Pre-house move planning – PART 2

house-move-part-2

 

Pre-house move planning – PART 2

In our first article in this series, we highlighted a few questions you should consider asking your seller… just to make life a little easier once you’re in your new house. This time we’re focusing on the preamble to the dreaded ‘P’ word… Packing. It has to be said, a little pre-packing planning goes a long way.

Top Ten Pre-Pack Planning Tips

Once you’ve poured a glass, cleared your mind of day-to-day concerns, and decided to think about packing, that’s the time to grab a pen and paper and start making the next list. Get the pre-packing planning just half right, and you’ll make the whole process A LOT smoother on the big day. So, what should you be thinking about? Here are some thoughts…

  1. Declutter first – seriously. Yes, it’s a daunting job, but remind yourself that the more you declutter now, the less you’ll have to pack. Imagine how much lighter you’ll feel if you can ditch a quarter of what you currently have. It’s so worth it.
  2. Buy packing boxes in a variety of sizes – And when you do pack, don’t use the big ones for books!
  3. Also buy bubble wrap, strong tape, small bags, marker pens and packing paper (newspaper does an excellent job too) – And buy a bit more of each than you think you’ll need. When you’re in the packing groove, you don’t want anything to break the flow.
  4. Check your contents insurance will cover you for loss and breakages whilst you’re on the move – You can tell your insurance company your new address at the same time. Oooh, it’s so nice to tick two boxes at a time, eh?
  5. Pack hazardous and corrosive materials separately – No explanation needed.
  6. Pack an Essentials Box for your first day/night – Think of it as a weekend bag for a house. This will include things like a kettle, coffee, tea etc. Plus plates, cutlery, cleaning cloths and washing up liquid. And don’t forget to pack a spare LOO ROLL!
  7. Pack an overnight bag for everyone else too – You know, washing kit, towels, PJs, fresh clothes etc. Even a hair dryer, if that is an essential.
  8. Consider adding a tool kit, first aid kit, torch and rubbish bags in your essentials box – Or at least make them part of an Essentials Box B.
  9. Make sure your Essentials Box(es) and overnight bag(s) are easily accessible – In fact, we’d recommend you transport them in your own car, rather than the removal van.
  10. Never lose sight of the fact that this is all in aid of something great – Because believe us, at times you’ll lose the will to live. Nothing’s forever, as they say. Hold onto that thought.

Hopefully the above has given you a few ideas, perhaps even prompted you to think about things you hadn’t yet thought about. And, as we said before, if you have any top tips yourselves, please do share them with us. Part 3 – Top Ten Packing-Beware Tips – coming next!

How to Boost Your Chances of Getting a Mortgage as a First Time Buyer…

As we have said in another article in this series – How much can I borrow? – getting approval for your mortgage isn’t just about how much you earn; lenders now also focus on affordability, how good your credit score is, and how clear credit history is too.

So, to improve your chances of being accepted for a mortgage, here are a few more things to think about…

Things to think about to improve your credit score…

Electoral roll – make sure you’re registered! The electoral roll is one of the first places a lender will check to validate your residency and identity.

Check your credit history – you can get copies of your credit file from the credit reference agencies. The agencies you need to contact are: Equifax, Experian and/or Callcredit. Check My File provide all of these three reports in one. Once you get sight of your file, check there aren’t any mistakes in the data – it does happen!

Check your current address is showing for all your accounts listed – this is something that is easily missed but it can cause confusion and delay if the address on your file doesn’t tally with the address you’ve given on your application form.

Break from past relationships – if your credit history is shared via an address with an ex-partner, write to the credit reference agencies to get this delinked. If that partner has a bad credit history, it will tar you too…

Rebuild your credit score – admittedly this takes time, but there’s no time like the present to get started again. Just from now on – make sure you pay everything on time!

Get the timing right – applications for other accounts like credit cards etc. stay on your file for a year. You may have to wait out that time for some of these to drop off before you can apply for a mortgage. Too many applications are frowned upon by lenders.

Don’t miss a payment or make a late payment – if you’re worried about slipping up with a credit card payment, perhaps set up a direct debit to ensure the minimum amount is paid every month. That way, you’ll keep your credit history clean.

Keep other applications to a minimum – we’ve already mentioned credit card applications above, but other types of account register too, like mobile phones and car insurance! Keep these down to a minimum.

Try not to withdraw cash on a credit card – this can be viewed as a desperate measure because it’s a very expensive way of getting hold of cash.

Never apply straight after rejection – basically, a rejected application leaves a footprint on your file, even if the rejection was due to an error on your file. So, check your credit history first before making any applications, and save yourself the worry.

Stay out of your overdraft – a lender will be able to see if you’re using your overdraft all the time. If you are, it looks as though you’re living on the edge of your affordability the whole time, and that’s not good.

Avoid payday loans – for the same reason as above. Payday loans do not look good from a money management perspective to a lender.

Close unused cards – if you have lots of credit cards still open but never used… close them down. A lender may worry that you can borrow fairly significant sums in the future without needing approval, and that will cause concern.

Other articles in this series written for first time buyers…

So… what is ‘Help to Buy?’ And… what is ‘Shared Ownership’?

In another article in this series for first time buyers, we have set out the basic types of mortgage available. This includes information on repayment vs interest only mortgages, as well as details on variable and fixed mortgages.

However, there are schemes specifically in place for those who are either struggling to save up for a deposit, though they can afford the monthly payments of a mortgage. Or, can only afford to buy a share of a property.

So, what are these schemes?

What is ‘Help to Buy’?

Help to Buy was introduced by the government to help those who could afford the monthly payments of a mortgage, but just couldn’t save enough for a deposit. It’s effectively a mortgage guarantee scheme that provides insurance to lenders to cover the next 15% of the value of a home if you put down a 5% deposit. In effect, the lender is getting comfort that 20% of the value of the property you are buying is protected, rather than just the 5% of your deposit. It’s not about giving you more comfort, it’s about giving your lender more comfort.

With Help to Buy, you still need to be looking at mortgages for a 95% LTV (loan to value). And it’s worth noting that only certain types of property are available on the scheme too.

Help to Buy, therefore, isn’t about making a mortgage cheaper for a first time buyer, it’s about making a mortgage more available.

If you think that Help to Buy is something you’d like to understand better, it’s best to discuss it with your adviser.

What is ‘Shared Ownership?

As the name suggests, when you buy a home on ‘shared ownership’ you’re not buying it all, only a share of it. The remaining portion is usually owned by a housing association.

A typical shared ownership arrangement would see you owning – and thus taking out a mortgage for – between 25% to 75% of the property, with rent being paid on the rest.

Because shared ownership schemes are usually set up and run by housing associations, each association will have its own way of doing things. There is no one size fits all. However, generally, the rule of thumb is that if you earn too much, you won’t be eligible for a shared ownership scheme. And equally so, if you earn too little the outcome is the same.

It’s important to note that when you come to sell a property in shared ownership, the housing association is likely to want to have a say in who is buying it.

If you think Shared Ownership is something you’d like to investigate further, then mention it to your adviser.

Other articles in this series written for first time buyers…

What is the Process for Getting a Mortgage as a First Time Buyer?

Things are getting exciting now. You’ve found the perfect property. They’ve accepted your offer. It’s all systems go.

So what happens next? You speak to your adviser and get the ball rolling… that’s what!

What will my adviser do first of all?

Having ascertained what your plans are in the short, medium and perhaps even long term, your adviser will be in a good position to start moving you through the mortgage application process.

First off, that will mean gathering some initial supporting information from you. This will include:

  • Last 3 months bank statements
  • Last 3 months payslips
  • Most recent P60
  • Copy of your passport
  • Copy of your driving licence

 

Fact finding…

Their next step will be to sit down with you to complete a ‘fact find’. This will give both you and your adviser a useful picture of your circumstances. Now, be warned, this isn’t a five minute job. There are a lot of questions to go through, and it might feel as though your finances are being inspected under a microscope. However, putting in the detailed work now, will definitely pay off later when your mortgage application is submitted. Your adviser will have identified any weak areas and taken steps to mitigate them. And this will mean you’re hopefully one step closer to that all important – acceptance.

Search the market…

Having gathered a clear picture of your financial situation, an experienced adviser will already have a feel for which lender is best for you. However, they will still research the whole of the market before making their recommendation.

And once you’re happy with their recommendation… then it’s on to the next step.

Decision in Principle…

Your adviser will complete a Decision in Principle application for you. Once submitted, the chosen lender will complete their initial credit underwriting. Three possible decisions can come from this:

  • Accept – which means your adviser can move on to complete a full mortgage application.
  • Refer – which means that some initial data is outside of the lender’s normal lending criteria. However, your application may still be acceptable, it’s just that your case will be reviewed by an underwriter in more detail (which in turn will then lead to an accept or decline decision).
  • Decline – which means you have been turned down for a mortgage in this instance. Your adviser will speak to the lender to understand why, and will explain the reasons to you. Depending on what the issue is, it might be that your adviser will then undertake to do another DiP with another lender.

If, once this process has been completed, you have been accepted in principle, your adviser will look to proceed to a full application.

Moving to full application…

At this point, your adviser will need to know which solicitor you will be using. They will also gather any further information that the lender has requested from the DiP.

 

When armed with everything they need, they will then:

 

  • Complete the full mortgage application
  • Request that you pay any lender fees (eg. application/valuation fees etc.)
  • Forward all the supporting information requested by the lender

 

Valuation…

Things now start to get even more exciting because your lender will instruct a valuation to be carried out. This usually takes place within 10 working days of your application being submitted. If the valuation comes back and the lender is satisfied, they will review your file and hopefully issue their mortgage offer.

 

Mortgage offer…

This will normally be sent out within 10 working days of receipt of the valuation. It will be sent to you, your adviser and your solicitor. And it is at this point that your solicitor’s work begins in earnest. They will carry out the necessary searches and liaise with you and the lender to arrange a completion date.

 

Is that it?

Not quite, though your adviser will possibly take a bit more of back seat at this point. The majority of their work has been done. There is little else that they can do with regard to the actual mortgage application besides push the solicitors and lenders along if things start to drag on.

 

However, a good adviser will be mindful of other financial aspects that you may need to consider. These could include protection requirements as well as general insurance (buildings and contents).

 

How long from start to finish?

The general rule of thumb is that an adviser will aim to have an offer being issued to you within 4 to 6 weeks of making the full mortgage application. From this point solicitors should be able to conclude the process within another 4 to 6 weeks.

 

Other articles in this series written for first time buyers…

  • An introduction to getting a mortgage
  • Do I need an adviser?
  • How much can I borrow?
  • What types of mortgage are there?
  • How to boost your chances of getting a mortgage
  • What is ‘Shared Ownership’? What is ‘Help to Buy’?

What Types of Mortgage are Available to First Time Buyers?

Do I need to decide between an interest only mortgage and a repayment one?

You may well have heard terms like ‘interest only’ and ‘repayment mortgage’ bandied around, and are probably thinking that’s a good place to start. However, these days the most appropriate route -for just about every first time buyer – is a repayment mortgage. The reason for this is that there is a concern with an interest only mortgage that you’re not chipping away at the loan each time you make a monthly payment. You are only paying interest. Twenty five years down the line, when your mortgage policy expires, you will still owe all that you originally borrowed. That leaves a lender exposed for a long time. However, with a repayment mortgage, each time you make a monthly payment you are slowly paying back the amount you have borrowed, as well as interest. And that’s what lenders like.

As an aside, it’s worth noting that it’s actually much harder to get an interest only mortgage now even if you do want one. Many lenders have pulled out of offering them full stop. So on the whole, this article is focused on repayment mortgages.

What types of deal are out there?

Fixed rate

As the name suggests, a fixed rate mortgage is one where the interest is fixed for a set length of time. It doesn’t change. If rates go up, you pay the same amount regardless whilst the rate is fixed. If rates go down, however, you also still pay the same amount. If you think you may move house during the term of the fixed period, it’s worth checking that you can move the mortgage to another property. Plus it’s also worth checking what (if any) penalties you might have to pay.

At the end of the fixed rate period, most lenders will move you onto their standard variable rate unless you make alternative arrangements.

Variable rate

A variable rate mortgage is one where the rate can change. The rate variation can be prompted by different triggers and you will need to check with your adviser what the trigger mechanisms are for the product(s) you are looking at.

There are quite a few different types of variable mortgage, but the most common ones include:

  • Standard variable – where the lender charges their standard variable rate.
  • Tracker – where the rate tracks either an economic indicator or another rate – often The Bank of England’s base rate.
  • Discount rate – where a discount off the lender’s standard variable rate applies for a short time, often 2 or 3 years.

How flexible should a mortgage be?

There can also be additional flexible elements within a mortgage policy, so it’s a good idea to ask your adviser about these. However, to give you an idea, some examples are:

  • Can I overpay? – Some policies enable you to overpay without penalty. This can mean you manage to pay your mortgage off quicker than predicted. It’s important to note, however, that the timing of payments can make a difference to how much benefit you’ll get with respect to reducing your interest payments. It’s best, therefore, to discuss this in detail with your adviser.
  • Can I borrow back? – Some policies actually enable you to borrow back again if you’ve made overpayments.
  • Can I take payment holidays? – Some lenders will allow you to not pay for an agreed length of time. This isn’t something to do lightly and you should discuss this option with your adviser before considering it.
  • Can I offset my mortgage? – An offset mortgage keeps your mortgage and your savings in two different accounts. However, the savings portion can be used to offset what you pay each month in interest on your mortgage.

Are there other mortgage products available to first time buyers?

There are schemes available like ‘Shared Ownership’ and ‘Help to Buy’ that first time buyers can access. We’ve written a separate article on these, which can be found here.

Other articles in this series written for first time buyers…

As a First Time Buyer, How Much Can I Borrow?

Following on from our introduction to mortgages for first time buyers, one of the first questions we get asked is: How much can I borrow? There isn’t a straight forward answer to that, and here’s why…

How much can I borrow?

Before the recession, lenders typically calculated how much they would lend by applying a multiplier to the applicant’s salary. For example, if you were buying a house on your own, they might have typically been prepared to lend you four times your salary. If you were buying as a couple, they might have typically been prepared to lend you three times your joint salary. Those days of simple calculations, however, are over.

Now the key consideration is affordability. Whether you’re a first time buyer or not, the key questions are: Can you:

  1. a) Afford your monthly payments now?
  2. b) Continue to afford them if interest rates increase?

A far more detailed inventory of your income and outgoings, therefore, is now assessed. Once you’ve bought your food, paid your bills – including credit card spending and other loans – and covered the costs of running your car etc., how much is left every month? Once that’s been calculated, does the answer to the questions above stack up?

And there’s an additional aspect too… Don’t forget that how much a lender will allow you to borrow isn’t just about your ability to afford the payments. Your credit score and previous payment history on other loans is also taken into consideration. This can be where applications fail to get approval.

So it’s probably becoming clear now that it’s not possible to give you an easy answer to the question: How much can I borrow? It’s worth considering speaking to an adviser.

How much do I need to save for a deposit?

People groan at the thought of having to pay a deposit when buying a house. And yes, it does tend to be quite a substantial sum. However, it can serve to protect you in the future, so on balance it is a good thing.

The terminology that’s often used is ‘Loan to Value’. It’s unlikely that you’ll find a mortgage for anything more than 95% of the value of the property, and this would be referred to as an LTV of 95%. So, if you are going for an LTV of 95%, the minimum deposit you’ll need to have saved is 5% of the value of the house you want to buy. There is a good reason, however, to try to put down more than this…

You are far more likely to get a better rate the more deposit you put down. Going from only paying 5% to paying 10% deposit can make a huge difference to the rate you get, as well as the monthly payments you will have to make. If you can go even higher, the rates improve even more. Think of it like this:  The more deposit you pay… the less you borrow… the better rate you get… the less your monthly payments are… which means, overall, the cheaper your mortgage is.

Other articles in this series written for first time buyers…

 

I’m a First Time Buyer… Do I Need an Adviser?

If you’re reading this article, then you are probably the sort of person who likes to be informed before you make a decision. You may understandably, therefore, be wondering if you need an adviser at all for your mortgage. Notwithstanding the fact that you’re a first time buyer, and this is your first mortgage, you’re thinking you should be able to pull it all together yourself and not have to pay for the services of someone to do it for you. And that’s very possibly the case, but it’s worth being aware of what benefits you get if you go through an adviser.

An adviser affords you a level of protection

Any advisers providing advice on mortgages have to be qualified to do so. Other than the fact that this means they understand the complexities of the mortgage market, an adviser who is regulated by the FCA (Financial Conduct Authority) also has a duty of care to you. They have access to the whole of the market and, because of this duty of care, have to recommend a mortgage that is suitable to your circumstances. If they fail to do this, you are protected and have the right to complain and be compensated.

An adviser is on your side

Because advisers have access to the whole of the market, they really are looking for the best mortgage for you. They aren’t on the lender’s side, and their advice is unbiased. If one lender doesn’t offer the right sort of product for your circumstances, other lenders will. An adviser will seek those products out.

They have experience and knowledge – things that take time to build up

Submitting an application for a mortgage these days isn’t as simple as just filling in a form. There are a lot of hoops to jump through to prove that you can actually afford a mortgage, and it’s easy to make a mistake. With this in mind, it’s worth knowing that each lender has its own preferred criteria. An adviser understands what these are and can therefore save you a lot of time and heartache.

Other protection

An adviser is mindful that it’s worth borrowers being aware of other financial products available when they have a mortgage. Life insurance, for example, to ensure the mortgage is paid off in the event of the mortgagee’s death. And of course, there’s buildings and contents insurance too.

A good adviser, who has experience and knowledge, will also be able to provide you with advice on other types of protection too with respect to your mortgage arrangements. Examples would be:

  • Death cover
  • Critical illness
  • Long term illness
  • Payment protection

But how does an adviser make their money?

There are two ways an adviser can earn their crust:

  • By charging you a fee
  • By receiving a commission from the lender – for putting business their way

Either way, however, it’s important to note that your adviser has to provide you with a Key Facts document that details any fees or commissions they make.

In summary…

Only you can decide if the benefits of using an adviser are right for you. It’s true that they will either charge a fee or make a commission for their services. However, in return for that, as a first time buyer you are working with someone who not only has knowledge, experience and access to the whole of the market but is also helping you find the best mortgage for your circumstances.

Other articles in this series written for first time buyers…

Introduction to Mortgages for First Time Buyers

Buying your first home is an exciting but nerve-wracking time. There is a lot to take in and understand. So, bearing in mind how important it is to get things right, we thought that a series of articles specifically addressing the concerns and queries of first time buyers would be helpful. The topics that we cover in this series are:

What is a mortgage?

First things first, it’s worth remembering that a mortgage is, in essence, just a loan. What makes it slightly different to other loans that you may take out, though, is that it:

  • Usually runs for a longer  period – 25 years is a common mortgage term
  • Is secured against your property

What does that second point mean? Well, it means that in return for lending you money to buy the property, a lender protects themselves by putting a charge on it. This means that in the event you cannot, or simply stop, paying your monthly payments, they have the right to repossess the property, sell it, and recoup their money.

How does a mortgage work?

We’ll cover this in more detail over the next few articles, but in summary once a mortgage policy starts it is broken down into these components:

  • Deposit – This is the initial payment you pay and is not included in the capital amount you borrow.
  • Capital – This is the amount of money you borrow.
  • Interest – This is the amount your lender charges you for borrowing the capital until it is paid. Depending on the type of deal you choose, this may be charged at a variable, fixed or capped rate.

You then pay back the interest and capital to the lender, usually on a monthly basis, until the loan is paid off. The usual term is 25 years, but it can be shorter or longer depending on your requirements and circumstances.

What happens if I can’t pay my monthly payments?

It’s important to note that throughout the length of the mortgage policy, the loan is secured against the property you’ve bought. This means if you can’t afford to make your monthly payments, your lender will have the right to repossess your home and sell it to recover the amount you still owe. Plus, you need to be aware that if they sell your home for less than the outstanding amount, you still owe them the difference.

It is very important, therefore, to only borrow what you are sure you can afford to repay on a monthly basis. And it’s critical that you pick the right sort of mortgage from the start…

To find out more about mortgages for first time buyers, please see the other articles in this series.

Other articles in this series written for first time buyers…