What is a mortgage?
A mortgage is a loan from a bank or building society that enables you to purchase property. The loan is repaid with interest over a number of years, with the term for doing this dependent on your personal financial circumstances.
A mortgage can be held by an individual or jointly between one or more people, but if you do not keep up your repayments, your home could be repossessed by the lender.
Will I be accepted for a mortgage?
All mortgage lenders have their own criteria. The following factors all play a part in determining their mortgage offer and how much they are willing to lend to you:
- Amount you wish to borrow
- Size of your deposit
- Employment status and income
- Credit rating
- Existing debt
- Your age
- Length of the mortgage term
- Your credit status
- If you are applying solely or jointly
In order to be accepted, you need to convince lenders that you are able to repay your mortgage. To do this, lenders typically use your credit report to check your repayment history. Your credit file will contain current and existing records on items such as credit cards, loans, overdrafts, mortgages, mobile phone/s, some utilities payments and all accounts opened in the past six years. If you have had arrears, defaults, CCJs, debt management plans or previously been made bankrupt, there are mortgage options available which we can help you with.
How does the mortgage application process work?
To get a mortgage, you will need to save a deposit of at least 5%. However, the more you can save, the better your rate will usually be. If you already own your own home, you can use the equity in your property for this. Our expert mortgage advisors can talk you through the benefits and the difference in your monthly payments by increasing your deposit.
Once you have found the property you want to buy, our mortgage advisors will assess your personal needs and circumstances and recommend a mortgage product that is right for you. They will compare hundreds of mortgage quotes, including a number of exclusive products that cannot be found on the high street or comparison sites, and ensure that you get the right deal at a great price.
If you are happy with the mortgage product your advisor recommends, you will pay an upfront fee to receive your Agreement in Principle (AIP). This will give you an approximate sum of how much the lender is willing to let you borrow, and enable you to put an offer in on your dream home.
If your offer is accepted, you will need to appoint a solicitor to handle searches, surveys and contracts, which we can arrange for you. We handle the entire mortgage application process through to completion, liaising with your solicitor and lender to ensure that your application is a success.
If you are looking to remortgage, then we recommend looking for a new mortgage deal around 3 months before your current deal expires. Starting early will give you plenty of time to compare all the available mortgage products and submit your application. If your mortgage is approved early there's no need to panic, as we will ensure that the completion date corresponds with your current deal's end date.
How much can I afford to borrow?
Most mortgage lenders will lend you up to five times your salary. However, this is dependent on a number of factors including your age, number of dependants and current financial commitments. Lenders generally work out how much they will lend you based on what you can realistically afford each month after you have paid your bills, credit cards, loans etc.
Our mortgage advisors can help you understand how much you can realistically borrow before an application or credit search is completed, by assessing your individual needs and circumstances. If you choose to proceed with an application, then our advisors will know which mortgage lenders to approach to ensure you get the required loan amount.
How much deposit will I need?
To buy a home with a mortgage, you will need to save a deposit of at least 5%. The more you can save, the better your mortgage rate will be. There are a few exceptions to this however as follows:
- If you already own a home, you can use the equity from your property for the deposit
- If you are a council tenant and are looking to buy your current home under the Right to Buy scheme, most mortgage lenders will now accept your Right to Buy discount as a deposit.
With property prices increasing, first time buyers are struggling to save enough money to buy a home. The government has therefore introduced 'Help to Buy' to enable first time buyers to get on the property ladder.
Our professional mortgage advisors are experts on all the various mortgage deals available and can help you decide which mortgage deal best fits your needs.
What are the associated costs with buying a house?
When buying a home, you will need to not only have enough money saved for your mortgage deposit, but also your mortgage fees, moving costs and legal expenses. We have compiled a handy list below of all the possible purchase and moving expenses you may have to pay, to help you with your budgeting. The exact fees and amount you will pay, is dependent on the value of the property you are buying and your chosen mortgage lender.
Mortgage booking fee: Some mortgage lenders will charge this to secure a fixed-rate or tracker deal.
Cost: £99 - £250
Mortgage arrangement fee: Some mortgage products will incur a mortgage arrangement fee, in addition to the mortgage booking fee. This fee is either paid upfront or added to your mortgage debt. If you chose to add it to your mortgage, the cost will increase over the lifetime of your mortgage.
Cost: £1,000 - £2,000
Telegraphic transfer fee: Needs to be paid to the lender to transfer the amount you are borrowing for the mortgage to the seller's solicitor.
Cost: £25 - £50
Mortgage broker fee: If you use a mortgage advisor to arrange your mortgage for you, you will need to pay a fee or commission, depending on the value of your mortgage.
Cost: £95 - £495. However, this may vary if you need to use a specialist lender
Valuation and survey fees: Charged by the lender to value the property you are buying. The cost varies according to which survey you choose:
Home condition survey: Most basic and cheapest of all the surveys and often used for new-builds.
Homebuyer's report: More in-depth survey, assessing the inside and outside of the property, and also includes a valuation.
Building survey: A complete survey generally used for older or unconventional properties. Although they are the most expensive, they are certainly worth considering, as it could potentially save you a lot of money if any structural problems are found with the property.
Higher lending charge: Can be charged by lenders if you borrow most of the value of the property.
Cost: Approximately 1.5% of the amount you borrow
Searches: Your solicitor will arrange for the local authority to check whether there are any issues that could affect the property's value. The local council can charge a fee for carrying out these searches and may also request that a drains search be done at the same time.
Cost: £250 - £300
Legal costs: You will need to instruct a solicitor to carry out the necessary legal work for you.
Cost: £850 - £1,500 plus VAT
Stamp Duty Land Tax (SDLT): Charged on all purchases of UK land and property over £125,000. However, the amount you will pay is dependent on the purchase price of the property you are looking to buy, and whether you have owned a home before as follows:
First home: First-time buyers are exempt from paying SDLT on the first £300,000 of the purchase price of a property up to the value of £500,000. All purchases in excess of £500,000 will pay the standard stamp duty rates as follows:
- £0 - £300,000: 0%
- £300,001 - £500,000: 5%
Next home: If you are currently or have previously been a homeowner, you usually pay SDLT on increasing portions of the property price:
- £0 - £125,000: 0%
- £125,001 - £250,000: 2%
- £250,001 - £925,000: 5%
- £925,001 - £1.5 million: 10%
- £1.5 million+: 12%
Second property: If you are looking to buy an additional property, you usually have to pay 3% on top of the normal SDLT rates as follows:
- Less than £125,000: 3%
- £125,001 - £250,000: 5%
- £250,001 - £925,000: 8%
- £925,001 - £1.5 million: 13%
- £1.5 million+: 15%
For example, if you buy a next home for £275,000 the SDLT you owe is calculated as follows:
0% on the first £125,000 = £0
2% on the next £125,000 = £2,500
5% on the final £25,000 = £1,250
Total SDLT = £3,750
Information correct as of December 2017 - Source: www.gov.uk/stamp-duty-land-tax... costs: Paid to the removal firm (if you choose to use one) to pack, transport and deliver your possessions to your new home.
Cost: £300 - £600
What type of mortgage do I need?
For the majority of mortgages, you borrow money from a lender to buy a property and pay interest on the loan until you have paid it back. The only exception are interest-only loans. Here are the different types of mortgages available:
- Fixed rate
- Variable rate
- Discounted rate
- Capped rate
- First time buyers
- Buy to let
Repayment mortgages: Every month you make a payment which is calculated so that you pay off some of the capital you have borrowed, as well as the interest. By the end of your mortgage term, you would have repaid the entire loan.
**Interest-only mortgages: **Each month you pay only the interest on your mortgage and repay the capital at the end of your mortgage term. This option will not suit everyone, as you will need to guarantee that you can find the money when the time comes. If you don't, you risk having to sell your property to pay off the mortgage. Lenders can also insist that you provide evidence on how you intend to do this.
Fixed rate mortgages: Popular with first time buyers, as you know exactly how much you'll be paying each month for a particular length of time.
The disadvantages are that you may have to pay a higher rate if the interest rate falls, and a repayment charge if you either switch or pay off your mortgage before the end of the fixed term.
The lender will also automatically place you on a standard variable rate (SVR), which will probably have a higher interest rate, in which case you will need to apply for another fixed rate deal.
**Variable rate mortgages: **Also known as a Standard Variable Rate (SVR) and are every lender's basic mortgage. The interest rate fluctuates, but never above the Bank of England's base rate and is determined by your mortgage lender.
Tracker mortgages: Vary according to a nominated base rate, normally the Bank of England's, which you will pay a set interest rate above or below.
Discount rate mortgages: Some of the cheapest mortgages around but, as they are linked to the SVR, the rate will change according to the SVR and are only available for a fixed period of time.
Capped rate mortgages: A variable rate mortgage, but there is a limit on how much your interest rate can rise. However, as mortgage rates are generally low at present, many lenders are not offering them.
Cashback mortgages: Lenders typically give you a percentage of the loan back in cash. However, you need to look at the interest rate and any additional fees, as it is very likely that you will be able to find a better deal without cashback.
Offset mortgages: Combines your savings and mortgage together, by deducting the amount you have in your savings, meaning you only pay interest on the difference between the two. Using your savings to reduce your mortgage interest means you won't earn any interest on them, but you will also not pay tax, helping higher rate taxpayers.
95% mortgages: Generally for those with only a 5% deposit. However, as there is a risk that you may fall into negative equity if house prices go down, mortgage rates are usually high.
**Flexible mortgages: **Allow you to overpay when you can afford to. Other mortgages give you this option too, but you can also pay less at particular times or miss a few payments altogether if you have chosen to overpay. This does however come at a cost, as the mortgage rate will generally be higher than other mortgage deals.
First time buyers mortgages: All of the aforementioned mortgages are available to first time buyers, although some are more favourable than others. The government also offers a number of incentives for first time buyers through its help to buy scheme.
Buy to let mortgages: Enables you to purchase additional property for renting purposes only. The amount you can borrow is partially calculated on the rent payments you expect to receive.
How much does a mortgage cost?
The amount you pay each month is dependent on the total cost of your property and the type of mortgage you have. The costs you may need to pay vary but typically include:
Interest: Accrues across the lifetime of the mortgage and is charged as a percentage rate on the amount you owe.
Mortgage fees: A product fee which is charged for taking out the mortgage.
Application fees: Charged on application, regardless of whether you take out the mortgage.
Valuation fees: Can be charged by lenders for calculating how much your home is worth.
Higher lending charges: Can be applied to mortgages that have a small deposit.
**Telegraphic transfer fees: **Charged by the bank for arranging to transfer the money they are lending you (usually to your solicitor).
**Broker fees: **Often charged if you use a broker to arrange your mortgage.
**Early repayment charges: **Can be charged if you repay your mortgage before the end of the agreed term.
**Exit fees: **Lenders can charge these if you move to a new lender.
**Missed payments: **These can be charged by your lender if you fail to keep up your repayments, which can increase the total amount you owe.
Can I get a mortgage with bad credit?
If you have a history of bad credit including; arrears, defaults, county court judgements (CCJs), debt management plans or bankruptcy, there are still mortgage options available. Your choice of mortgage lender and type of mortgage will however be limited, and the rate of interest will be higher than someone who has a good credit rating. Our expert mortgage advisors are in regular contact with adverse mortgage lenders and are well placed to advise you on all your available options.
How long does it take to get a mortgage?
Getting a mortgage application approved is dependant on you, your mortgage advisor, solicitor and lender. At CLS, we handle the entire process for you through to completion, communicating with your solicitor and lender to remove the stress and hassle from you and ensure that your application is a success. Having all the relevant mortgage documentation to hand ready for your mortgage advisor, will also help speed up the process.
Are there any government incentives for first time buyers?
The government has created the help to buy scheme to assist first time buyers in buying their own homes. The scheme consists of two parts; help to buy shared ownership and help to buy equity loan.
Shared ownership gives first time buyers the opportunity to buy shares (between 25% and 75%) of a new or existing property and pay rent on the remaining portion. With equity loan, the government will lend a new home buyer 20% of the purchase cost, which means you will only need a 5% cash deposit and a 75% mortgage to buy your home. If you are looking to buy a property in the city under the London help to buy, the government percentage the government will lend you increases to 40%. However, the cost of the property you can buy is capped at £600,000.
The help to buy initiative also includes a help to buy ISA, which rewards first-time buyers by boosting their savings. If you pay in £1,200 in the first month and then £200 a month thereafter, you will receive the maximum £3,000 bonus from the government when you are ready to buy your home.
The government's latest savings initiative the Lifetime ISA, also aims to help first time buyers get on the property ladder, and is beneficial for those who are looking to buy their first home within the next few years. You can pay in up to £4,000 a year and receive a 25% boost to your savings at the end of the first year and then each month thereafter.
If you would like to find out more about the help to buy scheme and check your eligibility, our expert mortgage advisors are here to help you.
What insurance do I need to buy a home?
When buying a home your mortgage lender will likely insist that you have buildings insurance in place before you exchange contracts.
Whilst it is not compulsory to have any other level of cover in place to buy a property, there are insurance policies that can help you through a rough patch. For example, income protection can pay your mortgage repayments for a fixed period of time, should you unexpectedly find yourself out of work due to an injury or illness, whilst a life insurance policy could completely clear your outstanding mortgage debt, should the worst happen to you.
If you would like to know more about the various protection options that are available, we can help. Our expert mortgage and protection advisors can meet or chat at a time to suit you, and can ensure that you get the right level of cover for your personal circumstances at an affordable price.
What are the different types of survey?
If you need a mortgage to buy your new home, then your mortgage lender will ask that a valuation be conducted on the property, before they determine whether they will approve your mortgage offer or not.
There are three different types of home surveys available. The survey your lender will request to be made, is dependent on the type of property you are looking to buy. For peace of mind, you can however pay to have a full structural survey carried out on your property, before you commit to buying it.
- Home condition survey: Most basic and cheapest survey, often used for new-builds
- Homebuyer's report: More thorough, as it evaluates the inside and outside of the property
- Building survey: A complete survey that assesses the full structure of the property, generally used for older or unusual properties.
Can I remortgage my home?
Most people are able to remortgage their home to get a new mortgage deal. There are many reasons why remortgaging could be a good option for you including:
- Getting a better mortgage rate
- Having the option to make overpayments
- Enjoying a more flexible mortgage
- Freeing up cash for some long awaited home improvements
- Purchasing additional property
- Saving money on your monthly repayments
- Reducing your current term
If you would like to know which remortgage options are available to you, get in touch! Our expert remortgage advisors will provide you with a free mortgage review and compare thousands of deals to find the remortgage deal that best fits your needs.
How can I remortgage my home?
The first thing you will need to consider before you remortgage is how much you can afford to pay. You can do this by collating your mortgage paperwork and recent bank statements together, to see what your current interest rate is and how much your monthly outgoings are.
You will also need to check if you will need to pay any additional costs such as; an arrangement fee to your new lender for setting up the mortgage, an exit fee and/or early repayment charges for leaving your current lender, and valuation and legal fees. Some fees can be added to your mortgage.
Remember, if you choose to do this, you will have to pay interest on them. Luckily, most remortgage deals have no or low set up costs. But, it's important to make sure you check first before committing to a new mortgage deal.
Part of our service in ensuring that you get the best remortgage deal, is to check whether a new mortgage deal would be the best option for you, based on the interest rate and any potential fees involved.
When should I remortgage?
If you current mortgage deal is due to expire, then you should ideally start to look for a new mortgage at least three months prior to this, to ensure that everything is in place when this happens.
If you feel that your current mortgage deal is restricting you however, and are considering switching to either get a better rate, reduce your term or simply want a more flexible mortgage, then it has never been a better time to do so, with interest rates at an all-time low.
To check whether now is the right time for you to remortgage, get in contact and see if you can take advantage of the fantastic remortgage deals available.
How much does it cost to remortgage?
If you are thinking of remortgaging your home, you may find that there are some charges for doing so. The exact fees and precise amount you will pay are dependent on your current mortgage deal and the value of the property you are buying. The typical fees you could be expected to pay are as follows:
Mortgage arrangement fee: Can be paid upfront or added to your mortgage debt. Remember, if you choose to add the Mortgage Arrangement Fee to your mortgage, you will ultimately pay interest on this.
Estimated cost: £1,000 - £2,000
Mortgage broker fee: If use a mortgage broker to help you remortgage, you will need to pay a fee for them to arrange this for you.
Estimated cost: £95 - £495
Valuation and survey fees: Your new mortgage lender may request for your home to be re-valued. The cost for this varies, depending on the survey the lender requests:
Estimated cost: £250 - £600
Legal costs: You may need to use a solicitor to take care of any required legal work for you.
Estimated cost: £850 - £1,500 plus VAT
How does a bad credit mortgage work?
If you have bad credit, the mortgage options available to you are similar to standard mortgages. However, you will have to pay a higher rate of interest, and will likely need a larger deposit of around 15% or more. The more you can save however, the better your chances are of getting your mortgage application approved.
Mortgage lenders see those with poor credit as a risk, and therefore charge a higher rate of interest and request a bigger deposit to mitigate this.
If you have a history of bad credit or are worried about your finances, get in touch. Our mortgage advisors are experts in adverse mortgages and can advise you on your available options to help you get on the property ladder.
How do i know if I have bad credit?
Most people have a general idea about their credit rating. But, it's important to check your credit rating before you apply for a mortgage. In doing so, you will know whether you will need to apply for a standard or poor credit mortgage, and avoid having a rejected mortgage application appear on your report, which could affect your future credit chances. To obtain a copy of your credit report, sign up to either Experian, Noddle or Equifax.
How can i improve my poor credit rating?
To improve your bad credit rating, there are a few things you can do to possibly increase your chances of being approved for a bad credit mortgage:
- Check that you are on the electoral roll
- Always pay your bills on time and in full
- Close any credit accounts you have for stores or catalogues and no longer use
- Consider applying for a credit builder credit card, to help show lenders that you can manage money responsibly
- Guarantor loans can also improve your credit score, if you keep on top of your repayments
- Regularly check your credit report to make sure that all the information is correct. If any of the details are incorrect, contact the relevant lender and ask for these to be amended.
Making these changes should help improve your credit score, but it will not happen overnight, especially if you have a history of bad credit or have missed multiple payments.
What happens to my mortgage when I move home?
When you move home, you should be able to transfer your current mortgage to your new property. As you will probably need to borrow more, in order to purchase your new home, your mortgage lender will want to value the new property.
Moving home is however one of the best times to get a better mortgage deal. You will firstly need to check if there are any early repayment charges or exit fees for repaying your current mortgage deal early, which your current lender should be able to tell you.
If there are penalties for leaving your current lender, then you will need to find a new mortgage deal that is sufficiently cheaper to cover these costs. Our mortgage advisors are remortgage experts and can tell you whether a new mortgage deal would be best for you.
How much does it cost to move?
When you move home, there are quite a few expenses involved which you may not have considered, especially if you change your mortgage lender. We have put together a handy list of all the associated costs when moving home below for your guidance. The precise fees you will need to pay are determined by the value of the property you are buying and your mortgage lender.
Mortgage booking fee: Some mortgage lenders will charge this to secure your mortgage deal.
Cost: £99 - £250
Mortgage arrangement fee: Some mortgages products charge a mortgage arrangement fee and a mortgage booking fee, which is either paid upfront or added to your mortgage debt. Remember, if you choose to add this cost to your mortgage, it will increase over the lifetime of your mortgage.
Cost: £1,000 - £2,000
Telegraphic transfer fee: Needs to be paid to the lender to transfer the amount you are borrowing for the mortgage to the seller's solicitor.
Cost: £25 - £50
Mortgage broker fee: If a mortgage broker arranges your mortgage for you, you will need to pay them a fee or commission for doing this.
Cost: £95 - £495
Valuation and survey fees: Your mortgage lender will request a valuation for your new home. The cost will vary according to which survey you choose:
Home condition survey: The most simple and cheapest survey, often instructed for new-builds.
Homebuyer's report: A more thorough survey, valuating the inside and outside of the property.
Building survey: A complete survey, commonly used for older or unconventional properties. If you want peace of mind, before you commit to buying your new home, this type of survey is certainly worth considering.
Searches: Charged by your local council for checking whether there are any problems that could affect the value of the property you are looking to purchase.
Cost: £250 - £300
Legal costs: A solicitor will be needed to carry out any necessary legal work for you.
Cost: £850 - £1,500 plus VAT
Stamp Duty: Paid on all UK land and property purchases over £125,000. The amount you pay is dependent on the purchase price of your property as follows:
£125,001 - £250,000: 2%
£250,001 - £925,000: 5%
£925,001 - £1, 500,000: 10%
If you are buying an additional property, the percentage you will need to pay is calculated as follows:
Less than £125,000: 3%
£125,001 - £250,000: 5%
£250,001 - £925,000: 8%
£925,001 - £1.5 million: 13%
£1.5 million+: 15%
Moving costs: If you need help to pack, transport and deliver your belongings to your new home, you will need to instruct a removal firm.
Cost: £300 - £600
Can I buy a property and sell my home at the same time?
In order to buy a new home with a mortgage, you will need to sell your existing home first. However, if you are struggling to sell your home, you could consider renting your property temporarily, until you are able to sell it.
A let to buy mortgage would enable you to lease your current property and buy a new home. Let to buy mortgage lenders will need to see that your rental income will comfortably cover your mortgage repayments. But, if you choose to continue letting your existing property instead of selling it, you will need a buy to let mortgage.
If you think a let to buy mortgage will help you secure the property of your dreams, you will need to apply for both a let to buy and residential mortgage, and ensure that both applications complete at the same time, which we can arrange for you.
Do I need to pay Stamp Duty Land Tax (SDLT) on a buy to let property?
If you buy a second property that is not your main residence, you will have to pay Stamp Duty Land Tax (SDLT) on it. The amount you will pay is dependent on the purchase price of the property as detailed below:
Less than £125,000: 3%
£125,001 - £250,000: 5%
£250,001 - £925,000: 8%
£925,001 - £1.5 million: 13%
£1.5 million+: 15%
Information correct as of April 2017 - Source:www.gov.uk/stamp-duty-land-tax/residential-property-rates
Am I eligible for right to buy?
If you have been a tenant in a council property for 3 years or more, then you may be able to purchase your home at a reduced price through the government's right to buy scheme.
Your eligibility will need to be confirmed by your landlord and right to buy mortgage lenders will need to ensure that you can afford to keep up the monthly repayments, before they approve your mortgage application. But, if you decide that becoming a homeowner is the right path for you, then we are here to help you.
How can I get a right to buy mortgage?
If you have received your right to buy documents from the council and are looking for a mortgage to purchase your home, you are in safe hands with us. As expert right to buy mortgage advisors, we can tell you how much you can afford to borrow and find the right mortgage product to suit your individual needs and circumstances.
When you are ready to process your right to buy mortgage application, we will manage the entire process for you; completing all the necessary paperwork, liaising with your lender and solicitors and keeping your regularly informed on the status of your application, so that everything runs smoothly from start to finish.
Can I apply for a right to buy mortgage with bad credit?
If you have a history of bad credit including; missing a few credit card payments or County Court Judgements (CCJs), there are still mortgage options available, even if you have previously been turned down by a high street bank or building society.
There are mortgage lenders who specialise in providing mortgages to individuals with a poor credit history. Interest rates for bad credit mortgages are usually slightly higher than standard mortgages, as you are seen to be a higher risk. However, if you keep up your repayments, your credit rating should improve and allow you to move to a standard mortgage within a few years.
Our mortgage advisors regularly deal with bad credit mortgage lenders, and are well placed to find you the perfect right to buy mortgage to suit your individual needs.
How much is the right to buy discount?
The right to buy discount varies according to how long you have been a tenant. If you have been a tenant in a council property for 3 years or more, you will receive 35% off the market value of your home. After 5 years, the discount increases by 1% for every additional year you have been living in your council property. The maximum discount you can receive is £77,900 or £103,900 if you live in London.
Can I use my right to buy discount as my deposit?
One of the main advantages of the right to buy scheme is that most mortgage lenders will accept your right to buy discount as your mortgage deposit. As expert mortgage advisors, we can help find you the perfect mortgage deal, which will accept your discount as your deposit, at a great price.
It's important to remember however, that although you may not need to save for a mortgage deposit to buy your council home, you may have to pay mortgage fees to pay as well as survey and conveyancing costs, so you should save and budget at least a few thousand pounds for these expenses.
How long after defaulting can I get a mortgage?
There's no definitive answer to this question since every situation is different, but typically you would need to wait at least five years after defaulting before being eligible for a mortgage with a high street lender. This is because high street lenders want to be sure that you're in good financial shape and have recovered from your previous financial setback before lending you money.
The UK mortgage market is very competitive, so there are many lenders who will be happy to work with you even if you have had some financial difficulties in the past. Which means it is possible to get a mortgage after defaulting, but you should expect higher mortgage rates and most likely a specialist lender.
To give yourself the best possible chance with lenders, you have to re-establish a good credit history, which usually means being timely with your payments on all other debts and be prepared to provide lots of documentation and answer lots of questions about your current and previous financial situation.
If you can demonstrate that you've made significant strides in improving your credit score and overall financial situation in the last few years, then you may be able to get a mortgage with a high street lender sooner. So, start planning now, and get on track with your finances if you want to buy a home within the next few years!
What does a discharged CCJ mean?
To understand a discharged CCJ you must first understand what a CCJ is. A CCJ, or a County Court Judgment, is a type of court order that can be issued in the UK if someone owes money to another person or organisation. A CCJ will state how much money is owed and will also set out a repayment plan. If the debtor does not stick to the repayment plan, then they may be ordered to pay the full amount of the debt plus interest and other costs.
Which leads onto the main question, what is a discharged CCJ. A discharged CCJ means that the debtor has fulfilled their obligations under the repayment plan, and so the debt has been cleared. This can happen if the debtor pays off the full amount of the debt, or if they make all of their payments on time for a certain period of time (usually 12 months).
A CCJ can be made against you when you don't repay payments on things like credit card bills, personal loans, utility bills or any other kind of debt. If the debt is for something small, like an overdue gym membership, the creditor may just send you a letter asking for payment, or they could issue you with a CCJ. But if the debt is bigger, they are much more likely to take you to court and get a CCJ issued against you.
Once a CCJ has been made, it'll stay on your record for six years. This means that if you try to take out a loan, credit card or a mortgage during that time, the lender will see the CCJ and could refuse your application. It is best practice to consult a specialist advisor before trying to secure debt with a CCJ regardless of whether it is discharged or not. This is especially important when it comes to larger loans such as mortgages.
How long after a repossession can I buy a house?
It depends on a lot of factors - how much you owe on the repossessed property, your income and employment status, how much deposit you have saved up, and your credit score are just a couple of areas that lenders would assess. Generally speaking, most people who have their home repossessed will need to wait at least two years before they can buy another one. The lender may also require a larger deposit than what is typically required for a standard mortgage.
But to be clear, there is no hard and fast rule about this, and it will depend on your individual circumstances. In time you should be able to buy a house after a repossession, this may be longer in cases where the repossession was caused by financial misconduct on your part. Also, keep in mind that the sooner you can start repairing your credit, the better your chances will be.
The reason why lenders will be cautious for a few years is because they will want to see that you've re-established yourself financially and are in a position to make regular mortgage payments.
Of course, there are always exceptions to the rule and some smaller and more specialist lenders may be willing to consider your application sooner. So, it's definitely worth shopping around and speaking to different banks and building societies before making a final decision. Ultimately, the wisest decision is to speak to a financial advisor who will fully review your entire situation.
How long does a default stay on a credit file?
A default stays on your credit file in the UK for six years. This means that potential creditors will see the default on your credit file for six years, which could potentially have a negative impact on your ability to obtain credit in the future, the severity of the impact will decrease over time.
The good news is that you can start to rebuild your credit rating as soon as the default is registered on your file. You can do this by getting a copy of your credit report and checking that you're paying all of your bills or debt in full and on time, this is a great start to help improve your credit rating.
If you are having trouble paying your debts, it is important to speak with your creditors as soon as possible to try to reach a payment arrangement. Creditors may be willing to work with you if you can show that you are making a good-faith effort to repay your debts. Additionally, there are various debt relief options available that may be able to help you get back on track financially.
If you have a default on your credit file, it can be very difficult to get a loan or a mortgage from the normal avenues, such as high street banks and building societies. You may find that you are unable to get approved for any credit at all. You can improve your chances of getting approved for credit if you speak to a specialist credit or mortgage advisor, it is extremely important to be truthful and honest when answering questions and providing documents.
How long do CCJs last?
In the United Kingdom, CCJs (county court judgments) usually last for six years. However, this can vary depending on the specifics of your case. It is always best practice to speak to a licensed solicitor or another legal professional when it comes to the specifics surrounding your own personal circumstances.
If you are trying to apply for a loan or a mortgage during the six years, the CCJ will more than likely have an impact on your application, obviously this depends on a lot of factors, but if the CCJ is recent, it doesn't matter how perfect all other areas of your application may be, this is something that lenders will still need to consider.
However, it's important to keep in mind that a CCJ is not the be-all and end-all when it comes to your credit profile. It is still possible to secure a mortgage or credit even with a CCJ on your account, it will just require specialist advice and exploring unconventional avenues, such as lenders you may not find on your typical high street.
Obviously, the chases of being approved by these lenders can be imparted by other negative marks on your file (e.g., missed payments). But with the right knowledge, and a true and honest reflection of your circumstances, then a professional experienced advisor could steer you in the right direction.
What is a good credit score for a mortgage in the UK?
Depending on which credit reference agency you use, a good credit score for a mortgage in the UK is anything above 700. Lenders will generally offer better interest rates to borrowers with scores above 700, and those with scores below this threshold may find it more difficult to obtain a mortgage or may have to pay higher interest rates.
If your credit score is below 700, there are still options available to you, but you may have to pay a higher interest rate or put down a larger down payment. You can improve your credit score by paying off your debts and by making sure that all your credit is in order.
The biggest thing to remember here however, is that lenders will not just look at your credit score to determine how risky it is to lend you money, they will scrutinise the historic events that influence the score a lot more harshly than they will the actual score itself.
A higher score does not automatically mean you are more likely to be able to secure a mortgage. It is however a good indicator that you have little or no prior credit issues, this will in turn indicate that you are more likely less of a risk to lend money to and therefore increase your chances to secure a mortgage.
It's important to work on improving your credit score through good financial decisions such as repaying your debt on time and in full, and not living above your means. These factors will not only help you increase your credit score they will also help you get the best interest rate possible on a mortgage.
How soon will my credit score improve after bankruptcy in the UK?
Generally speaking, you can expect your credit score to start improving within about two years of declaring bankruptcy. This is because the stain of bankruptcy will stay on your credit report for up to seven years, but your new, post-bankruptcy credit history will start contributing to your overall score after two years have passed. It does however depend on a few factors, such as how long ago the bankruptcy occurred and what your current credit score is.
Filing for bankruptcy is a serious decision, and it will definitely have an impact on your credit score. However, if you take steps to rebuild your credit history after bankruptcy, you can begin to improve your credit score over time.
Keep in mind that it will likely take some time before your score reaches its pre-bankruptcy level, but with perseverance and patience, you should be able to get there. It is worth noting that any additional misconduct will likely cause your score to drop further, losing any positive impact that you may have made, so after bankruptcy, it is imperative to stay on the straight and narrow.
Speak with a professional and experienced mortgage advisor to learn more about how to improve your credit score and conduct your finances after bankruptcy, they may also be able to explore your current options and provide estimates of what to expect once your credit score recovers.
How many missed mortgage payments before repossession in the UK?
There's no one definitive answer to this question since it will vary depending on the mortgage lender, the terms of the mortgage agreement, and the state of the housing market. However, most experts agree that if you miss 3-6 mortgage payments in a row, you'll likely be facing foreclosure.
If you're behind on your mortgage payments, it's important to get caught up as soon as possible. Missed payments will not only lead to foreclosure but they will also have a devastating impact on your credit score and other related finances.
Contact your lender if you're having trouble making your monthly payment and see if there are any solutions available to you. You may be able to work out a modified repayment plan or even refinance your mortgage altogether. Don't wait until it's too late.
What are lifetime mortgages?
A lifetime mortgage is a type of mortgage where you can borrow a set amount of money and then repay it, plus interest, over your lifetime. It's often used as a way to release equity from your home in order to help pay for things like home improvements, early inheritance, or long-term care.
There are two main types of lifetime mortgages: those that are repaid through regular payments (similar to a traditional mortgage), and those that are repaid in one lump sum at the end of the loan term. The latter type is sometimes called a "roll-up" mortgage.
The interest rate on a lifetime mortgage is usually fixed, which means that your monthly repayments will stay the same for the life of the loan. This makes it a more predictable option than some other types of home equity release products.
It is strongly recommended to speak with a financial advisor to find out if a lifetime mortgage is right for you, there are many options to explore, some of which are not obvious right away to the regular consumer, but with help from a financial advisor, more intricate and technical solutions can present themselves.
How to get a mortgage with bad credit?
A bad credit score doesn't have to mean the end of your mortgage search. Many mortgage providers specialise in lending to those who've had problems with their finances.
What is bad credit?
If you've ever failed to make a payment on a credit card, loan, utility bill, or struggled with a previous mortgage or financial arrangement, the details will have ended up on your credit report, affecting your credit score.
A poor credit score affects how lenders of every type view the level of risk you represent; that dictates whether they choose to lend you the money you need or not.
If you've been rejected for credit in the past, it's likely it was because of your credit score. However, that doesn't necessarily mean you'll be rejected again.
What are bad credit mortgages?
A bad credit mortgage is the same as any other mortgage, but there are a few differences in how they work.
Because the borrower is considered a higher risk, these products compensate for safeguarding the loan amount.
- Loan amounts are lower.
- Interest rates are higher.
- You'll need a lower LTV (loan-to-value ratio) by providing a higher deposit.
Proving to lenders that you're a reliable option for a mortgage
The first thing you need to do is show lenders you're not the risk you once were. That means cleaning up your credit report and improving your credit score.
There are several ways to improve your credit score, so ensuring you've acted upon as many as possible should help improve your chances of landing the mortgage you need.
You can show you're responsible and in charge of your finances by:
- Making all regular utility, credit and loan payments in full and on time.
- Reducing costs, showing you have money left over at the end of each month.
- Ensuring all information on your credit report is correct; that includes any past actions, relationships, or issues that have since been resolved.
- Stop applying for additional credit.
- Keep the balance on credit cards as low as possible and always make minimum monthly payments.
- Produce honest explanations of how any problems happened. There are many acceptable reasons you may have struggled in your past. Most lenders understand that we all face issues and emergencies that are out of our control at some point.
What's the interest rate for first-time home buyers?
How long is a piece of string? Sadly, as much as we'd love to give you the figure you're looking for, it's an almost impossible practice.
Mortgage interest rates depend on such a wide range of factors we couldn't possibly narrow it down to a specific number for every type of buyer and loan type.
Interest rates depend on all the factors that go into a mortgage application. That includes your income, outgoings, credit score, deposit, mortgage term, and property price.
Current ballpark figures suggest that typical standard variable rates of the high-street banks are around 4% to 5%. For now. Be prepared for them to change depending on the state of the economy.
The same high-street lenders offer fixed rates over 2 and 5 years with interest rates between 2% and 3.5%. But be careful, many of those come with set-up fees of as much as £1000.
You might be better off opting for a higher interest rate option with a zero fee over the fixed-rate term. After all, you can renegotiate a new deal at the end of the fixed-rate term.
When it comes to figuring out the best option for your circumstances, it's worth speaking to an expert. That could be a mortgage broker or a financial advisor; either way, it's their job to help you get what you need.
Fixed-rate and tracker, repayment and interest-only mortgages
Such a simple-sounding heading covers thousands of mortgage options.
As a first-time buyer, you can choose a repayment mortgage, where every month you chip away at the total cost of your home, or an interest-only mortgage, where you only ever pay off the interest on the loan.
Interest rates for both options will vary depending on your LTV (loan to value ratio), determined by the deposit put down against the property. Your interest rate will also vary depending on your credit score, if approved at all.
For example, let's look at the tracker mortgages for one of the major high-street banks. At the time of writing, they're offering a 2.34% variable rate on 90% LTV mortgages, with 1.74% rates available for 60% LTV options. Both have a booking fee of £999, reverting to their (current) variable rate of 4.04%.
Alternatively, a 2-year fixed-rate option comes with a 2.79% rate with a zero fee or 2.44% with a £999 fee at a 90% LTV. Opt for a 5-year fixed-rate, and it's 3.19% with the zero fee and 3.09% with the £999 fee.
There are hundreds of providers with thousands of mortgages. And it could all change month to month. So finding the right mortgage at the best interest rate can prove to be quite the adventure.
How much deposit do I need as a first-time home buyer?
Buying a home is likely to be the costliest purchase we make. Even for the most affordable houses or apartments, you're likely to need at least £5k or £10k, and as much as £50k for dream first homes or those in prime locations.
The UK average is fluctuating between £15k and £20k at the moment, with mortgage deposits growing as property prices continue to rise. Why? Property prices tend to increase steadily with inflation, but they took further substantial leaps at the beginning of the COVID pandemic and, more recently, under the cost of living crisis.
How to calculate your ideal deposit amount
Working out how much you can borrow depends on your income, outgoings, and credit score. The rule of thumb for typical borrowers is around four times your annual salary. However, assuming you'll be offered interest rates that convert to affordable repayments by putting the minimum 5% deposit down is unlikely. There are lenders currently offering 5% deposit mortgages, but not many, and not at the favourable terms you want.
To achieve those preferable interest rates, you're far more likely to have to put down a deposit somewhere between 10% and 25%.
Let's consider a house or apartment at the lower end of the market costing £100k; that equates to:
- 5% deposit = £5,000
- 10% deposit = £10,000
- 15% deposit = £15,000
- 25% deposit = £25,000
For a slightly higher-priced property, let's say £250k, the numbers rise to:
- 5% deposit = £12,500
- 10% deposit = £25,000
- 15% deposit = £36,500
- 25% deposit = £62,500
How can I put together a bigger mortgage deposit?
Those figures could be enough to stop many first-time buyers in their tracks. However, all is not lost! There are schemes available to help first-time buyers get on the property ladder, some of which are designed to boost the deposit amount they can put down against their mortgage applications.
- Help-to-buy scheme
- Shared equity scheme
- Lifetime ISA scheme
There are also mortgage opportunities that allow parents and family members to help their children win their first mortgage.
- Family gift and loan deposit mortgages
- Joint mortgages with parents or family members
- Guarantor mortgages with parents or family members
First-time buyer – “How much house can I afford?”
To determine how much money you can afford to spend on your first owned home, you'll need to know how much lenders are likely to offer you and work out how much deposit you can put together.
With those figures to hand, there are additional expenses you'll need to consider and cover, such as professional and mortgage fees, insurances, taxes, surveys, moving costs, and all of those other unexpected costs you'll meet along the way.
Your deposit and salary are the first steps of the calculation
Assuming you've saved a decent deposit—most lenders will hope to see at least 10% to 15% before lending you a preferable rate—hopefully, you should receive an offer around four times your salary.
However, having considered your deposit and other relevant criteria, the amount they're willing to lend is only the start. The second part of each offer is the interest rate your lender is prepared to offer. The higher your deposit and the lower the risk you appear to be, the more preferential your interest rate will be. Why is this important? The interest rate dictates how much your monthly repayments will be—the higher the interest rate, the higher your monthly repayment figure.
The higher your monthly repayments are, the less money you'll have available for everything else at the end of each month.
Calculating a home buyer's affordability
As well as your salary or primary income, lenders consider any additional income you may have and your monthly outgoings.
Their affordability calculations have to be thorough to ensure you can afford your repayments. Each affordability check includes:
- Your current rent payments
- Utility bills
- Council tax
- Travel and commuting costs
- Monthly grocery purchases and essential living supplies
- Credit card and loan payments
- Child maintenance
- School fees and childcare
- Insurance costs
- How much you spend on entertainment and leisure
- Holidays and travel breaks
Finally, to evaluate the level of risk you represent, your lender will also examine your credit report. For those with a low credit score, it's worth making every effort to improve it and your chances of being accepted for the mortgage you want.
Getting on the property ladder isn't easy. Many first-time buyers have to accept some form of help getting approved for their first mortgage. Here are a few ways it happens:
- Support from a parent or family member with a deposit as a gift or loan.
- Having a parent or family member act as a guarantor.
- Taking out a joint mortgage with a parent or family member.
- Taking out a joint mortgage with a partner or friend.
We are growing a forest
Planting a tree with every mortgage