Equity Release - lifetime mortgages
What is a Lifetime Mortgage?
A Lifetime Mortgage is when you take out a mortgage secured on your property, provided it is your main residence, while retaining ownership. You can choose to ring-fence some of the value of your property as an inheritance for your family, you can also choose to make repayments or let the interest roll-up. The loan amount and any accrued interest is paid back when you die or when you move into long-term care.
Most people who take out equity release use a Lifetime Mortgage. Usually you don’t have to make any repayments while you’re alive, interest ‘rolls up’ (unpaid interest is added to the loan). This means the debt can increase quite quickly over time. However, some lifetime mortgages do now offer you the option to pay all or some of the interest, and some let you pay off the interest and capital.
In the same way ordinary mortgages vary from lender to lender, so do lifetime mortgages.
When considering a lifetime mortgage, there are some things you need to know.
The minimum age at which you can take out a lifetime mortgage is usually 55. We’re all living longer so the earlier you start the more it is likely to cost in the long run. You can normally borrow up to 60% of the value of your property.
How much can be released is dependent on your age and the value of your property. The percentage typically increases according to your age when you take out the lifetime mortgage, while some providers might offer larger sums to those with certain past or present medical conditions.
Interest rates must be fixed or, if they are variable, there must be a “cap” (upper limit) which is fixed for the life of the loan (Equity Release Council standard).
You have the right to remain in your property for life or until you need to move into long-term care, provided the property remains your main residence and you abide by the terms and conditions of your contract. (Equity Release Council standard).
The product has a “no negative equity guarantee”. This means when your property is sold, and agents’ and solicitors’ fees have been paid, even if the amount left is not enough to repay the outstanding loan to your provider, neither you nor your estate will be liable to pay any more (Equity Release Council standard).
You have the right to move to another property subject to the new property being acceptable to your product provider as security for your equity release loan (Equity Release Council standard). Different lifetime mortgage providers might have slightly different thresholds.
Whether you can pay none, some or all, of the interest. If you can make repayments, the mortgage will be less costly. However, with a lifetime mortgage where you can make monthly payments, the amount you can repay might be based on your income. Providers will have to check you can afford these regular payments.
Whether you can withdraw the equity you’re releasing in small amounts as and when you need it or whether you must take it as one lump sum. The advantage of being able to take money out in smaller amounts is you only pay the interest on the amount you’ve withdrawn. If you can take smaller lump sums, make sure you check if there’s a minimum amount.
At Prospect Tree Mortgages we offer expert advice in Lifetime Mortgages so if you have any questions or want to discuss yours or family circumstances please do not hesitate to contact us on 01303 721117 or via our contact form.
The process of buying a property doesn’t start with selecting a home within your budget.
Often, it’s worth preparing months in advance if you need to apply for a mortgage. You’ll need to get your borrowing history in shape, for starters, so that mortgage lenders may view your ability to repay loans in a favourable light. Having a good credit score is crucial to getting a mortgage at a good rate. You may still be able to get a mortgage without good credit, but the structures and rates available to you might leave you paying more than you should.
Because of how closely it will be scrutinized, you should definitely look at your credit score and report before a lender does. An FTC study in 2013 showed that as many as 25 percent of consumers have an error on their credit report that could affect their score. Your credit report will help you identify areas of improvement. For instance, credit card utilisation rate the ratio of your credit card debt to available credit, this can be a major impact on your score. Something as simple as increasing your credit limit could improve your score before you apply for a mortgage.
Here are some of the things that you can do to get credit-ready before applying for a mortgage:
Lenders use a range of factors to determine whether or not to give you a mortgage loan. There is no one simple solution for a successful application. However, the steps above could help boost your chances of obtaining a loan for purchasing property. If you want to know more about any of the information above please don’t hesitate to contact us on 0800 8620 840 or visit our website www.ptmortgagesltd.co.uk and fill out a contact form for a call back.
Applying for a mortgage successfully is not luck. There are two major factors you need to be in control of, Budgeting and unsecured debt. Taking control of these areas will help you in your mortgage application as well as in your day to day financial life.
First off and arguably most important is budgeting. The simple act of making and sticking to a monthly budget is the most effective way of taking control of your finances and preparing you for a mortgage. It will help your piece of mind and highlight any areas you may need to review or cut out completely. You should aim to keep your spending within the money you have and the limits you set yourself. Every pound you earn needs to be allocated to an expenses category (including savings), check how you are getting on mid-way through the month, this will help to keep you on track. It seems simple, but it is incredibly effective!
When a lender reviews your application, they are checking you can afford the mortgage you have applied for. A major contributor to the affordability calculation is unsecured debt you may have.
The more money you owe on hire purchase, unsecured bank loans or credit card balances the smaller loan you will be able to obtain from a mortgage lender. We usually take out these debts to buy things we want NOW. Simply put if you can’t afford to buy that watch or sofa you want, you shouldn’t. Save up for it instead through budgeting your income. Pay off credit cards and stop paying unnecessary interest. This will not only show an underwriter you are able to budget and save but also a financial intelligence and maturity. After all, the more committed outgoing you need to pay every month means you have less money for a mortgage payment, and therefore less borrowing ability.
Spend time on your finances before you approach a mortgage lender to present yourself in the best way possible. After all you are asking for a significant loan, and the lender needs to be sure you can pay it back.
If you want to discuss budgeting or unsecured debt with one of our advisors don’t hesitate to give us a call 0800 8620 840 or fill out an enquiry form on our website www.ptmortgagesltd.co.uk
Not all the things on our to do lists fill us with excitement at the thought of crossing them off when completed. Reviewing your mortgage is certainly not the most exciting item for most people.
For many of us, our biggest monthly expense is our mortgage payment. If there’s a chance of saving money at mortgage review time, surely we can find the time?
We all know that when a fixed rate comes to an end the rate moves onto the lenders standard variable rate, and generally speaking it is higher than the one you had before. Thus costing your more money per month in interest payments on top of paying back the loan capital.
It may not even make a huge difference to the monthly payment amount and therefore fall to the bottom of your ‘to do list’, but all the time you are on a lenders standard variable rate you are at the mercy of any rate change that may occur. This is the main reason why carrying out a mortgage review BEFORE your existing fixed rate period comes to an end.
It is best to speak to a broker three or four months in advance of the end of your fixed rate period to make sure there is enough time to research and organise the new mortgage deal so when the old one finishes it will simply move over to the new one seamlessly.
Prospect Tree Mortgages are able to look at the whole of the marketplace in order to source the best mortgage deal available to you and your circumstances. This is the most efficient way of making sure you not only have the best deal for you but also save as much time and effort as possible. In short leave it all to us! The vast majority of remortgage deals come with FREE legal work and a FREE valuation. Great incentives to switch to a better deal.
Reasons to speak to Prospect Tree Mortgages about your mortgage
We will explore options that may have previously not been available to you due to credit issues, lender criteria or timescale. After our review and research process you may find a lender with more favorable interest rates is now available to you.
We will explain everything that is going to happen clearly and concisely. There are no stupid questions and it is important we cover any uncertainties you may have prior to applying for anew mortgage. You really can ask us anything, we want you to understand and be comfortable with your new mortgage.
We will tell you what we need from you to go ahead with your application, after this you can leave it with us. We will complete your mortgage application and liaise with the chosen lender throughout the process to get your mortgage offer. This means you can forget about any lengthy hold music chasing up your offer, leave that to us.
Your broker will support you all the way through the process keeping you updated with the progress from beginning to end. If you have any questions along the way we are only at the other end of a phone to chat.
Don’t let your mortgage fall off your radar and end up on the standard variable rate, you really are just throwing your money away. Get in touch and see what we can do for you.
Also – After your broker has helped you once, you’ll find they even save you the bother of remembering in the future as they’ll contact you in advance every time for your review!
Talking shop at a dinner party is not everyone’s idea of a great evening.
I honestly believe this happens to mortgage brokers more than any other profession.…other than maybe doctors.
I was asked about how lenders calculate the loan available for a Buy to Let mortgage. Riveting conversation subject matter I'm sure you'll agree?
The way a lender calculates the loan available on a BTL product via a ‘rental calculation’. This means the amount of rent received is a major factor in determining what the loan available to you will be. Each lender has a different calculation and criteria around which tax bracket you (the borrower) are in, (stop me if this is getting to complicated) changing the figures used in the calculation and giving a different outcome based on your personal circumstances.
The short version of this is you need an advisor who is well versed with Buy to Let in order to not only get the best deal but get a deal at all! We look after lots of portfolio landlords (you are a portfolio landlord if you own more than four properties in most lenders opinions) as well as landlords with one property. With ever changing criteria and a potentially volatile market place it is imperative to seek advice. Aside even from the fact that most Buy to Let lenders are unavailable to the borrower to access directly.
I know helpful!
What Documents will I need to provide to get a mortgage?
So, you are applying for a mortgage. How do you prove you can do what you say you can?
The answer lies in a list of documents requested by your broker and lender, and is for most clients, the part of the application process they dread. Some of the more common questions when documents are requested can be;
Do I really need to send you all these months bank statements?
I haven’t got my last pay slip, does this matter?
Can’t you just apply and see what the lender asks for?
The fact of the matter is that when asking to borrow a large amount of money you will need to provide plenty of evidence to verify certain things, for both the lenders and the brokers benefit.
These will include;
We as your broker are of course regulated by The Financial Conduct Authority (FCA). It is quite proper for due diligence to be carried out when applying for a mortgage.
There should be no surprises for you as a client when documents are requested, it should be made clear what the expectations are in this department right for the outset. No one will give you a mortgage without evidence you can afford it, your documents fulfil this task.
Luckily these days we are able to accept scanned copies of documents, as well as online bank statements and online pay slips. This means Prospect Tree Mortgages are able to help you wherever you are based.
Documents required upon application
Latest 3 months pay slips (13 if received weekly) If overtime, bonuses or commission is being used additional pay slips evidencing this will be required. Your P60 is a useful document to have handy as well as it shows your total income for the last financial year. Latest 3 months bank statements (for all current accounts) Photo ID, Proof of address, Proof of deposit (if a purchase). There could be more documents requested at any time by your broker or the lender you are applying to.
Latest 2 years full accounts or SA302 year-end tax calculations (along with the corresponding tax year overview) from HMRC. Proof of address, photo ID, latest 3 months bank statements (for all current accounts) There could be more documents requested at any time by your broker or the lender you are applying to.
This gives you an idea of the documents required to complete a mortgage application, but is by no means an exhaustive list. Once we have carried out the initial fact finding process with a client we will always request a specific list of documents based on their individual circumstances and requirements.
Our aim at Prospect Tree Mortgages is to make our clients life as easy as possible, and once we have the documents we need from our clients we get on with the work. Processing the mortgage application, liaising with the chosen lender and making sure a mortgage offer is achieved as quickly as possible with minimal pressures on your time.
You're a first time buyer. How exciting! But buying a home is a massive project management task and it can be extremely complicated. On the bright side, a Mortgage Advisor can make all the difference between a nightmare experience and a smooth one as far as the finance side of things is concerned. Here's what you can expect from a good Mortgage Advisor.
Understanding your situation and needs properly
Even a tiny difference in your mortgage rate can save you thousands in interest over the years, and a Mortgage Advisor is your best bet for efficient, effective shopping around without the hassle. They are likely to have exclusive deals with lenders that only they can access. They'll do all the research for you. They'll also save you time by telling you which lenders are likely to accept you and letting you know how to improve your application. And they can even speed up your application by dealing with the paperwork for you, using their expertise to make your application as attractive as possible.
A qualified mortgage broker specialises in mortgages. It's their job to find the right mortgage with rates that suit your budget, showcase the best options, identify the best lenders and mortgage deals. Every home buyer is unique, with their own budget, outlook, attitude, expectations and needs. You need a Mortgage Advisor who takes the time to get to know your situation and treats you like an individual. Someone who understands that a property purchase is about much more than buying a building - it's also deeply personal. This is the type of service our mortgage advisors in Kent pride themselves on delivering.
Find an advisor who can offer more than one solution
Because mortgage rates and offers can vary so widely, it's best to work with a Mortgage Advisor who can source products from a number of different lenders. This is in contrast to a mortgage broker at your local bank or building society who are restricted to offering their own products only. Working with a local mortgage broker means you have more options and are unlikely to miss out on more competitive deals.
Excellent customer service
The best mortgage advisors are highly efficient, with a fast turnaround on the paperwork and the motivation needed to contact you at every stage with updates. They're discreet and thorough, and the duty of care they have towards their customers means they'll be able to justify their recommendations if asked.
They make their recommendations based on your individual circumstances, exploring your deposit and repayment preferences, various interest rates, your credit history and other critical information to pin down the mortgage offers you’re eligible for. As such they are a valuable partner in the home-buying process.
Having thoroughly explored your circumstances they'll be able to explain the different deals and types of mortgage available, tell you which ones they think are the best for you, and give you good, clear reasons why they're making the recommendations.
A quick turnaround of the mortgage agreement in principle
When buying a property, speed is often the essence. Delays can mean chains break and buyers drop out. When you secure a mortgage offer there's no hard and fast rule about how long it takes. T But you'll probably need to wait for anything from two weeks to a month from application to the mortgage offer stage, as long as things are straightforward. A good mortgage broker will keep things on track at every stage.
Local and national advice
Local expertise is often invaluable. If you want someone who only deals locally, in your country or region, you should be able to find a suitable Kent mortgage advisor, for example. But a good, reliable Mortgage Advisor in Kent will be able to provide advice nationwide.
Make the right choice
Choose the right mortgage advice from the right person and the whole mortgage process can be more of a pleasure than a pain. Our experienced mortgage brokers at Prospect Tree Mortgages are ready to support you with any mortgage needs you may have. Get in touch by calling 0800 8620 840 or use our online form to get started
Kent based mortgage brokers Prospect Tree Mortgages are delighted to announce their recent shirt sponsorship agreement with Kent Cricket Club for their 2019 campaign. Prospect Tree Mortgages will be the main shirt sponsor of England and Kent Cricket Cricketer Joe Denly.
Joe Denly was the first Canterbury-born cricketer to be capped by Kent cricket club in 2008. The right-hander is widely regarded as one of the most attractive strokemakers on the county circuit.
In 2018, Denly became the first player to ever score a century and take a hat-trick in the same T20 fixture, away at Surrey in the Vitality Blast.
The end of the 2018 saw Denly scoop up the PCA’s Vitality Blast and Royal London One Day Cup Most Valuable Player Awards, as well as the overall 2018 County MVP Award.
His form in 2018 earned him a maiden England Test call-up that winter, becoming the first player born in Canterbury to play a Test for England.
Nick Daynes, Director of Prospect Tree Mortgages stated, “Joe is the younger brother of our very own mortgage advisor Sam Denly. We are delighted to be supporting Joe and wish him the best of luck throughout his England test and Ashes campaigns.
Kent County Cricket Club has awarded Joe a Testimonial in 2019 which will feature many fantastic events to raise money for Joe and his chosen charities. Details of all these events and more can be found by following this link: http://www.joedenlytestimonial2019.co.uk/
The mortgage valuation is based on the surveyor's knowledge of comparable prices in the locality. It may also give a "minimum reinstatement value", which is the amount of money it would take to rebuild the property from scratch, should it ever be necessary. The mortgage lender will also ask to see evidence that a suitable buildings insurance policy is in place, together with confirmation that you are covered for the minimum reinstatement value.
The mortgage valuation is for the benefit of the mortgage lender, NOT you the buyer! It is designed to give enough information for the lender to decide whether the property is safe to lend on, and up to what amount. Though you may pay for the report, you may not get a copy or even see what the surveyor has written. In some circumstances your mortgage broker may be able to obtain a copy of the report but this is not always possible.
You should NOT solely rely on your mortgage valuation if you are buying a property. In fact, the lenders valuation is exactly that, a valuation, and not a survey at all. The lender is taking the risk when lending, that the security (the property) is of adequate value to cover the loan they provide to the borrower. This safeguards them should the borrower default on the payments and repossession is necessary. This is the only reason the mortgage lender carries out a valuation at all.
Have you ever heard the phrase ‘drive by valuation’, ‘desktop valuation’ or ‘index valuation’? No, well let us explain, all these basically mean is that no one has actually physically been to the property to value it. Shocked? Well this is why it is so important to have your own survey done on a property you want to buy, because if you don’t and there are problems you didn’t know about they are now YOUR problems.
At Prospect Tree Mortgages we encourage buyers to carry out at least a homebuyers report when buying a property. An independent surveyor working for and paid by you ‘the buyer’ has your best interests in mind. You will receive a comprehensive report on the state of the property you are buying, and we can assure you the surveyor will spend at least a few hours inspecting the property and will provide a detailed report. It always surprises us that when making the most expensive purchase in their lives, buyers in the main will not have a survey to check that the property is safe and does not have any hidden issues.
If you are thinking of purchasing a property our expert mortgage brokers would be more than happy to walk your through the process as well as arrange a mortgage agreement in principle for you.
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.