| Index »Mortgage Types |
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| First Time Buyer |
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| Mortgage Types - Getting Your First Mortgage |
| Our website contains a Mortgage Calculator that instantly tell you what your monthly repayments would be on any given mortgage, so they provide a useful starting point when buying your first home.
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| Remember, there are plenty of specific first time buyer mortgages out there these days, including 100% mortgages, shared ownership deals allowing you to buy with friends, and guarantor mortgages, all designed to make getting your first mortgage that bit easier.
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| There are government loans available for first time buyers who are Key Workers. And in some instances you can buy your first home with a Housing Association. If you want an idea of the interest rates available, check out our best buy tables.
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| If you are a first time buyer, no doubt you will have a lot of questions to ask. First and foremost, what are the best mortgage deals for first time buyers? Should I opt for a fixed rate, a capped rate, a discount or a tracker for my first house? How do I get my first mortgage? Should I go to a bank, a building society or a specialist lender when I'm buying my first home? How much can I borrow for my first mortgage, and how much will it cost me?
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| The process is fraught with insecurity. Say you've seen your dream home. The seller doesn't have to commit to you until the very last minute.
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| To get to this point you'll be chasing solicitors, surveyors and the mortgage lender, none of whom will feel that getting a move on is as important as you do. But it's vital because another buyer could come along at any moment.
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| Meanwhile, with no guarantee of success, you'll be paying out for valuations, conveyancing, searches and possibly having to find a deposit.
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| Remortgage
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| When you remortgage, you are switching your mortgage to another deal, and frequently; another lender.
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| Remortgages can be used for various reasons, most people simply switch mortgage because it will work out cheaper for them. For example, the introductory discounted interest rate may have finished with your current lender; therefore you could get a discount, or a lower APR, with another lender. Other individuals may use a re-mortgage to consolidate their debts, if they take out their remortgage for a larger amount than owed on the existing mortgage.
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| Buy To Let Mortgage
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| A buy to let mortgage is when you purchase a second property with the intention of letting it out to tenants. Many people want to increase the size of their property portfolio to take advantage of rising house prices and rental rates. Of course, while it can be a very lucrative endeavour, it's important to make sure you invest in the right kind of property and secure the best mortgage available. With thousands of mortgages offered through over a hundred UK lenders, we can find the right deal for you. With the fall in equity markets more and more people are turning to property as a wise way of building capital for the future.
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| Also, many of our clients have 'lazy' equity in their main residence which they can use to buy more property.
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| Buy to let mortgages are available with as little as 10% deposit. They can be underwritten on the projected rental income only, so you need not have a high personal income to build a property portfolio.
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For new buy to let investors we offer experienced, sensible advice, from mortgage advisers, who own buy to let properties themselves.
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For experienced investors or portfolio holders we have a number of links with sophisticated Lending sources for specialist situations such as corporate lets, limited company portfolios, equity pooling, and sales and leaseback deals
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| Who Is It Suitable For?
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| Although there are risks involved with investing in a second property, the financial rewards can be great. Some people arrange buy to let mortgages to take advantage of the rental income the house will generate. Others are looking for capital gains, selling or remortgaging the property in a few years time. There is, however, no guarantee that house prices will continue to increase, so it's important to make sure that you can handle any extra mortgage payments and arrange suitable mortgage protection cover. You will also have to decide whether you want to use a private letting agency to handle all of the tenancy issues.
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| The whole process of obtaining funding for residential investment borrowing is rather complex. so approaching a professional advisers in order to provide you with guidance and assistance in both choosing the finance, arranging the finance and arranging any necessary insurances will save you time and money.
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| Remember that even the largest UK brokerages may be outstanding in the field of dealing with owner-occupier mortgages - but their knowledge and access to investment property (BTL) funding may be very limited.
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| 100% - 125% Mortgage
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| 100% mortgages allow you to arrange a mortgage deal without paying a deposit (usually around 5-15% of the property value). With house prices continuing to rise, this is a very useful arrangement for people looking to get a foot on the property ladder.
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| If you're unable to afford a deposit, then a 100% mortgage may be the best choice for you. Particularly popular with first time buyers, 100% mortgages are available with dozens of companies throughout the UK.
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| 100% mortgages aren't right for everyone. Borrowing anything over 90% of your property value is a higher risk to the lender, so interest rates are generally higher. If you can afford a deposit, you may benefit from lower interest rates and a shorter repayment term. However, if you are looking for a way to purchase a house without having to save up thousands for a deposit, this is an excellent option. With many 100% mortgage deals it is also possible to switch mortgages at a later date.
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| 125% Mortgage?
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| 125% mortgages allow you to borrow up to 125% of the value of your property. It's a popular deal with first time buyers, people looking to consolidate debts or anyone purchasing a house in need of repairs or renovation. 125% mortgages allow you to borrow 25% on top of the value of your property. It's a very useful arrangement for first time buyers, who can purchase a house without a deposit and use the extra money to pay associated costs (moving fees, decorating, stamp duty etc). Because the loan money can be used for any reasonable purpose, it's also an increasingly popular as a way to consolidate debts from other unsecured loans and credit cards.
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| Whether a 125% mortgage suits you is down to your circumstances, and personal preferences. Interest rates are generally higher when you borrow anything over 90% of your property value, due to the increased risk to the lender. Your monthly repayments may therefore be larger than with a conventional mortgage deal, or the repayment term may be longer. However, with many 125 % mortgage deals it is possible to switch mortgages at a later date. It is also possible to arrange interest only or repayment agreements with your lender.
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| Capital Raising Mortgage
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| Capital raising mortgages are usually ways of remortgaging your house to release funds for other purposes. The cash could be for home improvements, a holiday, a new car or simply to consolidate existing debts. Many people use remortgaging to take advantage of lower mortgage interest rates when consolidating all their loans into one manageable monthly fee.
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| A capital raising mortgage can be a very useful short-term solution to financial problems, whatever you need the money for. The lower interest rates mean that by increasing your mortgage, you will likely pay less than getting an unsecured loan. However, you should consider the fact that it will mean larger mortgage repayments and a longer repayment term. There may also be early repayment penalties on your current mortgage.
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| There are many reasons why you might wish to raise capital on your home. A capital raising mortgage can help you secure funds for anything from renovations and improvements to investing in another property. Adora Financial Services can find the right capital raising mortgage for your needs. With a whole of market choice, we are experts in locating the best deal from thousands of mortgage offers.
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| Debt Consolidation Mortgage
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| Debt consolidation mortgages allow you to reduce your monthly outgoings by consolidating all your debts (credit cards, loans, store cards etc) into one single payment. Because a secured loan such as a mortgage usually offers lower interest rates than credit cards and unsecured loans, you can often save money by consolidating. Even if you have a bad credit history including CCJs, arrears, bankruptcy or defaults.Consolidate your debts into one manageable monthly sum with a debt consolidation mortgage. With a whole of market choice
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| Who Is It Suitable For?
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| If you have lots of unsecured loans and credit card debt spread amongst several lenders, the benefits of a debt consolidation mortgage can be significant. Your monthly payments are likely to decrease, often by as much as 60%. However, the payment term is usually longer than a standard unsecured loan, so in the long run you may end up paying slightly more. The decision is whether your priority is reducing monthly outgoings or paying less overall.If you are thinking of consolidating existing borrowing you should be aware that you will be extending the term of the debt and increasing the total amount you repay.
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| Equity Release Mortgage
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| An equity release mortgage allows you to access the equity tied up in your property. To put simply, an equity release mortgage is a way for a homeowner to sell part of their house in exchange for a cash sum without moving house. It's popular with older people or those who have already paid off, or are close to paying off, their mortgage.
There are two ways to release equity from you home - a mortgage reversion or a lifetime mortgage. A lifetime mortgage provides either a cash sum or a cash amount spread over a period of years, effectively as a loan secured against your property. The interest is only payable when you die or move to a nursing home and the house is then sold, paying off the outstanding interest. Reversion schemes allow you to sell a percentage of your property in return for a lump cash sum or monthly payment.
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| Who Is It Suitable For?
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| There are lots of advantages to equity release mortgages, but it's important that you consider the following pros and cons before deciding if it's the right scheme for you: Equity release is a great way to solve the problem of being asset rich, but cash poor in retirement. You don't have to move from your home or downsize to a smaller property to release the money staying in your property and not moving might help reduce inheritance tax (though there are complications with this) With a lifetime mortgage it is less clear how much of the property will be yours to pass on to your children/grandchildren.
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| You may lose some rights to means tested benefit If the sum released is spent unwisely, then it can have a negative impact on quality of life. If you opt for an income-payment equity release mortgage this will be counted in your tax calculations.
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| Offset Mortgage
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| With an offset mortgage you keep your balances e.g. mortgage, savings, current account etc in separate accounts but all balances are offset against each other. This means that the credit balances allow that much of the mortgage not to accrue interest. With an offset mortgage you can link your savings and current account with your mortgage. This means that any cash you have in savings can reduce your mortgage interest payments. There are hundreds of offset mortgage deals in the UK, so finding the right one can be a headache. We have access to every lender and mortgage provider in the UK. Our whole of market choice can save you time, money and hassle when trying to arrange a mortgage.
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| With some of these mortgages you can make underpayments - this means if in one month you have an unexpected expense you can pay less off your mortgage. Payment holidays may also be available where you pay nothing for a month or so.
Over-payments can also be made. Most current account and offset mortgages are variable rate mortgages which means the amount you repay increases or decreases in line with any interest rate changes.
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| Repayment Methods
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| The two main ways to repay your mortgage are 'repayment' and 'interest only'. With a repayment mortgage you make monthly repayments for an agreed period (the 'term') until you've paid back the loan and the interest. With an interest only mortgage you make monthly repayments for an agreed period but these will only cover the interest on your loan. You'll normally also have to pay into another savings or investment plan that'll hopefully pay off the loan at the end of the term.Offset mortgages are totally flexible arrangements that tie together your current account, savings and mortgage. All are kept in separate accounts, but when the interest is calculated, each is taken into consideration. This helps reduce interest payments.
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| Poor/Bad Credit Mortgages
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| High-street lenders will often decline your mortgage application if you have had financial difficulties in the past. There are however, lenders who specialise in providing adverse or bad credit mortgages to people who have had such difficulties.
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| Adverse credit lenders make mortgages more obtainable for those with a poor credit history or bad credit rating allowing mortgages to be obtained by everyone no matter what your credit status.
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| The primary reason for being refused a mortgage may be because your name appears on a credit blacklist. A poor credit rating or adverse credit history can result in a traditional mortgage application being rejected. If a borrower has a history of poor credit usage then they are often described as Sub Prime.
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| Adverse status can result from any of the following:
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Mortgage arrears or loan arrears |
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County Court Judgement (CCJ) |
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Bankrupcy |
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| These are not the only causes of credit problems. Credit checks can often show some minor problems with your credit record such as:
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Absence of a credit record |
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Incomplete work or income history |
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Not appearing on electoral roll |
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Late bill payment |
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Debts incurred as a student |
| A ruling by a County Court against a person who has not satisfied debt payments with their creditors is known as a CCJ. The ruling remains on the persons financial credit history profile for a period of seven years. Failure of an individual to make payments at the correct time or to not comply with the lender's requirements is known as a Default.
If you have a poor credit history it doesn't mean you can't get an adverse credit mortgage. There are numerous lenders that specialise in lending to people with adverse credit status.
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| If you do have poor credit then with a large enough deposit you should be able to obtain a competitive rate adverse credit mortgage. You will then be on route to repairing your credit rating. Interest rates may be a little higher because the lender views the borrower as a higher risk which protects the lender should the borrower default on mortgage payments. If you do not have a deposit you can still get a 100% adverse credit mortgage. Some lenders offer credit repair mortgages. These help you improve your credit rating if you make regular repayments. After a number of years, your annual interest rate is reduced and will revert to the lender's standard variable rate, providing you have maintained a clean credit record throughout that period.
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| Professional Mortgage
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| Mortgage Lenders are keen to attract professional borrowers, and as a result a number of mortgage lenders offer exclusive deals to eligible professionals.
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| If you are a Professional, you can benefit from:
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Lower Interest rates |
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Enhanced lending multiples |
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Competitive fees |
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| Right To Buy
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| Right to Buy gives you the opportunity to purchase you own council home. If you have lived in the property for some time (a minimum of two years).
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| Right to Buy' was first introduced in 1980, this government scheme is aimed at secure tenants of local authorities and those individuals who are assured tenants of registered social landlords or housing associations who previously held secure tenancies with local authorities. It is open to virtually any secure tenant who can afford to buy. Any land let together with your home (for example, gardens and garages) will usually be treated as part of your home.
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| The Right to Buy works by allowing you to buy the council house you are currently living in at a discount price. The longer you have lived in the property, the bigger the discount - and you will retain the title deeds from the council upon purchase. Some lenders will offer Right to Buy mortgage deals with good rates of interest.
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| You may have the 'Right to Buy' if you are a secure tenant of a district council nationwide, a London Borough Council, a non-charitable housing association, other registered social landlord or Housing Action Trust. You do not have the Right to Buy until you have spent at least 2 years as a tenant with one of these bodies. For new public sector tenants who take up their tenancies after 18 January 2005 you will need to have spent 5 years as a tenant.
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| You may be able to exercise your Right to Buy jointly with members of your family who have lived with you for the past 12 months, or with someone who is a joint tenant with you.
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| You may be eligible for a Right to Buy mortgage if you:
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Currently live in a council house |
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Have lived in your council property for at least two years |
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Can afford to purchase the house under the Right to Buy conditions |
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Your house isn't part of an elderly, disabled or employment-related scheme |
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| Self Certified Mortgage |
| Self certified or 'self cert' mortgages are arrangements where the Lender will advance money without the client needing to prove their income. |
| This type of arrangement is ideal for the self employed client, those who have more than one source of income, or those paid with a high element of commission or bonus. Available to both employed and self employed applicants (including first time buyers) we can arrange self certified mortgages of up to 95% of purchase price. We can even help self employed people with as little as one day's trading history. There are also a range of deals available for clients with a poor credit history. |
| It's a popular choice for all kinds of borrowers, including freelancers, unsalaried company directors, part-time employees and even people with bad credit history. All you have to do is sign a declaration agreeing that you can afford the loan repayments. |
| To be clear, a self certified mortgage means that you state, but do not have to prove, your income. No wage slips or accounts will be required. 'Self certified' mortgages should not be confused with the more common 'fast track' mortgages where the Lender does not usually ask for proof of income but reserves the right to do so. |
| Self Certification is an increasingly popular way of obtaining a mortgage. Many people are now self employed or on short term contracts and don't have an income that is easily assessable due to bonuses and sales commission they earn. Amount they can borrow is based on a signed declaration of income. They are also suitable for those who regularly undertake short term contract work, or have a number of jobs or are seasonal wage earners. Working practices have changed significantly in recent years, with many more people now self-employed, contracting or drawing an income from several different sources. |
| If you run your own business you may not qualify for a conventional mortgage and self certification is the best method of obtaining your mortgage. High street lenders tend to approve mortgage applications for those who have long-term regular income, usually with at least three years accounts. You can certify your earnings without having to supply proof of income documentation, such as pay slips or fully audited accounts. Some lenders may require a document signed by your accountant to say that your income is sufficient to service the repayments. |
| If you have your own business you may sometime have to produce business bank statements for a set period so the lender can look at the gross income you received. Lenders may supplement this information with credit searches. If you are a home owner, you will be asked to supply your existing mortgage statements, and if you rent, the lender may ask for references from your landlord. Many lenders only accept business through authorised intermediaries. Using the services of a specialist mortgage broker you can get access to some exclusive deals that are not available on the high street. |
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| Who Would Qualify? |
| Self Cert Mortgages are available to most people not just the self employed.You can usually borrow up to 75% of the value of your property, although we can source 90% to 95% on a self cert basis. The larger the deposit you have the less income checks the lender will carry out.As with any financial commitment you should be realistic about repayments. Having a shorter repayment term saves you money in interest but it will mean a greater monthly cost, whereas a longer repayment period will reduce the repayment but increase the amount of interest. You should aim to create a balance between paying off your mortgage quickly and keeping the payments at an amount you can afford. |
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| Who Is The Self Certified Mortgage Suitable For? |
| There are many pros and cons to self certified mortgages. To decide whether it is suitable you should consider the following points: |
| Accounts, payslips and statements are not required to be approved for a self certified mortgage. You can arrange a self certified deal at any interest rate type that you would find with traditional mortgages, including fixed, capped, tracker and discount. |
| It Suits a broad range of borrowers, including people on multiple incomes, part-time employees, bonus-reliant income, people who receive much of their income from shares and investments, contractors, and freelancers. |
| If your current income doesn't reflect what you expect to earn in the near future, you can self-certify to take that into account. Due to extra risk for the lender, self certification usually has higher interest rates than traditional mortgages usually requires a larger deposit than comparative mortgages (the higher the deposit, the better the interest rates) |
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| Shared Equity Mortgage |
| Shared equity mortgages allow the borrower to pay lower monthly fees on a property in exchange for the lender taking a share of the equity. There are over a hundred companies in the UK that offer shared equity mortgages, making it confusing and difficult to find the right deal. Shared equity mortgages are useful for people who can't afford the full cost of a new home, but don't mind sacrificing a share of equity to purchase it. Usually, the lender charges normal interest rates on the bulk of the loan, then offers reduced or 0% interest on the rest of the sum. The repayment is therefore less than an unsecured loan, and the lender receives the rest of their money back upon sale of the property. |
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| Shared Ownership Mortgage |
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| Shared Property Ownership |
| Over the last few years the Government have set up of a number of affordable housing schemes to help first time buyers get on the property ladder. One of the most common of these schemes is a shared ownership arrangement, where the purchaser buys a proportion of the property and rents the remainder from the Housing Association (registered Social Landlord). Currently there are very few lenders on the market that will lend for this type of arrangement. |
| When purchasing under a Shared Ownership arrangement Lenders will expect you to be able to afford both the mortgage payment and the rental payment (for the rented share of the property) when calculating your affordability. |
| Shared ownership schemes are intended for people who cannot afford to buy a property outright and gives them a helping hand to get on to the property ladder. Although you will not own the property outright, you will still have all the normal rights and responsibilities of an owner-occupier. It is possible for up to four individuals to become joint owners, but each applicant must meet the eligibility criteria. |
| Shared ownership is the most common way of purchasing affordable housing from a Housing Association or Registered Social Landlord (RSL). It allows you to purchase a share in a property, which can be anywhere between 25% and 75% with 50% being the usual average. As when buying a property in the conventional way, you organise a mortgage to cover the cost of the percentage you are buying and then you pay a low rent on the outstanding part. |
| The Housing Corporation is sponsored by the Office of the Deputy Prime Minister and is a Non Departmental Public Body. Its role is to regulate and fund Housing Associations in England. Housing Associations are the principle providers of new social housing. There are currently over 2,000 Associations in England. RSLs are social landlords who are registered with the Housing Corporation. The majority of RSLs are Housing Associations, but some are co-operatives, companies and trusts. Housing Associations are run as businesses, but they do not trade for profit and any money they make is ploughed back into the organisation to fund new homes and maintain existing ones. |
| Once you have purchased your share in a property, your investment doesn't have to stay at the same level. As your finances allow, you can buy further shares in your home, buying it outright if you want to. This method of house purchase is known as "staircasing". |
| Another scheme that is sometimes available is "Do It Yourself Shared Ownership". In this instance, rather than purchasing a property directly from the Housing Association, they would set you a budget and you would be able to look on the open market. When you have found a property, the Housing Association would purchase it and then sell you a share of between 25% and 75%. The scheme then works in the same way as outlined above. |
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| Staircasing And Selling For Shared Ownership Properties |
| Staircasing refers to the practice of purchasing additional percentages of a shared ownership house. Depending on the type of lease there may be restrictions on time and amount of staircasing, but often 25 per cent portions are available until the homebuyer reaches 100 per cent. The cost of staircasing depends on the valuation of the property at the time the purchase takes place. |
| Once the buyer reaches 100 per cent of the property, they effectively own it on a long lease, not as a freehold. At this point, the buyer only has to pay ground rent on the property (a very low figure) but does not have to pay rent to the housing association they have purchased from. |
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| How Would I Go About Staircasing? |
| In order to purchase a further part of your home, it will be necessary to contact the housing association you have purchased from. At this stage, an independent valuation will be commissioned. The valuation costs are entirely the responsibility of the buyer, and must be paid in full before staircasing occurs. Depending on the share you wish to purchase, you must pay this percentage of the value as determined by the valuation. If the buyer still wants to purchase a further share in the house, they will have between three and six months to pay. If a valuation expires it will be necessary to renew it. |
| The mortgages available on shared ownership are somewhat limited as some lenders feel that shared ownership is more risky than more traditional loans. This is probably due to the fact that these schemes were originally available to help financially insecure members of society. The fact that a third party i.e. the Housing Association has to be brought into the legal framework might also make them slightly wary. However, as house prices have risen, a much larger cross section of the general public are looking at shared ownership as a means of getter on the property ladder and therefore, some lenders will now offer 100% mortgages on shared ownership schemes. |
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| How To Get Into Shared Ownership |
| Firstly you will need to find a property you want to buy. You can either approach your local Housing Association or you can buy from someone who already owns a shared property. If you do opt to buy privately, the Housing Association will still need to be approached to ensure that you meet their criteria. Many Housing Associations have waiting lists for properties on their books so if you plan to purchase in this way, it is a good idea to add your name to their list as quickly as possible. |
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| Shared Ownership Stamp Duty |
| As seen above, shared ownership buyers usually purchase a percentage of the property under a mortgage, whilst paying the housing association or local authority rent on the rest. However, because the property is not 100 per cent owned by the buyer, who is eligible to pay Stamp duty? Does the buyer pay for their percentage, or not if it falls below the minimum stamp duty threshold? |
| When a shared ownership lease is granted, the purchaser or purchasers can either pay stamp duty land tax at each separate stage of their purchase - they pay as and when they buy each percentage block of their property. Alternatively, the property buyer can make a market value election and pay tax as if the property had been purchased outright from the start. The purchaser and their legal advisers must make this decision. Stamp Tax advisers can assist buyers in calculating how much tax is owed in each instance, but this is the extent of the aid that they can give. |
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| Student Mortgage |
| It's becoming increasingly popular for students to arrange a mortgage while at university, rather than pay high rental fees. Available with dozens of companies across the UK, finding the right student mortgage can be confusing. |
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| What Is A Student Mortgage? |
| Student mortgages are offered if a guarantor is available - usually parents or legal guardians. With high rental prices and a relatively stable housing market, students and parents alike are starting to see this as a logical way to pay for accommodation, but have property to show for it at the end of the course. It's possible to find student mortgages up to 90% of the value of the property. |
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| Expatriate Mortgage |
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| UK Expatriates Buying In The UK |
| For many expatriate Britons, buying a home in the UK is a very attractive idea - either as an eventual home to come back to, or as an investment. |
| You may be concerned that by the time you come back to the UK, you won't be able to afford the kind of house you want anymore, or you may want to buy a property as part of a retirement plan or for holidays. |
| Whatever your situation, buying a property in the UK when you are living overseas may seem difficult at first. Most high street lenders aren't able to help, and finding a suitable broker without help can be difficult too. |
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| Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it. This is a general guide and should not be taken as any recommendation. Suitability of a mortgage will depend on your personal circumstances. Please seek appropriate Expert advice before relying on them. They are subject to the UK regulatory regime and is therefore primarily targeted at consumers based in the UK. |
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