What is this new type of mortgage I hear you shouting from the stalls!
Well, it’s a way of First Time Buyers increasing the amount available to borrow by including a parent or guardian in an affordability calculation, all whilst not sharing or diluting the ownership of the child’s first home. If you think this sounds remarkably similar to using a Guarantor then you would be right, well, sort of….
The main benefit of this type of mortgage product is the ability to borrow more, this is because the parent's income is taken into account, and more importantly, the parents will not be liable for the additional 3% stamp duty normally applied when buying a second home property.
The lender takes into account the parents’ salary alongside the child’s, increasing their ability to borrow and therefore their options for buying. Projecting forward, the idea is that once the child has started to earn more money and is in a position to take on the entirety of the mortgage debt, they are able to remortgage and release the parent from the joint mortgage. This is important to remember as both parties are applying for the mortgage and are therefore both responsible for the mortgage payments being made every month.
The main difference to a guarantor mortgage is that the parent is only putting the mortgaged property at risk as opposed to potentially their other assets (including own home) when acting as a guarantor.
What situations will a Joint borrower sole proprietorship mortgage be useful?
There are a number of scenarios in which this type of mortgage might be used, we have detailed some of these below:
If an applicants’ income is low:
Many lenders will accept up to four applicants and consider two incomes. A few will accept the incomes of all four.
If an applicant is newly self-employed:
They may not have enough income to cover a sole mortgage.
Applicants with no credit history:
Some people may have no credit history at all, or a low credit score. In this instance adding someone with good credit can help get the mortgage approved.
If the main borrower has bad credit however, adding a joint borrower is unlikely to help just to overcome credit issues (more sensible to consider a specialist bad credit lender)
Things to consider when considering a Joint borrower sole proprietorship mortgage
Before taking out this type of mortgage, we recommend you spend time thoroughly discussing the pros and cons with an experienced mortgage broker who can support you to find a mortgage that best suits your needs and circumstances.
What happens if the relationship breaks down between homeowner and additional borrower?
It can be a difficult process to extract yourself from a JBSP mortgage as the additional borrower / non-legal owner. The fact that a JBSP mortgage was taken out in the first place suggests the legal owner probably can not afford the mortgage on their own. If this is the case a mortgage lender is very unlikely to agree to release the additional borrower from the mortgage. Independent legal advice should always be sought prior to entering into this type of mortgage.
Will being on a JBSP mortgage as an additional borrower affect me going forward?
In short. Yes. If you as the non-owner want to buy a property with a mortgage and take out a new line of credit the total monthly mortgage payments will be included in any affordability calculations. If you remortgage an existing property the same issues with affordability may arise and hamper your previously simple transaction.
How do I get off this mortgage?
I would suggest working out how you will get off the mortgage before entering into a JBSP mortgage (see above for pitfalls). The legal owner may plan on earning enough to support the mortgage on their own, or add a spouse or partner to the mortgage allowing the lender to release you from it.
In the event that the legal owner is unable to keep up with the mortgage repayments as the additional person on your mortgage YOU will also be liable to pay them.
In this case, the legal owner may need to sell the property in question in order to not burden the additional borrower, who would be 100% liable for the monthly mortgage payments in the same way as the legal owner.
Like all types of mortgages there is absolutely a place for Joint borrower sole proprietorship mortgage products. However, as an additional borrower on this type of mortgage we would recommend taking independent legal advice before agreeing to be on a Joint borrower sole proprietorship mortgage, and most importantly be aware of the impact this will have on your own personal circumstances in the future.
For help with arranging your mortgage contact your local mortgage broker on 0800 8620 840.
As a first time buyer, life is tougher than it has been for decades. In the 1980s it was still possible to earn a low wage and save to buy your own place. A flat cost maybe three times your salary. An average studio flat cost £30,000, you were paid £10,000 a year, you got a mortgage without much trouble, and it was relatively easy to manage. Now, according to the government's UK house price index, the average UK property costs around £226,000. No wonder most of today's UK first time buyers are around 30 years old.
Just like the old days, you still benefit from saving a decent deposit, maybe 5% or 10%, but that's a lot more money than it used to be when property prices were lower. To buy an average home you need a 10% deposit of more than £22,000, or a 5% deposit of around eleven grand, and that's no joke. At the same time a 100% mortgage is a very rare thing, almost unheard of these days.
There's more. Mortgage providers are more risk averse than they used to be, and they'll make you work hard for a mortgage offer. Unless all your ducks are in a perfect row, with no issues or problems, you can easily be turned down.
All this means that as a first time buyer you've got your work cut out for you, assuming you're prepared for the long haul it involves. Many young people these days have given up and don't bother trying to get on the property ladder. If you live in the super-expensive South East your dream home might even feel like a complete impossibility.
Whatever your situation, you really need to know how much money you can borrow before you start looking at places to buy. Getting in touch with a local mortgage broker is the best way to find out how much you can afford, they’ll guide you through the process and handle the complete mortgage applications.
Luckily there are some handy options available to help you improve your chances of getting on the property ladder. Here they are:
Some of the most popular first time buyer mortgages are joint ones, where you buy a home with other people, for example a good friend, partner, or family member. They might help pay the deposit, or pay part of your mortgage, or add their income to yours so you can afford the kind of place you need. It may mean you and the others own equal parts of the property as joint tenants, or a different amount each, which makes you tenants in common. Either way it's wise to get independent legal advice before taking out a joint mortgage, and make sure you've legally agreed, up front, what happens if one of you wants to sell up or leave. A Mortgage advisor can give you a better idea of how this type of mortgage works.
Shared ownership / help to buy
If you earn less than £60,000 a year a shared ownership mortgage could be just what you need. It means taking out a mortgage on a percentage of the property, while either the government or a landlord owns the rest. You pay low rent on the value of the property that isn't in your name, and you can often buy a bigger share of the property later on, when you can afford it.
Help to Buy is effectively a government equity loan. If you have a 5% deposit saved you can get on the housing ladder by buying a newly-built property. The government lends you as much as 20% of the property value and after five years you begin paying interest on the loan they've provided.
With the help of a guarantor, a trusted person who will pay the mortgage if you can't, you could get a bigger mortgage for your first home than you would otherwise manage. The guarantor in these cases is usually a parent or close family member, and while you don't need to put their name on the mortgage, they will need to sign a legal agreement confirming that they’ll pay your mortgage if you fail to. you do need independent legal advice to make sure everything's boxed off properly and all future potential circumstances taken into account.
Why you need local mortgage brokers
If you live in Kent, for example, find a good local Kent mortgage broker. The property scene is different across the country, cheaper in some places and expensive in others. Different regions have different issues and problems. Local insider knowledge means you can get a better deal, or more choice, or at the very least some valuable insight into the areas you're thinking about buying.
If you need a mortgage agreement in principle or just want to know a but more about mortgages and the options available to you feel free to contact Prospect Tree Mortgages on 0800 8620 840, we are able to help you no matter your location.
The length of mortgage terms has always been a hot topic. But with the likely age of retirement reaching new highs, and lenders criteria also as strict as ever, a longer term seems inevitable to many new borrowers.
There are a number of factors contributing to the length of a mortgage term. The most significant being affordability and budget.
Lenders calculate clients’ affordability based on various criteria, length of the term being one. It stands to reason that if the loan available to an applicant significantly increases with a higher term this will be attractive. House prices have been increasing steadily over the last 10 years and are at an all-time high (in most areas), in contrast, the affordability calculations lenders now employ have got stricter, often including many more regular expenditure as well as committed expenditure on a monthly basis.
A borrowers’ budget is the maximum amount affordable per month when taking into account all the other expenditures they have, committed or otherwise. If the monthly payment for their mortgage reduces with a longer term, then this will look extremely attractive. After all who wouldn’t want to pay less per month for the same house?
Add this to the potentially higher loan amounts available and more and more borrowers will be considering longer mortgage terms. How else are they going to be able to afford the property they need?
My own take on the longer mortgage terms hitting the headlines is that like most things the 40-year term may be ‘a means to an end’. Similar to clients with adverse credit who may be forced to use a lender with a higher rate for their first fix and then move to a cheaper lender after the first fixed rate period finishes. A borrower with a 40-year term may well plan to be in a better budgetary position after their first fixed rate term comes to an end, thus allowing them to reduce the term upon re-mortgaging. Of course, their ‘plan’ to be in a better position may not happen by that time.
It is too easy to chastise borrowers and their brokers alike when discussing longer mortgage terms. The fact of the matter is that clients use brokers to do a job, in many occasions this is to assist them in borrowing the maximum amount they can, allowing them to compete with all the other buyers in the same position as them, if they can get more money over a 40 year term and the monthly cost is lower I am afraid the total amount of interest payable over the entire term does not really play a major role in the borrows decision making (even if this is pointed out by the broker).
Opinion by Kent based Mortgage Broker Nick Daynes , Director of Prospect Tree Mortgages.
So you're thinking about buying a place of your own? It's a complicated process, knowledge is power, and it really helps if you understand the ins and outs of every aspect of the procedure properly. Here's what you need to know about a mortgage in principle, whether you need one, and how to get one.
What is a mortgage agreement in principle?
A mortgage agreement in principle is also called an AIP for short, and sometimes called a 'decision in principle', 'agreement in principle' or 'mortgage promise'. It's actually a 'certificate' that shows you how much money your lender is happy to hand over so you can buy a home or investment property.
An AIP is useful because it makes a lot of sense to know roughly what you can borrow when you go house hunting. There's not much point spending time and effort viewing places you'll never be able to afford, for example, and it's also important not to restrict yourself unnecessarily just because you're not sure how much cash you've got to play with. Once you know for sure, your search for a place to buy will be a lot more efficient and effective.
Remember there's no guarantee
A mortgage agreement in principle isn't a guarantee. Just because a lender says they'll lend you an amount, it doesn't mean that's what'll happen. They might decide not to lend you a penny. To know for sure what you can actually borrow, you need to make a full and complete mortgage application, and wait until you're given an actual mortgage offer. The final sum can easily differ from the original decision in principle.
Can you do without an AIP?
An AIP isn't a must, and there's no law saying you have to get one. In fact any good, experienced mortgage broker should be able to give you a decent idea of roughly how much you'll be able to borrow without needing an AIP. Having said that, some estate agents tend to see people who have a mortgage in principle in place as more serious and more organised, buyers who are likely to move fast, decide fast, and buy fast.
What do you need to do to get a mortgage agreed in principle?
The most popular question asked is what do i need for a mortgage in principle?
A mortgage broker is your best bet. You need impartial, good quality mortgage guidance from someone who is qualified to advise you. Some brokers have access to the entire mortgage market, able to choose from a vast range of products and deals. Others deal with the products of just one or a handful of providers. Whoever you choose, they'll ask basic questions about your situation, arrange a credit check, and pin down a suitable lender for you.
Can you be turned down altogether?
The lender has one priority – to make sure you can pay back the money they lend you. Part of this due diligence process involves assessing how well you’ve dealt with debt in the past, so having a County Court Judgement against your name, or bad debt, or any other credit issues, will affect the loan you can get. If you have a bad debt record, a lender might turn you down altogether or charge you a higher interest rate than someone who manages debt better than you.
How long does a mortgage in principle offer last?
Because people's circumstances can change with the blink of an eye, a mortgage agreement in principle is usually only valid for anything between 30 and 90 days. You could lose your job, for example, or fall critically ill. But don't worry. As long as nothing has changed, the lender should be happy to extend the agreement for you.
One thing to remember...
Mortgage agreements in principle involve credit checks, and while two or three credit checks in short succession shouldn't affect your credit score, lots of checks in a row might look suspicious and have a negative impact on your credit score. It's probably safest not to ask multiple mortgage brokers to search the market for AIP deals for you at the same time.
Contact the team at Prospect Tree Mortgages If you need help finding out how much you can afford to borrow or require a mortgage agreement in principle certificate quickly. We are available on 0800 8620 840 or use the contact form on our website.
What do i need for a mortgage in principle?
This is the first time you're buying a home of your own, the first time you'll own a freehold or a leasehold interest in a property in Britain or abroad. That officially makes you a first time buyer, and you'll need a mortgage. So what, exactly, do you need to know? This is your guide.
Can you afford your mortgage repayments?
Your first step is to find out whether your income provides you with enough money to pay back a mortgage. If you have a regular income, it needs to be big enough to leave you the spare cash you need to pay the mortgage every month. If you have one or more large loans already, lenders might not feel happy about lending you more and potentially leaving you in an impossible position.
Your car finance or credit card or personal loan repayments might be too large, leaving you without enough money to set aside each month to pay off a home loan. You might have a bad credit record or CCJs – County Court Judgements - against your name. All this will affect your mortgage application and impact the interest rates the lender will want to charge.
You can fully expect the mortgage lender to ask a lot of questions and make plenty of checks. They'll not only make sure you can genuinely afford to pay the loan back, but they'll also ‘stress test’ your ability to pay if interest rates go up or your circumstances change. And they'll want to see actual evidence of your outgoings as well as proof of income. Once you've explored your finances and confirmed you'll have enough money, it's time to think about the deposit you'll need to pay.
How much deposit do you need to save?
Once upon a time, 100% mortgages were common. Now they're as rare as hen's teeth. It's more than likely you'll need to pay a deposit on your first home, and that means saving anything between 5% and 20% of the purchase price. If the home you want costs £150,000 you will need at least £7,500 to hit the 5% deposit mark. The more you save, the better and cheaper choice of mortgages you'll have.
What about the other costs involved in buying a home?
As well as a mortgage, you'll need to fork out money to pay for a collection of other sale-related things. Surveys, solicitors, removals, home insurance, the cost of decorating and furnishing your new place, plus any fees associated with arranging the mortgage and valuation. And there's Stamp Duty, a special tax the government levies on the property market. In Scotland it's called Land and Buildings Transaction Tax, and in Wales it's called Land Transaction Tax. But whatever it's called, as long as your property is liable for Stamp Duty you will have to pay it. Bear in mind first time buyers don't pay Stamp Duty on the first £300,000 of a home worth up to half a million pounds.
Know the difference between freehold and leasehold
If you want to buy a house, it’ll probably be freehold. A flat, however, will probably by leasehold, unless someone in the building has already bought the freehold for the residents to share. The difference is simple – a freehold lease includes ownership of the land under and around the property, a leasehold doesn't. Plus most leaseholds come with the burden of paying ground rent or yearly service charges so make sure you check these both with the estate agent and via your solicitor.
Check for any relevant 'affordable home-buyer' schemes
You might struggle to get on the property ladder at first, which is why it's always wise to explore the potential for government-backed schemes designed to give home buyers a helping hand. The lender will, however, still want proof you can afford to pay back the loan. Before you find a home to buy, find out whether there's an affordable housing scheme, Help to Buy scheme or shared ownership scheme that you can take advantage of.
Use a specialist broker to find the best mortgage
Unless you know the lingo, understand the jargon, and are familiar with the way the financial services sector works, it's best to talk to an expert, an experienced mortgage broker. They'll have a deep understanding of the different types of mortgage available, and they'll give you the best advice for your unique circumstances. The team at Prospect Tree Mortgages can offer you mortgage advice and arrange a mortgage that suits your needs and circumstances.
Apply for your mortgage
The mortgage application process usually involves proving your income via payslips and bank statements. If you’re self-employed, it'll involve your annual accounts and tax returns, going back at least two tax years, though there are some lenders who might lend on just one year of accounts.
Bear in mind that someone else responsible can guarantee a mortgage for you if you're having trouble finding one you can afford. A guarantor mortgage can be a life-saver under these circumstances, where a parent or close relation agrees to be legally responsible for paying the mortgage if you suddenly can't manage. It's a legally binding contract and should never be taken lightly. Your guarantor must be able to take your mortgage over and pay it if the lender demands it.
Prospect Tree Mortgages are mortgage broker in Kent but can offer advice nationally. Prospect Tree Mortgages can arrange a mortgage agreement in principle or agreement in principle certificate so that you can view properties in confidence knowing that you can move quickly to purchase the right property. Happy home hunting!
To speak to a local Kent mortgage broker near you, call 0800 8620 840 or use this contact form.
With the rise of the internet and in particular social media, there are literally thousands of UK mortgage brokers online, offering a vast number of mortgage products of every type, from repayment to interest only, commercial to bridging. Although these brokers are so easily accessible there is a genuine case for using an established, local mortgage broker.
When it comes to arranging your mortgage it actually makes more sense to take an old-school approach. A local mortgage broker, someone based near you who understands the local landscape and has local insight, can be absolutely invaluable. Here's why.
A mortgage broker understands complex mortgage products
A qualified mortgage broker is actually a specialist financial adviser, they have a deep, broad understanding of the various different mortgage products on the market, and how they work. And It's their job to live and breathe mortgages and so they are likely to be able to find a mortgage that suits your budget and circumstances whilst causing you little to no stress.
Because this type of financial product is incredibly complicated, with masses of small print, it makes sense to actually speak to someone face to face. It's too easy to make assumptions. It can be hard to understand the products on your own. You could potentially end up making a rash, uninformed decision by choosing a product that was chosen for you by an online computer algorithm, a decision that could ultimately cost you a lot more than it needs to.
A mortgage broker has a legal duty of care towards you
Because they have a legal duty of care towards you, mortgage brokers are legally bound to find the best deal for you. It also means you have legal comeback if it turns out you were sold a less than ideal mortgage. Do it all yourself and it's less likely you'll be able to harness the law to put things right.
Know you're speaking with a qualified expert
While you can decide to become a mortgage broker out of the blue, without a formal university degree, a qualified mortgage broker will have taken and passed a Certificate in Mortgage Advice and Practice, the industry-recognised CeMAP qualification. Find an advisor who is properly qualified and you can rest assured they'll know exactly what they're supposed to know, something that’s hard to be 100% certain about when you're working exclusively online.
Ask the right questions, get the right answers
A mortgage is a very large loan, and as such you don't want to dive in without asking plenty of questions. You'll want to talk about the size of your deposit, your repayment preferences and interest rates, and go through all of your personal information, things like your credit history and outgoings, with a fine toothed comb.
Box ticking online might not be good enough when your circumstances are unique. Being able to give details and explanations in person can make all the difference. You should be able to arrange an in-person meeting with a local mortgage broker either at your home, their office, or somewhere else mutually convenient.
Local insight can save you making costly mistakes
Imagine you live in Kent. You find a mortgage broker, Kent based and with lots of local knowledge. You let slip you're ideally looking for a brand new property on the X estate, there is a likelihood that your broker being local may know of an estate agent or event a property vendor who may be selling a property on X estate. There's no way an online-only mortgage broker service would have the same local insight to hand when compared to a mortgage broker in Kent.
Go local, do an excellent job of your mortgage
Do you feel comfortable arranging a long term loan of hundreds of thousands of pounds over the web? Or would you rather find a local expert mortgage broker in Kent and be 100% certain you've got the very best mortgage deal for your circumstances, and for the property you want to buy? Make sure you make the right decision for your personal situation.
The Prospect Tree Mortgages team are experienced mortgage brokers in Kent and can travel to meet you in at a location that best suits you. Get in touch with us via our enquiry page or call us directly on 0800 8620 840
This month we supported local charity Pilgrims Hospice with their Christmas tree recycling campaign. Managing Director Nick Daynes joined a number of volunteers on the 12 of January to collect Christmas tress from local residents in Ashford, Kent.
Prior to collection day Nick Daynes, said: “Prospect Tree Mortgages are very proud to be sponsoring the Christmas tree collection and and we are looking forward to getting our hands dirty with all the other volunteers when we help collect the trees. Last year we visited nearly 1,000 homes and raised more than £18,000 towards the vital work of the hospice. With your help we can make this another record-breaking year."
We managed to catch up with Nick shortly after collection day, he said:
I'm exhausted but also delighted to have been able to take part in this successful campaign. We collected over 1,200 Christmas trees and in doing so raised approximately £20,000 in donations for the Pilgrims Hospice.
If your mortgage deal is coming to an end you may find it to be an easy decision to stay with your current lender. However, they may place you on a standard variable rate which in most cases means you’ll be paying a much higher interest rate than what you might be able to achieve by choosing a fixed rate product.
If you are currently on a fixed rate product and the deal is due to end, it is recommended you speak to your current lender about switching to a new fixed rate mortgage product. There are many advantages to staying with the same lender, these include faster turnarounds, less paperwork, and potentially fewer fees.
However, just like staying with the same energy supplier, faster turnarounds and less fuss do not usually mean the best rates and therefore speaking to an independent mortgage broker such as Prospect Tree Mortgages might mean you can remortgage or switch to a product that makes more financial sense.
If your current mortgage deal is due to expire get in touch with a member of our team for a free no obligation discussion on 0800 8620 840 or fill out this enquiry form.
Prospect Tree Mortgages a nationwide mortgage brokerage are delighted to announce their recent partnership with Bulb a supplier of green gas and electricity.
The team at Prospect Tree Mortgages were determined to do more to help the environment and so teamed up with Bulb who supply all of their members with 100% renewable electricity and 10% green gas.
The partnership means that Prospect Tree Mortgages can recommend a green energy supplier to current homeowners and first time buyers. It also means that Bulb employees are able to obtain dedicated mortgage advice from expert mortgage brokers whilst benefiting from greatly reduced fees.
Nick Daynes, Director of Prospect Tree Mortgages stated, “We often support first time buyers with their mortgage arrangements and find that our customers are becoming more and more conscious of energy efficiency, the cost of energy and the impact it has on the environment. This partnership means we can offer our customers some value by recommending they switch to a renewable energy supplier and also means we can provide support to those that work for Bulb by offering them dedicated mortgage advice at reduced rates.
If you are interested in partnering with Prospect Tree Mortgages please get in touch via our general contact form.
Did you know? Doing nothing at the end of your mortgage introductory rate could cost you!
If you currently have a fixed rate mortgage you should take note of when the rate comes to an end and be prepared to consider a remortgage.
Doing nothing means your current lender will move you over to their Standard Variable Rate (SVR) this tends to be more expensive with monthly repayments higher when compared to most readily available fixed rate mortgages.
What is a Standard Variable Rate Mortgage
A Standard Variable Rate (SVR) Mortgage also known as a Variable rate mortgage is a lender’s basic mortgage rate. The rate of the mortgage can go up as well as down go down and is partly influenced by movement in the Bank of England base rate. However, a Standard Variable Rate might change even without base rate increases.
Of Course, there are a small number of positive benefits to being on a SVR. The main benefit is that there are often no early repayment charges.
Be an active borrower
Active borrowers are conscious of the date their mortgage introductory term ends and understand that their monthly repayments will rise if they don’t switch over to another product or lender. It is good practice to start looking for an alternative mortgage product or lender 3-4 months prior to your current product expiring.
At Prospect Tree Mortgages customer service is paramount, this means that when you arrange your mortgage through us you can rest assured knowing that we’ll stay in touch and give you a reminder before your introductory rate comes to an end. This way you’ll never end up on a lenders Standard Variable Rate.
Our expert mortgage advisors Kent are highly experienced and ready to discuss your requirements. Get in touch to arrange a free no obligation telephone consultation on 0800 8620 840 or fill in our contact form.