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Our property investment expert is Jeni Browne, Sales Director at
Mortgages for Business
www.mortgagesforbusiness.co.uk/
Tel: 0345 345 6788
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Question
Definition buster: What is an LTV?
My partner and I are saving for our first home and although we have a bit more saving to do we have started having a look at some mortgages. We wondered whether you could explain what is meant by LTV, please? Is this something to do with the interest rate?
Answer
There is so much jargon in the mortgage world! LTV stands for ‘loan to value’. This is how we express, as a percentage, the amount you owe on a mortgage, compared to the value of the property.
So, if your property is worth £100,000 and you owe £75,000 then the LTV is 75%. The lower the LTV, generally speaking, the lower your interest rate. I hope this helps!
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Question
Can I take out more than one mortgage?
My husband and I have a mortgage on our home which is due to end in 2027 (it was on a 25-year term) but we would like to help our son buy his first home. Can we also take out another residential mortgage with him to help him get onto the property ladder?
We are a bit concerned about the stamp duty implications as we know there is a surcharge of 3% on second properties. All three of us work full-time but my son has no deposit so we would need to fund this element too. We could afford 10%.
Answer
Like yourselves, many parents are looking to help their children get started and there are various schemes to help you with this.
In terms of whether you can get a second mortgage, the short answer is yes, however, you would need to prove to a lender that you could afford both mortgages based on your income and the lenders’ affordability calculations.
An option that you may not be aware of, but may want to consider, is ‘joint borrower, sole proprietor’ mortgages. You and your husband would be named on the mortgage and be part of the underwriting, but not on the property title deeds – this means you will not own the property and thus the stamp duty surcharge will not apply.
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Question
How long does it take to receive a mortgage offer?
I am hoping to buy my first home and I want to get my mortgage in place before I start making offers as I have heard this will put me in a good position. Once I contact a broker, how long is it likely to take to get a mortgage offer? Will I need to send any documents at this stage and, if so, what will I need?
Answer
So, there are two stages to a mortgage application – agreement in principle and then the mortgage offer.
The agreement in principle (AIP) is what buyers tend to have in hand before making offers on properties. This is where you approach the lender, tell them about your income and expenditure and a credit search is carried out. Assuming that this goes to plan, the lender will agree to lend to you based on the information provided (subject to full underwriting) and an AIP is issued.
This should take no more than 24 hours for a broker to produce. It is good practice to send your broker bank statements to verify your income and expenditure, but it is not essential.
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Question
Second charge mortgage: What does it mean?
We are thinking of making some improvements to our home, including a loft extension. We have considered remortgaging to fund the project, but someone recently mentioned getting a ‘second charge mortgage’. How does this differ from a straightforward loan and would it be a better option than a remortgage?
Answer
A second charge mortgage is a secured loan. The term ‘second charge’ means that, essentially, the first charge lender has first rights to the equity in the property if it is sold in the event of a repossession, and the second charge lender has rights after this.
Because of the nature of this security, second charge lending tends to be more expensive than first charge lending. So, generally, you would either remortgage or obtain a further advance from your current lender, rather than take a second charge.
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