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Mortgages

Why we have the lowest interest rates?

Did you know that there are several places where we could source your mortgage? These are –

A high street bank or building society.
One of almost 100 independent lenders in the UK.
It could be an exclusive deal through a particular mortgage packaging company.

Did you also know that the majority of brokers work for a panel of lenders, with often as few as 10 – 15 lenders on their panel? A broker can only represent 1 panel of lenders, which means it’s pot luck whether you find a broker who can provide the type of mortgage you are looking for, and secondly, at the lowest interest rate available at the time.

Should I use my regular bank or building society?

Your bank or building society are likely to have a very limited number of mortgages available, primarily their own. Remember there are over 100 lenders providing mortgages in the UK. However, because 12and3 brokers can access the entire market, should your bank or building society be offering the lowest interest rate for your circumstances, then your bank or building society will be suggested as a possible provider for your mortgage, and should you go ahead and use your bank or building society via your assigned mortgage broker, it would not cost you anymore than if you had gone direct. This ensures that you access the lowest interest rates available.

Can I get a fixed rate mortgage?

You can access all types of mortgage, To simplify this complex issue, there are primarily 2 types of mortgage, ie,

Fixed rate mortgages – as the name suggests the interest rate is fixed for 1-15 years, you choose how long. This means you know exactly how much you will pay every month regardless of whether the Bank of England base rate is increased or decreased.

The rest. These include trackers, discounts and variables. All of which will increase your monthly mortgage cost if the Bank of England base rate goes up, and likewise, your monthly mortgage will reduce, if the Bank of England base rate is reduced.

What is a capped mortgage rate? This mortgage works just like a tracker or discount, but it has an upper limit on how high your monthly payments would rise, even if the Bank of England base rate continued to rise.

What is a LIBOR rate? Without getting into needless complex issues, it is briefly the interest rate that the banks lend money to each other. Some mortgages are calculated based on the LIBOR rate. Whilst it is not linked to the Bank of England base rate, it tends to follow the Bank of England base rate. This means that once again, if the Bank of England put up the interest rates, it is very likely that mortgages linked to the LIBOR rate will also increase.

Can I get a 100% mortgage?

If you are a first time buyer, you have a clean credit file and not had any late payments, defaults or CCJ’s (county court judgments) as a result of not paying any bills or loans on time, and you have an income sufficient to qualify for the amount you wish to borrow, the answer is yes. With a 100% mortgage, because the lenders have no equity in the property that you would like to buy, they are very keen to ensure that the mortgage monthly payments are affordable for the applicant(s) and that you have no history of late or missed payments on any bills or loans.

What if I want to pay off large amounts of the mortgage?

At the end of the initial incentive period, for example a 2 year fixed rate mortgage, most mortgage lenders would allow you to pay off as much as you like, therefore reducing your mortgage and the monthly payments.

Many mortgages will allow you to over pay by 10% per year during the initial incentive period, ie 2 year fixed rate, without incurring any penalties.

If you want the ability to pay off more than 10% per year, then you may want to look at a flexible mortgage. Flexible mortgages allow you to pay off as much as you like, whenever you want. If you have been overpaying, they will also allow you to take payment holidays. Flexible mortgages are popular with clients who receive large bonuses or company directors receiving dividends, or those people working away, often outside the UK, or contract workers, who are not paid regularly.

What is an Offset mortgage?

Offset mortgages can work superbly well for anybody so long as you are well disciplined. They work like this –

Imagine you have current account with a massive overdraft facility, big enough to accommodate your mortgage, lets say £250,000. If you did not pay anything into the account you would be charged interest on a daily basis on the £250,000, which you would pay once a month, like any other mortgage. The interest rate is a very competitive rate, inline with other competitive mortgage products.

The aim would be to pay your total income per month (single or joint) on for example on the 1st of the month. You would pay all of your bills, direct debits, standing orders, etc on the last day of the month. This means the majority of your income that arrived on the account on the 1st of the month has been sat in the account for almost a whole month before it is used to pay bills.

If the overdraft is £250,000 and the total income on the 1st of the month was £4,000, then clearly you will have been charged interest daily for most of the month on £246,000. Clearly, the more money that can be placed on the account, the greater the savings on interest. This can work very well for those people receiving large bonuses, commissions or dividends.

Whether you are buying a high value property from Knight Frank, Savills or Strutt and Parker, or you are purchasing a property found on Rightmove for £100,000, the logic and benefits remain the same. Everybody can save money but it becomes particularly profitable for high wage earners with high value properties. So if you are looking for your dream home through Savills, Strutt and Parker or Knight Frank, take a few minutes to save yourself what could be a significant sum of money every month amounting to considerable overall savings and in addition save yourself up to 2.5% broker fee…this is the fee many high value national estate agents will charge to find your mortgage.

Remortgages

Historically home owners would set up their mortgage with a lender and stay with the same lender along time after the initial attractive interest rate came to an end, therefore offering their loyalty to the lender only to be rewarded with high interest rates and mortgage payments significantly higher than if they changed to another lender.

Fortunately, homeowners have now become aware that they do not have to pay high interest rates if they change their mortgage provider when the initial special interest rate finishes, which is somewhat similar to the way we switch utility companies when the one we are currently using puts their prices up.

Are remortgages different from mortgages?

Not really, they follow the same principles, they require a survey, you will need the services of a solicitor and the choice of mortgages is very similar to mortgages for purchasing.

Can I release equity from my property?

Yes. Usually up to 90% loan to value, the exact amount may be determined by your income(s).

Can I get a fixed rate remortgage?

Yes, you can get fixed rates, trackers, discounted and capped, infact everything you can get with a purchase mortgage.

I have become self employed since buying the property?

Not a problem, although your current lender and the high street lenders will most definitely have a problem if you cannot provide 3 years trading accounts, but there are many lenders who will welcome your business and you can expect to be offered an attractive interest rate.

Can I consolidate my debts?

Remortgaging can be a great way of reducing your monthly bills. You can consolidate as many debts as you like, particularly expensive credit cards and store cards. Even if you have been falling behind on your loans, and your current mortgage payments are increasing as the Bank of England base rate increases, it is essential that you re-arrange your finances in order that you can cope as soon as possible (see also poor credit remortgage page).

What if I have a poor credit rating?

Even if you have a poor credit rating, you do not have stay with the same lender if the interest rate is high and continues to rise. There are many lenders who specialize in such circumstances and because you have either a poor credit rating or various late payments, defaults or CCJ’s, does not mean you have to remain tied to the current lender (see also poor credit remortgage page).