Mortgage Advice with RAE Financial Advisory Services Ltd
RAE Financial Advisory Services Ltd is your trusted partner in navigating the intricate world of mortgages. Whether you’re embarking on your homeownership journey as a first-time buyer, considering remortgaging options or delving into the world of property investment with buy-to-let mortgages, our team of dedicated independent mortgage advisors is here to guide you every step of the way.
Understanding Mortgages
At RAE Financial Advisory Services Ltd, we believe that understanding mortgages is key to making informed decisions about your financial future. A mortgage isn’t just a loan; it’s a vital financial tool that enables you to realise your homeownership dreams. Whether you’re purchasing residential or commercial property, a mortgage involves borrowing funds from a lender, with the property itself serving as collateral until the loan is fully repaid.
Mortgages are secured’ loans which are intended to help buyers purchase residential property. When an individual takes out a loan, the lender charges interest: the same is true of a mortgage.
This means that the loan is secured against the value of the property being purchased until the mortgage is paid off. Sources of residential mortgages include high street banks, building societies and other types of less well known financial institutions.
Key Factors to Consider for Navigating Mortgage Approval
Securing mortgage approval involves careful consideration of various factors by lenders. From assessing affordability and deposit size to evaluating property value and type, lenders meticulously scrutinise each aspect of your financial profile to determine eligibility. With our expert guidance, you can navigate the mortgage approval process with confidence, ensuring that you secure the best possible terms tailored to your individual circumstances.
Mortgage providers follow a set of rules and procedures when deciding whether or not they will agree to provide a mortgage to purchase a residential property. Although different lenders apply different lending criteria, the amount a potential buyer can expect to borrow of a property’s purchase price is determined solely by the mortgage provider’s requirements.
Here are some of the factors lenders take into account when making their decision:
Affordability
The mortgage provider will want to be certain that the borrower can afford to service the loan — i.e. to make the monthly repayments as and when they fall due. To help them make that decision, the lender will want to see the borrower’s personal financial incomings and outgoings. Any rent the borrower may be paying will be discounted, but the lender will factor in the potential cost of the monthly mortgage repayment.
Deposit
The amount the borrower can contribute towards the cost of buying a property — the ‘deposit’ — is a major consideration. Because most mortgage loans are secured on the value of the property, mortgage providers prefer borrowers who can provide large deposits: the smaller the loan, the lower the lenders’ risk. And the larger the deposit, the lower the borrower’s monthly repayments will be, which reduces his or her outgoings and improves the affordability criteria from the lender’s point of view. In the current financial climate, most lenders expect borrowers to deposit at least 5% of the property’s purchase price.
Value
Mortgage providers lend against the value of the property, not the agreed purchase price. To avoid lending more than is absolutely necessary (and therefore increasing their financial risk) most mortgage providers will insist on having the property in question valued by a qualified surveyor.
Property Type
Some lenders will not consider mortgaging certain types of properties. Leasehold properties, properties below a certain price, property being purchased through an assisted purchase scheme or under a Right to Buy scheme, or where property is being purchased ‘off plan’, may not be acceptable to the mortgage provider.
Time Frame
Mortgage providers generally have a maximum number of years over which they lend and will set a date when the mortgage must be repaid in full.
Value
Mortgage providers lend against the value of the property, not the agreed purchase price. To avoid lending more than is absolutely necessary (and therefore increasing their financial risk) most mortgage providers will insist on having the property in question valued by a qualified surveyor.
Our Independent Mortgage Advisory Services
The prospect of buying your first home could be both daunting and confusing. Our aim is to guide you through the process from start to finish so that you understand exactly what the purchase entails and how much it will cost.
The mortgage market changes all the time, not just in terms of mortgage deals and regulations but also in the way lenders assess loan applications.
Some of the changes have been in the way mortgage lenders assess the suitability of all clients for the different types of loans on offer. They base this decision on a variety of factors, primarily:
1. The property – type, condition, access and location
2. Employment status – amount and frequency of income (and time in your current role)
3. Financial commitments – current and future (and your history of managing credit).
There is now more focus on affordability and expenditure. This is very different from the traditional approach of simply multiplying your annual personal (or rental) income by a pre-set multiple to obtain a maximum lending amount.
We pride ourselves on being up to date with regulation, legislation, and the economic
market.
We understand your needs, match them to the requirements of lenders, and protect you and your dependants once you have bought your property. This way, we help you save time and money in the new world of mortgage advice.
RAE Financial Advisory Services Ltd offers a comprehensive range of mortgage advisory services in Manchester and the North West that are designed to meet your specific needs and goals:
Mortgage Types
Embarking on your homeownership journey? Our first-time buyer mortgage advisors provide clear, concise advice to guide you through the process, from determining borrowing limits to selecting the right lender and mortgage type.
FIRST TIME BUYER
The prospect of buying your first home could be both daunting and confusing. Our aim is to guide you through the process from start to finish so that you understand exactly what the purchase entails and how much it will cost.
The mortgage market changes all the time, not just in terms of mortgage deals and regulations but also in the way lenders assess loan applications.
MORTGAGE REPAYMENT
Our mortgage repayment advice is tailored to your individual requirements to ensure we find the best solution for you and your finances. We’re based in Manchester and give mortgage repayment advice to clients across North West.
Once their mortgage application has been accepted in principle, the borrower may have the option of deciding how he or she repays their loan: on a ‘capital and interest’ basis, on an ‘interest only’ basis, or as a combination of these two.
Capital and interest mortgages
An arrangement where part of the monthly repayment is used to pay the interest and the remainder is used to reduce the original amount of the loan. In the early years of the mortgage, most of the monthly repayment goes towards paying the interest; in later years, the interest charges diminish and more of the repayment is available to reduce the loan amount.
Interest-only mortgages
All of the monthly repayment (which will be lower than a capital and interest repayment) is used to pay the interest on the loan and therefore the capital does not reduce.
Lenders require evidence that a customer will have in place a clear, credible repayment strategy and that the repayment strategy has the potential to repay the capital borrowed.
Repayment strategies may include deposits or investment product(s), pension(s) periodic repayment of capital from irregular sources of income (i.e. bonuses), the sale of another property or other land or other acceptable methods which meet lending criteria.
Where the repayment of capital is an investment, the investment runs alongside the mortgage but is separate from it, the cost should be taken into account when calculating the overall costs of the mortgage arrangement.
REMORTGAGING
Remortgaging is the process of switching your existing mortgage to another mortgage lender, usually to lower the amount you're paying on your mortgage.
You are not obliged to stick with your original lender for the full mortgage term, and you can move to another lender at any time to get a lower interest rate – you don’t have to be buying a new home. Remortgaging could save you hundreds or even thousands of pounds over the term of the mortgage. It is important to note that early repayment charges may be applied by the existing lender.
Our remortgage advice is tailored to your individual requirements to ensure we find the best solution for you and your finances. We’re based in Manchester and give mortgage repayment advice to clients across North West. We will be pleased to help and advise you further on how to switch and save.
STANDARD VARIABLE RATE MORTGAGES
In a Standard Variable Rate (SVR) mortgage, the borrower’s monthly repayments are based on the prevailing rates of interest their lender charges — not the Bank of England (BoE) base rate. In other words, it is entirely the lender’s decision on the rate of interest they charge the borrower.
Although the rate of interest charged in a SVR mortgage can be influenced by changes in BoE base rate, whenever the bank raises or lowers base rate, the lender can do the same, or ignore the change altogether. On occasions, the lender may increase or decrease their rates of interest even if the BoE has not changed theirs.
The rate of interest charged on SVR mortgages can range from 2% – 5% above base rate, or more.
Generally speaking, arrangement fees for SVR mortgages tend to be lower than for trackers or fixed rate deals and if the borrower pays off their mortgage sooner than planned, he or she may not incur an early repayment charge.
FIXED RATE MORTGAGES
In a fixed rate mortgage arrangement, the interest rate is fixed for a pre-determined period of time, which can be for up to 5 years or more. The monthly mortgage payment will not change, no matter whether the Bank of England, or the mortgage provider, raises or reduces their interest rates. For the borrower, the advantage of a fixed rate deal is that he or she knows exactly how much their monthly repayment is going to be each month and for how long.
In some instances, the interest rate charged on a fixed rate mortgage can be higher than the interest rates charged for other types of mortgages. The borrower may also have to pay an arrangement fee to set up a fixed-rate deal.
Usually, once a fixed rate arrangement comes to an end, the lender’s standard variable rate applies.
TRACKER MORTGAGES
The rate of interest the borrower pays is linked to the Bank of England’s (BoE) base rate of interest. So whenever the base rate changes, so does the tracker’s interest rate and the borrower’s monthly repayment. For those reasons, tracker mortgages are known as ‘variable rate’ mortgages.
When interest rates are low, the borrower’s monthly repayment might be less than it would be on a different type of mortgage, such as a fixed rate or standard variable rate mortgage. But when interest rates are high, the reverse is true. And as the rate is likely to vary, the borrower can never be sure exactly what their monthly repayment is going to be.
Although the rate of interest on a tracker mortgage is linked to BoE base rate, the actual interest rate charged on the mortgage will be determined by the lender and will usually be higher than base rate. So if base rate is 0.5%, the interest rate on a tracker mortgage will be 0.5%, plus whatever rate of interest the lender charges. If for example, the lender charged an additional 2% interest, the actual rate of interest on the mortgage would be 2.50%.
Although some tracker mortgages run for the life of the loan, most last for less than that — between one year and 5 years is not untypical.
Once the tracker arrangement finishes, most lenders will switch the mortgage to a standard variable rate of interest.
CASHBACK MORTGAGES
A cashback mortgage is an arrangement where the lender pays or rebates to the borrower a sum of money (or some other form of financial benefit/incentive) either on completion of the mortgage or at a later stage. The borrower can use the cashback to help pay some of their property purchase costs such as legal and surveying costs, stamp duty, removals charges or home improvements and repairs.
The amount of cashback the borrower will receive depends on the lender’s requirements: sometimes it is calculated as a percentage of the total mortgage advance and will therefore vary in value, or it may be a fixed and non-negotiable amount. Some mortgage providers insist that the borrower already holds (or opens) a current account with them before they qualify for cashback.
Cashback mortgages are usually associated with standard variable rate or tracker mortgages, although the rate of interest may or may not be higher.
As well as applying an early repayment charge, if a cashback mortgage is redeemed before the end of the agreed term, the lender may ask the borrower to repay all or part of the cashback.
OFFSET MORTGAGES
In return for not receiving any interest on their savings, the homeowner pays a lower rate of interest on their mortgage: an arrangement known as ‘offsetting’. An Offset mortgage is only available where both the mortgage account and the savings account/accounts are with the same provider.
On a £200,000 mortgage for example, if the homeowner offset £20,000 of their savings against their mortgage, he or she would pay interest on the outstanding balance — i.e. £180,000. As the rates of interest charged on mortgages are usually higher than those paid on savings accounts, offsetting can be more financially advantageous to the borrower.
Furthermore, homeowners can use an Offset Mortgage to either shorten the term of their mortgage, or reduce the monthly repayments. Borrowers who wish to shorten the term of their mortgage would base their monthly repayment on the full £200,000 mortgage and pay more each month than the lender requires them to. Or the homeowner could base their monthly repayment on the lower (offset) figure of £180,000, which would reduce the monthly repayment but the term of the mortgage would remain the same.
Apart from the money in the savings account, some providers allow borrowers to offset the cash in their current accounts and their cash ISAs against their mortgage debt. If the borrower makes withdrawals from any of the accounts that are linked to their mortgage, the amount of savings offset against their mortgage reduces.
In common with other mortgages, Offset Mortgages are available on a fixed and variable rate of interest basis, although some lenders charge a higher rate of interest for providing an Offset Mortgage than a standard variable rate mortgage.
Our Independent Mortgage Advisory Services in Manchester and the North West
RAE Financial Advisory Services Ltd offers a comprehensive range of mortgage advisory services in Manchester and the North West that are designed to meet your specific needs and aspirations.
If you’re interested in our mortgage services, call us today for a no obligation chat about sourcing the right mortgage. Our mortgage services are tailored to your individual requirements to ensure we find the best mortgage for you and your finances.