Buying your first house can be pretty scary and quite daunting, especially if you are trying to navigate it all by yourself. At Veracity Financial Planning, our advisers will work with you and on your behalf to make the whole process as stress-free as possible.
Contact us directly on 0115 967 0888
Whether your first meeting with our advisers is in person, on the phone, or a video chat we will still need you to have the same bits of information ready.
Each lender has its own Standard Variable Rate (SVR). This is an interest rate that is usually linked to the Bank of England’s (BofE) base rate, the lenders SVR will usually change in line with the BofE base rate.
In most cases, your broker will advise you to take a special rate deal from a lender, which is usually cheaper than the lender’s SVR and will be for a set period of time such as 2 years, 3 years or 5 years. Once your special rate deal comes to an end your rate would revert to the lenders SVR however before this happens you have the option to re-mortgage onto another special rate deal either with the same lender or a different lender instead of accepting the lenders SVR.
Although your mortgage term may be over 25 years, nearly all lenders will offer short-term special rate deals, usually between 2 and 5 years, these will be cheaper than the lender’s standard variable rate.
The common types of deals available are fixed rates, discounted rates, tracker rates, libor linked, and capped rates.
As the name suggests the interest rate will remain the same (‘fixed’) for a specified period of time. The rate is always lower than the lenders Standard Variable Rate (SVR).
The interest rates will be a set percentage below the lender’s SVR. e.g. If the SVR is 3% and the discount is 1% less you would be charged a 2% rate, however, if the SVR increased or decreased your rate would move proportionately up or down.
The tracker rate will follow a variable rate that is not the lender’s SVR. In most cases this will be tracking the Bank of England’s base rate.
Libor (or the London Interbank Offered Rate) is another form of a tracker rate but specifically linked to the Libor’s base rate.
Unlike a fixed rate where the interest will not change, a capped rate is variable but cannot go above a certain set rate.
A mortgage can be broken down into two sections, capital and interest.
The capital is the amount that you originally borrowed.
The interest is the agreed percentage (%) payable on the capital amount outstanding. If you had a £100,000 mortgage and there was a 2% interest rate you would pay £2,000 per year in interest. This is how the lender makes their profit on the loan.
When you take out a mortgage you have the option of repaying it as:
Capital & Interest, Interest only or Part & Part.
Capital & Interest:
This repayment method involves making both capital repayments and interest repayments each month. By repaying both capital and interest the loan will be structured so that you will have paid off your loan completely by the end of the term. This form of repayment is most commonly used with a residential mortgage.
This form of repayment only requires the interest payments to be made each month. The monthly costs tend to be much cheaper as the capital element is not paid until the end of the term. As you are only paying off the interest on the mortgage the amount of capital that you owe always stays the same which is why you must have a plan to repay the capital outstanding at the end of the term. This can be done by selling the property at the end of the term, by using other savings, or by using some other type of planned repayment vehicle. This method of repayment is most commonly used for a buy-to-let or investment mortgage.
Part & Part:
Part and part repayment involves part of the loan being on capital & interest and part of it on Interest only. This will reduce the initial monthly cost and reduce the amount owed at the end of the term. You will still need a plan to repay the remaining capital outstanding at the end of the term.
Of course, the cost of any mortgage depends on how much you borrow from the lender, how much deposit you put down, and other factors such as interest rates, fees, solicitor costs. The best ways to make your monthly mortgage repayments as cheap as possible whilst still buying at a decent price is to:
Keep the Loan to Value (LTV) down: The loan to value ratio is how much money you borrow in comparison to how much the property is worth, i.e. how much money you are willing to put down at the outset (your deposit). The lower the LTV, the lower the interest rates may be.
Your adviser can give you a rough indication of how much your monthly payments will be during your initial consultation.
You need to consider the following when planning for your mortgage:
Solicitors: For a standard residential purchase, solicitors will charge around £700-£1,000 for the legal work, in addition there will be £500-£1,000 for disbursements, which are land registry fees and various searches plus VAT.
Stamp duty land tax (SDLT): Stamp duty is tax paid on the land that you purchase your property on. This is paid to the solicitor. The good news is first-time buyers don’t pay any SDLT on their property if it’s valued under £300,000.
Mortgage Advisers: As advisers, we do charge a fee for the work that we do on your behalf regarding administration and advice. Click here to see our fees.
Moving costs: Your possessions will need to be moved from your old house to your new house which may require the services of a removal specialist or just a few car loads.
Furniture: You will need to furnish your new property.
Buildings & Contents Insurance: You can’t get a mortgage without buildings insurance. It is usually sensible to also insure your contents. If you haven’t already set up buildings & contents insurance we can help you.
Personal Insurance: Finally, life insurance. It isn’t an essential cost, but it is advised that you take out a life and/or health policy or income protection to cover the mortgage costs in the event of you or your partner’s accident/serious injury/critical illness or death. Click here to read about Life insurance.
As independent mortgage advisers, we can offer you deals from across the whole of the market. We work with a range of lenders, high-street and challenger banks who will be able to lend to most clients.
Our advisers work in Nottingham and the East Midlands but work with clients across the United Kingdom.
If you are looking to move home and would like to discuss your mortgage with us;