10 Tips for First Timer Buyers

Buying a home is the biggest financial commitment you will ever make. Sadly, most first time buyers don’t know where to start when considering their first mortgage.

This is where we believe we can help. We are dedicated to helping First Time Buyers, by explaining step by step exactly what you need to know, before you choose your first mortgage.

We’re here to guide you and answer any questions you might have. As a starting point, use this article as a guide. It contains 10 critical things we believe you must know before you choose your first mortgage.

If, at any time, you have any concerns or questions, please feel free to contact us immediately. We’re here to help you!

Email:
propertyportal@pinkdotmortgages.co.uk

Factsheets

If this article helps you, download it from our documents library and forward it to family and friends.

Available factsheets:

• First Time Buyers
• Mortgage Jargon
• Home Movers
• Remortgaging
• Types of Interest Rate
• New Property Investors

Top Tips

1. Don’t just dive in

Take your time to understand how mortgages work and consider all of your options. Just taking the time to read this article should significantly improve your knowledge and help you on your way.

2. Understand what type of mortgage you want

There are two types of mortgages;

Repayment mortgage - first of all, you choose over how many years you would like to repay your mortgage. Most people choose to repay their first mortgage over a 25 year term. However, 30 year or even 35 year mortgages are becoming more popular. Your monthly repayments are made up of the interest charged and a portion of the capital to repay the mortgage itself. Over your chosen term, you gradually pay off the entire amount borrowed. Providing you maintain your repayments correctly you can see your loan getting smaller and you will repay your mortgage at the end of the chosen term.

Health Warning! – the longer your term, the more interest you pay. In the early years, your payments will be mainly interest so, if you want to repay the mortgage or move house in the early years, you'll find that the amount you owe won't have gone down by very much.

Interest only mortgage - your monthly repayments consist of repaying the interest only (hence the name!). You do not repay the amount you borrowed and this remains a lump sum which is payable back to the Lender at a future date. Because you're only paying off the interest, and not the loan itself, your monthly payments will be lower. Generally, you also make payments into a separate savings plan, with the aim of this producing enough savings to repay the amount you borrowed, although this is not something that your chosen Lender will ask you do.

Health Warning! – with an interest only mortgage, you have no guarantee that your mortgage will be repaid when you want it to. It’s totally dependent on the returns of your saving plans. Play safe – our advice is where ever possible, opt for a repayment based mortgage (although there will always be some genuine exceptions).

3. Understand what type of interest rate schemes there are

There are a number of different schemes offered by lenders: You need to understand how each one works, before you are in a position to choose a scheme which is suitable for you.

Variable rate - your monthly payment fluctuates in line with the lenders standard variable mortgage rate.

Tracker rate – your monthly payment fluctuates, usually, in line with the Bank of England Base Rate, often referred to as a "Base Rate Tracker".

Discounted - the Lender offers an initial discount, usually against their normal standard variable rate for a given period. Your monthly payment fluctuates in line with the lenders standard variable mortgage rate, but at the agreed discount. At the end of the discount period, the interest rate usually reverts to the lenders standard variable rate.

Fixed rate - your monthly payment is fixed over an agreed period and will remain the same regardless of whether interest rates rise or fall. At the end of the fixed rate term the interest rate usually reverts to the lenders standard variable rate.

Capped - the interest rate is guaranteed not to go above a certain level throughout the given capped rate period, but you will benefit from any reduction in interest rates. Your monthly repayment cannot therefore go above the “capped” level.

Flexible mortgages - these schemes allow you to overpay, underpay or even take a payment holiday. Any unpaid interest as a result of an underpayment or payment holiday will be added to the outstanding mortgage. Any overpayment will reduce the outstanding mortgage. Some have the facility to drawdown additional funds to a pre agreed limit.

Offset Mortgages – these schemes allow you to link your current, savings or deposit accounts to the mortgage, so that the positive account balances are offset against the mortgage resulting in a reduced interest payment.

Cashback - some lenders offer a cashback payment on completion of the mortgage. In some cases, if the mortgage is paid back early, a proportion of this may have to be repaid to the lender.

4. Choosing the right mortgage scheme

As you have just seen there are a number of different rates to choose from. The key thing to remember is that a “fixed rate” is the only way of knowing exactly what your repayments are going to be over a given period of time. With any other type, your monthly repayments will go up and down as interest rates change.

5. Choosing the right mortgage scheme period

Mortgage schemes run for a specific period and have nothing to do with the actual term over which you have chosen to repay your mortgage. You can choose a 1 year deal, 2 year, 5 year (etc). It’s all a matter of getting the right balance and one that suits you.

Health Warning! - Be very careful! Always check whether the scheme you are considering has any early repayment charges. If you wanted/needed to change your mortgage within the scheme period, this is a fee you would have to pay to buy yourself out of your chosen scheme. In some cases this can be a significant amount, linked to the amount that you borrow.

6. Don’t forget the costs and fees you’ll incur in buying your first home

When you buy your first home, you’re going to incur a number of different fees. Always make sure you get written quotations before committing to anything.

Valuation fee – There are three types of valuation. The fee must normally be enclosed with your application. The type of valuation you choose will depend on the age and condition of the property. Each is more expensive than the previous.

Basic mortgage valuation - This is for the lender's own purpose. They will appoint a surveyor and the fee you pay will be based on a sliding property valuation scale.

Homebuyer report - This provides you with information in a standard format. The report will include comments on the state of repair and condition of the property along with any general defects.

Full structural survey - This provides you with a structural report based on a detailed examination of the property. Any areas of concern that you might have about the property will be investigated.

Arrangement/Booking Fee – this is a fee payable to the Lender. Where applicable, this will be payable either in advance (with the valuation fee) or added to your mortgage balance on completion of the mortgage. If the fee is added to the loan, you will pay interest on it, over the mortgage term. The fee will be specified in your mortgage quotation.

Legal costs and fees – you’ll need to appoint a solicitor (or conveyancer) to act on your behalf. Always check to ensure that the fee they quote you includes the fees to cover the transfer of ownership of land, the costs of legal registrations and miscellaneous costs (known as disbursements).

Stamp Duty Costs – Stamp duty is a 'purchase tax' and is generally payable where the purchase price of the property is more than £125,000. The current charge is 1% of the purchase price of the property. This increases to 3% if the price is more than £250,000 and to 4% if the price exceeds £500,000, 5% if the price is more than £1m and 7% if greater than £2m.

Higher Lending Charge - This is sometimes required where you have a low deposit towards the property. It is an insurance policy that the Lender asks you to pay (one single payment), but is used to protect them against a loss should the property have to be repossessed and subsequently sold (this would happen if you did not keep up your mortgage payments). Should a loss be incurred on repossession, you (the borrower) would remain responsible for the shortfall, even though they may have paid the insurance premium. The cost of the insurance can usually be added to the value of the mortgage you are applying for.

Buildings and contents insurance - All lenders require that you fully insure the property for the total cost or rebuilding of it. It is also strongly recommended that you take out contents insurance. It is your responsibility to ensure that you have adequate cover.

Mortgage protection - It is recommended that you protect your mortgage and associated payments in the event of death, being unable to work as a result of an accident, disability, sickness or unemployment. It is your responsibility to ensure that you are able to meet your mortgage payments when they fall due and you should therefore consider whether you would be in a position to do so, in the event of the above mentioned events.

7. How much can you borrow?

There are a whole host of ways in which Lenders now assess how much they will lend you. The main factors being, your annual income (less any regular commitments you already have, such as credit cards, loans), whether you have a good credit rating, size of your deposit.

Whilst it is sometimes possible to achieve 4 or even 5 times your income, you must remember one very important point; - what you can borrow is sometimes a lot more than you can actually afford.

8. A deposit always helps!

Put simply, the bigger the deposit, the better the deals you’ll get.

To access the mortgage markets you will need a minimum deposit of 10%.

It is, however, possible to buy a 'newly built' property with only 5% deposit.  This is via the Government backed 'New Buy' scheme. Contact us for more information.

9. How to save on costs and fees!

First Time Buyer incentive packages – many Lenders will offer these and typically you could save on the need to pay for a valuation fee or higher lending charge insurance premium.

10. How long does it take to organise a mortgage?

The arranging of a mortgage typically takes 2 to 3 weeks. However don’t confuse this with the time it takes to get hold of the keys to the property and the date you can move in. This very much depends on the number of people in the property chain. Your Solicitor and Estate Agent will be able to guide you as to the length of time it will take.

When its time to organise your next mortgage

Email: propertyportal@pinkdotmortgages.co.uk

Important info: The explanations contained in this article are the most commonly understood and are only a brief summary. Various Lenders can impose different meanings and apply various conditions. If you choose Pink Dot Mortgages to act as your mortgage broker, we will undertake a full appraisal of your needs and financial circumstances and match these with the appropriate Lenders, before making any personal recommendations as to the schemes available and suitable for you. As such, none of the above explanations are intended as advice.

This article is provided by PropertyPortal.com Ltd in collaboration with Pink Dot Mortgages Ltd. Pink Dot Mortgages is authorised and regulated by the Financial Services Authority (no. 465258). Not all services are regulated. Registered company no: 6132484 – Swatton Barn, Badbury, Wilts, SN4 0EU, registered in England & Wales. Your home may be repossessed if you do not keep up repayments on your mortgage.

© 2012-Pink Dot Mortgages Ltd

10 Tips for Remortgaging

There are many factors to consider when re-mortgaging. Failing to think ahead or research the mortgage markets correctly means that many individuals get it wrong!

This is where we believe we can help. We are dedicated to helping individuals who are looking to re-mortgage their own property, by explaining step by step, exactly what you need to know before you re-mortgage.

We’re here to guide you and answer any questions you might have. As a starting point, use this article as a guide. It contains 10 critical things we believe you must know, before you re-mortgage.

If at any time, you have any concerns or questions, please feel free to contact us immediately. We’re here to help you!

Email: propertyportal@pinkdotmortgages.co.uk

Factsheets

If this article helps you, download it from our documents library and forward it to family and friends.

Available factsheets:

• First Time Buyers
• Mortgage Jargon
• Home Movers
• Remortgaging
• Types of Interest Rate
• New Property Investors

Top Tips

1. Don’t just dive in!

The cheapest re-mortgage rates aren’t always the best deals. Look at the small print!

2. Understand why are you re-mortgaging

This question isn’t as daft as it may sound! When re-mortgaging you need to think ahead, as this will dictate the type of scheme you are looking for. For many people it’s not just about reducing their monthly repayments now.

The key question to ask yourself is, “how much flexibility will I need going forward?” Then take heed from tip number 3.

3. Beware of early repayment charges!

If you haven’t really stopped to consider tip 2, you’re likely to come unstuck here, as many people do!

If you’re considering a discounted, tracker or fixed rate, it’s common that these schemes will lock you in for the duration of the scheme period (2 years, 5 years etc). As we’ve already said, consider how much flexibility you’ll need!

If you do opt for a scheme that locks you in, check whether:

• you have the flexibility to make overpayments (there is no common rule, Lenders act differently)
• the mortgage comes with a “portability” option. ie, if you decide to move within the scheme period, you can take your current mortgage with you.

Avoid schemes which lock you in beyond the scheme period. These are known as “overhang periods” (for example; 2 year fixed rate with a 3 year tie in, meaning you have no option but to pay the Lenders Standard Variable Rate in year 3; this could be high!).

4. Repayment Methods

If you have an interest only mortgage, should you be considering switching to a repayment based mortgage? At the very least, get some quotes and compare your options.

Health Warning! – with an interest only mortgage, you have no guarantee that your mortgage will be repaid when you want it to! It’s totally dependent on the returns of your saving plans. Play safe – our advice is where ever possible, opt for a repayment based mortgage (although there will always be some genuine exceptions!).

5. Mortgage Term

A re-mortgage doesn’t have to be like for like. Consider the outstanding term of your mortgage! Can you afford to reduce it (even by one year!). Do you need to extend it to make your mortgage payments more flexible?

6. Understand what type of interest rate scheme you want

As you can see, there are a number to choose from! The key thing to remember is that a “fixed rate” is the only way of knowing exactly what your repayments will be over your chosen term. With any other your monthly repayments will go up and down as interest rates change.

Variable rate - your monthly payment fluctuates in line with the lenders standard variable mortgage rate. This can cause budgeting problems in times of increasing interest rates.

Tracker rate – your monthly payment fluctuates in line with the Bank of England Base Rate, often referred to as a "Base Rate Tracker".

Discounted - the Lender offers an initial discount on their normal standard variable rate for a given period. Your monthly payment fluctuates in line with the lenders standard variable mortgage rate but at the agreed discount. At the end of the discount period, the interest rate usually reverts to the lenders standard variable rate.

Fixed rate - your monthly payment is fixed over an agreed period and will remain the same regardless of whether interest rates rise or fall. At the end of the fixed rate term the interest rate usually reverts to the lenders standard variable rate.

Capped - the interest rate is guaranteed not to go above a certain level throughout the capped rate period, which can be from one to ten years, but you will benefit from any reduction in interest rates. Your monthly payment cannot therefore go above the “capped” level.

Flexible mortgages - these schemes allow you to overpay, underpay or even take a payment holiday. Any unpaid interest as a result of an underpayment or payment holiday will be added to the outstanding mortgage. Any overpayment will reduce the outstanding mortgage. Some have the facility to drawdown additional funds to a pre agreed limit.

Offset Mortgages – these schemes allow you to link your current, savings or deposit accounts to the mortgage, so that the positive account balances are offset against the mortgage resulting in a reduced interest payment.

Cashback - some lenders offer a cashback payment on completion of the mortgage. In some cases, if the mortgage is paid back early, a proportion of this, may have to be repaid to the lender.

7. Choosing the right mortgage scheme

As you have just seen there are a number of different rates to choose from. The key thing to remember is that a “fixed rate”, is the only way of knowing exactly what your repayments are going to be over a given period of time. With any other type, your monthly repayments will go up and down as interest rates change. Think about what you will be able to afford.

8. Costs and fees you’ll incur

Most Lenders offer re-mortgage incentives. They want your business! Generally, the incentives cover the cost of a property revaluation and standard legal fees.

In order to secure the deal you want, you will generally have to pay a one off arrangement fee/booking fee to the Lender. This fee can sometimes be added to the mortgage itself so that, upfront, there is no cost.

Health Warning! – if you add fees to the mortgage you will pay interest on it.

9. How much can you borrow?

There are a whole host of ways in which Lenders now assess how much they will lend you. The main factors being, your annual income (less any regular commitments you already have, such as credit cards, loans), whether you have a good credit rating, size of your deposit.

Whilst it is sometimes possible to achieve 4 or even 5 times your income, you must remember one very important point;

• what you can borrow is sometimes a lot more than you can actually afford!

10. How long does it take to organise a re-mortgage?

To switch from one lender to another typically takes between 4 and 6 weeks.

When its time to organise your next mortgage

Email: propertyportal@pinkdotmortgages.co.uk

Important info: The explanations contained in this article are the most commonly understood and are only a brief summary. Various Lenders can impose different meanings and apply various conditions. If you choose Pink Dot Mortgages to act as your mortgage broker, we will undertake a full appraisal of your needs and financial circumstances and match these with the appropriate Lenders, before making any personal recommendations as to the schemes available and suitable for you. As such, none of the above explanations are intended as advice.

This article is provided by PropertyPortal.com Ltd in collaboration with Pink Dot Mortgages Ltd. Pink Dot Mortgages is authorised and regulated by the Financial Services Authority (no. 465258). Not all services are regulated. Registered company no: 6132484 – Swatton Barn, Badbury, Wilts, SN4 0EU, registered in England & Wales. Your home may be repossessed if you do not keep up repayments on your mortgage.

© 2012-Pink Dot Mortgages Ltd

10 Tips for Home Movers

There are many factors to consider when planning your next mortgage. Failing to think ahead or research the mortgage markets correctly means that many individuals get it wrong!

This is where we believe we can help. We are dedicated to helping people looking to move home by explaining, step by step, exactly what you need to know before choosing your next mortgage.

We’re here to guide you and answer any questions you might have. As a starting point, use this article as a guide. It contains 10 critical things we believe you must know before you select your next mortgage.

If at any time you have any concerns or questions, please feel free to contact us.

Email: propertyportal@pinkdotmortgages.co.uk

Factsheets

If this article helps you, download it from our documents library and forward it to family and friends.

Available factsheets:

• First Time Buyers
• Mortgage Jargon
• Home Movers
• Remortgaging
• Types of Interest Rate
• New Property Investors

Top Tips

1. Don’t just dive in

The cheapest mortgage rates aren’t always the best deals. Look at the small print!

2. Understand what you need

This question isn’t as daft as it may sound! You need to think ahead, as this will dictate the type of scheme you are looking for. For many people it’s not just about their monthly repayments now. The key question to ask yourself is, “how much flexibility will I need?”. Then take heed from tip number 3.

3. Beware of early repayment charges

If you haven’t really stopped to consider tip 2, you’re likely to come unstuck here, as many people do!

If you’re considering a discounted, tracker or fixed rate, it’s common that these schemes will lock you in for the duration of the scheme period (2 years, 5 years etc). As we’ve already said, consider how much flexibility you’ll need!

If you do opt for a scheme that locks you in, check whether:

• you have the flexibility to make overpayments (there is no common rule, lenders act differently).
• the mortgage comes with a “portability” option. ie, if you move within the scheme period, you can take your current mortgage with you (just in case you move again soon – some people do!).

Avoid schemes which lock you in beyond the scheme period. These are known as “overhang periods” (for example; 2 year fixed rate with a 3 year tie in, meaning you have no option but to pay the Lenders Standard Variable Rate in year 3; this could be high!).

4. Repayment Methods

If you have an interest only mortgage, should you be considering switching to a repayment based mortgage? At the very least, get some quotes and compare your options.

Health Warning!! – with an interest only mortgage, you have no guarantee that your mortgage will be repaid when you want it to! It’s totally dependent on the returns of your saving plans. Play safe – our advice is where ever possible, opt for a repayment based mortgage (although there will always be some genuine exceptions!).

5. Mortgage Term?

Your new mortgage doesn’t have to be like for like. Consider the outstanding term. Do you need to increase it (especially if you’re taking on a bigger mortgage) or can you afford to reduce it (even by one year!).

6. Understand what type of interest rate scheme you want

As you can see, there are a number to choose from. The key thing to remember is that a “fixed rate” is the only way of knowing exactly what your repayments will be over your chosen term. With any other, your monthly repayments will go up and down as interest rates change.

Variable rate - your monthly payment fluctuates in line with the lenders standard variable mortgage rate. This can cause budgeting problems in times of increasing interest rates.

Tracker rate - your monthly payment fluctuates in line with the Bank of England Base Rate, often referred to as a "Base Rate Tracker".

Discounted - the Lender offers an initial discount on their normal standard variable rate for a given period. Your monthly payment fluctuates in line with the lenders standard variable mortgage rate but at the agreed discount. At the end of the discount period, the interest rate usually reverts to the lenders standard variable rate.

Fixed rate - your monthly payment is fixed over an agreed period and will remain the same regardless of whether interest rates rise or fall. At the end of the fixed rate term the interest rate usually reverts to the lenders standard variable rate.

Capped - the interest rate is guaranteed not to go above a certain level throughout the given capped rate period, but you will benefit from any reduction in interest rates. Your monthly repayment cannot therefore go above the “capped” level.

Flexible mortgages - these schemes allow you to overpay, underpay or even take a payment holiday. Any unpaid interest as a result of an underpayment or payment holiday will be added to the outstanding mortgage. Any overpayment will reduce the outstanding mortgage. Some have the facility to drawdown additional funds to a pre agreed limit.

Offset Mortgages – these schemes allow you to link your current, savings or deposit accounts to the mortgage, so that the positive account balances are offset against the mortgage resulting in a reduced interest payment.

Cashback - some lenders offer a cashback payment on completion of the mortgage. In some cases, if the mortgage is paid back early, a proportion of this, may have to be repaid to the lender.

7. Choose the right mortgage scheme

As you have just seen there are a number of different rates to choose from. The key thing to remember is that a “fixed rate” is the only way of knowing exactly what your repayments are going to be over a given period of time. With any other type, your monthly repayments will go up and down as interest rates change. Think about what you will be able to afford.

8. Don’t forget the costs and fees you’ll incur in buying your next house

When you buy your next home, you’re going to incur a number of different fees. Always make sure you get written quotations before committing to anything.

Valuation fee – There are three types of valuation. The fee must normally be enclosed with your application. The type of valuation you choose will depend on the age and condition of the property.

Basic mortgage valuation - This is for the lender's own purpose. They will appoint a surveyor and the fee you pay will be based on a sliding property valuation scale.

Homebuyer report - This provides you with information in a standard format. The report will include comments on the state of repair and condition of the property along with general defects.

Full structural survey - This provides you with a structural report based on a detailed examination of the property. Any areas of concern that you might have about the property will be investigated.

Arrangement/Booking Fee – this is a fee payable to the Lender. Where applicable, this will be payable either in advance (with the valuation fee) or added to your mortgage balance on completion of the mortgage. The fee will be specified in your mortgage quotation.

Legal costs and fees – you’ll need to appoint a solicitor (or conveyancer) to act on your behalf. The fee they quote you will also include the fees to cover the transfer of ownership of land, the costs of legal registrations and miscellaneous costs (known as disbursements).

Stamp Duty Costs – Stamp duty is a 'purchase tax' and is generally payable where the purchase price of the property is more than £125,000. The current charge is 1% of the purchase price of the property. This increases to 3% if the price is more than £250,000, 4% if the price exceeds £500,000, 5% if the price is more than £1m and 7% if greater than £2m.

Higher Lending Charge - This is sometimes required where you have a low deposit towards the property. It is an insurance policy that the Lender asks you to pay (one single payment), but is used to protect them against a loss should the property have to be repossessed and subsequently sold (this would happen if you did not keep up your mortgage payments). Should a loss be incurred on repossession, you (the borrower) would remain responsible for the shortfall, even though they may have paid the insurance premium. The cost of the insurance can usually be added to the value of the mortgage you are applying for.

Buildings and contents insurance - All lenders require that you fully insure the property for the total cost or rebuilding of it. It is also strongly recommended that you take out contents insurance. It is your responsibility to ensure that you have adequate cover.

Mortgage protection - It is recommended that you protect your mortgage and associated payments in the event of death, being unable to work as a result of an accident, disability, sickness or unemployment. It is your responsibility to ensure that you have adequate cover.

9. How much can you borrow?

There are a whole host of ways in which Lenders now assess how much they will lend you. The main factors being, your annual income (less any regular commitments you already have, such as credit cards, loans), whether you have a good credit rating, size of your deposit. Whilst it is sometimes possible to achieve 4 or even 5 times your income, you must remember one very important point; - what you can borrow is sometimes a lot more than you can actually afford!

10. How long does it take to organise a new mortgage?

The arranging of a mortgage typically takes 2 to 3 weeks. However don’t confuse this with the time it takes to get hold of the keys to the property and the date you can move in. This very much depends on the number of people in the property chain. Your Solicitor and Estate Agent will be able to guide you as to the length of time it will take.

When its time to organise your next mortgage

Email: propertyportal@pinkdotmortgages.co.uk

Important info: The explanations contained in this article are the most commonly understood and are only a brief summary. Various Lenders can impose different meanings and apply various conditions. If you choose Pink Dot Mortgages to act as your mortgage broker, we will undertake a full appraisal of your needs and financial circumstances and match these with the appropriate Lenders, before making any personal recommendations as to the schemes available and suitable for you. As such, none of the above explanations are intended as advice.

This article is provided by PropertyPortal.com Ltd in collaboration with Pink Dot Mortgages Ltd. Pink Dot Mortgages is authorised and regulated by the Financial Services Authority (no. 465258). Not all services are regulated. Registered company no: 6132484 – Swatton Barn, Badbury, Wilts, SN4 0EU, registered in England & Wales. Your home may be repossessed if you do not keep up repayments on your mortgage.

© 2012-Pink Dot Mortgages Ltd

Top Tips for New Property Investors

There are many factors to consider when planning your next mortgage. Failing to think ahead or research the mortgage markets correctly means that many individuals get it wrong!

This is where we believe we can help. We are dedicated to helping people looking to move home by explaining, step by step, exactly what you need to know before choosing your next mortgage.

We’re here to guide you and answer any questions you might have. As a starting point, use this article as a guide. It contains 10 critical things we believe you must know before you select your next mortgage.

If at any time you have any concerns or questions, please feel free to contact us.

Email: propertyportal@pinkdotmortgages.co.uk

Factsheets

If this article helps you, download it from our documents library and forward it to family and friends.

Available factsheets:

• First Time Buyers
• Mortgage Jargon
• Home Movers
• Remortgaging
• Types of Interest Rate
• New Property Investors

Top Tips

1. You need a deposit!

You can access the Buy To Let mortgage markets with a 20% deposit, but as you will see in a moment it’s not quite that simple!

2. How much can you borrow?

This generally hasn’t anything to do with how much you earn. Lenders in this market will base how much they will lend on a rental income calculation. See tip 3 below!

3. Rental income calculation?

Let’s say you want to borrow £100,000.Use the following formula as a rule of thumb and you’ll soon know if a Lender is likely to say yes (subject to a satisfactory valuation!).

100,000 x 6% / 12 = £500

So, in order to obtain a Buy to Let mortgage of £100,000, the rental income on the property need to be at least £500pm.

4. Minimum Deposits

The type of Investment Property you look to purchase will have different minimum deposit requirements. EG: - old properties – 20% - new builds – 30% - showhome leaseback schemes – 40%

5. Professional Letting Agents?

Lenders will generally require you to appoint a Professional Letting Agent to act on your behalf. Their fees are likely to be between 12.5% to 15% of the monthly rent

6. Tenancy Agreements

Lenders will require you to set up a formal 6 month assured short term tenancy agreement (AST). Your Letting Agent can help you with this.

7. Buildings Insurance

You will need special Landlords Building Insurance in place

8. Tax Implications

Two key points to be aware off: Rental income is taxable and when you sell a property that is not your main residence, you’re liable to pay Capital Gains Tax. In other words, if you are entering this market, you need an accountant to advise you.

9. Understand what type of mortgage you want

Most Investors opt for an interest only mortgage as their aim is to obtain capital growth in the property. There may however be some genuine reason for opting for a repayment based mortgage.

10. Understand what type of interest rate schemes there are

These are no different to the schemes you are familiar with when considering a residential mortgage.– Variable, Fixed, Tracker, Discount, Offset. Before choosing, consider how much flexibility you need. As with residential mortgages, beware of Early Repayment Charges.

11. Don’t forget the costs and fees you’ll incur when buying an Investment Property

Again, these are no different to those associated with a residential purchase Valuation fee – There are three types of valuation. The fee must normally be enclosed with your application. The type of valuation you choose will depend on the age and condition of the property Basic mortgage valuation - This is for the lender's own purpose confirming the property provides security for the loan. The fee you pay will be based on a sliding property valuation scale set by your the Lender. You may wish to consider one of the more detailed types of survey. Homebuyers report - This provides concise information in a standardised format on the state of repair and condition of the property. The report will include comments on the property's general defects and the valuers opinion as to its marketability Full structural survey - This is a structural report based on a detailed examination of the property. Any areas of concern that you might have about the property will be investigated. Arrangement/Booking Fee – this is a fee payable to the Lender you are applying to. Where applicable, this will be payable either in advance (with the valuation fee) or added to your mortgage balance on completion of the mortgage. The fee will be specified in your mortgage quotation. Legal costs and fees - The fees charged by a solicitor include the charge for conveyancing (the transfer of ownership of land), the costs of legal registrations and miscellaneous costs (known as disbursements); for example, local Search fees and land Registry fees. We recommend you obtain an estimate of these costs early on the process. Stamp Duty Costs – It’s the big one! Stamp duty is a 'purchase tax' and is generally payable where the purchase price of the property is more than £125,000. The current charge is 1% of the purchase price of the property. This increases to 3% if the price is more than £250,000, 4% if the price exceeds £500,000, 5% if the price is more than £1m and 7% if greater than £2m.

12. Budgeting

How long will it be, before your first tenant moves in? Immediately? Within 2 or 3 months? Factor into your budgeting plans that you might have to initially fund your buy to let mortgage until you find your first tenant.

13. Releasing Future Capital

It might seem odd thinking about this now, but you need to understand one very very important point. If your property grows in value and you want to remortgage to release some of the capital growth, point 3 still applies. The amount of capital you can release over and above your existing mortgage is still governed by the rent the property commands.

14. How long does it take to organise a BTL mortgage?

The arranging of a mortgage typically takes 2 to 3 weeks. However don’t confuse this with the time it takes to get hold of the keys to the property. This very much depends on the number of people in the property chain. Your Solicitor and Estate Agent will be able to guide you as to the length of time it will take. And when it’s time to organise your first BTL mortgage speak to propertyportal@pinkdotmortgages.co.uk

When its time to organise your next mortgage

Email: propertyportal@pinkdotmortgages.co.uk

Important info: The explanations contained in this article are the most commonly understood and are only a brief summary. Various Lenders can impose different meanings and apply various conditions. If you choose Pink Dot Mortgages to act as your mortgage broker, we will undertake a full appraisal of your needs and financial circumstances and match these with the appropriate Lenders, before making any personal recommendations as to the schemes available and suitable for you. As such, none of the above explanations are intended as advice.

This article is provided by PropertyPortal.com Ltd in collaboration with Pink Dot Mortgages Ltd. Pink Dot Mortgages is authorised and regulated by the Financial Services Authority (no. 465258). Not all services are regulated. Registered company no: 6132484 – Swatton Barn, Badbury, Wilts, SN4 0EU, registered in England & Wales. Your home may be repossessed if you do not keep up repayments on your mortgage.

© 2012-Pink Dot Mortgages Ltd

Mortgage Jargon

Advance - the mortgage loan.

APR - Annual Percentage Rate. This is the rate of charge on a loan calculated to a set formula. It includes not just the rate of interest, but also associated costs. It was introduced to provide a meaningful comparison of rates charged by different lenders. You may see this expressed as "The overall rate for comparison is x.y% APR".

Arrangement Fee - this is normally charged by the lenders for arranging a mortgage loan.

ASU - Accident, Sickness and Unemployment. This is an insurance policy designed to provide a regular income for a specified period, should the borrower become unemployed or be unable to work due to an accident or sickness resulting in a loss of earnings.

Bank of England Base Rate - this is the benchmark lending rate regulated by the Bank of England. Lenders will normally follow its movement and alter their own Standard Variable Rate.

Capital and Interest - monthly repayments to a lender are made up of interest and capital which reduces the mortgage debt over time (also known as a repayment mortgage).

Capped Rate - some lenders will, for a guaranteed period, ensure that your rate does not exceed a fixed upper limit (the “cap”), even if interest rates rise beyond that limit.

Cash-back - a type of mortgage where you will receive a cash lump sum at the commencement of your mortgage. The amount will vary depending on the scheme offered.

CCJ - County Court Judgment. A decision made in the County Court, usually for the non-payment of a debt which is registered on your credit file. Once the debt is paid ("satisfied"), and a satisfaction certificate obtained, it is also noted on your credit file.

Completion - the day you become the new owner, get the keys and can move in to your property.

Contracts - the legal documents under which the buyer and seller of the property agree the terms.

Conveyancing - the process of transferring ownership of the property.

Credit Search - the search your lender will carry out to determine your credit payment history.

Credit Scoring - a process generally used by lenders to determine whether you are a good credit risk.

Critical Illness Cover - a type of life assurance policy, paying a lump sum to the life assured on the diagnosis of a critical illness specified in the terms and conditions of the policy.

Deposit - the amount of money you put towards the purchase of the property.

Disbursements - costs which you will have to pay for things such as land registry, search fees etc. which are in addition to the fee payable to your solicitor.

Discount Rate - for an agreed limited fixed period, the lender will apply a discount off their standard variable rate.

Early Repayment Charge - a financial penalty for repaying part or all of the mortgage before an agreed date. It is often applied to fixed, discounted, tracker, capped and cash-back mortgages.

Endowment - a savings plan with built-in life assurance which on maturity can help repay an "interest-only" mortgage.

Exchange of Contracts - the date at which both parties confirm the purchase/sale of the property through solicitors. The purchase is then legally binding. The buyer is responsible for the new property's buildings insurance.

Extended Tie-ins - early repayment charge that apply even after the scheme date has finished.

Fixed Rate - the interest rate is set for an agreed period of time.

Flexible Mortgages - a mortgage type that will allow flexibility of repayments. Options may include the ability to overpay, underpay or take payment holidays. Where the lender calculates interest on a daily basis any overpayments have an immediate effect on the outstanding mortgage balance.

Homebuyer's Report - a Homebuyers Report, or a homebuyers survey, is a surveyors assessment of the state of repair and condition of the property. The report will summarise the findings and make recommendations for further investigations or remedial work if required.

Higher Lending Charge – an insurance policy, payable by the property purchaser, that covers the lender if the property is repossessed and the subsequent sale proceeds do not repay the outstanding mortgage debt and costs in full. The Higher Lending Charge protects the lender, not the purchaser who would still be responsible for the shortfall.

Income Multipliers – a multiple of gross income used by the Lender to determine how much you can borrow.

Income Reference - the lender will usually request written confirmation of income from your employer.

ISA - Individual Savings Account. A tax efficient savings plan which can be used to help repay an "interest-only" mortgage.

Leasehold - a form of land tenure where a person has rights over a piece of land for a specific period. Most residential leases have long terms and are usually set initially at 99 years or 999 years.

Licenced Conveyancer - an alternative to using a solicitor. They specialise in property ownership transfer.

Life Assurance - a policy taken out by most borrowers to help repay the outstanding mortgage debt in the event of death.

LTV - Loan To Value. This refers to the size of the mortgage in relation to the value of the property. For instance a mortgage of £75,000 on a property of £100,000 value is said to be 75% LTV.

MPI - Mortgage Payment Insurance. A policy which is designed to provide you with a monthly benefit to help pay your mortgage if, due to illness, accident or unemployment (if selected), you are unable to work resulting in a loss of earnings.

Negative Equity - where the property has a value which is lower than all the loans secured against it. Non Status - a mortgage arranged under Non Status terms where evidence of income is not necessarily a requirement.

Offset Mortgages - a mortgage type where you may be able to link your current, savings or deposit accounts to the mortgage, so that the positive account balances are offset against the mortgage resulting in a reduced interest payment.

PEP - Personal Equity Plan. A tax efficient savings plan which can be used to help repay an "interest-only" mortgage.

Personal Pension - this is a structured savings and investment plan designed to provide you with an income on retirement. As you can take some of the plan as cash it could be used to help repay an interest-only mortgage.

Re-Mortgage - a new mortgage with a different lender even though you are not moving home. It can be of the same size, bigger or smaller.

Repayment Mortgage - see Capital and Interest mortgages.

Sealing Fee - a fee paid to your "old" lender upon closure of your mortgage account.

Searches - these are checks carried out during the Conveyancing process to determine any planning proposals or other matters which might affect the purchase or future saleability of the property.

Self Certification - this is a special arrangement whereby the lender relies on the borrower to certify their own income and is primarily designed for the selfemployed.

Standard Variable Rate - the interest rate applied to the mortgage account when no other overriding scheme such as a fixed rate is in force. It fluctuates and follows the Bank of England base rate.

Structural Survey - this is based on a detailed inspection of the property and reports on the general structural condition. It is typically for older or unusual properties. Any issues or concerns from the report can be discussed directly with the surveyor.

Term - the period of years over which you take the mortgage.

Title Deeds - documents that show proof of ownership.

Tracker Mortgage - the lender agrees a rate linked to the Bank of England base rate in the form of either a loading or discount for a set period. The Bank of England review the base rate every month, although the reviews do not necessarily result in a change of rate.

Transfer Deed - the document that transfers ownership.

Valuation Report - Lenders require a standard valuation to be undertaken on the property before issuing the mortgage offer. The lender will compare the valuation figure with the agreed buying price, and use whichever is lower when deciding on how much to lend.

Vendor - the seller.

When its time to organise your next mortgage

Email: propertyportal@pinkdotmortgages.co.uk

This article is provided by PropertyPortal.com Ltd in collaboration with Pink Dot Mortgages Ltd. Pink Dot Mortgages is authorised and regulated by the Financial Services Authority (no. 465258). Not all services are regulated. Registered company no: 6132484 – Swatton Barn, Badbury, Wilts, SN4 0EU, registered in England & Wales. Your home may be repossessed if you do not keep up repayments on your mortgage.

© 2012-Pink Dot Mortgages Ltd

Common Types of Interest Rates

Lenders offer various types of interest rates, you need to understand how each one works before you choose a scheme which is suitable for you.

Variable rate - your monthly payment fluctuates in line with the lenders standard variable mortgage rate.

Fixed rate - your monthly payment is fixed over an agreed period and will remain the same regardless of whether interest rates rise or fall. At the end of the fixed rate term the interest rate usually reverts to the lenders standard variable rate.

Tracker rate – your monthly payment fluctuates, usually, in line with the Bank of England Base Rate, often referred to as a "Base Rate Tracker".

Flexible mortgages - these schemes allow you to overpay, underpay or even take a payment holiday. Any unpaid interest as a result of an underpayment or payment holiday will be added to the outstanding mortgage. Any overpayment will reduce the outstanding mortgage. Some have the facility to drawdown additional funds to a pre agreed limit.

Offset Mortgages – these schemes allow you to link your current, savings or deposit accounts to the mortgage, so that the positive account balances are offset against the mortgage resulting in a reduced interest payment.

Discounted - the Lender offers an initial discount, usually against their normal standard variable rate for a given period. Your monthly payment fluctuates in line with the lenders standard variable mortgage rate, but at the agreed discount. At the end of the discount period, the interest rate usually reverts to the lenders standard variable rate.

Capped - the interest rate is guaranteed not to go above a certain level throughout the given capped rate period, but you will benefit from any reduction in interest rates. Your monthly repayment cannot therefore go above the “capped” level.

Cashback - some lenders offer a cashback payment on completion of the mortgage. In some cases, if the mortgage is paid back early, a proportion of this, may have to be repaid to the lender.

When its time to organise your next mortgage

Email: propertyportal@pinkdotmortgages.co.uk

This article is provided by PropertyPortal.com Ltd in collaboration with Pink Dot Mortgages Ltd. Pink Dot Mortgages is authorised and regulated by the Financial Services Authority (no. 465258). Not all services are regulated. Registered company no: 6132484 – Swatton Barn, Badbury, Wilts, SN4 0EU, registered in England & Wales. Your home may be repossessed if you do not keep up repayments on your mortgage.© 2012-Pink Dot Mortgages Ltd