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Gavin Richardson, CeMAP, Cert II, Head of Residential mortgages at
Mortgages for Business
www.mortgagesforbusiness.co.uk
Tel: 01732 471 613
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Question
Pitfalls of long-term fixed rates
Do you think there are any disadvantages to getting a ten-year fixed rate? I am considering moving from a tracker when my mortgage ends later this year and with interest rates rising I am keen on getting a long-term fixed rate. I like the idea of a ten-year mortgage, but wondered if there was anything I needed to watch out for? My current rate is 1.34% but a quick comparison site search suggests the cheapest deal I can get on a ten-year fixed rate is more than 2%. My property’s value is £345,000 and I would need to borrow £71% of the value.
Answer
The biggest drawback to taking out a long-term fixed rate is what happens if you need to break it -for example, if you get divorced or are made redundant? It is highly likely that you will be subject to early repayment charges (ERC), which can be high even if you have been paying the loan off for many years.
The typical homebuyer is likely to move three times before they hit 45, and eight times during their lifetime, so if you do decide to go down the 10-year fixed-rate route, I would advise you to get a mortgage which is portable. A portable mortgage means you won’t get penalised with ERCs when you move, because the mortgage is coming with you!
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Question
Help to Buy options
I am 23, would like to buy a new build flat and have started looking at the Help to Buy Equity scheme. I have £7,000 in an ISA which I can use for my proportion of the deposit. Do I need to get a specialist mortgage for this scheme or can I use a mainstream product? Does it need to be a five-year deal to run in line with the term of the Government loan?
Answer
Not all lenders accept Help to Buy applicants, but it’s by no means hard to source finance. To name a few, lenders including Barclays, Halifax, NatWest, Santander, HSBC, Post Office and The Woolwich will all assist. You do not need to take out a five-year term.
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Question
Can a broker help us remortgage?
My wife and I are having a disagreement about remortgaging. We are due to remortgage after taking out a two-year deal on our first home. My sister went through a broker to get her remortgage and got a really good deal and I would like to do the same when we remortgage. However, my wife thinks this will cost us more money and wants to use a price comparison site. She thinks this will save us money in broker’s fees. I like the idea of someone handling the paperwork for us and taking some of the stress out of the process, however. Is there anything else I can say to convince my wife?
Answer
Comparison sites are a very good way of getting a flavour of what rates to expect, but even though these sites throw up a variety of products, they don’t actually tell you if you are suited to any of the rates. Do you really have the time to check each one in depth?
It is worth bearing in mind that many mortgages are only available via qualified mortgage brokers. A lot of the UK lenders require business to be submitted via a qualified adviser – as a sort of quality control filter. Lenders trust mortgage brokers to get all the administration in order before submitting an application.
The other main reason people use a mortgage adviser is down to time and convenience. Here at Mortgages for Business we organise all the paperwork, work with the lender to get an offer and liaise with our customer’s estate agent, solicitor, accountant and insurance provider to ensure everything moves along smoothly.
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Question
Mortgage application for self-employed borrowers
Both my husband and I are self-employed; we run our own video production agency and things are going well. However, we are worried the fact we are both self-employed will hinder our chances of being accepted for a mortgage, or – at the very least – reduce our options. Is there anything we can do to increase our chances of getting on to the property ladder? We are currently both saving for a deposit and will be looking to buy next year if things go well.
Answer
Mortgages for self-employed borrowers are often perceived to be harder to come by, or subject to additional requirements. The reality is that this is not the case. If you can provide your mortgage broker with one years’ worth of accounts, then there are plenty of options out there! You won’t be subject to higher rates and you won’t be restricted to how much you can borrow – well, any more than someone in full-time employment.
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