Looking for a new mortgage
Hi – I am Sam from Furness Building Society and I am presenting a short video to explain to you the process of seeking a new mortgage.
You may find this useful if it is some time since you have moved home or changed your mortgage provider. There has been many changes introduced in 2014 which are likely to make the experience very different to last time.
If I am moving what do I do when I have seen something to buy?
The first step is to work out what you think you can afford for a mortgage, and then assess what ‘equity’ you have in your current home, in other words the amount you think your home will sell for minus the amount of your current mortgage.
Put the two together, and add any other savings you may have to put towards a property and this is how much you may be able to pay for a property.
Working out what you can afford to borrow is tricky – the Furness website has a guide to help you work out all of your outgoings and a calculator to work out approximately how much your mortgage will cost. A mortgage adviser will be able to help you with this.
The amount you are contributing or ‘putting down’ towards the property is known as the deposit. Once you know the size of your deposit you can assess the mortgage products that may be suitable for you. Generally speaking, the larger the deposit the lower the rate of interest you will have to pay on your mortgage.
The different types of mortgage?
There are hundreds of mortgages on the market and most of them are classified as Discount, Tracker, or Fixed Rate.
Nearly all lenders have a basic mortgage rate, sometimes known as Standard Variable rates or Mortgage Variable rate. Discount mortgages are those which provide a discount from these basic rates for a set period of time. If the basic rate changes up or down your mortgage rate will change in line with it.
A tracker mortgage is linked to an independent measure such as the Bank of England base rate, and the rate will only change in line with changes to the independent measure. This is also likely to be for a set period.
Fixed Rate - This mortgage rate does not change during the set period at all. Even if other mortgage rates in the market go up or down with this type of mortgage the rate will not change during the set period.
Normally the mortgage rate reverts to the lender’s basic rate at the end of the set period and at that time you are likely to be offered other competitive deals, or you can search for an alternative lender.
What are the options when paying back a mortgage?
There are two main methods; repayment or interest only. A repayment is when you pay the interest back plus the amount you originally borrowed – which is known as capital. Each month you pay more than just the interest cost -this extra amount reduces your overall mortgage size so for each future payment the proportion that is interest is that bit less, and even more of what you pay goes into reducing your overall borrowing. Eventually, over the lifetime of the mortgage providing you make all of the required repayments the whole amount you borrowed is paid back
The second option is interest only, where you just pay interest and the amount you owe never reduces. This is much less common and a mortgage lender will want to see a very clear plan as to how you will be able to pay back what you owe at some stage. An example would be for a buy to let, where you will be able to pay what you owe when you sell the property.
How to choose the right mortgage?
For most people their home is the most expensive purchase they will ever make, and making sure you have a mortgage that will suit your circumstances is very important. Regulatory changes in in the mortgage industry means that lenders will now adopt a very different approach to providing mortgages.
All the checks you may remember from last time you applied for a mortgage still apply, though you will find now that simply working out how much a lender will lend you is not just based on your level of earnings. A lender will want to know a lot more about your total financial commitments so that they can be confident you can afford your mortgage.
A lender will also take into account your likely future income and even changes that are taking place in the market, for example if the Bank of England base rate rates go up. They will want to know you can still cope if things become more stretched.
All this will take time and do not be surprised if your mortgage appointment takes up to two hours! Some lenders may offer to do this in two sessions, especially if you are applying over the telephone. Furness offer mortgage interviews over the telephone though our contact centre, Furness Direct, and also in all our branches because for something so important a lot of people want to meet face to face.
In the application process we will provide you with advice as to which product best matches your needs and even provide you with details as to why we think a particular mortgage is the most suitable for you.
What is the process after application?
A mortgage underwriting team assesses all mortgage applications, and the timescale for a decision will vary according to personal circumstances, as for example we may ask for more information if you have missed bill payments in the past. Typically, it takes 2-4 weeks from application to a formal mortgage offer.
If you are not moving home and just switching your mortgage provider (remortgaging) the process can be quicker. If your application is accepted we will either inspect your property or simply do a ‘drive by’ assessment. The whole process from application to completion can be just a few weeks.
If you are moving home then a valuation will be required before an offer is made. From this point the timescales to complete your purchase tend to be more in the hands of the solicitors, and ‘the chain’ of buyers and sellers that are all looking to buy and sell at the same time as you.
What costs are there to think about?
Most mortgages have fees and a mortgage advisor can help you determine whether a low rate but high fee mortgage is right for you. In addition to this there are solicitors fees, stamp duty for homes above £125k, removal costs, and the cost of the survey to factor in. If you are selling there are also estate agency fees. However, when remortgaging some, of these costs can be avoided – again a mortgage advisor can help with this.
How to find out more
Furness Building Society have mortgage advisors in all of our branches – visit any one to find out more. Alternatively, you can call Furness Direct on 0800 220 568 or view our website www.furnessbs.co.uk/mortgages.
Your Home May Be Repossessed If You Do Not Keep Up Repayments On Your Mortgage.
Furness Building Society is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Furness Building Society is on the Financial Services Register under registration number 159624