The Homemover Guide
Ever wanted a step-by-step guide to the process of buying and selling a property? The Mortgage Centres’ Homemover Mortgage Guide is just that. Written by the experts, this guide will help you navigate the experience from start to finish, with helpful information throughout.
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The guide covers many topics, helping you to break down the process. It gives an overview of the various aspects:
- Property valuation
- Stamp duty
- Legal and other fees involved
- Calculating what you can borrow
- Choosing the right mortgage
- Increasing your chances of success
- Bad credit
- How to do your own research
What to expect when buying or selling a property
Start at the beginning – deposits and valuing your property
The process of selling an existing property to move to a new one is often described as one of life’s most stressful experiences, but it doesn’t have to be.
For many homeowners, most of their money is locked up in their existing property. The difference between the value of the property and the amount owed on an outstanding mortgage is known as equity.
The equity is what normally forms your future deposit. A first-time buyer will need a pot of cash to pay for fees and provide a deposit, whereas a homeowner could use the equity from the sale of their property.
Speak to an estate agent to value your existing property. Most agents will do this initial valuation free of charge, so it is often worth having valuations carried out by a few different agents for comparison – that way you can ask the fee each agent will charge to market the property, so you can budget for it.
The costs involved
Stamp Duty
Unlike for first-time buyers, stamp duty becomes payable as soon as the purchase price of a property exceeds £125,000. The percentage of stamp duty paid increases as the property value increases. If you’re buying a second property, there will be an additional charge at the relevant rates at that time.
Our Stamp Duty Calculator is quick and easy to use and provides an instant figure for the amount you’ll pay.
Legal Fees
There are lots of legalities involved in the process of both buying and selling, which will need to be taken care of by a professional, typically referred to as a conveyancer.
Land Registry Fees
There are certain fees involved with registering a property in your name which are paid to various parties, including the local authority.
Other Fees
Depending on your situation, you may need to pay for several other services, including a mortgage valuation/surveyor and mortgage adviser.
What you can borrow
Calculating the costs you are likely to incur will help you know what you will have available for a new deposit. The amount borrowed in relation to the value of the property is known as the ‘Loan to Value’ (LTV). The lower the LTV percentage is, the better the interest rates available from lenders.
Fill out our quick and easy Mortgage Affordability calculator below. We only require a few details to see how much you may be able to borrow.
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Choosing the right mortgage
The world of mortgage products can get complicated. We’ve outlined some of the most common types as simply as we can, but by far the best way to understand it all is by speaking with someone who knows the market. So, give us a call and let us help.
At the most basic level, there are two decisions you need to make when deciding on how you intend to arrange a mortgage, and both are specific to your personal situation.
Repayment
- Each month your payment pays off both the loan and the interest
- One reason to do it: Monthly payments reduce your overall loan amount
- One reason not to: Payments are higher
Interest only
- Each month your payment pays off the interest only and no capital
- One reason to do it: Payments are lower
- One reason not to: Monthly payments only service the debt/interest
Fixed
- Your interest rate is fixed for the duration of the fixed rate scheme
- One reason to do it: You are protected against future interest rate rises
- One reason not to: Having this security can be more expensive
Variable
- Your interest rate fluctuates ie can go up or down
- One reason to do it: You can make the most of interest rate falls
- One reason not to: You are not protected against interest rate rises
Our tips for home movers
How do I increase the chances of obtaining a mortgage?
There are many ways you can try to make the process of getting a mortgage a little easier. Here are some suggestions.
Pay your bills
Late or missed payments can affect your credit rating and in turn impact your mortgage options. Stay on top of them or they could cause you problems.
Do your personal admin
With so many bills now paperless, it’s easy to forget to change your address or other details. This could affect your mortgage chances, so make sure everything’s up to date.
Don't shop around too much
Every time you make a mortgage application, or even use a comparison website, you may be subject to a credit check and too many of these could reduce your eligibility.
Manage your credit
The funny thing about credit is that it can be easier to get it if you already have it. For this reason, it’s sometimes good practice to spend a little amount each month on a credit card.
This shows you can borrow money and repay it. Use it to pay for your travel each month, or fuel for your car, something easy you can pay back without hassle. Remember to pay at the very least the minimum payment each month on time.
Forget about payday loans
Although advertised as a way to help you, this form of credit can do the exact opposite when applying for mortgages. Lenders see them as an indication of cash flow problems even if they are maintained and paid on time.
What documents do you need to apply for a mortgage
Once you know how much you could borrow and your deposit, you will have a ballpark figure of the amount you may be able to buy for. But what will a lender need from you to verify your case?
This will vary between lenders, but you can expect this to be your last three payslips if you are employed (possibly more if you wish to include regular non-guaranteed sources of income such as overtime, commission etc.) together with your last three months’ bank statements.
Outgoings will need to include any regular payments you make. Don’t forget to include debts like credit cards and loans. You’ll also need to provide proof of ID and address.
Self-employed requirements can vary considerably from one lender to the next, including those that consider only one year’s trading, so it is always worthwhile making sure you are covered for any eventuality.
If you’re self-employed or own 25% or more of the business (sometimes less depending on the lender) you’ll probably need to provide your last two years’ tax return summaries (SA302s) and, on occasion, your last two full years’ business accounts.
Do your research
While diving into the mortgage market might seem like a daunting prospect, with a little research and advice from people who know their stuff, you can familiarise yourself with the landscape and it won’t seem quite so scary.
- Family and friends
Advice from someone you trust who has had first-hand experience is extremely valuable. However, bear in mind that it’s likely their situation was very different to yours and may not be up to date.
- The internet
Yes, there is an abundance of information online and yes, some of it is very useful (like this guide), but there is much of it that isn’t, so tread carefully and don’t believe everything you read!
- Lenders
They are the ones lending the money but remember that they can only discuss their own products and criteria, so always speak to more than one to get the broader view.
- Mortgage brokers
Experience, expertise, and wider access to the market should therefore mean that consulting the professionals is by far the best option. Give us a call today to find out how we can help.
How do lenders assess how much you can borrow?
Calculating the costs you are likely to incur will help you know what you will have available for a new deposit. The amount borrowed in relation to the value of the property is known as the ‘Loan to Value’ (LTV). The lower the LTV percentage is, the better the interest rates available from lenders.
Any savings you have to cover fees or supplement the deposit will help to keep the mortgage amount down. Many lenders will allow additional funds such as family gifts to be used for this purpose, too.
When a lender assesses you for a mortgage, they will consider a multitude of things, including:
- Your income
- Your outgoings
- The size of your deposit
- How much debt you have
With no two persons’ situation the same, plus every lender having its own set of criteria, it becomes impossible to predict exactly how much you can borrow, but most lenders have an online affordability calculator to give you a rough idea. Don’t take this figure as final because it could change when a more detailed assessment is made.
At The Mortgage Centres, we’ll take all your individual factors into consideration and tell you exactly how much you can borrow, while providing expert guidance along the way. It is possible to include additional income in your calculations such as benefits or maintenance for example, but this all depends on the lender’s own specific rules. We also have a guide to mortgage affordability.
Can you get a mortgage with bad credit?
If you are a buyer with bad credit, it’s likely not going to make things any easier for you, but it hopefully isn’t the end of the road.
Your previous and existing credit conduct plays a major role in a lender’s assessment of your ability to borrow money from them. If you have a bad credit history this will form part of the underwriting and could hinder your chances. Lenders will take into consideration all the hard facts, whether it is something deemed relatively minor such as a missed credit card payment or something more serious like a County Court Judgment (CCJ), they will know if it shows on your credit file.
However, they will also take into consideration how long ago these blemishes appeared and will look in detail at your overall financial conduct to see whether your behaviour has changed. So, if you’ve had some problems in the past, but you’re doing your best to put them right, it will be noted and may make a difference.
Remember that things like CCJs disappear from your credit file after six years, so if this is just around the corner and it is possible for you to wait, we’d recommend that you do. If you can’t wait, don’t worry! Call us today and we’ll help you work out a plan.
Having a bad credit history will not immediately disqualify you from getting a mortgage, but you may have to work harder than others. We highly recommend speaking to a mortgage adviser for help. Give our friendly team a call and we’ll be able to tell you exactly where you stand.
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