01. All you need to know about Mortgages
What is a Mortgage?
A mortgage is a loan you take out from a mortgage lender to pay for a property. If you don’t pay back the loan, as per the agreement you make, then the mortgage lender can take possession of the property and sell it to repay the loan. The loan is divided into the capital (i.e. the amount of money you borrowed to buy your property) and the interest (i.e. the amount the mortgage lender charges for lending you the money)
How much can you borrow?
This depends on how much you earn and how much the property you want to buy is worth.
Depending on the property’s value
Most lenders will loan up to 75% of the property’s value and many will go to 90% or 95%.
Depending on how much you earn
The amount you can borrow will vary between lenders but the rule of thumb is three and a half times your annual earnings. However typical variations would include:
Couple 1: two and a half times both annual incomes
Couple 2: three to three and a half times the greater income plus one year of the second income.
Some lenders now use more sophisticated credit rating methods, where they examine your income and your outgoings. The idea is that every borrower has unique circumstances.
Someone with teenage children and high outgoings can’t afford to borrow as much as a singleton earning the same salary.
What is Remortgaging?
Remortgaging is not about buying a new home but switching your mortgage to another deal to lower your repayment amounts and save money. It is of particular relevance if the value of your home has risen
What is Conveyancing?
Conveyancing is the legal work involved in buying and selling a house. It would normally be done either by a solicitoror a licensed conveyancer.
As a buyer you need to have one or the other for the sellers/vendors Estate Agent to contact immediately your offer is accepted so try to have one lined up before you get to this stage.
The Financial Conduct Authority do not regulate conveyancing services.
Which Mortgage is best for me?
First Time Buyer – As a first time buyer, you are likely to have some particular requirements.
You will probably have a very small deposit. You may be having to push your budget to the limit just to afford a mortgage, but are determined to get a foot on the property ladder.
There are several suitable solutions for you:
- Choose a mortgage term longer than 25 years it may seem daunting but many lenders will offer mortgages with terms up to 40 years
Any of these choices can be a good way to get started in home ownership, with a view to moving to a better deal in 2-5 years time when you have some equity in your property and are perhaps able to afford larger monthly payments.
Remember, very few people stick with the same mortgage for 25 years anymore. It is normal to change mortgages for a new deal every 2-5 years.
Self-Employed – Getting a mortgage for self-employed people has always been a bit more of a challenge. Even if your business is well established, it can be hard to prove your income and since mortgage lenders assess your ability to pay based on net income, you could find that they underestimate your borrowing ability.
So what are your choices?
- If your business is well-established, and you can provide 3 years or more of audited accounts, showing a stable income, you should not have too many problems. Lenders are more flexible than they once were.
As with other specialist mortgages, it can be worth getting the advice of a specialist mortgage adviser to make sure you get the best deal for you.
02. Information regarding Lifetime Mortgages
How old do I have to be to qualify for a Lifetime Mortgages?
The usual prerequisites to take out a Lifetime Mortgages contract are –
- Aged at least 55 for Lifetime mortgages and over 65 for Home Reversion schemes
- Own your own property and/or have a small mortgage on it, plus
- Be a UK resident
Can I move home with a Lifetime Mortgage Deal?
This depends on which style of plan you’ve signed up for. Most lifetime mortgages can be transferred as long as the new property is acceptable to the lender. But if the new property is of a lower value than your present home the lender might require you to settle some of the mortgage. Home reversion schemes are not usually allowed to be transferred but it does depend on the property.
If you were looking to move home and your lender agreed you must expect to pay further legal and other associated Lifetime Mortgage costs because new paperwork and due diligence will have to be done.
Finally, most schemes will allow you to move without restriction but first you will have to cancel the Lifetime Mortgage deal in full which potentially could cost a large amount of money. Occasionally this might mean you would not have enough equity to buy another property.
How important is it to shop around for a Lifetime Mortgage deal?
The importance of shopping around combined with plenty of research is very critical to those thinking about a Lifetime Mortgage plan
What happens if I have to move into long term care?
There are usually two types of long term care –
- Where you remain in your home and are looked after by a care assistant, and
- Where you physically move to a care centre
If you remain in your home then normally the Lifetime Mortgage deal will carry on as usual. But if you move out of your home to other accommodation then the deal will end, the property will be sold and the debt repaid.
03. About Life Insurances & Policies
What is Life Insurance?
It’s a It’s a straightforward and affordable way of helping make sure that your family and loved ones are financially secure in the event of your death.
A Life Insurance plan pays out a cash lump sum if the person(s) insured dies during the term of the plan. The lump sum can be used to provide financial support to your family and loved ones, who might otherwise struggle to pay the mortgage, bills and other living expenses without your income.
Having the right level of Life Insurance in place gives you peace of mind and your family a financial safety net if they ever need it. There are different types of life insurance, so it’s important to pick the right type for you.
What is Level Life Insurance?
It’s a Life Insurance plan where the amount of life cover stays the same for the duration of the policy term. It could be the right sort of life insurance to choose if you want to provide a specific amount of money for your family and loved ones.
It’s also suitable to cover an interest-only mortgage, where the outstanding mortgage loan remains the same for the term of the mortgage
Who can apply for life cover?
You can apply for Life Insurance online if you’re a UK resident aged between 18 and 66. A UK resident is defined as someone who’s permanently resident in the United Kingdom of Great Britain and Northern Ireland (excluding the Channel Islands and the Isle of Man
How much life cover should you get?
That depends on your personal circumstances. You’ll want to take into account factors like:
- how much your family would need to support themselves without your income
- the size of your outstanding mortgage loan and how long it’s got to run
- the amount needed to pay school and university fees
- any other outstanding debts you have.
If you want help deciding on the amount, use our calculator to work out how much life cover you might need
Can you buy joint life cover?
Yes. You can have joint life cover that pays out if one of you dies during the plan term. Only one pay-out per plan can be made.