at all.

With getting a mortgage make sure you speak to someone to trust, and make sure you can afford if the rates go up as well as if they are currently low.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Why you may need to remortgage now.

Why you may need to remortgage now.

We have had quite a few blogs on how to get yourself ready for a remortgage, the idea behind our blogs is to help people to get the right advice to help get them ready for all elements of mortgages.

Last couple of weeks, there have been reports about why it is a good time to re-mortgage. In October, over £26bn worth of mortgages deals are due for renewal. Which is the largest for the month this year. So why are we telling you this. Well anyone who’s mortgage deal is up means that you could potential save a lot of money on your mortgage.

At the moment there is scope to save hundreds each month on your monthly mortgage payments. With much more competitive rates these days people coming out of a 5 year mortgage maybe looking at something much better than what they are on now.

On top of that your mortgage value could be better. If your house has appreciated in value. It means your loan to value ratio will be better and you may qualify for an even better rate:

Official Land Registry data shows that the average UK house price in October 2014 was £191,855, and had risen to £229,431 by May this year (the latest month for which figures are available) – an increase of just under 20%.

The Yorkshire says a homeowner who initially borrowed 85% of a £200,000 property in October 2014 at a market-average five-year fixed rate of 4.25% could benefit from a lower LTV of 65% and take advantage of the society’s two-year fix priced at 1.54%, which would save £201 a month in repayments. (However, this deal does involve paying a £1,495 product fee).”

(you are now departing from the regulatory website, Coleshill Mortgage Services or Quilter Group are not responsible for the accuracy for the linked site)

Please see the full article here

What should you do then? Well with remortgage it is always a very individual situation so it is hard to tell you what to do, but its always worth checking your deal and when it expires, most have a period before when you can move out of the deal to another without incurring costs.

Then speak to someone you trust. It is the best way for you to make sure you see the whole of the market and get the best deal you can. Don’t just speak to your lender. They have a limited amount of products they can offer. So for a potential of £200 savings per month, it is worth spending the time to get the right deal for you.

 Your home may be repossessed if you do not keep up repayments on your mortgage.

Houses need to be built.

Houses need to be built.

There is just not enough houses being built.

This is a strong argument for our current housing crisis in the UK. Just like in any market there is a core relationship between supply and demand. If the supply does not match the demand there can be huge fluctuations in price. For instance if there is far more supply than demand then often the price will go down. And if there is far more demand than supply then price will increase.

So in the UK there just is not enough houses being built for the demand that is needed. The problem with housing is in a country, in theory, there really is only a finite amount of houses you can build. And it takes a long time to build a house, it takes a lot of planning and it takes a lot of negotiating with councils, government and developers.

The government to build 300,000 new houses by 2020. But when we get reports that councils are unable to hit house building targets. it feels like the pressure is not going to let up.

The guardian reported on the following

Targets for new homes are likely to be missed by half of England’s local authorities, according to a damning assessment of the government’s housing strategy, while increasingly profitable building companies are getting away with paying less for infrastructure and more than half of councils have failed to draw up adequate plans to solve the housing crisis. “

See full article here

(you are now departing from the regulatory website, Coleshill Mortgage Services or Quilter Group are not responsible for the accuracy for the linked site)

So what does this mean for the country in regards to house prices. Well not enough houses, means a lack of supply, which as mentioned above means either a maintenance of prices or a rise of prices for houses.

Looking at the below image you can see we just do not have enough homes per capita.

See the full report here 

(you are now departing from the regulatory website, Coleshill Mortgage Services or Quilter Group are not responsible for the accuracy for the linked site)

It’s just over one house per two people over 20. We have some of the lowest amount of houses. Think of people who have more than two properties, old people that live on their own, each one adding to that rate. And their right to. But we are drifting apart from the standard of other comparable countries.

It’s very difficult to get a good answer apart from build more house and that is what the government wants to do and is trying to do.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Help to Buy; it seems to be helping the people better off than those in need of property.

Help to Buy; it seems to be helping the people better off than those in need of property.

It was reported on Jeremy Vines radio 2 show, a little guilty pleasure of mine, that the Help to Buy scheme is being exploited by people who could afford the deposit in the first place. It reported that nearly a fifth of those who had used Help to Buy are not first time buyers. And that a typical household using Help to Buy had a household income of £44,000, compared to the national average £25,000.

I had not managed to totally remember all those statistics from the radio report. This article here was incredibly helpful.

(you are now departing from the regulatory website, Coleshill Mortgage Services or Quilter Group are not responsible for the accuracy for the linked site)

But if you cannot be bothered to read all those statistics, I want to speak about why and how Help to Buy is being used for what it was not meant for.

If you don’t know the Help to Buy scheme we have written blog here explaining it.

I feel this is happening because of two reasons. The first reason is what is stipulated on the article, that developers are using Help to Buy as a way to drive up the price on houses so they can get a higher price per unit. It’s all pretty nasty, but as they know that people have the option for Help to Buy and the government has set aside the cash to help people get onto the property ladder. But the developers understanding that the Government will give others up to 20% of the deposit. Means they bid more for the land, and therefore need to get more for it. So what does it result in. Higher price on houses, and therefore the people who need houses can’t afford them.

Secondly, is something a little more natural, and this is just, my feelings for it. Is that it is a good deal, with some areas, still growing in value for houses. So if you get a new house you may be in for a good investment, and if the government help you with a deposit (which acts as kind of a loan), then it can mean you get onto the property ladder, with a new house and the potential for it to really grow into something worth a lot in the future. But it really is a risk. And should not be done lightly.

It is a shame that people are abusing the system to get a better lift onto the property ladder. The idea is to bring more house into the market and help the availability of property for young families or couples looking for a hand to owning their home.

But the scheme is still there for now and it is still available if you feel you need it, but if you don’t then its always better to have paid your own deposit. It means it is your money that is placed in the property and it means no surprise payments when the “Help to Buy” tenure lapses.

As always, speak to someone you trust get the right advice so you can make the right decisions for you.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Are you renting? Can it put you in a good place for a mortgage.

Are you renting? Can it put you in a good place for a mortgage.

Can rental help your mortgage application?

While saving for deposit for a property it is not uncommon for people to live with their parents until they are well into their late twenties, sometimes thirties. It’s not only not uncommon but according to the press its more likely than not. We do not want to make much of what the press says. But with house prices and wages unable to keep up for people, it has become harder and harder to get a successful mortgage application.

Now we have written quite a bit about all of this. Even a helpful guide that went through different aspects of how you could improve your chances of getting a mortgage. Please find the article here.

One of the things that is not on our guide, is your record for renting. And that’s because its not technically counted as part of your mortgage application. Some lenders may look at it. But basically you could pay your rent on time for 5 years and still its not even considered as part of your application.

When a lender looks at your application they want to see if you are “worthy” to pay your mortgage payments. Firstly the lenders want to see if you can afford it, considering your pay and life outcomes. Secondly they look at your credit history to see if you have a past of paying things back right. Finance deals, credit history etc. But they do not necessarily look at your rent history.

It is not per se a debt but it is a show of your ability to pay something back. In a world of climbing debt, credit card spending going out of control. You could be super sensible, live your life to your means, rent, and not rack up debt. You get kind of punished for not having a good credit history.

Back in 2017 there was a petition set up online that wanted parliament to look at encouraging lenders to look at renting as a way to encourage an application for mortgage. It was debated in parliament and some lenders have adopted a policy to at least consider rental history.

So why is rental not as important?

Well there are a few reasons that your rental history is not considered.

  • Rental is not a long term debt

Thing is landlords are looking for possibly a year’s worth of rentals, whereas a mortgage advisor is looking for 25 years plus from someone.

  • Employment changes

You may be fully employed now, that may change, for a landlord, that may mean you leave the property. For a mortgage lender that could be disastrous for both them and you.

  • It is not a debt.

The act of taking a debt is a full promise. You take something and you pay it back. It really resembles a trust, and even if you have any life’s unexpectant events, you still have to pay it back.

So at the moment, yes some lenders look at rental history. But for now you cannot rely on it unfortunately, you have to make sure all the other elements are in line.  But on the bright side, lenders are looking at the full picture these days. A good rental history is not a bad thing and it keeps a roof over your head. Never despair always speak to someone you trust and pay your bills!

Your home may be repossessed if you do not keep up repayments on your mortgage.

Birmingham’s resolute housing prices until 2020.

Birmingham’s resolute housing prices until 2020.

This is not a blog about nice places in Birmingham or the surrounding areas. That would be good. But this blog is about a report from Knight Frank, an estate agent in London, about the house prices in Birmingham showing their resoluteness in not responding to the housing crisis since 2009.

In that I mean the average price of houses around Birmingham have not only kept their value but have increased by 45% since 2009, and not only that but have risen 5%-10%, year on year, since 2015. In theory if you had a house that was worth £178,000 and it rose by 5% a year for 5 years. You would have made over £50,000. Which is not bad.

The report shows why this has happened. You can read it all here. (you are now departing from the regulatory website, Coleshill Mortgage Services or Quilter Group are not responsible for the accuracy for the linked site). Its quoted to say the following:

“– its relative affordability compared to other markets in the UK, especially those in the South of England. As the UK’s second-biggest business hub, Birmingham draws comparison with London, the financial centre of Europe. However, when looking at residential property prices, the difference is striking, with newbuild development prices in some central zones of the capital ranging from £1,000 to £2,000+ per sq ft, compared to around £300 to £450 per sq ft in central Birmingham. The affordability trend dovetails with the improvement in amenity and lifestyle in the city, making it a destination for young workers and families alike.”

It’s funny, because it is pretty simple social economics, affordable housing, a place where you can get a decent job, things to do and make your life more richer (in more ways than one) means that the price of housing goes up.

So where does it end. Well we are not sure, do we end up with another London, where house prices get beyond the average earner. Possibly. The idea of a free market is that it will in theory sort itself out. Competition in a free market, means as house prices increase, sales go down and then therefore prices go down a little, everything becomes more affordable, inflation catches up, peoples pay catches up. House prices go up. So on and so forth.

It doesn’t always work like that. At the moment, in terms of buying a house to hopefully increase in price, will always be a risk. It may happen, it may not, so make sure you understand what you are doing, and the risks involved.

But at the moment the report forecasts a growth from now until 2020 in the Birmingham area, so it is always worth a look.

Your home may be repossessed if you do not keep up repayments on your mortgage.


Getting a longer mortgage. Make sure you know the facts!

Getting a longer mortgage. Make sure you know the facts!

There was an interesting article in the Observer last week or so. The main crux at the beginning of the article was about the fact that people getting approved for mortgages with a length of 40 years was increasing. Or more importantly had increased. And this was a real symbol of the times we live in today.

I have quoted it below:

“The growth in lenders offering mortgages of much longer terms has been swift. Just five years ago, less than 36% of mortgage products had a maximum time of 40 years, according to financial website This has now risen to almost 51%.” Find the full article here

(you are now departing from the regulatory website, Coleshill Mortgage Services or Quilter Group are responsible for the accuracy for the linked site).

So what does this mean. Well it’s part of the issue that has been plaguing everyone with a standard job, a standard life. They cannot afford to buy property! Especially in London. The problem is it means that lenders are not getting the new customers they need to maintain growth. You know normal business stuff.

So the lenders in a desperate attempt to make mortgages much more affordable are offering mortgages at a much longer term. They used to average around 25 years. But now they are offering mortgages of up to 40 years. So what does it mean for people on these longer mortgages?

Well firstly, if you stay in the home you have bought and you pay your general mortgage payments for 40 years rather than a standard 25 years. That means if you bought it when you were 30 – The mortgage wont be paid off until you are 70!

Secondly if you want to move, how much equity will you own in the house? Take the following scenario: Your life and pay may have improved, and you had been in your original house for 12.5 years, on an average 25 year mortgage you would have been 50% through your mortgage. On a 40 year mortgage that is only around 25%. That’s a big difference. And if your house has not increased in value. Well you may struggle for that deposit when you sell. So you have to save again. And we have not even taken in interest rates.

And finally we get to interest rates. A longer term in your mortgage means more interest paid over time. Which essentially makes the product of the mortgage just flat out more expensive. So not only can you not afford a standard length mortgage and therefore go for something that is longer; to either reduce the monthly repayments or be accepted by the lender under the strict rules. The mortgage you can get accepted for is more expensive over time. Its really tough spot for people and families desperate to own their own home.

It really doesn’t look good, but when going for mortgage there is options, there always is. Make sure you speak to someone you trust and understands the mortgage market.

Making sure the lender says yes for your mortgage.

Making sure the lender says yes for your mortgage.

There is no sure-fire way for mortgage application to be approved. You just never know what a lender is looking for. There are lots of specified reasons you may not get accepted or actually get accepted for a mortgage. Based on income, what you want to lend, what your credit report is, how long you have been working, if you are working, what your job is, your age… the list is endless, well not endless but long. So making sure you can definitely get accepted is not a sure thing. But like anything worth doing, you have to make sure you can give yourself the best chance.

1 –

If you are going direct to the lender, make sure you speak to them about what they need, that the information you need to prepared. You have prepared. Most lenders have comprehensive information on the website about their requirements for a mortgage. Now things will be different per lender but often it will be things like proof of income, payslips, a comprehensive budget (this is explained deeper in the next point).

2 –

Make sure you have developed a comprehensive budget. Most times we do not put down everything but to develop a comprehensive budget you really need to identify exactly your income and outgoings are.

Here is an example of a things to consider in your budget.:

All income – look at the following

  • Income from your job
  • Your job may have overtime, bonus shifts etc,
  • Freelance work
  • Income from assets

Anything you consider, you need to take in the general amount of money that you have come into bank each month. You cannot really take in yearly bonuses as these are not a stable income. But say if you are a nurse and on average take three additional shifts a month, then these will absolutely be taken into account.

All Outgoings

  • Rent (yes they will look at your rent and how you are managing it so far)
  • Food
  • Car, petrol, transport
  • Entertainment and Leisure
  • Utility bills
  • Telecommunications
  • TV (license and things like Netflix)
  • Clothing
  • Hobby spends
  • Children and dependents
  • Debts and credit cards.
  • Savings
  • Any thing else you can think of.

It really is worth taking the time to work this out.

  • A mortgage broker. Does not accept and deny you a mortgage so they can take the time to get to know you. Yes they will get you to go through all your ingoings and outgoings. But the great thing is they will be able to give a professional opinion about your chances; but not only that, but will help you find the right lender for you. The issue with mortgage applications is once you apply for one, if you get rejected, this stays on your credit report and can harm future applications.
  • Make sure your credit report is tip top. This is true for most financial applications but do all you can to ensure your credit report is working for you. It is always checked for an application and it is always taken into account.

As always speak to someone you trust and make sure when getting a mortgage take the time to make the right decision for you. Speak to different people, speak directly to lenders as well as brokers. All of these hoops to jump through for a mortgage is all about the lender making sure you can payback everything given to you plus interest.

Your home may be repossessed if you do not keep up repayments on your mortgage.