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One of the most common questions we get asked from customers like first time buyers in Grimsby is “How much can I borrow for a mortgage”. Let’s look at the background of affordability assessments and how they apply post-2014.
Back in the day before credit scoring, mortgages were manually assessed by your local building society manager. Lenders moved towards more uniform income assessments to provide a consistent approach in the 1990s.
Maximum lending “caps” were brought in so that customers couldn’t borrow more than 3-4 times their annual income.
At the time of the credit crunch in the 2000s, these income multipliers kept becoming more and more generous. Of course, some lenders allowed their customers to “self-certify” their incomes with no background checks such as payslips.
This went horribly wrong and it was a struggle to get onto the property ladder from 2008-2010. This is because lenders battened down the hatches and created a cautious (over-corrected) lending environment.
In 2014, the Mortgage Market Review (MMR) was introduced once the market had finally recovered. This brought a new set of guidelines for lenders to adhere to. The old income multiplier method was scrapped and replaced with new, more sophisticated affordability calculators.
These new calculators gave a closer look into an applicant’s spending habits and net disposable income. This meant that the lender could have an in-depth look into your bank statements to ensure that unaffordable mortgages were not granted as they were before the Mortgage Market Review was introduced.
To this day, there is still a “lending cap” in place at about 4.75 times your annual income but your expenditures are also analysed. For example, lenders seem to penalise low-earners and even things like gambling can sometimes affect your chances of being lent the money. Some take pension contributions as a fixed outgoing so would often lend, say a public sector worker with a big pension deduction less than a private sector and so on.
If you are looking to maximise your borrowing capacity to obtain the home you want to buy then we would advise you to speak to a Mortgage Broker in Grimsby, like us. A Mortgage Advisor in Grimsby will research the property market on your behalf and try to find a lender that will lend you the right amount that you need.
Before you take out a mortgage you should sit down and have a chat with an expert Mortgage Advisor in Grimsby and work out your finances together to ensure that the repayments feel comfortable to you.
You may not be aware but most mortgages are portable these days. This portability means that when you are moving home in Grimsby, you can transfer your mortgage from one home to the next without a penalty. This is great if you have previously secured a fixed rate deal that you are still in the middle of and decide you want to move and take it with you.
Not all mortgages are portable, you should check with your lender or Mortgage Broker in Grimsby before putting your house on the market. If you have had your mortgage for some time or if it is with a specialist lender there is a chance it might not be portable, so bear this in mind when arranging your mortgage.
Sometimes, we find that customers don’t consider the porting options available to them. There are several potential reasons for this. Maybe the new lender will not lend them the extra money they need to fulfil the move. When you port a mortgage, you can only port the amount you currently owe and any additional borrowing needs to be placed on a deal from the lenders’ current range and that might not be competitive.
If you do port a mortgage and borrow extra monies, the additional borrowing creates something called a “sub-account”. In other words, you have one mortgage but with two different rates of interest applying to it, and it may not be as good as the rate you already have.
This can be a real pain because almost certainly the two products will “overlap” each other and as such it’s difficult to get these to line up without having to let one drift onto the standard variable rate for a while. Customers tend not to like having to change their mortgage deals as often as this and some of them decide to take the “hit” and pay an early repayment penalty to swap lender and get it all lined up.
Like any mortgage application, you will have to check to see if you are eligible to borrow more money if this is what you are looking for. Porting a mortgage can sometimes be difficult and may require specialist mortgage advice in Grimsby from a professional who has lots of valuable experience in hoving home in Grimsby.
As a local mortgage broker in Grimsby, we offer expert advice regarding porting mortgages, so if you are struggling or need any type of mortgage advice, get in touch with our fabulous team.
Recent data brought forward by Dataloft has highlighted some of the main reasons as to why homeowners decide to move house in Grimsby.
The main reason in which homeowners decided to move was for a bigger living space, according to 37% of responders. It makes sense, as there are generally only two groups who seek for somewhere smaller; retirees and separating couples.
However, it’s found that family homes need more space due to numerous reasons; parking spaces, the build-up of belongings, children grow up and even the number of limited bathrooms for a growing family.
But you do not have to move home in order to create space within a home. Alternative options are available such as raising capital via a re-mortgage to build an extension. This is a very popular option.
Further options would be conversion such as turning a garage into an office space. These types of improvements can even make your home a higher value for when it comes to the time when you decide to sell in the future.
The second factor showed that 24% of respondents were looking for a better area. This could be down to the fact that when they were First Time Buyers, they were on a condensed budget. Chances are they are now earning a majority more in finances than they did at the initial purchase of their current home and now they would prefer to live in a more affluent neighbourhood.
Another major reason for moving area is the choice of schools available to their children. This can be an important factor for parents, especially when their eldest child is due to move up to secondary school.
Finally, 17% of home movers are looking to relocate to be closer to friends or family. This often happens when couples being to start their own families. If both parents work then this would mean that childcare services would have to be looked into, and with many Private nurseries seeming to increase in expense, which leads to expecting couples to reach out to their own parents for help with childcare aspects as a cheaper alternative.
Buying for the very first time is the ‘go to’ option for many people. Most would rather buy than rent seeing as the prices are moderately the same (or sometimes less). However, moving brings in a lot more personal elements into the equation such as leaving behind your first home whilst also trying to balance out the pros and cons of moving versus extending your current property.
If any of these reasons sound familiar, then you might benefit from a Free Consultation with one of our Mortgage Advisors. We can help you compare the costs of raising money for home improvements versus the expenditure of moving. We will calculate your maximum borrowing capacity and give you a quote on monthly payments so you can have a think about your next step.
Talking to a Mortgage Advisor in Grimsby is a recommended option by many because your Advisor may have good knowledge of the local area and share with you what options other clients have been taking recently and also the more suitable recommendations tailored for your finances in relation to the surrounding areas.
When customers like first time buyers in Grimsby have an offer accepted on a property your next job is to arrange a property survey. This will establish the condition of the property and ensure that it is worth what you are going to pay for it. If something is found on the survey you are then in a position by law to approach the seller to negotiate a price for the works required.
Here’s a short video from the Royal Institution of Chartered Surveyors (RICS) that explains the different types available to you.
There are 3 main types of property survey available to you:
A basic valuation is the cheapest option and you will be required to have one of these before you receive your mortgage offer. Please don’t confuse this with a full survey. The mortgage valuation confirms to the lender that the property is worth at least what it is lending you.
Your mortgage lender may even offer you a free basic valuation as part of your deal.
A Mortgage Valuation will not highlight any repairs that are needed. However, it may point out any obvious defects and recommend that you investigate further.
A Homebuyer’s report will cover structural safety and highlights problems, including damp, as well as anything that doesn’t meet current building regulations. This kind of report will give you an independent report of your property by an expert.
To ensure you are not paying for two surveys it is advisable to ask the mortgage companies surveyor to carry out this report for you – it will usually take a couple of hours to complete.
A Full Structural Survey is advisable for older properties and those of a non-standard construction.
Depending on the property size and type – a full structural survey can take as long as a day to complete.
A full structural survey provides a detailed report on the condition of the property and highlights issues that should be investigated further before going ahead with the purchase, providing you with peace of mind about the condition of your property.
You can find a surveyor to carry out a Homebuyer’s report or building survey through the Royal Institution of Chartered Surveyors.
Whether you are a first time buyer in Grimsby actively viewing properties or a home mover 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 business we receive lots of feedback as to what sales tactics can be used, examples of this are:
“Keeping everything under one roof is easier with one point of contact”
“If you use our services it will give the vendor peace of mind that everything will go through smoothly”
“You need to come in and see our mortgage advisor for your offer to be qualified”
“Your offer is more likely to be accepted if you use our mortgage advisor”
“We get better deals than most brokers”
“Everything is likely to go through quicker if you use us”
“We will do all of the chasing of the solicitors for you and they’ll be more responsive to us due to the amount of work we send them”
“We’ll give you a free carpet/washing machine if you use our (extortionately priced) recommended conveyancing service”
Remember, when negotiating a purchase price, do you really want the seller of your property having access to your personal financial situation and potentially knowing your maximum borrowing?
Mortgage Protection Insurance is a term used to encompass various types of cover designed to protect borrowers from events which could severely impact their ability to maintain mortgage payments.
There are different variations but when connected to a mortgage they are all there to provide peace of mind and usually fall into the following categories:
As a rule, if the policyholder dies within the term, then the sum assured should be enough to pay off the outstanding mortgage balance and ensure the borrower’s dependents aren’t left with a debt they might not otherwise be able to manage.
Our advisors can run through all the different types of life cover and recommend the most suitable plan for you, having cover is really useful for first time buyers in Grimsby.
Critical Illness Insurance works in a similar way to Life Assurance, in that it is usually taken for a specific term of years and can have different options such as level/increasing etc. It is designed to pay out a lump sum and, like Life cover, for borrowers, it is typically taken on a decreasing term basis in line with the reduction of your mortgage balance.
The key is that the benefit is paid if you fall victim to one of a number of specified critical illnesses and pays out whatever the long-term prognosis of that illness. The type of illnesses covered vary from company to company, that’s why this type of insurance cannot be solely price-driven and advice is recommended.
In practice many companies will offer Life and Critical Illness Critical cover as a combined policy and would usually payout on the “first event” i.e. whatever happens first – either death or a serious illness – the pay-out is made. They can also be written on a single or joint life basis.
Whereas Life and Critical Illness cover pay out a lump sum, Income Protection pays out a monthly sum designed to replace your wages in the event of you being unfit to work. Unlike Critical Illness cover, there are no restrictions on the illnesses or injuries covered, the only factor being whether they make you unfit to work. There are however restrictions on how much you can cover and how quickly benefits would start to be paid.
Like Life and Critical Illness cover, these policies are underwritten based on your health and lifestyle at the time you apply. All income protection policies are written on a single life basis.
Probably the least common of the mortgage protection type policies but can often be valuable – particularly for those with young families. These plans can be taken to cover Life and/or Critical Illness and are underwritten on application in the same way as mentioned above.
However, unlike the traditional forms of policy, rather than pay out a lump sum, the cover would pay an annual or monthly income for the remainder of the term of the plan. Thus, it can replace the income of the main breadwinner for a number of years, dependent upon a particular client’s circumstances and, because of this would usually be written on a level or basis, or an index-linked basis designed to keep up with inflation.
There’s an adage that says you can never have too much insurance. Certainly, many people have one or more of the different types of policy and it would be wrong to think of Mortgage Protection Insurance as just an “either/or” choice. However, in the real world, affordability plays a massive part, so whilst it would be fantastic to cover yourself for every potential opportunity, a good advisor will sit down with you and tailor the type of cover to be the most suitable combination to your family’s priority and budget.
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Grimsbymoneyman.com & Grimsbymoneyman 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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Grimsbymoneyman.com & Grimsbymoneyman 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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