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Our property investment expert is Neil Bishop, Head of Residential Mortgages at
Mortgages for Business
www.mortgagesforbusiness.co.uk/
Tel: 0345 345 6788
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Question
How do I apply for a mortgage?
Do you know the best way to apply for a mortgage? I have been saving for a deposit for over two years – I managed to save quite a bit during the pandemic and I now have £38,000 to put down on a flat. I have been viewing properties and have seen a couple I am interested in.
Now I need to get a mortgage. Do I just contact some of the banks and ask for the forms? Or can I apply online?
Answer
Congratulations! You can apply directly to a bank in-branch, and some banks and lenders now offer the opportunity to arrange mortgages via video calls.
My recommendation though, would be to speak to a whole-of-market mortgage broker. They will be able to give you comprehensive advice and can search a wider range of potential mortgages, rather than a bank that can only offer products from their own range.
This may mean you can access a much more competitive rate and a more suitable deal for your situation.
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Question
What’s the cheapest mortgage type?
I am due to remortgage on my house in October after taking out a two-year deal as a first-time buyer in 2020. I had a two-year fixed rate with Barclays.
I’ve heard, because interest rates have gone up, it’s a good idea to fix your mortgage for five years. Is this more expensive? I only ask as it seems a bit of a no-brainer – so what’s the catch?
Answer
Fixing for a longer period gives you the peace of mind that your rate will not change for a while, which grants you financial security as you can budget for the long-term.
The differences between two and five-year fixed deals currently are minimal, so if you want the security of knowing what your payments will be for the longer term, the five-year deal is a good option.
However, when looking at the different options, it’s always worth considering your future plans, such as any potential house moves. If you were to move and leave a fixed deal early, you could end up paying high early repayment charges to cut the deal short, which could be a significant fee.
I recommend speaking to an experienced mortgage broker who can assess the different options with you.
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Question
My remortgage offer is more expensive than my current deal: What should I do?
My fixed-rate is due to expire at the end of December and my lender has offered me a new rate but it looks like I’ll be paying out about £600 a year more if I sign up!
I have 13 years left on my mortgage and just over £200k remaining to pay. My home has been valued at £550k to £600k. I have been offered a rate of 3.64% for either two or five years. My current rate is 1.24%.
Should I just accept this – after all, I know interest rates are going up. Or is there another solution?
Answer
When your fixed rate comes to an end, you have three options:
1. You can look at sticking with the same lender with a product transfer
2. You can remortgage to another lender
3. You can do nothing and stay on the lender’s Standard Variable rate (SVR).
Rates are still going up, which is why you’re seeing such an increase in the deal you’re being offered.
Generally speaking, a remortgage to a new lender will give you a better deal than a product transfer.
The likelihood is that even though rates are currently high compared to the last few years, fixing in again on a product transfer or completing a remortgage will probably be cheaper than letting your mortgage run on the lender’s SVR.
Like car insurance, I would shop around (or get a broker to shop around for you) to ensure you’re getting the best available deal.
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Question
How much deposit will I need for this house?
My partner and I have decided it’s time to start saving for our first home. We don’t have much money put aside at the moment so we are looking at how to start saving.
We have seen some houses we like in a new build estate near us in Swindon. The kind of property we would like is well over £200,000 at the moment! How much deposit will we need?
We earn a joint salary of £65k and our credit ratings are good. We have no dependents – unless you count the cockerpoo!
Answer
Some lenders require a deposit for a residential property to be as low as just 5%, so for this property you would only need to save a c£10,000 deposit.
Of course, the more deposit you put down, the better the interest rate you’re likely to secure.
But with a good credit rating, you should be able to secure 95% loan to value (LTV) mortgage with a 5% deposit. Good luck!
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