Mortgage Tips

Bank of England – Base Rate

Published on by David

A look back at base rate over the last 20 years

The Bank of England Official Rate or base rate over the last 20 years. In the chart below the first nine years shows what was a pretty normal range for base rate which averaged 4.95% over the period to Oct 2008. Since March 2009 rates have remained very low with only four changes to it over this period. 

If you have taken out a mortgage or remortgaged over the last 10 years you would be forgiven to think rates were always this low!! 

What next for interest rates?

That depends on Brexit, the economy and inflation.

The Bank of Englands role is to control inflation and they have a target of 2% and the Bank of England official rate will be changed to keep inflation at or close to this target rate. However they also have to take other economic factors into account.

In the latest monetary policy committee inflation report the bank that it would restrict the pace of interest rate rises over the next two years to no more than 0.25% due to Brexit uncertainty and a slowing economy. However Mark Carney the Bank of England Governor also warned that a modest recovery to the economy over the next 3 years will warrant higher interest rates.

If your mortgage rate is ending soon then considering a fixed rate is worth considering. If you would like to review your options get in touch with David for a free mortgage review.

David can be contacted on 01224 784030 or by email on david@portfs.co.uk

Chart Data supplied by Bank of England

LIFT – Open Market Shared Equity

Published on by David

The Low-cost Initiative for First Time Buyers – LIFT Open Market Shared Equity Scheme might be for you.

Unlike the Help to Buy scheme which is only for new build homes from house builders the Open Market Shared Equity (OMSE) scheme is for homes that are for sale on the Open Market. So if you want to buy your first home but can’t afford the total cost this might be the right scheme for you.

How it Works

The Scottish Government will give assistance to qualifying first time buyer by taking an equity share in your new home.

You will own the largest share usually between 60% and 90% of the purchase price with the Scottish Government holding the remaining share under a shared equity agreement. The mortgage lenders will typically require you to have a minimum of a 5% deposit based on the full purchase price/market value.

If you were to purchase a 75% share of your new home, the Scottish Government will provide assistance for 25% of the purchase price.

You will own 100% of your home and have the title deeds in your name but the Scottish Government will have a “standard security” on the home to protect their share. It also means that when you sell they get a their share of the sale proceeds back.

How to qualify

You need to be able to show that you can’t afford to buy a home that meets your needs without help from the OMSE scheme. If it looks like you’d be able to buy a home without any help, your application won’t be eligible.

Maximum price thresholds

There are maximum price thresholds and criteria on what you can purchase. The price threshold varies depending on where you are purchasing and the size of property you are eligible for. You can typically purchase a property that is one apartment larger than you require an apartment is classed a room. So, a 3 apartment property is a 2 bed property.

In Aberdeen City a one bed property (2 apartment) has a maximum price of £110,000 and a 2 bed (3 apartment) £130,000. In South Aberdeenshire these figures increase to £125,000 for a 1 bed (2 apartment) and £170,000 for a 2 bed (3 apartment) property.

Example

If you can get for example a mortgage of £85,000 you could if you qualify for the scheme purchase a 1 bed property in Aberdeen city for £110,000 and 82% share, £90,500, made up of your £85,000 mortgage and a deposit of £5,500.

What to do next

Get in touch and we can discuss the scheme in detail and your eligibility. The next step is to apply to the scheme administrators and if approved you will be issued with a “passport letter” then once you have found your home a copy of the valuation has to be provided so that the property can be approved.

If it seems complicated, don’t worry, we are here to assist at every stage of the process and make it as easy as possible.

To get more information or arrange an appointment give David a call on 01224 784030 or email david@portfs.co.uk

Portlethen Financial Services

Mortgage Advice Aberdeen

David Butler, Portlethen Financial Services, Unit 14 The Green, Portlethen, AB12 4UN

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

 

Mortgage Advice

Looking for a mortgage?

Published on by David

Things you should know…..

Whether you’re a First Time Buyer, looking to move home, Re-Mortgage to a better rate or purchase a Buy to Let investment property getting the correct advice is essential.

A Financial Adviser / Mortgage Broker can provide you with much more than your own bank or building society. Not only will they have access to a comprehensive range of lenders and rates they will also have the knowledge of the different criteria and lending policy of these lenders and when you are looking for the right mortgage for your individual requirements this knowledge and expertise is invaluable.

Mortgage Affordability

All lenders will carry out a mortgage affordability calculation to confirm the size of mortgage available taking into account your income, liabilities, living expenses and mortgage term etc. However, there is not one calculator that is used by all lenders they each have their own formulas and take slightly different things into account. A Mortgage Brokers knowledge could make the difference in sourcing the lender that will allow you to buy your dream home!

Credit Scores and Scoring

The majority but not all lenders will use credit scoring in reaching the decision to lend as well as reviewing the contents of your credit history/file. The three main credit reference agencies each offer online access to your credit history and a credit score but the credit score from these companies will not necessarily be the same score that you will get from a lender but is a guide. The lenders will each use their own score card and will have different pass marks for lending depending on the loan to value (ltv) you are requesting. The contents of the credit history/file can also override the credit score so even if you have a good score with the credit agencies the lenders criteria my override the score if you have had defaults / Court Judgements or decrees etc. 

It is a good idea to have a look at your credit file so that we can review it contents and make sure there is nothing that can prevent you getting a mortgage. A copy can be obtained by registering with www.noddle.co.uk which is a free service provided by Call Credit or from www.experian.co.uk or www.equifax.co.uk who offer a free month’s trial and then an ongoing monthly fee. 

If you are not registered on the electoral roll – register know as this may help improve your credit score.

While in an ideal world no credit (loans or cards) is what you want this is not the case when you want a mortgage. If you have never had any loans or credit/store card there is nothing to score so you will not have a good credit score so if you are looking to purchase and need to improve your credit score taking out a credit card can help. Use it to fuel up the car and then clear the balance in full every month so you build up a good record or regular payment, don’t miss any or be late!!, and don’t be tempted to run up a card balance that you cannot clear as this will impact on the mortgage affordability.

Documents

If you do not usually keep your payslips and bank statement and shred them then STOP!!! 

A lender will require documents to verify your income and will typically require your last 3 months payslips, P60 and between one and three months bank statements if you are employed. The self-employed will usually need to provide 3 years’ accounts and/or HMRC SA302 tax calculations and Tax Year Overview statements but again the lenders each have their own document requirements. As mortgage brokers we will again be able to discuss the lenders document requirements and recommend lenders appropriate to your individual situation. So if you have only been self-employed for a year or are a contractor working via your own Ltd company do not despair!

The lenders will use your bank statements to cross check against payslips in verifying your income but will also review the contents and there are some things that they do not like to see. While there is nothing wrong with the odd bet on a sporting event or a game of Bingo the proliferation of online betting and Bingo sites has made it far easier to do at the push of a button on your smartphone or tablet. If the activity on these sites is seen as high, whether you are winning or not, in relation to overall income then a lender is unlikely to lend.

Overdrafts – Lenders usually do not have an issue if you use an overdraft provided you are not permanently in overdraft and that when you are it is within the agreed overdraft limit. If you do go slightly over the limit provided this can be explained, then they may be okay lending.

Deposits

The bigger the deposit the better the rate of interest available and a lower credit score required to lend. It makes sense to try have the smallest mortgage you can but trying to build up a deposit for First Time Buyers can take time unless the bank of Mum & Dad can assist with the deposit. Lenders do offer loans with only 5% deposit but the rates of interest are higher than if you have 10% deposit and this is where all lenders start to offer rates although if the property is New Build house or flat the deposit required by most lenders is higher Typically 15% or 20%.

The deposit require will be based on the purchase price or valuation whichever is the lower so if you pay over valuation for a property you will require the deposit (5% or 10% etc) plus the amount over valuation paid.

There are a number of Government Schemes available to assist First Time Buyers and Home Movers and for New Build Property the Help to Buy scheme is a Shared Equity scheme where only a 5% deposit. I will be covering how these schemes work in a separate post.

Mortgage Advice

The purchase or refinance of your home is one of the biggest financial commitments you will ever make and getting the correct advice and reviewing all the options is essential. We have been providing advice and arranging mortgage for clients in Aberdeen and throughout the UK for 25 years and as Financial Advisers can provide the advice you require and arrange the mortgage and insurance to protect your home.

To discuss your plans, get in touch to arrange a Free Initial Mortgage Consultation and starting planning for your future.