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Once you have found your perfect mortgage product, you will begin preparing your mortgage application. This mortgage application is not a simple form that needs a signature, you will need to attach supporting documents to evidence your income and affordability for this mortgage. The reason behind this is that lenders need to know who they are lending to and whether that applicant can afford to take out a mortgage.
Your supporting documents will include your bank statements, payslips, P60, photo identification and proof of deposit. The mortgage lender will perform an audit to look over each of these documents to work out whether you are a reliable applicant that can afford to take out a mortgage and keep up to date with the monthly payments.
As a mortgage broker in Sunderland, we often get the question, “What do they look for during this audit?”. The answer to that is everything! They are trying to find anything that could stop you from getting a mortgage. One example of something that your lender may be looking out for is gambling transactions on your bank statements.
But why do mortgage lenders care if you gamble?
Let’s take a look at why lenders look for gambling transactions on your bank statements and what you can do to show the lender that you are a reliable applicant.
Mortgage lenders don’t worry too much over gambling transactions on your bank statements, they worry when there are lots of them. There is a huge difference between betting on the grand national once a year and the occasional football game to betting every day, week in, week out.
Mortgage lenders will always look at two things when noticing gambling transactions on your bank statements: how often you gamble and how much you are gambling. When you are preparing your mortgage application, if you are a frequent gambler and like to go big, you may find that lenders may be put off by your mortgage application.
No one can tell you how to spend your money or live your life, however, mortgage lenders have a duty to lend responsibly and adhere to mortgage regulations. Mortgage lenders need to be wary of who they are lending to and make sure that the applicant is reliable and responsible with their finances.
As a mortgage broker in Sunderland, we often ask our customers, would you want to lend a large amount of money to someone who frequently gambles away their money? Maybe you would to a friend or family member, but lenders don’t know you and won’t be willing to take any risks that could lead to your home being repossessed.
As mentioned in the previous section of the article, gambling is not illegal by any means, therefore, no one can stop you from doing it. On the other hand, large gambling transactions can have a negative impact on your ability to get a mortgage in Sunderland.
It is not impossible, however. Remember that it is down to the frequency of the transactions and the amount that is being gambled. If you gamble from time to time, you will likely find that these transactions will not have an effect on your chances, however, if you gamble all of the time, you may see that these transactions get brought up.
Even if you are a first time buyer in Sunderland with good credit, mortgage lenders will point out anything that could pose a threat to you not being able to afford a mortgage.
Your mortgage lender is trying to work out whether you are a reliable applicant or not. They want to know that you will be able to keep up to date with your monthly repayments. That being said, you may have guessed by now that they don’t just look for gambling statements on your bank statements, they look at a lot more!
You will have to supply at least three months’ bank statements with your mortgage application; mortgage lenders will be looking at every single incoming and outgoing over these months to take a look at what you are spending your money on. This will include any repayments that you currently owe such as paying off your credit card, your car loan etc.
If you have an overdraft, mortgage lenders will look at how often you are using it, how far you are going into it and why you are going into it. In a situation where you dip into your overdraft now and again, just when you need to, this will likely be okay with the mortgage lender. Whereas, if you were to be frequently dipping into your overdraft and have been at minus figures for a few months, lenders will likely start to doubt your ability to afford a mortgage.
There is always room for improvement when it comes to finances. As our mortgage advisors in Sunderland recommend, be smart and sensible.
In the months leading up to your mortgage application, you should be considering reviewing your bank statements and taking a look at them from a lender’s point of view. This could help you get an idea of where to start when it comes to making sure that you present yourself as a reliable and trustworthy applicant. Even if you are a first time buyer in Sunderland with good credit, we would still recommend doing this so that you get an idea of what your mortgage lender is going to be looking at.
Regarding gambling transactions on your bank statements, make sure that you gamble responsibly. The warning is there for both your financial and mental well-being.
As your mortgage broker in Sunderland, our job is to take all of the stress away from the mortgage process and give you the advice that you need.
During your free mortgage appointment with one of our mortgage advisors in Sunderland, we will go through your affordability and look through your bank statements. This will help you get an idea of what your mortgage lender will be looking for.
We want you to have the confidence that your bank statements look the best that they can do in front of the mortgage lender. Let us help you achieve this, get in touch with our team today and book a free mortgage appointment.
There are a wide variety of reasons why a homeowner may instead look at moving home in Sunderland. Here we will take a look at the most frequently found reasons that have been seen during our time as an expert mortgage broker in Sunderland.
One of the much bigger reasons that we see people looking to move home, is because they are now in need of more living space. This is a step that makes a lot of sense, as first time buyers in Sunderland will most likely have gone for a smaller house at first.
In the future, when circumstances are likely to change, it could be because they want a bigger place to live in. There are many reasons for this thinking, from wanting to start a family, to generally needing some more room in their home.
Rather than moving home in Sunderland, if you want to create more space, you could instead remortgage for home improvements. In doing so, you raise capital (money) to put towards the changes you would like to make, such as extensions on your property.
We tend to find that this is most popular with young and growing families, giving them the freedom to continue living within a home they have grown to love and appreciate over time. Common choices include loft conversions, extra bedrooms, home offices and home gyms, to name a few.
Remortgaging for home improvements is also a great way to potentially increase the value, handy for if you ever decide you want to sell your home. Get in touch for remortgage advice in Sunderland if this is something that you would like to achieve.
Another popular reason we hear of is customers perhaps looking to have a change of scenery, growing weary of what they have gotten used to. Once again, this is fairly common in homeowners who have previously had first time buyer mortgages in Sunderland.
The reason that this may be the case, is that they could have previously had a limited budget, settling for a property that was affordable at the time. Once they have come into more money in the future, it may be plausible that they could purchase the house they truly desire.
It’s more than just this, however, as family can become a reason for needing a change of location. Not everyone thinks of schools when they buy a house, though if you decide to have children, you may find yourself thinking about which schools are best and looking at catchment areas.
Speaking of family, we also hear every now and again from home movers, who give their main reason for moving as wanting to be closer to family and friends. These types of scenarios become more frequent when a couple has started a family or has suffered a significant loss.
In regard to starting a family, if both parents are working full time, we find it likely that they will move closer to family for help with childcare. This usually is a much more preferred choice, as planning childcare around your life and finances can be time-consuming and costly.
If you are looking at moving home in Sunderland, we would recommend speaking to an expert mortgage broker in Sunderland today. Our team of mortgage advisors here at Sunderlandmoneyman will be able to run through the entire home-moving process with you, including any costs you’ll have.
We have the ability to search through 1000s of mortgage deals, finding you the most appropriate one for your financial and personal situation. Book your free mortgage appointment today and we will get started on all the ways we can possibly help you.
If instead of moving home in Sunderland you feel more inclined to remortgage for home improvements, this is something we often help customers with. Book your free remortgage review today and we’ll help you take the next step in your chapter as a homeowner.
Whether you are a first time buyer in Sunderland actively viewing properties or a home mover in Sunderland with your house on the market, you may have noticed that some of the larger estate agents and builders are very keen for you to use their in-house mortgage advisor and conveyancing services.
Being part of a stand-alone Mortgage Broker in Sunderland, we receive lots of feedback as to what sales tactics can be used, examples of this are;
Remember, when negotiating a purchase price, do you really want the seller of your property to have access to your personal financial situation and potentially knowing your maximum borrowing?
Most homeowners who are looking at moving home in Sunderland will need to sell their current property to proceed The equity (the amount at which you sell for without your current mortgage balance added on) will contribute towards a security deposit for the next purchase. You can top this up from savings or a family gift if you wish.
There is always a “magic number”, the minimum that a seller (vendor) is willing to accept to agree on a sale. However, when a home is listed for sale, it is essential to market and presents it in the right way. It can make a big difference in terms of how quickly it sells.
The asking price should portray that of its surrounding properties. Be reasonable, and some estate agents may suggest the highest possible price for the sake of it. With everyone now able to advertise on Zoopla and Rightmove, it’s a good idea to make the dive into the market and get as many viewings as possible, within the first two weeks.
If interest in your property seems to below, there’s a chance it was overvalued.
Before putting their current property on the market, people often like to research and visit other properties to identify which one might become their new home. If this is you and you need a quick sale, here are some tips to give yourself the best possible chance of selling it.
The first tip can be challenging to imagine, but the first thing you need to do is inspect your own house as if you were viewing it for the first time yourself. If it has excellent “kerbside appeal”, (i.e. it looks beautiful as you drive up to it) that will be a great first impression.
Something simple like a freshly jet-washed drive and neatly cut front lawn indicates that you are the kind of person that looks after their home. It would help if you aimed for that feel-good factor, it’s more than likely that the potential buyer will think the inside is expected to be as nice as the outside.
If you have any kids, it’s best to put away any bikes or loose toys in the front garden. Make sure your front door looks appealing (clean), and the doorbell works. Spend a little bit of cash getting a nice new doormat or welcome sign.
Go around each room and caution around rooms like kitchen or bathrooms, pay much attention, ensuring that they are spotless, and have a high hygiene level. Cupboards and wardrobes should be neatly stacked and free of clutter.
One of the critical things is to ensure your home is immaculately clean. Wash your curtains, blinds, wipe down your walls, and clean all your floors and windows. All repairs should be up to date too and clean bedding on the beds. Windows should be sparkling clean inside and out. New carpets in smaller rooms can be an inexpensive way of creating the impression that your house is welcoming and has been well cared for.
If you are a smoker, it’s an excellent tip to air the rooms out before the potential buyer arrives. Ensure there are no bad smells lingering, buyers can be put off bad odours from pets or cigarettes.
You will want your buyer to feel at home and relaxed as they view your property so try and avoid having pets or young children getting in their way as they move around. That said, if it’s a family home you are selling, then just a couple of family pictures and paintings can help as it will them envisage bringing up their family there too.
A buyer likes to walk on their own, if there are two of them allow them some breathing space to talk amongst themselves but be ready to answer their questions honestly.
Your bathroom should be presented spotless declutter any items like cosmetics and co-ordinate your towels and flannels, maybe consider doing a small investment look at ways you could create a fresh feel with some minor renovations. Make the floor space spotless.
A well-lit house is more appealing to potential buyers, this is achieved through making sure lights brighten up rooms, and all curtains and blinds are open. Plants often block out light so place these strategically throughout the house.
White walls look fresh and clean, and it also has the added benefit for the buyer of being extremely easy to work whenever they redecorate. It helps to buyer avoid scraping previous wallpaper off the walls.
Interior doors should all be freshly painted. Polish the brass fixtures and ensure all entries open and close nicely, no broken locks, etc.
Buyers are looking at making the most of space, it’s recommended storing objects into cupboards and has clean and tidy worktops.
In terms of your garden, the viewer may want to look inside your shed so don’t just throw everything in there, and it needs to look neat and tidy.
Please pay attention to your fences, make sure all the slats are in place, and it’s nicely painted or creosoted. Tidy up any visible items such as outdoor barbecues. People do still like to see a colourful garden so ensure it’s beautifully turned out. Flowering plants are lovely to see if the season is conducive.
Make your garage space more efficient, therefore providing more space for a vehicle.
People buy from people, so it’s always better if you do the viewings yourself as the seller. You will no doubt feel very passionate about your home and can show it off in its best light, albeit pointing out any small issues that you have encountered over the years (“We leaked, we fixed it”) to present a balanced view.
Estate Agents do want to earn their commission, but they will have a certain amount of knowledge on your home compared to you.
Finally, remember the emotions attached to buying a home. If you have a family, it helps to accentuate it has been a happy home for you, and this is sure to rub off on the viewers if they are thinking of raising a family also.
It is very sad when you and your partner decide to call it a day. When you have made joint financial commitments unwinding that side of things does not always run as smoothly as you’d hope.
Here are three main questions that we get asked on Divorce and Mortgage Advice on a regular basis:
Obviously, when you buy a home together you don’t do so with the intention of splitting up in the future but it is a massive financial commitment and making changes to your mortgage further on down the line is not always easy.
When there are children involved, quite often it’s the mum that stays in the property but regardless of gender, there may come a time that whoever is “in situ” wants to take over the mortgage in their own right. This is not always straightforward!
The fact that you may be able to demonstrate you have been paying the mortgage without any help from your ex, does not change the fact that at the point of application you bought the property jointly or, in other words, in the event of mortgage arrears there are 2 people the Lender is allowed to pursue.
Before removing a party from a mortgage the Lender has to be sure that the remaining applicant has the means to be able to afford the mortgage on their own going forward and this means a full assessment of income regardless of whether you have kept up mortgage payments in the past or not.
Quite often in these situations, there is someone who can step in to replace the ex-partner such as a family member or indeed your new partner.
Of course, there are lots of Mortgage Lenders out there all with slightly different ways of assessing your ability to afford a mortgage so don’t give up hope if your existing Lender says no, we still may be able to help you.
In the event of a separation or divorce, you need to understand that even if you vacate the family home you remain responsible for any joint financial commitments you took out with your ex-partner. This is the case even if you make an agreement with your ex that they will make all the payments.
The mortgage payment for your old property will be taken into consideration if you want to buy a new property in the future so it’s essential in these instances that you take mortgage advice in Sunderland before making an offer. Some Lenders are more generous as regards how much they’ll lend you than others and I’ll take this into account when recommending the most suitable lender to apply for a mortgage agreement in principle with.
The answer to this one is YES, you can! Lenders and their credit scoring systems take many factors into account before they offer you a mortgage. On-going financial commitments are just one of these. The mortgage payment you hold with your ex will need to be inputted, alongside any other credit commitments you may have.
Once we’ve keyed all this in for you our system will confirm the maximum amount you are able to borrow. So you know your budget at outset and how much deposit you will need to put down.
It can be difficult to move on from your previous joint financial commitments. Just remember it’s all about risk as far as Lenders are concerned. They want to avoid repossession situations at all costs.
We offer a whole host of services, including remortgage advice in Sunderland and moving home mortgages. The best thing to do is to get in touch with us with your individual needs and we can advise you on the next steps.
Mortgage Protection Insurance serves as a comprehensive shield, encompassing various types of coverage, designed to safeguard borrowers from potential events that may impact their ability to manage mortgage payments.
By being linked to a mortgage, this insurance offers borrowers a reassuring sense of security and peace of mind.
In the realm of life cover, two main types prevail: “Whole of Life” and “Term Assurance.” “Whole of Life” provides a guaranteed lump sum pay-out upon the policyholder’s death, regardless of when it occurs.
On the other hand, “Term Assurance” pays out only if the policyholder passes away within a specified term of years. Within “Term Assurance,” various options exist, such as “level,” “increasing,” or “convertible.”
Presently, “Decreasing Term Assurance” is commonly utilised as mortgage protection. When connected to a repayment mortgage, the sum assured decreases in tandem with the mortgage balance over time.
Due to the reduced risk to the insurer as the policy progresses, the premiums are generally more affordable than other life cover options if the policyholder were to die within the specified term.
The sum assured in “Decreasing Term Assurance” should ideally align with the outstanding mortgage balance. By ensuring this, the policyholder’s dependents are safeguarded from inheriting a debt that they might find challenging to manage on their own.
Many individuals consider life cover as a means of providing for their loved ones after they’re gone, as it offers no personal benefit during their lifetime. Modern medical advancements have enabled many people in Sunderland to survive conditions that were once fatal.
Despite this, undergoing treatment and recovery from a critical illness may still impact one’s ability to meet financial obligations. As a response to this concern, Critical Illness cover has emerged in Sunderland.
Similar to Life Assurance, Critical Illness cover is taken for a specific term, and it offers different options such as level or increase. The policy is designed to pay out a lump sum and is usually taken on a decreasing term basis, in line with the reduction of the mortgage balance.
The crucial aspect is that the benefit is paid if the policyholder falls victim to one of several specified critical illnesses. Upon diagnosis of a covered critical illness, the policy pays out regardless of the long-term prognosis of the condition.
The specific illnesses covered may vary depending on the insurance provider, but typically include conditions such as cancer, heart attack, and stroke, among others. The pay-out is contingent on meeting the required severity level of the particular illness suffered.
Life insurance companies operate based on pre-designated clinical definitions set by the Association of British Insurers. This means that they cannot arbitrarily decide that a person is not ill enough to receive the benefits.
If successful treatment leads to recovery from the illness, the policyholder can benefit by having their mortgage taken care of. In many cases, insurance companies offer a combined policy that includes both Life and Critical Illness cover.
This policy typically pays out on the “first event,” meaning whichever occurs first, either death or a severe illness. The policy can also be written on a single or joint life basis, depending on the specific needs and preferences of the individuals involved.
Income Protection cover differs from Life and Critical Illness cover in that it provides a monthly pay-out rather than a lump sum. This type of policy is designed to replace your wages in the event that you become unable to work in Sunderland due to illness or injury.
Unlike Critical Illness cover, Income Protection does not have specific restrictions on the illnesses or injuries covered; the main consideration is whether they render you unfit to work. There are limitations on the amount of coverage and the time frame for benefit payments.
Typically, you can cover approximately 55%-65% of your income, and benefits will start after a “deferred period,” which is usually equivalent to the length of time you would receive sick pay from your employer.
The benefits will continue to be paid as long as you remain unable to work or until the policy term ends, whichever comes first.
Some policies may offer a “budget” option where benefits are paid for a shorter period, usually between 2-5 years, to encourage you to return to work or make alternative arrangements if the incapacity is prolonged.
Like Life and Critical Illness Cover, Income Protection policies are underwritten based on your health and lifestyle at the time of application. These policies are typically written on a single life basis.
Similar to Income Protection, these policies provide coverage in the event of unemployment. The benefits are typically linked to your mortgage and other essential costs, rather than being based solely on your wages. In case of a successful claim, the benefits are usually paid one month “in arrears.”
One distinctive feature of these policies is that they are underwritten at the time of a claim, not at the beginning. This may lead to some confusion or delays in determining whether the claim will be met.
These policies serve as a valuable safety net if you experience long-term unemployment. It’s essential to review the details of how and when any unemployment benefits will be paid out. It’s possible that you may return to work before becoming eligible for any monetary support.
One of the less common types of “mortgage protection” policies is the Family Income Benefit policy. However, these plans can hold significant value, especially for families with young children in Sunderland. They typically cover both Life and Critical Illness and are underwritten during the application process.
Unlike traditional policies that pay out a lump sum, Family Income Benefit plans provide an annual or monthly income for the remaining term of the policy. This feature allows it to replace the income of the primary breadwinner for several years, offering substantial financial support.
The type of policy, whether level or index-linked, will depend on the individual client’s circumstances and preferences. Level policies maintain a constant pay-out throughout the term, while index-linked policies are designed to adjust with inflation, ensuring the coverage keeps pace with rising living costs.
Having adequate insurance coverage is essential for everyone, whether you’re a first time buyer in Sunderland, a buy to let landlord, or planning to remortgage in Sunderland. Exploring various insurance options can bring significant benefits.
It’s crucial to understand that having multiple types of Mortgage Protection Insurance is not an “either/or” decision. In reality, you can have more than one policy to ensure comprehensive protection.
The key factor to consider is affordability, as covering every type of Mortgage Protection Insurance may not always be feasible. As experienced mortgage advisors in Sunderland, our priority is to customise the insurance solutions that best suit your family’s needs and budget.
During a consultation, we will carefully assess your requirements and recommend the most suitable combination of coverages. In cases where you opt for multiple policies, we can often consolidate them with a single provider.
This approach helps you save on additional policy administration charges associated with individual policies, making the process more streamlined and cost-effective.
If you are a homeowner with a mortgage from a high street lender, you’ll find that you will probably have the option to port your mortgage if necessary. Porting your mortgage occurs when you are looking to move home part-way through a fixed-rate deal.
Rather than paying the early repayment charge (ERC), the lender may actually be willing to let you pick up what is left of your current mortgage and move it onto a new property. This of course will depend on the value of where you’re looking to move and is subject to the lender’s discretion.
Portable mortgages work out really well for homeowners who are only part way into their fixed-rate mortgage term but already want to move home. Normally to leave this mortgage early, you would be penalised with an Early Repayment Charge.
If instead you can find another property of similar value and inquire with your lender, there is a good chance they’ll agree to let you port your mortgage to that property. This will mean you avoid the ERC.
You’ll find that there are a lot of mortgages out there that customers are able to port, though it’s important to note that this won’t apply to all of them.
There are some specialist lenders that don’t allow their customers to do this, for example. By contacting your mortgage lender, you’ll be able to determine whether or not this is an option for you.
Though it may be a possible option for some homeowners, in a lot of cases we find that they instead choose to not do this. Some may ride out their term and look to remortgage at the end to release equity for making improvements to their home.
In other cases, homeowners may want to do this but are restricted from doing so, due to being unable to afford to borrow an additional amount if required. Any further advance (second charge) will be at a different rate to the current mortgage deal that you have.
Depending on the rates on offer from your lender for this, it may be more financially viable for you to take the Early Repayment Charge and cut your mortgage short, rather than staying put.
A sub-account on your mortgage will be created when you look to port your mortgage, with the additional funds being taken out on a different deal than your current mortgage is on.
It’s important to remember that although you have a only one mortgage and one direct debit in your name, each will have different rates applied to them.
As time goes on, having a sub-account can be a little problematic. This is because eventually you will reach a point where these products will overlap one another.
In order to get these aligned once again, one of your sub-accounts may have to fall onto the lender’s standard variable rate for some time.
For more information, please feel free to get in touch and speak with a dedicated mortgage advisor in Sunderland. We would love to get started on the next step in your mortgage journey.
Whether you are moving house in Sunderland, need help with a buy to let mortgage or are self-employed and require mortgage advice, we’d love to help you.
We have availability every day of the week, so book yourself a free appointment for when best suits you and we’ll see how we can help.
For first time buyers in Sunderland hurdles in mortgage, acquisition is something often faced by lots of customers, and they are not impossible to deal with either. Here is a list of 5 common problems people may encounter when looking to obtain a mortgage in Sunderland.
Childcare fees are not a reason per se for a mortgage to be turned down, rather they tend to reduce the amount a mortgage can offer.
One thing that needs to be noticed is that when parents or guardians return to work and pay for childcare, they have to monthly dedicate hundreds of pounds. Lenders take them as a liability similar to car loans.
If childcare fees are not to be paid, and still the income is low, the guardian or parents might still not get as much amount as other applicants. However, this benefits by being considered as tax credits.
If you seek mortgage advice in Sunderland, you will come to know that such lenders exist who don’t count childcare fees as outgoing funds, resulting in higher chances of mortgage acquisition.
If things don’t work out in a relationship and you decide to go for separation or divorce, things tend to get tough when it comes to your monthly mortgage repayments.
Normally we get these three questions when people seek mortgage advice in Sunderland:
The answer to all of the above can be yes, but you will need expert Mortgage Advice in Sunderland. If you end up receiving maintenance, this can sometimes get used as part of the assessable income for a mortgage.
You would be happy to know that almost all types of benefit incomes are considered as incomes and include pension or eligibility for pension, disability benefits, working tax credits, and child tax credit.
To take advantage of such opportunities, all you need is to seek out mortgage advice in Sunderland and you will be good to go.
This one comes up a lot, but it is usually easy enough. Some Lenders need you to have been in work continuously for a certain period, but others don’t. You can even get a mortgage if this is your first job. If you are due to start a new career soon, then you may be able to get a mortgage if you have a signed contract and job offer letter.
Gaps in employment can be a problem with some Lenders. Probationary periods tend to be ok, in any case.
Anit-Money Laundering precautions are pretty strict these days. All Lenders will need you to evidence your deposit, and you will get asked to prove where the money came from. Your Solicitor and the Estate Agent you are buying from may ask you for this too.
Cash is a big no-no. Any significant cash deposits into your Bank will question, and your application may get rejected.
It is possible, in fact, regular, for some or all of the deposit to come from a gift. The person gifting you the money will need to confirm in writing that it is a gift, not a loan.
All the content provided above is for reference purposes only, and does not constitute mortgage advice.
When you begin the process of looking for a mortgage in Sunderland, you will soon realise that there are a wide variety of different options available. By enquiring for expert mortgage advice in Sunderland, we’ll help you to determine which one is right for you.
Below you will see a list of the most popular types of mortgages available on the market. If you have any questions regarding the mortgage options below, do not hesitate to contact our fantastic team of mortgage advisors in Sunderland.
A fixed-rate mortgage means that your mortgage payments are going to remain consistent for a particular duration. You are able to choose how long you fix your payments for, with this typically being around 2-5 years.
This means that no matter what happens with inflation, interest rates, or the economy, you know that your mortgage payment, which will most likely be your biggest outgoing, will not change.
When you have a tracker mortgage, this means that your interest rate will follow alongside the Bank of England’s base rate. In this situation, the mortgage lender that you are with will not be setting the rate themselves.
You will be paying at a percentage above the Bank of England base rate. For example, if the base rate is 1% and you are tracking at 1% above base rate, that means you will be paying a rate of 2%.
Home buyers who are looking to take out a repayment mortgage will have a combined amount of capital and interest to pay each month.
If you are able to maintain those monthly mortgage payments, he mortgage balance is guaranteed to get paid off at the end, with you owning the property outright.
A repayment mortgage is generally considered to be the most risk-free way to pay your capital back to your mortgage lender. Early on it will mainly be the interest that you are paying and your balance will reduce very slowly, especially for homeowners with say a 25+ year term.
This will change over time and in the last ten years or so of your mortgage, your balance will be reducing at a much quicker rate, as you will be paying back more capital than interest.
While you will find that a lot of buy to let mortgages in Sunderland get set up on an interest-only basis, it is much difficult for a residential home buyer to take out an interest only mortgage on their home.
Typically, you will find that it is much less likely for a mortgage lender to offer interest only residential products to customers, though there are a selection of circumstances where this type of mortgage may still be applicable.
These tend to include downsizing when you are older or have other investments that you will use to pay the capital back. Mortgage lenders can be quite strict when it comes to offering these products now, and the loan to values are a lot lower than they used to be.
With an offset mortgage, your mortgage lender will go ahead and set you up a savings account that will run alongside your mortgage account, to help you offset the balance and reduce the interest paid overall.
For example, let us say you have a mortgage balance of £100,000 and £20,000 is deposited into your savings account, you only pay interest on the difference, which in this case would be £80,000.
It is for this reason that an offset mortgage could be a truly efficient way of managing your money, especially if you are a higher rate taxpayer.
If you like the sound of any of the mortgage options that have been mentioned above, have any other questions relating the mortgage process or would like to get the ball rolling on your mortgage journey, please do get in touch.
In booking your free mortgage appointment online, you’ll benefit from speaking to a trusted and qualified mortgage advisor in Sunderland, who will look to guide you through the process as best they can, finding the most suitable mortgage product to fit your circumstances.
With any mortgage that you take out, you will be paying a combination of capital (the balance) and the interest (at a percentage of the remaining balance). You may actually be able to reduce the amount of interest you pay per month, by taking out an offset mortgage in Sunderland.
When a mortgage applicant takes out an offset mortgage in Sunderland, their mortgage lender will open a savings account for them, in their name, to run alongside their mortgage term. This savings account will not pay back your mortgage balance, but instead will lower the amount of interest that you pay.
So if we were to say, for example, that you had a £100,000 mortgage to pay off and put £20,000 into your savings account, you’d still have that £100,000 mortgage to pay per month, but you only pay interest on £80,000.
The amount of interest that you will have to pay is generally calculated at a percentage of your mortgage balance, which is what increases the overall cost. In short, the more interest you offset into your savings account, the less that you have to pay back on interest overall.
This of course, can save you a lot of money.
As mentioned above, the money that you deposit into your savings account will offset against the interest, reducing the amount that you pay overall. Unlike a standard savings account, you will not be paying tax on your savings, which can be beneficial for higher rate taxpayers.
A possible downside to this type of mortgage, is that your savings will not see any growth either. Interest will not be earned on any of the savings that are linked to your offset mortgage in Sunderland.
Even with this in mind, a potential offset mortgage applicant may not be deterred, especially with the potential for savings by offsetting the interest against the mortgage balance. Additionally, the flexibility of the account is another positive.
Using the aforementioned example of a £100,000 mortgage and £20,000 in savings, if you for any reason needed to dip into your savings, you have the freedom to do so. It’s important to remember though, that you would be paying interest on a higher balance amount.
So whilst with the savings in you would be paying interest on £80,000, if you drew out £10,000 to use, you would be paying interest on £90,000 again until you deposited further funds back into your savings account.
You will still have the responsibility of maintaining your monthly mortgage repayments, you would just have less interest to pay per month.
If you managed to offset our entire balance towards the end of your term (maybe through a combination of work bonuses and an inheritance helping you to achieve this), you would still be responsible for the repayment side of things, until the end of your mortgage term.
As mentioned earlier on, your monthly mortgage payments will be a combination of interest and capital. Whilst offsetting your whole mortgage balance would effectively reduce your interest rate to nought, the capital will still remain and require payment.
Depending on your mortgage lender, you may be able to repay your mortgage by a specific additional amount each calendar year. As a general rule of thumb, you can repay up to 10% per year, though you should always ask your mortgage lender prior to doing this.
Overpaying by too much per year can result in you owing an early repayment charge to the mortgage lender.
Whilst there may be a limit on the amount you are able to overpay on the mortgage balance, you are free to deposit as much funds as you would like to into your savings, whenever you see fit.
There is a lot to consider when dealing with an offset mortgage, as to whether or not it is the most suitable mortgage option for you. This can be quite a difficult decision, especially if you are applying for a first time buyer mortgage in Sunderland.
Really, it’s all about weighing up the positives and negatives. As said previously, this will be beneficial to higher rate taxpayers because they can deposit savings tax-free. Again, they are also very flexible, allowing you to deposit and withdraw funds at any time.
Another positive, especially for a first time buyer in Sunderland, is that someone else may have the option of offsetting against your mortgage. This means a family member could help you lower your interest rates, though this varies from lender to lender.
On the other hand, offset mortgages in Sunderland usually have higher interest rates than other mortgage deals that could be available to you. You are more or less paying a premium for a flexible mortgage type with the ability to offset against the interest.
Additionally, as touched upon above, you won’t be earning any interest on those savings as you would with a regular savings account. Furthermore, whilst you could offset against the interest if you come into more money, you could also just overpay your mortgage to reduce the balance.
There are many different reasons as to why it could be a good or bad idea for a home buyer. At the very least, you need to pay in a good amount into your savings account for it to be worthwhile, especially when it could cost a good amount to set up in the first place.
Book your free mortgage appointment and talk to a trusted mortgage broker in Sunderland today, where you will benefit from expert mortgage advice in Sunderland on the topic of offset mortgages and how they could work alongside your mortgage journey.
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Sunderlandmoneyman.com & Sunderlandmoneyman are trading styles of UK Moneyman Limited, which is authorised and regulated by the Financial Conduct Authority.
UK Moneyman Limited is Registered in England, No. 6789312 | Registered Address: 10 Consort Court, Hull, HU9 1PU.
Authorised and Regulated by the Financial Conduct Authority.
We are entered on the Financial Services Register No. 627742 at www.register.fca.org.uk
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