by admin | Sep 30, 2021 | Mortgage News
Babies are a lot of work. That’s a large part of why parental leave is so valuable. It allows parents to concentrate on parenting. At the same time, life goes on, and new parents need to keep on top of life admin and payments. With that in mind, here is a quick guide to mortgaging, remortgaging and parental leave.
Lenders are concerned about affordability
The first point to tackle is the elephant in the room. Lenders are required to examine a borrower’s ability to repay a mortgage. Parental leave and the expenses of having a baby can significantly impact a borrower’s ability to pay. They can therefore make it harder to get a mortgage.
There is, however, a clear difference between “harder” and impossible. In general, the key to success is understanding the obstacles you are likely to face. Then you can work to overcome them. In general, and as is often the case, the better your planning, the easier the change is likely to be.
Planning impresses lenders
When lenders assess your ability to pay, headline figures are only part of the story. They also look at your ability to manage your finances. In the context of mortgage applications, this means a lot more than “just” paying your bills in full and on time. That said, this is an excellent place to start. It also means showing you’ve thought about what the future might bring.
For example, if you’ve been planning on starting a family, have you been saving hard to build up a significant “cash cushion”? Once your parental leave is over, do you have a plan in place for childcare? If so, how are you going to finance it? Be very careful about relying on family help. Your family may be willing, but they are not guaranteed to be able, especially regarding grandparents.
Have you been able to build up an income stream outside of employment? If so, can you feasibly continue with it while also caring for a baby? How much income can you realistically generate from it? Do you have other assets you can monetise, even temporarily, such as a spare room?
Don’t blow your deposit on the baby
You’ll undoubtedly need some items for your baby, especially if you’re a first-time parent. Keep in mind, however, that new parents are prime targets for advertisers. Ignore paid-for promotions. Visit parenting groups and find out from other parents what you actually need and don’t need. Also, try to buy pre-loved as much as possible.
Consider your timing
This may not be an option for everyone on parental leave. It is, however, at least worth considering if you can. The last trimester of pregnancy and the first three months of a newborn are both joyous and exhausting. If you can’t sort out your mortgage before that time, it might be easiest to wait until later.
Usually, babies start to develop a more predictable rhythm when they are about three months old. They also tend to sleep for longer at a time, particularly at night. These changes can make it much easier for parents to organise non-baby-related aspects of their lives. It will also give a potential lender a better idea of how you’re managing your finances now that you’re parents.
Use a mortgage broker
Even if you tick every box as an ideal mortgage candidate, it can still be worth using a mortgage broker. Firstly, it can save you time. For new parents, there’s probably nothing more precious. Secondly, mortgage brokers can suggest deals you might never have found yourself. For new parents, this can be invaluable.
Why use Coombes & Wright Mortgage Solutions?
We are an award-winning mortgage & protection broker providing local, flexible, friendly advice. Our head office is in Brookmans Park, Hatfield, and we have advisers in Abbots Langley, Hertfordshire, London and Dover and Canterbury in Kent.
Our team has over 100 years of combined property and mortgage industry experience. Jointly, we have helped and advised thousands of people at all levels of the property ladder. We pride ourselves on personalised service, exceptional customer care and a friendly approach. We offer flexible appointments at a time and location to suit your – and your baby’s – busy lives!
by admin | Sep 24, 2021 | Mortgage News
You may need a mortgage for decades but you don’t necessarily have to stay on the same mortgage for all that time. In fact, you should make periodic checks to determine whether or not you’re still on the best deal. If you’re not, you should move as quickly as possible. Here is a brief guide to help.
Plan ahead
This is probably the single most important tip of all. When you sign up for a mortgage you will be told when your initial deal ends. That basically gives you a deadline to work towards. Be sure to allow yourself ample time to do thorough research before your current deal ends. Remember to allow extra time for holiday periods such as Christmas.
Keep your credit rating in good order
There are all kinds of reasons why this is important. Maximising your options for remortgaging is just one of them. At a minimum, try to avoid putting yourself in a situation where you’re going to have to repair damage to your credit rating. Where possible, take proactive steps to boost it. For example, make sure that you’re on the electoral register at your current address.
Check your credit record for errors before you start applying for new mortgages. Do this well in advance so you have plenty of time to get mistakes corrected. Remember, a lot of businesses (and organisations) are probably going to be working through the backlog of COVID19 for quite some time to come.
If you know your credit rating has taken a hit, possibly due to COVID19, then commit to seeing a mortgage broker. They may be able to find you a deal you wouldn’t have been able to access yourself. In any case, you have nothing to lose by trying – and potentially a lot to gain.
Aim to minimise your LTV ratio
The LTV ratio (or loan-to-vehicle ratio) describes the value of your loan as compared to the value of your home. This is where remortgages can have a massive advantage over regular mortgages. If you’ve been in your current home for a while, you’ll have paid off some of your mortgage. There’s also a decent chance that your home will have increased in value.
This means that even if you haven’t been able to make savings over the last year or so, you could still be an attractive prospect to a lender. If you have been able to make savings, you might want to consider putting them towards reducing your mortgage.
You would have to move carefully here. If you leave yourself short of savings, you could end up having to take out consumer credit. This could leave you worse off than if you’d just paid extra on your mortgage. On the other hand, if you can reduce your mortgage principal and maintain a decent “cash cushion” you could save yourself a lot of money.
Speak to your current lender
Never just assume that your current lender will offer you the best deal on your remortgage. At the same time, never just rule them out either. Find out what they can offer you so that you can compare it with your other options.
Check-in with a mortgage broker
It is literally a mortgage broker’s job to know the mortgage market inside out. Even if you’re a highly desirable customer, using a mortgage broker can save you a lot of time. If you know that you have hurdles to overcome, then a mortgage broker can help move them out of your way.
In particular, if you’ve seen your credit rating and/or finances damaged by COVID19 definitely speak to a mortgage broker about your options. They may still be able to find you a much better deal than your lender’s Standard Variable Rate.
For more information, please get in touch
by admin | Sep 17, 2021 | Mortgage News
It’s lovely if you can pay off your mortgage before you retire. In reality, however, that isn’t always feasible. This means that it can be useful to look at your options for dealing with a mortgage while in retirement.
Downsizing
If you want to move to a smaller property anyway, then astute downsizing can go a long way towards dealing with an outstanding mortgage. The key word in that sentence, however, is “astute”.
To make downsizing work financially, you need to find a suitable property at a suitable price. This price needs to be low enough to make it worth your while to pay all the expenses associated with moving. Ideally, the property should also have low running costs. If not, then it should have the potential to be upgraded and this should be reflected in the price.
If all these conditions are met, then downsizing can be a way to release equity from your current home while still allowing you the benefits of home ownership. Even if it doesn’t pay off the mortgage completely, it should lower your repayments and hence make them easier to manage.
Selling up and renting
This is essentially a variation of downsizing. You swap mortgage repayments for more affordable rent payments. You also release the equity in your old home to use as you wish. Although you might feel hesitant about returning to renting it does have its advantages.
In particular, disposing of your property can make a significant difference to a future Inheritance Tax bill. If you choose to make gifts out of the equity now and live for a further 7 years, those gifts are excluded from IHT calculations. Even if you die within 7 years, the gifts may still be eligible for taper relief.
Equity release
Equity release plans come in two main forms. With a lifetime mortgage, you borrow against the value of your home. The interest can be waived until you die, at which point it is paid out of your estate. Alternatively, you may be able to make repayments during your lifetime.
With a home reversion plan, you essentially sell a stake in your home. When you move on, the proceeds from the sale of your home are split between you and the lender in an agreed percentage.
Although the basics of both products are simple, using either form of equity release can have major financial implications. For example, the cash you receive by releasing your equity can affect your entitlement to means-tested benefits. It’s therefore essential to get professional advice before making any decisions.
Retirement mortgages
Retirement mortgages are essentially variations of regular interest-only mortgages. The key variations are that there is no set term and that there is no need to have a plan to repay the capital. Instead, you make interest payments each month for as long as you remain in the property and then when you move on, the property is sold to pay off the capital.
It is, however, important to note that, as with regular mortgages, your home may be at risk if you do not keep up repayments. You can, however, exit the mortgage by selling the property. If you do, you could potentially benefit from capital appreciation although this is not guaranteed.
Monetising your property
If you don’t want to give up your property, you might want to consider turning it into a source of income. Possibly the most obvious way to do this would be to take advantage of the government’s “rent-a-room” scheme. Depending on where you live and the type of property you own, there may be others.
The disadvantage of this approach is that it could put you to some inconvenience you’d rather avoid. For example, you might not particularly want to have lodgers in your home. You may, however, decide that overall the pain is worth the gain.
For equity release products we act as introducers only
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