by admin | Feb 27, 2021 | Mortgage News
As anybody who has tried it will know, being your own boss isn’t always easy. In the early days, you may have to do just about everything yourself. This can really limit your personal life. Even once your business matures, you still have to deal with unique challenges. In particular, you have to face up to the fact that lenders may be very wary of dealing with you.
Business owners versus mortgage lenders
According to a survey from specialist mortgage broker Haysto, approximately one in six people reported having their mortgage application rejected because they were their own boss. More specifically 14% of company directors and 15% of sole traders reported being turned down for a mortgage due to their employment status.
Looking at this from a “glass-half-full” perspective, however, five in six people are having mortgage applications accepted even though they are their own boss. This clearly shows that it is possible.
Understanding mortgage lenders
The key point to remember is that mortgage lenders now have to act in accordance with the terms of the Mortgage Market Review. In simple terms, this means that they cannot just look at multiples of income. They must look at the applicant’s personal circumstances and assess their ability to afford the loan over the long term.
Keep in mind that lenders can be sanctioned if they are found to have made an improper loan. The safest approach for them, therefore, is to err on the side of caution. Then add in the fact that lenders have to think about their own finances. Nobody will be happy if a bank winds up in the sort of trouble the world saw in 2008.
In short, therefore, if anyone wants to get a mortgage, they’re going to need to make sure that they satisfy a lender on all counts. This can be a particular challenge for the self-employed. That said, the challenge is not unique to them. Zero-hours contract workers and those on variable incomes are both in much the same situation. Here are some tips on how to address it.
Look after your credit records
Make periodic checks with the credit bureaux to ensure that your credit record is up-to-date and accurate. Keep it healthy by always making the minimum payments in full and on time. Pay extra if you can.
Reducing the balance on loans lowers your debt-to-income ratio. Reducing your balance on lines of credit (e.g. credit cards) doesn’t have quite the same effect. This is because you still have access to the credit. That said, staying comfortably below your credit limit is an indicator that you can manage your money.
Build up your deposit
Deposits protect your lender from house-price falls and from borrower defaults. Given that COVID19 and Brexit are both still running their course, it’s understandable that lenders will probably be particularly wary of these possibilities.
It can be hard to build up a deposit, especially when you’re renting. It may, however, be possible for you to get some help with it. For example, the Lifetime ISA is designed to help either with the purchase of your first property or in your retirement. It benefits from government bonuses.
Choose your lender with care
Lenders may all work to the same basic set of rules, but they still have some scope for individual decision-making. They may also have varying degrees of understanding about the realities of being self-employed.
Going to a mortgage broker may be a convenient way of getting guidance on which lenders are most likely to give you a yes. If you don’t want to go down this route, then at least do your research carefully. Check which lenders have the best track record of dealing with people in your situation.
Your property may be repossessed if you do not keep up repayments on your mortgage.
by admin | Feb 19, 2021 | Mortgage News
According to data from Halifax, first-time buyers now have to put up an average deposit of £57,278 to buy their own home. That’s £10,829 (23%) more than the previous year. First-time buyers in London have to pay over double this with an average deposit of £130,357. Here is a quick look at the drivers behind these figures and what can be done about them.
House price inflation
The most obvious reason for larger deposits is rising house prices. Despite COVID19 and Brexit, the UK has recently seen intense house-price inflation. While coincidence does not necessarily mean causality, it’s certainly interesting that this growth spurt started at the same time as the Stamp Duty holiday.
The Stamp Duty Holiday
The Stamp Duty holiday may have made a lot of people very happy. It is, however, unlikely that first-time buyers were amongst those rejoicing. They already benefited from a Stamp Duty discount. The Stamp Duty holiday effectively negated this. It put them back on the same footing as onward movers and made them only slightly better off than investment buyers.
In principle, the effect of the Stamp Duty holiday should already be starting to wear off. The closer it gets to the end of March deadline, the harder it will be for buyers to get from offer to completion by the deadline. In practice, there are two reasons why the impact of the Stamp Duty holiday might be felt for more than the next couple of months.
Firstly, the government may choose to extend the Stamp Duty holiday. It may choose to extend the overall deadline. Alternatively, it may choose to extend the holiday to anyone who has an offer accepted before the current deadline, thus giving them more time to complete. Even if it does neither, it might choose to alter Stamp Duty banding to bring in some revenue without creating a major shock in the housing market.
Secondly, what goes up does not necessarily come down again at all. Even if it does, it may not come down quickly. In other words, the end of the Stamp Duty holiday may see house prices stop rising or at least slow down their rise. It may not, however, lead to them actually falling.
Nervous lenders
At the end of the day, deposits are there to protect lenders against risk. This includes the risk of house price falls and the risk of lender default. Each lender has to decide for themselves how much of a deposit they require from each applicant. In simple terms, the more nervous a lender feels about a situation, the more likely they are to demand a high deposit.
Right now, average deposits are running between 19% in the North West to 27% in London. What’s more, they may also impose restrictions on the source of deposits. These actions may reassure anyone concerned about falling house prices triggering a rerun of 2008. They do, however, have a disproportionate impact on first-time buyers. They cannot benefit from an existing property increasing in value to help cover the cost of the deposit on a new one.
A way forward
Navigating a path through this situation could be tricky for all concerned. First-time buyers should certainly do everything they can to save for a deposit. This may include making use of the Lifetime ISA with its government-funded bonus system.
Industry, regulators and the government may, however, have to come together to organize further support measures for first-time buyers. Realistically, lenders’ hands are tied by the need to work within the framework of affordable and responsible lending. Regulators could loosen these rules, but there would be a risk to doing so.
This means that the bulk of the support is likely to need to come from the government. It could potentially come in the form of extra financial support, tax breaks, borrowing guarantees or some combination of all of these.
Your property may be repossessed if you do not keep up repayments on your mortgage.
by admin | Feb 12, 2021 | Mortgage News
New research from mortgage broker Habito suggests a worrying lack of awareness about how mortgages work. It shows how a lack of financial education can have a serious impact on personal finances. Here are some of the key takeaways.
Ignorance is not bliss
Almost 20% of people did not know whether or not they were on their lender’s standard variable rate (SVR). In other words, they do not understand one of the most fundamental points of their mortgage.
Almost half of the respondents did not understand what remortgage was. The source of confusion varied.
- 6% of respondents did not know the term remortgaging
- 8% of respondents thought it was the same as taking out a second mortgage
- 17% of respondents thought it meant taking on more debt or was only done out of need.
To be fair to the last set of respondents, remortgaging can be used as a way to cover other expenses. It can also be used as a debt consolidation tool. It may therefore be that these respondents have heard about it in that context and not really understood its wider meaning.
Inaction can be expensive
Just over a quarter of people knew that they were on their lender’s SVR. This means that either they did not understand the impact of this or they did understand the impact but were not taking action to remedy it. This could be because they did not see it as a priority or it could be because they felt they were not in a position to do so.
Interestingly 11% of people felt uncomfortable about having lenders scrutinize their finances. This is just under half of the people who knew that they were on their lender’s SVR. That could be a coincidence but it could also be cause and effect. In other words, people might grit their teeth and pay more than they needed rather than expose their financial situation to view.
There may also be a connection with the findings of separate research by another mortgage platform, Haysto. This highlighted the stress and frustration felt by people who had been turned down for a mortgage.
If people feel like their finances are too precarious for them to have a reasonable chance of being accepted for a new deal, they may not even try to apply for one. This possibility would tally with the fact that data from the Bank of England shows that between February and November 2020 remortgaging dropped 33%.
A little knowledge can be dangerous
A worrying one in ten people thought that paying their lender’s SVR would help them to clear their mortgage quicker. On the one hand, it’s great that people have grasped the general importance of paying as much as you can towards debts.
On the other hand, it’s very concerning that some people clearly do not understand the difference between capital and interest. Assuming this ignorance carries over into other areas of their lives, they could easily also be overpaying on other products such as loans and credit cards.
A possible way forward
While acknowledging the importance of personal responsibility, it is also important that businesses and governments are responsible too. As a minimum, the government/FCA could place an obligation on lenders to remind people when they are due to be switched onto the lender’s SVA.
This reminder could contain a clear explanation of the next steps, including the possibility of remortgaging. It could also have pointers to other sources of information such as the Money Advice Service.
If the government wanted to take this a step further, it could restrict the percentage of mortgages lenders could have on the SVR. This could be done either via a direct cap or by taxation.
Your property may be repossessed if you do not keep up repayments on your mortgage.
by admin | Feb 5, 2021 | Mortgage News
The year is still relatively new but the first month has proved both eventful and informative. Now, therefore, seems like a good time to review the mortgage landscape. With that in mind, here are some factors which could drive the mortgage market in 2021.
COVID19
It says a lot about the pandemic that it has easily knocked Brexit off the top spot in this list. Sadly, the end of 2020 did not lead to the end of the pandemic. On the plus side, vaccination is now starting to become a reality. This means that all being well, 2021 will be the year COVID19 is finally eradicated, or, at least, brought under control.
Of course, for various reasons, vaccination roll-outs are progressing at different rates in different places. This could end up having a major economic impact around the globe. If so, then, it probably should be assumed that the UK will be impacted to some extent.
That said, in the case of the UK, the impact could end up being neutral to positive. Right now, the UK is very much ahead of the curve on vaccinations. This means that it could, potentially, reopen its economy relatively early.
Initially, its trading options might be limited due to the ongoing impact of the pandemic in other countries. On the plus side, however, the U.S. is also pushing ahead with vaccinations. If it can also reopen its economy quickly, the UK may have the chance to develop a valuable post-Brexit trading partnership.
Brexit
Technically, Brexit is now complete. In practice, it’s clearly going to take some time for everyone to adapt to it. In the meantime, some companies are pulling out of the EU/NI market. Other companies are finding ways to adapt to the practicalities of Brexit.
Mortgage lenders are facing particular challenges because the Brexit deal was much more focused on goods than services. This means that lenders need to figure out how they’re going to manage existing customers who reside in the EU/EEA. They are also going to have to figure out how, or indeed if, they can onboard future customers from the EU/EEA.
There are already reports of financial services companies withdrawing or restricting facilities to customers based in the EU. Presumably, lenders in the EU are also withdrawing or restricting facilities to customers based in the UK for exactly the same reason. Both sets of customers can apply to mortgage lenders in their country of residence for property located abroad.
In principle, the UK could regain access to the EU (and vice versa) by coming to an equivalence agreement. In practice, this could still be a delicate situation for financial services as equivalence agreements can be revoked at any time. Lenders might, therefore, be reluctant to invest heavily in EU/EEA markets knowing that they could have the rug pulled out from underneath them (and indeed vice versa in the EU/EEA).
Remote working
According to data from people solutions consultancy New Street Consulting, there were three times as many remote jobs advertised in November 2020 as there were in November 2019. This will be in addition to the existing jobs which went remote during the pandemic and will now stay that way.
It may be too soon to declare the end of the office. It does, however, seem almost inevitable that many companies will at least scale back their office space. What’s more, the fewer trips staff are making to the office, the less important it is to live close to it. In other words, any shift to remote working has clear implications for the property market and hence the mortgage market.
Your property may be repossessed if you do not keep up repayments on your mortgage.
by admin | Jan 29, 2021 | Mortgage News
DIY can make for good entertainment. Type either “Room makeover” or “DIY disaster” into a search engine and you’re sure to get plenty of results. On a more serious note, however, it can be advisable to do some thinking before you decide whether or not to tackle DIY. If you do, then it’s advisable to do some more thinking on the best way to go about it.
Renters beware
Renters should generally avoid DIY completely unless they have explicit permission from their landlord. Simple bits of DIY may have a very low chance of going wrong. The problem is that if they do go wrong, you could find yourself in a whole lot of trouble with your landlord.
If you are going to ask your landlord’s permission, be very clear about exactly what you intend to do. Get permission in writing and then stick exactly to what was agreed. Make sure you’re clear on whether or not you can leave the changes in place when you move on.
If you can’t then think about the practicalities of rolling them back. For example, you may find it a lot easier to cover up paint than to take down even “renter’s wallpaper”, let alone traditional wallpaper.
People with old houses beware
Even if you live in a historic property, it’s probably fairly unlikely that you’ll find an oyster-shell wall or a fabulous wall mural in it. There is, however, at least the possibility of, literally, uncovering surprises, good and bad.
This means that if you’re planning on renovating an old house, you need to expect the unexpected and be ready to deal with it. That alone could be reason enough for home DIYers to leave well alone and just call in the pros.
The pros may also be in a better position to advise what materials can (or must) be used (or not used) in an older property. For example, some properties may require the use of traditional lime plaster to ensure breathability (and hence avoid condensation). In other cases, however, it may be appropriate to use modern materials but in a sympathetic manner.
Beware of your utility infrastructure
If you’re working anywhere near electrical wiring or plumbing (for gas or water), then you need to make sure that all the relevant supplies are turned off. Even so, you need to be very careful to avoid damaging them. The cost of putting right that damage could far exceed any savings you would have made by going down the DIY route.
If you’re tempted to attempt any DIY involving your utility infrastructure, then do your research thoroughly before you make a decision. Get it wrong and you could run into a whole world of pain. In fact, devaluing your home could be just one of a long list of problems you need to address.
Beware of working around windows
Take glass seriously. Even if you’re only doing something fairly basic like putting up a new curtain rod or installing shutters, you still need to protect the glass from both impact and vibrations. This isn’t just about keeping your window in one piece. It’s also about avoiding you (or anyone else) getting injured by broken glass.
Beware of working at heights
If you can’t reach something easily, get a ladder (or proper step stool). Do not just try to stretch or stand on a regular chair. Firstly you need to keep yourself safe. Secondly, if you’re going to do a job, do it properly. Raise yourself to a height where you can see and work comfortably and effectively.
Beware of paint cans
Spilt paint may not devalue your home, but it can certainly devalue your floor. Cover the floor properly. Pour as much paint as you need into a tray and keep that on a cover. Keep the lid on the paint can unless you’re actually pouring from it.
by admin | Jan 22, 2021 | Mortgage News
Despite the general lack of seasonal festivities, the Christmas period can still be financially challenging. That being so, you may be thinking about applying for a mortgage holiday in the new year. If so, here’s a quick guide to what you need to know.
Relief is still available for people impacted by COVID19
At present, people impacted by COVID19 have until 31st March 2021 to apply for a self-certified mortgage holiday. What this basically means is that you will automatically be granted a payment holiday for up to three months without the need to go through a formal approval process.
You can then extend this up to a total of 6 months. All COVID19-related payment holidays must, however, be finished by 31st July 2021. This means that if you think you might need or want to take the full 6 months, you’ll need to have everything signed off by the end of January.
The negatives of mortgage holidays
There are two potential negatives about taking a mortgage holiday. Firstly, the holiday gives you a break from the payments. It does not, however, give you a break from the interest. How much of a negative that will be will depend partly on your mortgage deal and partly on the size of your balance.
If you have a large balance on your mortgage, then you might want to consider organizing a partial payment holiday. This would give you some relief from the payments while limiting the amount of interest which accrued during the holiday. Alternatively, you could ask your lender if you could make payments voluntarily if your circumstances allow.
The second negative is that a payment holiday can impact your credit record. Technically, a COVID19-related holiday is not reported on your payment record. The problem is that in the real world, it’s pretty easy for lenders to figure out that you’ve had a payment holiday. If you’re making regular payments, your balance is going down accordingly. If you’re on a payment holiday, it isn’t.
Again, the real-world impact of this is likely to depend on your circumstances. If you’re happy to stay with the same lender for the immediate future, then you may be prepared to take the hit. If, however, you’re looking to change lenders, then you may be better overall to make the payments, even if it’s a struggle.
After the mortgage holiday ends
After the mortgage holiday ends you either resume payments as normal or go onto tailored support measures. These will be set up in partnership with your lender. Be aware that, like payment holidays, these support measures may come at a price. For example, if your lender extends your mortgage term, you may pay less each month but end up paying more overall.
Unlike COVID19 payment holidays, tailored support measures will be reported on your credit record. Again, the impact they have will depend on your circumstances. For example, if you extend your mortgage term, you will be able to maintain a track record of regular payments. If, however, you arrange another deferral, you will be sending a very clear message to a lender.
If you switch to an interest-only mortgage, then you’ll need to think very seriously about how you’ll repay the capital. Unless you have some other repayment vehicle in place, then you will need to give up ownership of your home. This may not mean that you have to leave it. You might, for example, be able to use equity release to pay off the balance.
Selling your home
If it’s a continual struggle to pay your mortgage, then your best option may be to sell your home. This can be a hard decision to take. In fact, you may want to get professional advice before you take it. Keep in mind, however, that there are many reasons why selling your home on your own terms is better than having it repossessed.
Your property may be repossessed if you do not keep up repayments on your mortgage.
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