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How Could an Interest Rate Rise Affect You?

Wed, 19 Jan 2022 20:42:04 GMT

How Could an Interest Rate Rise Affect You?

Mark Conway, Mortgage Specialist at Finance Remedy, shares his top 5 tips homeowners should consider to help manage an interest rate rise.

1. Explore locking in a fixed rate mortgage

Existing borrowers whose mortgages are directly linked to the bank rate may see an increase in monthly repayments. Those who are on lender revert rates or Standard Variable Rates (SVRs) will have to wait and see if their lender will pass on the rate increase in full or only in part, whereas those who have a tracker rate mortgage are more likely to see the rate passed on in full, and possibly as soon as their next mortgage payment.

A fixed rate mortgage could provide a temporary safe haven against upcoming interest rate rises as their fixed interest rates are guaranteed for a set time period.

If you’re remortgaging, make sure to speak to your lender about your mortgage terms as there may be exit fees or early repayment charges to consider.

2. Move quickly

It’s not uncommon to find that any hint of an increase can impact the market and therefore what mortgage deals are on offer and for how long. The sooner consumers act, the more likely they will be to secure a rate close to the lowest ever levels.

For most people a remortgage is a fairly straightforward process and certainly not something to be scared of.

Likewise, for those nearing the end of their current fixed rate mortgage deal or who are considering new borrowing, it may pay to contact a broker or lender to start the process sooner rather than later to secure a competitive deal.

3. Shop around for the best deal

Whether you’re a new buyer or looking to remortgage, make sure you shop around. A mortgage broker can help you find the most suitable deal for your circumstances and factor in true costs.

It’s important to not only think about headline rates, but also assess any additional fees that may be involved..

4. Work out what you can afford

Creating a budget based on your income and outgoings will help you to see any areas where you can potentially cut back on and make some savings, either to help boost your deposit or assess if you can overpay your mortgage.

It can also help you create a savings buffer should any unexpected financial costs or bills arise in the future.

To help work out your monthly repayments on your mortgage or even your overall monthly spending, try this mortgage affordability calculator or mortgage calculator .

A mortgage adviser can also help you with budgeting and affordability – this will be the first thing they look at to ensure you can afford mortgage payments both now and in the future.

5. Overpay your mortgage if and when you can

As mortgage interest accrues on the full amount of your mortgage over its entire term, consider overpaying to reduce the amount on which interest is charged. Doing so may help not only pay off your mortgage debt faster, but also be a big money saver in the long run. For example, if you have a £100,000 mortgage over 25 years with an interest rate of 4%, and you pay off an extra £100 a month, you could reduce your mortgage term by six years and save £15,534 in interest. Keep in mind though whether you can overpay on your mortgage without a penalty. A 10% overpayment facility per annum without incurring penalties is fairly typical of many products. If there is an early repayment fee, it’s worth speaking to your mortgage adviser to see if the overpayment charge outweighs the other benefits of making overpayments.

Mortgage Advice

We hope this information has helped, but if you have any further questions about how to get a better mortgage deal or if you want to get a free review with one of our trusted mortgage advisors, get in touch and we’ll assist with all your buy to let mortgage needs.

What is a Buy to Let Mortgage? Everything You Need to Know

Mon, 17 Jan 2022 14:17:56 GMT

What is a Buy to Let Mortgage? Everything You Need to Know

If you plan to rent out a property, you’re going to need a buy-to-let mortgage. And there are some key differences between buy-to-let and ordinary mortgages that can potentially make it more difficult to buy a property for rental purposes. At Finance Remedy we’re here to make the entire process easier for you. We’ll turn the confusing and stressful abundance of information available into a clear cut and exciting plan.

This blog post is designed to provide an in-depth introduction on buy-to-let mortgages. From interest rates to affordability criteria, to finding a buy to let mortgage calculator and understanding how much you can borrow, here is everything you need to know.

Who can get a buy-to-let mortgage?

There are certain criteria under which you can can get a buy-to-let mortgage:

You already own your own home, outright or with an outstanding mortgage.
You want to invest in houses or flats.
You can afford to take and understand the risks of property investment.
You have a good credit rating and aren’t stretched too much on your other borrowings, for example, credit cards.
You earn a certain amount, typically £20,000-£25,000 a year (if you are earning less than this it is still possible but you may find it more difficult to get a lender to approve your buy-to-let mortgage)

What is different about a buy-to-let mortgage?

Mortgage providers see buy-to-let mortgages as higher risk than residential mortgages. Often because landlords are faced with problems like rent collection and the possibility that your property will not be constantly occupied. Tenants also have lots of legal protection under tenancy rights.

With higher risk involved you often need to pay a larger deposit, usually at least 25% of the total value of the property, depending on the lender and type of mortgage. Other fees like arrangement and interest also tend to be higher too when taking out buy-to-let mortgages.

As most buy-to-let mortgages are interest-only, landlords usually only pay monthly interest payments, rather than repayments on the full capital amount itself. This means you pay lower monthly payments, but the mortgage must be repaid in full at the end of the term. This often gives landlords useful additional income.

Most landlords will settle the outstanding mortgage by selling the property, although it is worth considering that if house prices have fallen since the time you bought the property you will have a shortfall to pay.

Alternatively, some landlords will invest in property for the capital growth and make full capital mortgage payments (not just the interest) so that it is fully paid off at the end of the term. This is a great way to leave assets for children in the future.

Holiday Let, AirBnB

This is a relatively new area for lenders which has taken off even more in recent months due to Coronavirus causing a spike in demand of people looking to holiday in the UK. There specific products available for this type buy to let where you can buy a holiday home for your own use and rent out the rest of the time.

Buy to let mortgage rates

Fixed Rate

Usually lasting between 2-5 years, a fixed rate mortgage deal means your monthly interest payments will stay the same for a se period. This gives you the security of knowing exactly how much you have to pay each month, so you can pass this onto your tenants by guaranteeing their rent won't increase.

However, the rates are usually set slightly higher than variable rate mortgages, and you won't benefit from any falls in the interest rate. Once this fixed rate period is over you’ll automatically roll onto your mortgage provider's standard variable rate and these rates are usually some of the most expensive, so you should start looking for a new deal before the end of your term.

Standard Variable Rate

Often your lender's default plan, the rate which you will normally be moved onto once your other deals expire. As mentioned above these are often the most expensive mortgage deals on offer, with the highest interest rates.

If you are on an SVR it’s key that you shop around to find a better deal, which can do without incurring an exit fee. But until then the lender can also change this rate at any time.

Tracker

A tracker mortgage has variable rates, dependent on the Bank of England's base rate. This means setting your interest rate at a certain level above theirs, and your monthly payments could go either up or down.

So if the Bank of England raises their interest rates, you’ll be hit with higher monthly payments. However, you could benefit from lower payments if the base rate drops.

Discounted Variable

These mortgages are set at a fixed rate below your lender's standard variable rate. So if your SVR is set at 5% and your discounted rate is fixed at -2%, you will be paying at a 3% interest rate. Discounted rates always move inline with the SVR, so you’ll be subject to the same rises.

They also only last for a specific period of time, usually around 2 years. So after this deal has expired you’ll be back on the SVR.

What else should I consider when getting a buy to let mortgage?

Letting Agent Fees

Using a letting or estate agent to manage your property means incurring letting agent fees.

These should be factored into your budget, but they can of course save you time and effort by carrying out credit checks on your tenants, writing contracts and chasing unpaid rent. They can also help ensure the rented home is safe and up to the correct living standards.

The cost for this type of ongoing management can be between 10-15% of your monthly rental income.

Plan for times with no tenants

Don’t assume your property will always be rented. There will almost definitely be periods when your property is unoccupied or rent isn’t paid and you’ll need to have a financial backup to make sure you’re meeting your mortgage payments.

When you do have rent coming in, use some of it to top up your savings.

You will also need savings for bills. If the boiler breaks down, there’s a blocked drain or any other issues with the property then you’ll need to be ready to pay for repairs.

Landlord Insurance

Also known as buy-to-let insurance, this provides cover for your property, it's contents and landlord liability. Most mortgage providers offer buildings insurance, which will cover your property in the event of fire or damage. Contents insurance is not mandatory but will cover any existing furniture you have in the property, including curtains and carpets.

You do not have to insure the contents belonging to your tenants, this is their own responsibility.

Landlord liability covers you if a tenant or visitor dies or is injured on your property. This is also not mandatory in most cases, but some areas of the UK do require you to have landlord liability, especially if you're renting to students.

Don’t rely on selling the property to repay the mortgage

If house prices fall, you might not be able to sell the property for as much as you’d hoped. Don’t assume you’ll just be able to sell the property to repay the mortgage because if this happens, you’ll be left to make up the difference on the mortgage.

Buy-to-let and tax

Stamp duty on buy to let properties

New stamp duty rates are in effect until March 31st, 2021, so if you’re buying property or a second home you’ll still need to pay an additional 3% stamp duty surcharge on properties up to £500,000, with even higher rates above this threshold. This means stamp duty on a buy-to-let home costing £200,000 will now be £6,000.

Income tax relief

Previously, landlords were able to off-set mortgage interest and buy-to-let mortgage arrangement fees against their income tax bills, at up to 45%. But this tax relief has been reduced and phased out over the past few years, and is now capped at 20%. This is only an issue at the moment if you are a higher-rate tax payer.

How much can I borrow for a buy-to-let mortgage?

Finally, down to brass tacks.

The maximum you can borrow is linked to both your deposit and the amount of rental income you expect to receive. Lenders will need your rental income to be 25–45% higher than the interest only mortgage payment. This is an important factor when looking at buy-to-let mortgages and worth talking to an experienced advisor like Finance Remedy about this area and they can run it through their buy to let calculator.

Also, do your research, search online, talk to local letting agents and find out how much similar properties in the area are rented for.

Anything else I should look out for?

Yes definitely!

Amongst other things - look out for both the type of property AND the type of tenant!

In terms of property - some lenders will not lend on certain construction types, high-rise flats above a certain number of storeys, some ex-council properties, flats above commercial premises etc.

In terms of tenants - there are different products and regulations for different types of occupiers. For example, for houses of multiple occupation (HMO’s) and even properties rented to family members there are specific products that often come with higher interest rates.

Potential buy to let investors should consider both the type of property and the type of tenant when considering a property purchase.

Buy to Let Mortgage Advice

We hope this information has helped, but if you have any further questions about how to get a buy to let mortgage or if you want to get a free review with one of our trusted mortgage advisors, get in touch and we’ll assist with all your buy to let mortgage needs.

Everything You Need to Know About When to Remortgage in Leeds | Finance Remedy

Wed, 25 Nov 2020 11:48:05 GMT

What is a Buy to Let Mortgage?
Everything You Need to Know

Your current mortgage deal might be coming to an end, or you might be simply looking to borrow some extra money to get you through these tough times. You might be sat there asking “When is the Right Time to Remortgage in Leeds?” At Finance Remedy we’re here to make the entire process easier for you. We’ll try to help answer any questions about remortgage rates and make sure you don’t leave it too late searching for a quote.

If you do, you could end up lapsing into your LSVR (Lender’s Standard Variable Rate) and chances are you’ll end up paying more than you need each month. We highly recommend that to keep on top of your mortgage, you speak to a remortgage advisor in Leeds.

We’re offering a completely free, no strings attached review with one of our expert mortgage advisors.

Is now the right time to Remortgage?

In response to the coronavirus virus outbreak the Bank of England made an emergency rate cut on the 11th March 2020 to 0.25% in a bid to reduce the economic impact of the pandemic. Interest rates were then lowered even further to their record low of just 0.1%, meaning now is a great time to consider fixing your mortgage. Don’t make the mistake of waiting for the BOE to raise interest rates before making your decision as by that point the best remortgage deals will have gone.

Remortgage Options in Leeds

There are plenty of remortgage deals out there, and you can even do your own research by looking into one of the remortgage comparison sites out there. Do beware of using comparison sites as they often favour certain providers and often show deals that many applicants simply won't qualify for.

You should certainly consider all options before deciding to consolidate debts, such as reducing non-essential expenditure as much as possible and even asking family members for assistance. But if you are clear and have decided that a Debt Consolidation Remortgage could be the right option for you, our remortgage advisors in Leeds will take responsibility for recommending the right mortgage for you and helping with the application. Current and previous clients have ended up reducing their payments by hundreds or even thousands of pounds.

Millions of mortgage borrowers may be able to save over £5,000 - can you?

Millions of UK borrowers could potentially save themselves more than £5,000 on their mortgage payments by switching to a new fixed rate offer, according to research by Experian .

The credit reference agency's recent analysis has found that up to 44 percent of the UK's 10.8 million mortgages are likely to be on their provider's Standard Variable Rate (SVR).

For example, a homeowner with a £150,000 20-year mortgage loan on a typical lender's SVR of 4.75 percent will have a monthly repayment of £969, Experian said.

Meanwhile, the same mortgage on a typical two-year fixed rate remortgage deal of 1.25 percent, would mean a monthly repayment of £707.

As such, Experian has said that switching represents a saving of £6,288 over the two years, or £262 per month.

Should I stick with my Lender or shop around for a remortgage deal?

Millions of UK borrowers could potentially save themselves more than £5,000 on their mortgage payments by switching to a new fixed rate offer, according to research by Experian .

The credit reference agency's recent analysis has found that up to 44 percent of the UK's 10.8 million mortgages are likely to be on their provider's Standard Variable Rate (SVR).

For example, a homeowner with a £150,000 20-year mortgage loan on a typical lender's SVR of 4.75 percent will have a monthly repayment of £969, Experian said.

Meanwhile, the same mortgage on a typical two-year fixed rate remortgage deal of 1.25 percent, would mean a monthly repayment of £707.

As such, Experian has said that switching represents a saving of £6,288 over the two years, or £262 per month.

Remortgaging for Home Improvements

Are you looking to do some much needed home improvement? Investing in your home by doing an extension or loft conversion can often be a great investment as they can add value to your home.

You can even increase your mortgage to pay for cosmetic updates, so if your bathroom or kitchen is starting to feel tired or dated, then you can remortgage to pay for those too. Many people borrow for Home Improvements even if they know their home might not go up in value. If you’re already in your “forever home,” or if you can afford it then there’s nothing wrong with borrowing for this purpose at all.

If a significant amount is needed, the Lender may ask for the estimates for the works you intend to have carried out. You don’t have to use the Contractor that provided the estimate to do the actual jobs, but it is something to keep in mind.

What is a Capital Raising Remortgage?

You can borrow extra funds for most legal purposes, and there are many reasons why you might wish to raise capital on your home. These types of mortgage are usually to release funds for other purposes.

You can raise capital on your property when you remortgage to do anything from home renovations, large consumer purchases, gifts to family members, to purchase a Buy to Let property or to simply consolidate existing debts.

Many people use remortgage to take advantage of lower mortgage interest rates while consolidating loans into one manageable monthly fee. Finance Remedy are experts in finding the right capital raising mortgage deal suitable for your needs.

Remortgage to raise deposit for an Investment Property (Buy to Let)

Many people understand bricks and mortar as an investment much more than other types of investment they can't physically see or touch (such as stocks, shares and bonds etc). This is why thousands of homeowners have taken funds out of their home via a Remortgage to buy a property to rent out. Many of our clients at Finance Remedy have started this way and grown impressive property portfolios from that first remortgage. Whether buying just one property for extra income to top up pension or buying and selling property as a business, using the spare equity in their homes can provide the gateway to achieve this.

Whatever your current situation, we’re here to find the best remortgage options for you.

Speak to a trusted mortgage advisor in Leeds and we’ll assist with all your mortgage-related needs.

Finance Specialist Tips for First-Time Buyers | Finance Remedy

Tue, 01 Sep 2020 09:00:02 GMT

Finance Specialist Advice: Our Top Tips for First-Time Buyers

Dipping your toes into the property market as a first-time buyer can be one of the most daunting and overwhelming experiences of your life. With an ever-fluctuating economic climate and a great variety of factors to take into consideration, it can be a very stressful milestone.

At Finance Remedy we’re here to make the entire process easier for you. We’ll turn the confusing and stressful abundance of information you absorb into a clearcut and exciting plan. This blog post is designed to provide a light introduction to the property market and some top tips for first-time buyers.

Know Your Position and Prospects

First things first, everybody has different factors and circumstances to consider. When buying a house for the very first time, know your ballpark budget, and don’t be over-ambitious.

Make sure you have an exact idea of your financial and personal circumstances and priorities. Make these clear to any financial specialist or mortgage assistance from the off so that scouring the market and obtaining an Agreement in Principle can be done as scrupulously and efficiently as possible.

Mortgages come in different forms and it’s important to get the one that best matches your situation.

Do Your Research: The Most Popular Schemes and Savings Accounts for First-Time Buyers

Finance specialists will offer expert mortgage advice and break it down in the clearest way possible, but it never hurts to do some research beforehand and plan well in advance.

Make sure you’re benefiting from any savings accounts currently available so you can be saving as effectively as possible. Different ISAs have different requirements and intricacies, so find out what works best for your financial situation, time frame and objective.

A savings account will pave the path towards the specific scheme you want to go for. There are a plethora of schemes out there so you will want to know what you’re dealing with — even if it’s only a rudimentary understanding — so that when a financial specialist breaks it down for you, you can get to grips with it quicker.

Be it the Right to Buy scheme, Guarantor mortgages, a Shared Ownership plan , or another route, there are several paths available for first-time buyers, so look into the pros and cons of them all — maybe you’ll discover something you never knew existed.

Don’t Be Influenced by News Headlines or Current Affairs

Though the current climate is far from crystal clear, and at times it will feel like it is an impossible path to navigate, fearmongering and breaking news headlines will never cease to exist. Don’t let these cloud your judgement. Current events or gossip should not deter you from your goal.

If you have any doubts or want anything clearing up, seek independent mortgage advice from finance specialists that know the property market inside out, rather than reading into what is banded around in the press or via word of mouth.

The plight of first-time buyers has and always will be a hot topic in the media. It’s natural for house prices to shift, but it’s rarely predictable. House prices don’t seesaw annually, and getting on the ladder has never been easy, so if you’re ready — personally and financially — nothing should stop you from taking that first step.

Properties available before and after the events of 2020 have only dropped by a couple of per cent. Other than minor issues with visiting properties, now is not a worse time to buy than any other. In some cases, banks are offering mortgages that cover up to 95% of a property’s value, so if the 5% cost of the property you have in mind is affordable now, don’t procrastinate.

Reap the Benefits of Friends and Family

Not everybody has the financial ability to buy a house , and few have the funds to buy outright, which is why many consider buying with friends or family.

Having a plan from the offset is always necessary in this case. Establish a mutual objective and see how things could benefit you and whomever you choose to buy with. You may have to consider how you’d divide the property, and this might need some meticulous planning if the shares are different, but it’s a wonderful way of taking some of the weight off of your shoulders and getting on the property market.

Family can always help without actually having to provide financial support. Your parents’ savings — for example — can often be used to support a mortgage application, and the money won’t ever leave their pockets. It gives the lender greater security and gives you a better mortgage rate.

Speak to a professional finance specialist today . Using our expert industry knowledge and personalised mortgage support, we will go the extra mile to help you find what you’re looking for and ease the strain of stepping into the property market.