Mortgages

Your mortgage is probably the largest financial transaction and commitment you are likely to undertake. So it’s no wonder more and more people are seeking mortgage advice which is individually tailored to their own needs and requirements.

We at Fairfield Financial Solutions Ltd are not tied to any particular lender, which means that we have the ability to act on your behalf in order to establish the most suitable mortgage solution for you. We look at your mortgage not only as a loan to buy your home, but as part of your overall financial profile, tying it in with your intended retirement date, plans to start a family or when you may wish to move home. 

Based on the information you provide in an initial meeting with our adviser, we will search the mortgage market reviewing the lenders available, some of which offer exclusive products to brokers such as ourselves. It is essential that you provide truthful and up-to-date information to us to enable us to determine which lender will offer you the most suitable mortgage options suited to your particular requirements.

Residential mortgages are one of the most common forms of credit in the UK, making it possible for millions of homeowners to afford their homes. Unless you are in the fortunate position to buy a property outright, you will need to borrow some money and that’s where the mortgage comes in. 

A long-term loan taken out by one or more individuals to purchase a home in which they are going to live, a residential mortgage comes in various formats, making it easier to find one that best suits your circumstances. 

Residential mortgages include fixed rate, variable or tracker mortgage options and are granted on homes that are used as a residence by the borrowers. It must not be rented out to tenants or used for commercial purposes. 

What’s Required?

Residential mortgages require a cash deposit, starting from a minimum of 5% of the property value.

The Details

A residential mortgage is calculated on your loan to value ratio (LTV). Your LTV is the amount borrowed set against the value of the property. E.g. if you are looking to purchase a £200,000 property and have £40,000 deposit, you will need to borrow £160,000. This gives you an 80% LTV ratio with your deposit accounting for the other 20%. The lower the LTV rations the less risk for lenders and the better interest rates you’ll see offered. 80% and less is seen as a low LTV ratio and anything above is at the high end. 

Interest

Interest is the fee a lender charges for lending you money in the first place, and is charged on the value of the mortgage owed. This means you will repay the value of your mortgage, plus the interest rates you have agreed. 

However, you are unlikely to stay in a fixed interest rate for the duration of a mortgage. The three mortgage products are outlined below:

  • Fixed Rate Mortgage – this sets out a monthly payment for a number of years, typically between 2 and 5. However longer options are available. This type of mortgage can be beneficial if interest rates rise significantly, however you will not benefit from falling rates. 
  • Tracker Mortgage – using the Bank of England’s base rate with a pre-agree mark up, this is a more  changeable rate.
  • Variable Rate Mortgage – changing at the discretion of the lender, this option means the cost of your mortgage may go up or down. However it is unlikely to be a sudden increase as lenders still need to remain competitive.

What kind of borrower are you?

Each residential mortgage can be tailored to fit the needs of different home buyers. Whether you are a first-time buyer, looking to remortgage or simply moving home, our advisers are here to provide impartial advice to ensure you find the product that’s best suited to you. 

Call us on 01638 551476 to speak to one of our team.

Buy To Let mortgages are available specifically to buy a property to rent out. The main difference is that lenders take the potential rental income into account when deciding how much they are willing to lend.

These loans can be arranged on an interest only basis, although other options are available, and are calculated on your income and a percentage of the rental income you will receive for renting the property. 

Available as fixed, discounted or tracker deals, these mortgages do usually require a larger deposit than a standard mortgage due to the higher risk involved. These risks are viewed as the property being left empty, or that a tenant may stop paying rent. 

If you are looking to start a landlord portfolio or want to increase an existing one, let our team find the buy to let mortgage that’s right for you. Call our team on 01638 551476 to discuss your options. 

The Financial Conduct Authority does not regulate most forms of buy to let mortgages.

Introduced by the Government in 2013, the Help To Buy Scheme has opened up the market to first time buyers in England. Coupled with low mortgage interest rates, and now available on new and old properties, first time buyers will only need a deposit of 5% in order to get a mortgage for up to 75% of the property’s value. 

The scheme is aimed at those who would have otherwise been priced out of the market, allowing first time buyers to get a loan worth up to 20% of the property’s value (40% in London from April 2016. This leaves you only needing to pay a deposit of 5% if a 75% mortgage is given. 

For example, a £10,000 deposit, could help you purchase a home worth up to £200,000. This breaks down into 5% for the deposit (£10,000), 20% for the government loan (£40,000), and 75% for the mortgage (£150,000). The benefit of using the government loan is that there are no loan fees for the first 5 years of owning your home. 

You will own your home, which means you can sell it at any time, but you’ll have to pay back the equity loan.

Are you eligible?

All applicants are subject to credit checks and stress tests, and each mortgage lender will have their own terms on eligibility.

To qualify you will need: 

  • a minimum of 5% deposit (the property value cannot exceed £600,000)
  • a secured mortgage of up to 80% (75% for first-time buyers and new build properties)
  • a clean credit history
  • proof you can afford the repayments 

To discuss your eligibility for the Scheme, just call one of our team on 01638 551476.

Commercial mortgages are loans secured against property that is not your home or residence. Buy-to-let mortgages are a special type of commercial mortgage, but generally this type of mortgage is taken on for loans of over £50,000 (although some lenders have a minimum of £75,000 or more). 

Typically granted for up to 70% of the value of the property, borrowers are required to have a cash deposit for the balance of the purchase price required. This is because lenders take the property you are buying as the only security for the loan. If you don’t have the cash you may be able to offer the lender additional security which may come in the form of another property in which you have considerable equity in.

Mortgages may still be granted on leasehold properties, but it is usual for lenders to require more than 70 years on the lease before additional security is required. 

With many options open to the commercial markets, understanding your options is key. Our specialist Commercial Broker is here to offer impartial advice to ensure your business is on the best track possible. To find out more contact our office on 01638 551476.

Remortgaging is the process in which a homeowner or commercial property owner switches to a new mortgage product. This can be with the same or a different lender, and is usually done when a fixed rate mortgage term ends. If nothing is actioned after your term ends you’ll be moved onto a long term variable rate, which can typically be higher than the rates offered on new mortgage deals. 

Things to consider:

Fixed vs variable: What best suits your circumstances at the time of remortgaging? Would you prefer the security knowing exactly what your monthly repayments will be for the next few years, or would you be happy to take a bit more of a risk with variable options in order to take advantage of potentially lower monthly payments in the short term?

Arrangement fees: The mortgage with the lowest rate may not actually be the cheapest deal. Factor in the costs of arrangements fees, as you may find it cheaper to pay a slightly higher rate of interest if the set up costs are lower. There are many variables affecting these fees, but you may find the arrangement fee is lower if you are borrowing a larger amount for instance.

Other fees: There will be legal and valuation costs to factor in. Although lower than when you originally bought your property, your new lender will require a valuation survey and you will need to instruct a solicitor. 

Deposits: The amount of equity in your home may make a difference on the competitive mortgage products you can qualify for. 

Early repayment charges: Consider the early repayment charges, should you be unsure of how long you want to be tied to your current mortgage deal. Some products will include an early repayment charge, whilst others, such as lifetime trackers for example, are completely penalty-free.

Exit fee: Your current lender will most likely charge an exit fee, covering the administration costs of closing your account. Costs vary depending on the lender.

To discuss your options for remortgaging, contact our team on 01638 551467.

You may have to pay an early repayment charge to your existing lender if you remortgage.
All mortgages work in the same basic way: you borrow money to buy a property, pay interest on the loan and eventually pay it back. They only really become complicated when you start looking at different interest rates, different ways to repay, borrowing for different periods of time, particular mortgages for special situations and charges you may need to pay.
 
So, what are the different types of mortgage available?
 
Repayment mortgages
This is the basic way of repaying all mortgages, however specialised they are. Repayment mortgages require you to repay some of the interest you owe, plus some of the money you have borrowed each month. At the end of the period, often 25 years, you’ll have paid back everything you owe and you’ll own your home outright. Although, it is more than likely you will move within the 25 years, so you may be able to take the mortgage with you (called ‘porting’ your mortgage) or you can repay the original loan and take out a new one.
Suited to: buyers who want to be certain their house will be paid for at the end of the mortgage.
 
Interest-only mortgages
As it says on the tin, interest-only mortgages require you to pay the interest month by month and repay the capital at the end of the period with money you’ve saved elsewhere. This is a very different product from a repayment mortgage because at the end of the loan you’ll have to find enough money to repay the whole debt. You can save up any way you want or use money from an inheritance but you must be confident of having the money to hand when the time comes to repay. If you don’t, you might have to sell the house to pay off the mortgage. There’s still a risk that won’t be able to repay the mortgage on time so, before granting an interest-only mortgage, lenders can insist you show them how you intend repaying the loan at the end.
Suited to: buyers who have other means of repaying the debt when their mortgage ends and would like to keep their monthly payments low intitially.
 
Fixed rate mortgages
Fixed rate mortgages are popular, particularly with first time buyers, because your mortgage rate is fixed for a set number of years. You know exactly how much you’ll be paying each month for that length of time, regardless of what happens to interest rates on other mortgages. The downside is that you’ll be stuck on a higher rate if other mortgage rates go down. You can get out of a fixed rate mortgage but there’ll be an early repayment charge to pay for switching before the end of the period. When the mortgage comes to an end, you’ll be put on the lender’s standard variable rate (SVR) which will probably have a higher interest rate than you’ve been paying. In that case you can apply for another fixed rate deal.
Suited to: buyers who are budgeting carefully and want to know exactly how much they’ll be paying over the next few years.
 
Variable rate mortgages
Every lender has a standard variable rate (SVR) mortgage. This is their basic mortgage. The interest rate goes up and down as mortgage rates generally change. They are partly influenced by the Bank of England base rate but other factors come into play as well. The interest rate you pay on an SVR mortgage can change even without base rate moving and similarly base rate might come down but your mortgage rate stays the same.
Suited to: buyers who think mortgage rates are going down but better deals are probably available elsewhere.
 
Tracker mortgages
Tracker mortgages move in line with (i.e. they track) a nominated interest rate which is usually the Bank of England base rate. The actual mortgage rate you pay will be a set interest rate above or below the base rate. When the base rate goes up, your mortgage rate will go up by the same amount. And it’ll come down when base rate comes down. Some lenders set a minimum rate below which your interest rate will never drop but there’s no limit to how high it can go. With base rate at 0.5% and an add-on rate of 1.5%, your mortgage rate will be 2%. 
Suited to: buyers who can afford to pay more if rates go up but believe that rates will go down.
 
Discount rate mortgages
The discount is a reduction on the lender’s standard variable rate (SVR). Mortgages with discounted rates are some of the cheapest around but, as they are linked to the SVR, the rate will go up and down when the SVR changes. The deal, though, lasts only for a fixed period of time, typically 2 to 5 years.
Suited to: buyers who want a low rate of interest but can afford to pay more if rates go up.
 
Capped rate mortgages
This is a variable rate mortgage but one with a ceiling (a cap) on how high your interest rate can rise.  You have the comfort of knowing that your repayments will never exceed a certain level while you can still benefit when rates go down. As mortgage rates generally have been low in recent years and there are better deals around, lenders don’t often offer capped rate mortgages at the moment.
Suited to: buyers who believe mortgages rates are going to get a lot higher.
 
Cashback mortgages
This is a marketing incentive sometimes offered by lenders. When you take out their mortgage, they give you money back, typically a percentage of the loan. This isn’t necessarily as attractive as it first sounds. You should look carefully at the interest rate being charged and any additional fees before considering.
Suited to: buyers who need a lump sum of money to help with moving house.
 
Offset mortgages
Offset mortgages are linked to a savings account and combine savings and mortgage together. Each month, the lender looks at how much you owe on the mortgage and then deducts the amount you have in savings. You pay mortgage interest just on the difference between the two. For example, if you have a mortgage of £100,000 and savings of £5,000, your mortgage interest is calculated on £95,000 for that month. This cuts the amount of interest you pay but the mortgage rate is likely to be more expensive than on other deals. You can still access your savings if you need to but the more you offset, the quicker you’ll repay your mortgage. When you use your savings to reduce your mortgage interest, you won’t earn any interest on them but you won’t pay tax either which is particularly helpful for higher rate taxpayers.
Suited to: buyers who have a good amount of savings, especially higher-rate taxpayers.
 
95% mortgages
These are for people who can afford only a 5% deposit. With such a small deposit you are at risk of falling into negative equity if house prices go down – they need fall only 6% and suddenly your house is worth less than your mortgage. Because of the risk, lenders will charge a comparatively high mortgage rate.
There’s more information for people with 5% deposits in the government’s Help to Buy scheme (www.helptobuy.gov.uk).
Suited to: buyers who are struggling to save a deposit.
 
Flexible mortgages
Flexible mortgages give you more leeway with making repayments. You can choose to pay in more than your regular amount when you can afford it. 
And, unlike other mortgages, if you have already overpaid you can pay less if you hit a difficult patch or even take a payment holiday and miss a few payments altogether. In return for this flexibility, the mortgage rate will be higher than on other deals.
Suited to: buyers who suspect they will run into financial problems in future.
 
First time buyer mortgages
First time buyers can apply for any of the types of mortgages listed above. The government also has schemes to help people struggling to get on the mortgage ladder with its Help to Buy schemes. 
 
Buy to let mortgages
Buy to let mortgages are for people who want to buy a property and rent it out rather than live in it themselves. The amount you can borrow is mainly based on the amount of rent you expect to receive, however there other factors that can affect this. First time buyers are unlikely to be allowed a buy to let mortgage. 
 
 
It can still be a confusing world of lending products, so arrange a consultation with one of our advisers to find out which product is most suited to your circumstances and what current lenders are offering. Call us to arrange a consultation on 01638 551476.

A MORTGAGE IS A LOAN SECURED AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBT SECURED ON IT. 

For mortgages, we can be paid by commission, a fee, or a combination of both. Our typical fee is £250 and is payable on receipt of the mortgage offer.

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