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Taking out a mortgage is one of the biggest financial commitments that you’ll make in your life. This is because it is going last around 20-30 years. Furthermore, this is why you need to be prepared and know exactly what you are signing up for.
Quite a lot of people get a mortgage with the mindset that they’ll take one out and not need to think about it again, they just need to pay it off. This is not the case…
In Birmingham, when you take out your mortgage, it’s likely that you’re fixing yourself into a short fixed-term rather than a 10+ term. This is because lenders usually offer shorter 2-3 year mortgage products over longer deals.
Once you get to the end of your term, your will lapse straight onto your lender’s standard variable rate of interest (SVR). This rate, when compared to your current rate, will likely be higher and increase your mortgage payments. Moreover, if you were to have a mortgage review before your fixed term ends, you could end up saving money.
As it’s coming up to the end of your mortgage term, you should start thinking about remortgaging in Birmingham. Getting a mortgage review booked in with a remortgage advisor in Birmingham could help you access a better, competitive product.
A mortgage review is simply a review of your mortgage (we probably didn’t need to tell you that).
Mortgage reviews will allow you to find out whether you can access a better mortgage product at the end of your term or not. For you to get one, you’ll have to book an appointment with your mortgage broker in Birmingham, lender or building society and make them aware that you want to review your mortgage options through a remortgage.
You may be able to access a better rate by taking a mortgage review!
The mortgage review process is just like any other mortgage process. You will be asked to supply evidential documents that support your affordability, you are who you say that you are, etc. Once your mortgage advisor in Birmingham has all your information, they can begin searching through products.
If you managed to maintain your mortgage payments, your credit score will have had a boost during the period of your mortgage term. You will have proven to your lender that you are a reliable applicant. The higher your credit score, the better chance you have of being able to access competitive products.
Unfortunately, sometimes you won’t be able to access a product with a ‘better’ rate. In this situation, you can speak with your lender and see whether you can simply renew your deal for a further couple of years. When it comes to the end of your next term, you may have the chance to access better deals then.
Birminghammoneyman offers a free mortgage review to every applicant, so book online today and speak with an advisor.
Mortgage reviews are very important. It’s vital that you keep on top of your remortgage situation so that you know exactly where you are and where you stand. This will be worth your while if you access a competitive deal from taking a review.
You could end up saving a lot of money in the long term. It would also prevent you from slipping onto your lender’s SVR, which could be expensive.
Every lender’s SVR is different, but it’s all worked out the same way. They track the Bank of England base percentage and then add their own on top. This is why their SVR can be so expensive. If you are happy with paying their payments, it’s completely up to you.
Even if you don’t get around to taking a mortgage review and end up on your lender’s SVR, you can still remortgage any time after. You aren’t locked into a specific deal or term on your lender’s SVR, so you can contact your advisor when you want to.
It is possible to switch products whilst still tied into a deal, although, it will cost you. If you find a product that you like and want to remortgage in Birmingham before your term ends, you will have to pay an ERC (early repayment charge).
Remember that you are not required to stay with the same lender through a product transfer, you can remortgage if you believe that there are better deals elsewhere.
With the constant increase in housing prices, you may have got lucky and there will be lots of equity within your home. If this is the case, you may be able to access more competitive products.
Mortgage interest rates are based on loan to value ratios. By rule of thumb, the more equity you have, the lower the interest rates you will be able to access.
Capital raising is also an option that is available to you, so if you are interested in this, please speak with an expert mortgage broker in Birmingham like us.
If you haven’t owned your home for long or your home hasn’t increased in value yet, there may still be money-saving options with your current mortgage lender.
Keeping up to date with your mortgage payments is key, if you manage to, you may find that you’ll be able to access some product transfer deals.
Sometimes, the products offering the lowest rates may not be the best deals. These types of deals are known to come with high set-up/arrangement fees.
As a mortgage broker in Birmingham, we consider every costs when buying a property in Birmingham. We will also take these costs into account when trying to find your mortgage products. We want to save you as much money as we can.
When looking for a mortgage product, we will try and find one that matches your personal and financial situation. Get in touch for Remortgage Advice in Birmingham today.
Once you have gotten the hard part out of the way, that being saving up for your deposit (or if you’ve utilised a gifted deposit) and have decided you are ready to buy your first property as a first time buyer in Birmingham.
The next step is to get yourself prepared for the mortgage process that is about to follow.
In our experience as a mortgage advisor in Birmingham, we have found that customers benefit the most by getting in touch with a mortgage broker as early on in your process as you can.
Your dedicated advisor will help you to work out an outline of the amount you could be looking to borrow for a mortgage and how much your monthly mortgage costs could be.
Before anything else, your top priority should be to obtain an up-to-date credit report. You ideally don’t want any credit issues such as a missed phone contract payment, to hold you back from a mortgage. A credit report will be able to show you potentially harmful factors.
Following these steps will give you a realistic overview of the likelihood that you’ll succeed with a mortgage and what your budget could be. This will help you to organise your accounts, such as any existing credit cards or phone contracts.
Our hard working and dedicated mortgage advisors in Birmingham are able to obtain a fully credit-checked agreement in principle for you, within 24 hours of your primary mortgage appointment.
There’s a lot of important paperwork for you to gather for your process, so it’s a good idea for First Time Buyers in Birmingham to start organising what you will be required to have ahead of looking for your mortgage. In doing this, you possibly enable yourself to go through the process quicker.
We need to be able to prove your identity. With this, you’ll need to provide us with some photo ID such as a driving license or passport, so that we can prove who you are.
On top of this, you’ll need to prove where you are living. To achieve this, you need to send us a utility bill or original bank statement that has been dated within the last 3 months of your current home address.
One of the most important factors when seeing if you qualify for a mortgage, is analysing your income and spending habits. This can can be a big difference maker in whether or not you obtain a mortgage. Your bank statements should show your income and what you having regularly going out.
Lenders will not be too thrilled to see gambling transactions on your account. They also won’t be too happy if you go over an agreed overdraft limit or if your direct debits regularly bounce.
It’s best to plan ahead regarding your bank statements. The more organised they appear to be, the more likely you are to be accepted by a mortgage lender.
You will have to prove you have the financial capability to pay for the deposit and also evidence where this came from for the purpose of anti-money laundering.
Try not to move money around your accounts too often as it will make auditing where everything came from a little complex. Lenders like to see you build up your savings, so you’ll need to provide individual proof for any large financial deposits into your bank account.
We regularly see that money for deposits has been given as a gift by a member of your family. The gifted deposit also need to be evidenced, with the “donor” needing to sign a letter to confirm it is a gift and not to be paid back as a loan.
Regarding being able to afford a mortgage, the most important thing is to be able to prove your that you are financially capable to keep up monthly mortgage repayments.
If you are a regular employee, the proof you will be required to provide is the last 3 months’ payslips and most recent P60. Lenders can take into account frequent overtime, commission, shift allowance and any potential bonuses.
If instead you are an applicant who is self-employed in Birmingham, then you’ll need to enlist the help of your accountant. They will help you request your last 2 or 3 years’ tax overviews and tax calculations documents from HMRC, which you can use for proof of income.
When taking out a mortgage in Birmingham, it really is a good idea to prepare yourself ahead of the process starting. Make note of what you expect your outgoings to be after you move and work out what you are able to afford.
Factor in costs like council tax and utility bills, food, drink and leisure activities. This will demonstrate how much money you actually have free to put towards monthly mortgage repayments.
It may seem like a difficult process, but without taking the steps we mentioned above, it is not possible to proceed with any lender or broker. Once you have taken the necessary steps, you’ll be just that little bit closer to your home owning dreams.
It’s better to prepare yourself in advance, making a collection of everything a mortgage lender might wish to see. This saves both your time and frustration further along the process, especially if it’s something that could’ve easily been arranged at the start.
A mortgage agreement in principle is basically an obtainable document or certificate of confirmation that proves to the estate agent or seller of the property that ‘in principle’, the bank is willing to lend you a certain amount for a mortgage. You may also see this called a decision in principle.
This is something that we will always look to obtain for of our customers if they don’t have one already, and something we can usually get within 24 hours of your initial appointment.
In order to obtain an agreement in principle, you will have to pass the lenders credit score. This works out well because in almost all cases, this is a very good sign to the lender that you are creditworthy and could be trusted with a mortgage.
If you are in the market for buying a new home as a first time buyer in Birmingham, then an estate agent will often want to check again and again in order to make 100% sure that you are ‘mortgage ready’ when it comes to making any offers on a property.
In having this certificate on hand, you will prove to the seller that you are able to obtain a mortgage for the amount you will need to purchase the property and are ready to proceed with the sale.
A mortgage agreement in principle will not be a definitive guarantee of being able to obtain a mortgage, as the rest of your full application will require further background checks (such as evidencing your income) and having a property valuation undertaken on the property you’re looking to buy.
As an experienced mortgage broker in Birmingham, we highly suggest that all customers try to obtain an agreement in principle at the earliest opportunity. This is because of the following reasons:
1. Negotiating Power.
2. Avoid Disappointment.
3. Knowing Your Limits.
Once you reach the point of being able to make an offer on a new home, the majority of estate agents will undertake the necessary steps to ensure that you can go forward with a mortgage on the property.
Generally speaking, they will require you to provide them with evidence that you are able to afford the purchase of the property, prior to listing the property as sold and taking it off the market.
If you have already managed to have a mortgage agreed prior to making an offer on the property, you’ll come off as more appealing to the seller.
This will also prove to the seller that you’ve put a lot of careful thought about your mortgage journey and not just decided to purchase out of the blue, with no preparation.
This might persuade a seller to accept any offers that you make that are lower than the initial asking price. Make sure not to make offers too low though, as you don’t want to insult the seller.
When it comes to making a purchase on a property, we often find that customers can go full steam into the process, making an offer on a property without making sure that they can afford to actually buy the property in the first place.
This could lead to customers facing potential disappointment if the mortgage application happens to fail, as by that point they may have already had their heart set on that property.
By getting in touch with a mortgage advisor in Birmingham early on, the potential disappointment that you otherwise would’ve faced could potentially be avoided.
Often, there are various factors that are causing a mortgage to decline that can be overcome with a little time and the guidance of a trusted mortgage broker.
If you are a First Time Buyer in Birmingham and know you have a good credit score because you’ve never been turned down for credit, have paid everything on time and are registered on the voters roll etc, it is still worth getting in touch with us for mortgage advice in Birmingham.
You might find that you could approach various different lenders and each time get a different max mortgage amount back from them. These lenders all calculate affordability in their own unique way, with their own individual criteria.
If you are self employed in Birmingham, though the mortgage process is not completely impossible to navigate, it can be very complex for self employed applicants, without the assistance of a mortgage broker in Birmingham by your side.
Some lenders will take your net profit, others are known to use your salary and dividends. Some use your latest year, whereas some others will use an average over three years.
Being aware of your borrowing limits is very important when it comes to applying for a mortgage, as then you have a realistic idea of what your price range on a property is going to be.
Our team of mortgage advisors in Birmingham will be able to give you a guide of the potential maximum mortgage available to you and help you to work out an estimate of the amount you’ll possibly be paying back per month for your mortgage.
This article was initially published back in 2019, and now this information has become outdated. Everything was 100% accurate at the date that this article was published.
Experian statistics show that lenders rule out 33% of all mortgage applications due to mismatches in criteria.
The statistics highlight the importance of customer care and 5-star service when using a mortgage broker in Birmingham. It’s all about the value of the customer and helping them pass the lender criteria the first time.
Experian also found out that only 3.5% of people searching for mortgages were eligible for deals on the market. However, just because you had seen these cheap deals online, it cannot guarantee that you will qualify for it.
As our customer, we will offer you full customer service, trying to find you the perfect deal.
Experian had shown that 22% of applicants started using price comparison websites to find the right mortgage.
We recommend that if you happen to fall inside that demographic, remember that price comparison websites exclude matching a lender’s criteria.
On top of that, the application can take weeks to process, not to mention that the lender can dismiss your case. Ideally, please speak to one of our mortgage advisors in Birmingham. They can search thousands of deals and pick the right ones tailored for you, saving you time and money.
The analysis also showed that 27% were eligible for a mortgage but only for a reduced amount to meet the lender’s affordability requirements. Again, we find this happens all the time. A lender says you can borrow one amount but find a reason to reduce the mortgage available down the line.
Our customers are our priority, and as a trusted mortgage broker in Birmingham, whether your self employed in Birmingham or looking to remortgage, we’ll recommend the best deal tailored to you and ease the pressure throughout the entire purchase. Our brilliant mortgage advisors and outstanding back office team will do the bulk of the work for you.
First time buyers in Birmingham, and other consumers are awareness of credit scoring appears to be higher than ever before, and a large majority of people who get in touch with our team appear to have already reviewed their credit reports online.
There are lots of different credit reference agencies to choose from, with the two most commonly heard of companies being either Experian or Equifax. We personally would recommend that new clients use Check My File for a 30-day free trial. If you do not cancel, this will change to £14.99 a month, though you can cancel this at any point in time. This report offers our clients a collaborative look at the information produced in an easy to understand the color-coded credit report.
Try it FREE for 30 days, then £14.99 a month – cancel online anytime.
Often our customers will ask if our Mortgage Advisors in Birmingham will be doing a credit search of their own, because they are aware that too many searches can cause problems for their credit score. The lender always runs credit checks, but our Mortgage Advisors in Birmingham will ask the client for their permission beforehand.
A hard credit search will provide a much more in-depth look at your credit report. Any financial institution that looks to carry one of these out should seek your permission before doing so. The advantage of a “hard” search would be that you have a much higher chance of succeeding with your mortgage if you pass the credit search, as they will have already gone quite deep into your details.
The only thing that can go wrong from then on is if, for some reason, you cannot provide satisfactory documentation to back up the information you have disclosed, or it turns out you have provided false details.
Another benefit to the hard search is that it leaves a ‘footprint’ on your credit file, meaning that anyone who looks at your report can see that it you’ve already been under the microscope so to speak. This isn’t inherently a bad thing but if for example, you have multiple searches included in your credit file in a short period, then it could be perceived as you are applying for lots of credit at once, which the lender may feel is suspicious activity.
The footprint does not state whether your application was successful or not but if you have several searches over a few weeks then lenders’ systems could wrongly assume you are being declined on the basis that “Why else would you go to Lender number two unless Lender number one had said no?”.
The odd hard footprint on your record is no big deal so this doesn’t give reason to worry a whole lot about it. The main lesson to take away here, is take precaution in having too many hard searches, as this could negatively affect your process.
On the other side of the coin, we have a soft credit search. This is a much ‘lighter’ search which looks at your financial situation and would be the type of search that would be carried out on price comparison websites to let you know what may be available to you. It may also be used from time to time, in order to verify your identity. Many mortgage lenders carry out soft searches, and we’re always seeing more lenders switching to this type of search.
While less information is offered to who is carrying out a soft search, as opposed to what they would receive if it were a hard search, you can still get a good idea as to whether or not you’ll find mortgage success by obtaining an Agreement in Principle. If you get this, you’re theoretically in with a good shot anyway.
One of the most beneficial things about soft searches is that while you will be able to see soft searches that have been carried out on you, if you check your credit file (people are usually surprised by how many have been carried out on them) these searches are not visible to other financial institutions like banks, building societies or other mortgage lenders. This means you can freely apply for an Agreement in Principle and it is unlikely to damage your credit score, whether it is successful or not.
If you are in the market for making an offer on a property as a first time buyer in Birmingham or are maybe moving home in Birmingham, our trusted Mortgage Advisors in Birmingham would highly recommend that you have a mortgage agreement in Principle in place before getting in touch with the seller.
You want to be able to give yourself the best possible chance of securing the property you want at the lowest possible price, so if you can demonstrate that you have your finances in a good place, you are effectively giving yourself the upper hand. Having an Agreement in Principle could also mean that any estate agent may be put off trying to ‘cross-sell’ their other in-house mortgage services to you.
If you have been reading up on mortgages or more specifically have been having a look at what your options may be for taking out a Remortgage in Birmingham, you may well have seen the term Capital Raising before.
When seeing this term, you may be confused and wonder what exactly is Capital Raising? Capital Raising is simply the act of raising money for a purpose, with money in this case referred to as the Capital. There are a few different ways this can be achieved and it is used for a variety of different reasons.
Generally we find that it is quite common for customers to take out a Remortgage as a means of releasing the equity that is in their property. If you are unsure of what Equity is; Equity is the difference between what you have left to pay on your mortgage and how much the property has been valued at.
If the value of your property happens increases in value over the duration of your mortgage, rather than Remortgaging to Release Equity, you may have the option to take out a Further Advance. This mortgage type allows you to take out an additional mortgage on your property to borrow an additional amount, as a means of releasing the equity in your property.
This mortgage will generally be taken out over a longer term and have interest rates at a lower rate than a standard personal loan would be, although this is something you will pay back alongside your existing mortgage.
This can be a really solid option for homeowners who are not looking to Remortgage, or maybe tied into their existing deal. It’s important to remember though that there are risks, such as a higher risk of repossession if you cannot keep up the much larger number of monthly repayments.
A Second Charge Mortgage works in a similar way to a Further Advance, as with this mortgage type you will be taking out an additional mortgage alongside the one you already have, as a means of releasing the equity in your home for future home improvements or anything else you wish to spend your newly acquired income boost on.
The difference between a Second Charge and a Further Advance is that with a Second Charge you will often be with another lender and on a slightly different interest rate. In the unfortunate event of a repossession, your initial mortgage lender will be paid back from the sale of the property in question, with any remaining funds used to pay off the Second Charge with the second lender.
There are lots of reasons why you may find yourself needing to Capital Raise and release equity via a Remortgage. The options for this that we often hear include to fund any Home Improvements, Modifications or Alterations, such as a new home office, a possible home extension or even a conversion to a loft or garage. Sometimes, we also see customers using these to consolidate any debts that you have gathered over time.
Other circumstances wherein a homeowner may use this include; to gift a deposit to your kids, to purchase a second home (usually an option with Buy to Let Landlords in Birmingham), and to pay for larger purchases such as a car, wedding or holiday.
If you have any equity in your property and are in the market for a capital raising mortgage, then a Remortgage in Birmingham could be beneficial to you. As a general rule, mortgage lenders will let you borrow up to 90% of the value of your property.
Please do Get in Touch and we will advise you of the most appropriate course of action to take for your circumstances. If remortgaging isn’t quite the option for you, taking out unsecured credit might be a more suitable option. A standard Remortgage can take an estimate of around 4 to 6 weeks to fully go through.
With Debt Consolidation there are some risks to bear in mind. That is why we always recommend you speak with a qualified Mortgage Advisor in Birmingham, before you look at consolidating any unsecured debts against your property.
Birminghammoneyman is an experienced Mortgage Broker in Birmingham, here to help you find the best capital raising mortgage deal for your financial, as well as personal circumstances. All of our customers will benefit from a free Remortgage consultation with a qualified advisor. During this consultation your dedicated mortgage advisor in Birmingham will make a full recommendation.
If you happen to be over the age of 55, you may find yourself better suited for the option of Equity Release in Birmingham.
A Secured Loan is also known as a Second Charge Mortgage, is a secured loan that is effectively an additional mortgage alongside the one you already have, though with interest rates that are higher than the average amount. Secured Loans are familiar with people looking to borrow more than their current lender is willing to lend.
The reason that these interest rates tend to be higher is that in the event of arrears and an eventual repossession, the provider of the Secured Loan, the second lender that you borrowed from, must wait for the original provider, the first lender that you borrowed from, to sell the property before getting their money back.
The second lender knows that there is a much higher risk of things going wrong and not making money back, so they opt to charge higher interest rates. Whilst this is often known as an expensive “last resort”, they can usually accommodate specific situations.
When taking out a Second Charge Mortgage, your first mortgage stays the same. The new amount gets borrowed from a different lender and a separate direct debit.
When it comes to paying these amounts back, the first lender will always prioritise, and the second lender will usually get whatever is left. If the property sells for enough and has enough equity to cover both the first and second charges, you get to keep some of it with some leftover.
The length of this new amount varies, as you could take it out over a shorter or longer-term than your primary mortgage. If you’re only in need of a small amount, you may benefit from looking at unsecured borrowing instead of a second charge.
This article was originally published on 19th April 2021 and the property market has now resumed and this information has become outdated. Everything was 100% accurate at the date that this article was published.
There are many different reasons why someone may want to remortgage. it may be to improve your home e.g. through a home office, new kitchen, loft conversion, etc, to raise capital, or to release equity for another property.
Whatever your reason for wanting to remortgage, you will still have to go through a similar process as when you took out your initial mortgage. If you are looking to remortgage, then it may be worth approaching a remortgage advisor in Birmingham like us, we can help search 1000s of remortgage deals to find you a product that suits your financial situation.
Today we are going to focus on remortgaging for home improvements and even more specifically, for a home extension.
If your home is feeling a little cramped or like it needs something else you may want to consider remortgaging for a home extension in Birmingham. Rather than going through the expenses and stress of purchasing another property, you could just extend your current home to allow more living space. Now is a perfect time to think about this remortgage option.
As a Mortgage Broker in Birmingham, who’s dealt with lots of applicants remortgaging for a home extension, we have learned that people mostly do it for one of two reasons:
Customers commonly say “I’m moving to a bigger house for more room” when they haven’t thought about remortgaging first. If you are only looking to move home just for a house with an extension/loft conversion, you should look at your remortgage options first, as it may be cheaper for you plus you avoid the costs of buying a home in Birmingham.
If you want more living space because you are going to start a family/have a family, it may be simpler to extend your house through a remortgage rather than move home. You also may have already found your “forever home,” and you can afford to remortgage; there is nothing wrong with borrowing for this purpose at all.
Home improvements can often put extra value on your home. People sometimes remortgage for a home extension with plans to sell their property, and there’s nothing wrong with this too. Whether you plan to move out within the next couple of years or much further down the line, either way, you should see the price of your property rise due to the new extension.
As of now (19/04/2021), we can still safely say that remortgage products are still competitive and are holding at a steady rate. So, now is still a great time to remortgage for home improvements. This is especially because of the constant rising of property prices, now could be the perfect time to invest in your home.
You should know that if you apply for a remortgage for home improvements and the amount you need to borrow is significant, the lender will reserve the right to ask you for estimates for the works you intend to have carried out. You do not necessarily have to use the Contractor that provided the quote to do the actual jobs.
Depending on the work that you are planning to have on your home, you may find that remortgaging for a home extension in Birmingham barely affects your monthly mortgage payments.
Approximately, spending as little as £100 – £200 a month, could allow you to borrow £25,000 – £50,000 depending on the specifications. Lots of different things will be factored in when it comes to deciding how much you’ll be able to borrow when remortgaging for home improvements.
There are plenty of different extensions and improvements you can choose to add to your property. Whether it’s an extension or a conversion, it doesn’t matter, both can be added to your home during a remortgage for home improvements:
Adding a home extension can be time-consuming, but it can make a huge impact in the long run and your lifestyle. We have spoken to many customers who have taken our remortgage advice in Birmingham and have been happy with their results.
Our Remortgage Advisors in Birmingham are here to help you through the whole remortgage process. If you want to remortgage for other means, no worries, we can still try and help!
Our Mortgage Advisors in Birmingham have been working with remortgage applicants for over two decades now and know exactly what they’re doing during the whole application process. Along with excellent remortgage advice in Birmingham, you could find yourself walking away with an excellent deal that saves you money in the long run.
When you remortgage for a home extension, you may find that your payments barely even change, and you get a brand-new extension with it too!
Contact us today and receive a free remortgage consultation in Birmingham. Our Remortgage Advisors in Birmingham will be more than happy to answer any remortgage questions that you have.
In the beginning of your mortgage process, you will quickly become aware that there are lots of different options available to you. Ranging from mortgages for first time buyers in Birmingham to Home Movers in Birmingham, or remortgages in Birmingham, there is a large variety to choose from.
In this article, you will see a selection of free information with accompanying videos, of the most popular types of mortgages available on the market. If you have any further questions regarding any of the below mortgage options, then please do not hesitate to get in touch.
A fixed rate mortgage means that your mortgage payments are going to remain consistent for a set period. You are in control of the length you wish to fix your payments for. Popular choices tend to be two, three, or five years, sometimes longer.
No matter what happens to inflation, interest rates or the economy you know that your mortgage payment, often your biggest financial outgoing, will not unexpectedly change.
A tracker mortgage means that your interest rate will follow the Bank of England’s base rate, and is not set by either yourself or the mortgage lender.
You will be paying 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%.
When you take out a repayment mortgage, this means each month you are paying a combination capital and interest. This means that if you keep your payments going for the full length of the mortgage term, you are guaranteed to pay off your deal in full by the end of your term.
This mortgage type is the most risk-free way to pay the lender back your capital. In the beginning of your mortgage term, it is mainly the interest that you are paying and your balance will go down at a slow rate, especially if you have taken out a term over 25, 30 or 35 years.
Things pick up in the last ten years or so of your mortgage, where your payments are paying off more capital than interest and you will be able to pay off your balance quicker.
While many mortgages connected to buy to let mortgage in Birmingham can still be set-up on an interest-only basis, it is much more difficult to get that kind of mortgage on a residential. It is much less likely for lenders to offer an interest-only product nowadays, though there are certain circumstances where this can still be viable.
Reasons this may work, include downsizing when you are older or have other investments that you will use to pay the capital back. Lenders are very strict when it comes to offering these products now, and the loan to values is a lot lower than it used to be in days gone past.
With an Offset Mortgage, the lender will organise a savings account to go alongside your mortgage account. Let’s say you have a mortgage balance of £80,000 and £20,000 remains deposited into your savings account, you only pay interest on the difference, which in this case would be £60,000. It can be a very efficient way of managing your money, especially if you are a higher rate taxpayer.
No matter whether you are a First Time Buyer in Birmingham, Home Mover in Birmingham or looking at your options for Remortgaging in Birmingham, home buyers and homeowners should know that overpaying, even if you only do so by a little bit, can really make a difference in the amount of interest you pay back over the duration of your mortgage term. The earlier you start overpaying, the quicker you can start reaping the rewards from doing this.
Whether or not you can do this, all comes down to the lender’s preference. You may find that your lender will allow overpayments on a tracker mortgage or a flexible offset mortgage. This is why it’s important to check with your lender.
It has been suggested in the past, that homeowners may not be able to afford making any extra payments. In these cases, it may very well be that life just gets in the way. The concept of overpaying sounds ideal when you take out a mortgage, but generally there’s always something new and flashy we’d rather be having a cash splurge on.
We find that it’s more just an issue with remembering to overpay your mortgage. It’s probably not something that would come into your mind too often either, apart from maybe when your mortgage term is due to finish.
If this sounds like your personal situation and you’re maybe hoping to overpay for the purpose of say, retiring early, what should you do? We would recommend that you set up a standing order that is payable to your lender each month. Set it up to go out on the same day as your standard mortgage payments.
So as an example, say your monthly mortgage payment is £450 per month and goes out on the second of each month. Then let’s say you are able to afford an extra £85 per month and are wanting to put that towards your mortgage payments. You should set up a standing order of £85 to go out to your lender on the 2nd of each month too.
A benefit of this, is your mortgage payments will then total at £535 and because it’s going out as a regular payment, this outgoing will become the norm for you. Another perk is that where something like a direct debit is controlled by the receiver, standing orders are controlled by the payer. If you’re having a financial crisis this month and want to go out, just log into your online banking and cancel the outgoing payment.
Whilst it would be a shame for you to stop overpaying, at least you’ll be in receipt of those benefits up until that point. Depending on the lender you have gone with, you may even be allowed to arrange reduced payments or take a “payment holiday” if you’ve been overpaying for quite a while. You must check with your lender though, as if you’re looking to do this and don’t ask, it could negatively affect your credit report.
Overpaying can be great, but it’s not obligatory. If you don’t feel the need to do so, you don’t have to, simple as that. That being said, knocking off a year or two from your mortgage term will be something you’ll benefit from greatly in the long run.
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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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Birminghammoneyman.com & Birminghammoneyman 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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