MORTGAGE LENDER FAQ

As a guide, lending up to 3 times gross annual salary will normally be considered. Where there are two borrowers who are earning  both incomes will be taken into account and the loan will be up to 3 times the higher income plus one times the lower or 2.5 times their joint incomes.

Where the main income exceeds £22,000, or joint incomes £38,000, and a loan of no more than 70% of the purchase price or value is required, it may be up to 3.5 times a single income or 3.5 times the first and one times the second, or 2.75 times joint incomes.

Up to 50% of regular overtime, bonus, or commission may be used when calculating the maximum loan, provided this does not exceed 20% of total earnings.

You should be in permanent employment, or be self employed with a minimum of three years trading history. Some forms of contracted employment may also be considered.

Please note that  the term of a mortgage and your outgoings will be taken into account together with the appropriate affordability measures when assessing how much should be lent which may limit the loan within the income multiples described.

What methods of repayment are available?
How can I repay my mortgage and what requirements or advantages do the methods have?

Here are two ways of repaying your mortgage:

Repayment.

With a capital repayment mortgage, your monthly mortgage payment will include an element of capital so that, month by month, the amount you owe is gradually reduced. By the end of the mortgage term the balance is zero.

Interest Only.

Each month your payment consists of interest only so the amount you owe remains constant throughout the term. Thus, it is vitally important that you make arrangements to ensure that you can pay off the mortgage at the end of the term. To do this, many people invest in an endowment policy or ISA contract which are designed to provide a lump sum at the end of the term to pay off the mortgage.

If you are selecting an interest only mortgage you should give careful thought to consulting an independent financial advisor about providing for repayment of the loan. In any event, you should be aware that few investments guarantee a specific amount to be available at the end of the mortgage term. Also, there may be a serious reduction in the value of an investment if it is not held for the full term originally planned, along with other penalties for early surrender.

If you have an endowment policy, the Association of British Insurers and its members have agreed a code of practice to ensure formal reviews of endowment mortgage policies are carried out regularly. Under the ABI code insurers will tell you if a shortfall is likely to arise where the life policy was bought with the intention of paying off all or part of the mortgage. If you have any concerns or queries about your policy, please contact your financial advicer or life company as appropriate.

Part Interest and Part Repayment

It is possible for customers to divide their mortgage into two parts and manage one on a repayment basis and the other on an interest only basis.

Life Cover

You should consider making provision for repayment of the loan, whether interest only or repayment, during the term in the event of the death of any of the borrowers. This may be particularly important for a principal income earner, where there are dependents in the household.

What types of interest rates are available?
How do the interest rates vary with the products and how does this affect my repayments?

 Standard Variable Rate

The vast majority of mortgages in the UK are based on a 'variable rate' mechanism. This means lenders have the right to change the rate at their discretion. In practice rates tend to move in relation to funding costs and with regard to competition in the market. You should be provided with a table of historical rates upon request.

Occasionally variable rate products are offered whereby the interest rate is at an agreed margin above whatever may be the standard variable rate. Whilst the standard variable rate may vary, and with it the amount of interest customers pay, the margin remains constant.

Tracker Mortgages

From time to time mortgages are offered where the interest rate is linked to a market reference rate. In these circumstances the interest charged on your mortgage will be set at an agreed margin above the appropriate reference rate and reviewed as and when there are changes in that reference rate or in line with the terms and conditions of your specific mortgage.

Incentives for new borrowers

Whilst nearly all mortgages have the standard variable rate as their base, there are a number of different types of incentives that we offer from time to time to attract new customers:

Fixed Rates

The interest rate charged to a customer can be fixed at a particular level for a certain period, usually the first few years of the mortgage. After the fixed period, the rate charged usually reverts to a 'variable rate' or tracker.

Discounts

Another way of offering incentives to new customers is by way of a 'discount' off the variable rate otherwise charged. Whilst the rate remains variable, an amount of the interest which would normally be due is discounted and not charged to the customer for an agreed period, after which a variable rate will apply.

Cashbacks

An alternative to discounts and fixed rates which can control and reduce costs for a period of time, a "cashback" allows customers to take their incentives upfront. Typically an agreed amount will be paid after completion which can be used to cover the expenses involved in acquiring a new mortgage, or a new home, or indeed for anything else.
 

Can I swap the Product on my mortgage?

 For full details of our current range of products please consult your financial adviser. The decision on whether or not to agree to a particular request for change of mortgage is at the discretion of the loan company and an administration fee may be payable which we will let you have details of upon request.

Is my mortgage Portable?

You may, on moving home, wish to transfer the terms that apply to your existing mortgage on to your new mortgage. Doing this may allow you to avoid incurring a redemption charge that would otherwise be payable on a fixed, discounted, cashback or other incentivised mortgage. In general however, the new loan should be as much as the existing mortgage, and the new loan should complete simultaneously with the redemption of the existing mortgage. Any unexpired fixed or discounted period will need to be carried forward to the new loan along with the unexpired period of the redemption charge. As with all mortgages, the granting of a new loan is entirely at the company's discretion.

How is Interest Charged and Collected?
What methods of payment are acceptable, and how can I get more information?

Payments are only accepted by direct debit and are usually collected from your bank account towards the end of the month. Your loan balance upon which we charge interest is recalculated on a quarterly basis. As a result, you should benefit from any reduction in the capital balance of the mortgage every three months. Your mortgage offer will contain precise details about the arrangements that apply to your loan. You should read these carefully and ensure that you fully understand the financial implications.

What references are required?

In order to offer attractive interest rates to our borrowers we seek a number of references which help us to make a decision on each individual mortgage application.

Income
Confirmation of your income will normally be required. Please include independent written verification of earnings, for example your P60 and last three months payslips, when submitting the full application form.

Credit History
Upon receipt of the application a credit search will be undertaken immediately. This will enable confirmatiof your inclusion on the electoral roll and will disclose your credit history. Subject to a clear credit search, further references will be sought.

Employers
Your employers will be contacted requesting full details of your employment. A minimum 3 year record for all applicants is required so it may be necessary to write additionally to previous employers.

Lenders
A reference will be sought from your present lender (if applicable) to confirm the payment record on your existing mortgage. However if two most recent annual mortgage statements can be provided it may not be necessary to apply for a lenders reference.

Self Employed or Controlling Directors
For self-employed applicants, a minimum of the latest three years' business accounts plus your last three personal tax assessments will be required but different rules are available for contracted people such as computer consultants. They are considered subject to having a minimum of six months remaining on their existing contract and to be able to demonstrate continuity of past income.

Landlord
If you do not have a mortgage, a landlord's reference will be sought where applicable.

Bank
In addition to the above requirements, a reference may be sought from your bank in some cases.

Progress Tracking
You or your financial adviser will be fully informed of the progress of your application.
 

What types of property are acceptable?

Mortgage applications will be considered for houses and bungalows classed as traditional build (brick/stone with a slate roof) and for freehold houses and leasehold flats. Properties must be in Mainland England, Scotland or Wales.

In all cases a valuation will be undertaken by our surveyor to confirm whether or not the property is suitable for mortgage purposes.

If you are in any doubt, please contact us or your financial adviser to confirm whether or not a
particular property that you wish to mortgage is likely to be acceptable.
 

How can I protect my investment property and possessions?


Separated or combined buildings and contents insurance policies are available.

Whilst insuring both the property (up to the full rebuilding cost) and landlords' contents, some policies go further by guaranteeing rental income where the tenant falls behind, and provides mechanical breakdown insurance for central heating, plumbing and electrical systems.

These policies can protect your property and contents against specific causes of loss or damage such as theft, fire, flood, storm, burst pipes, subsidence, lightning, explosion, earthquake, collision, riot and vandalism. In addition you can be covered against accidental damage to the building and loss of rent receivable where such damage renders the property uninhabitable.

Please note that  you are required to ensure that the buildings are protected with an acceptable policy covering all major risks. Should you choose to arrange your own insurance, a fee may be charged.

What about protecting the mortgage payments?

Recent changes to benefit rules mean that income support for mortgage payments is no longer immediately available should a borrower be made redundant, or find themselves unable to work through sickness or accident. 'Payment Protection' insurance is available to cover against such contingencies. Depending on the level of cover chosen, payment protection insures mortgage payments for up to 12 months following involuntary unemployment (redundancy) accident or sickness.

Can I take a further advance?

If you require additional funds once your mortgage has completed, you may apply for a further advance. Normally your mortgage should been running for a minimum specified period before an application would be considered.

Financial Hardship:

A mortgage is usually the largest and most important financial commitment that you will have. However, a change in your personal circumstances may have adverse financial consequences. Therefore, if you encounter any difficulty in meeting your regular payments it is vital that you contact your lender as soon as you are aware that there may be a problem.

Thank you