Through our years of giving our customers expert mortgage advice in Newcastle, our dedicated mortgage advisors have found that enquiries from renters interested in becoming First-Time Buyers in Newcastle are always on the rise. They can achieve this by purchasing their rental property from their landlord.
Newcastle has always been a popular place for people to call home and enjoy their life, however, many tenants who are already living there find it quite a bit challenging to own their own home there.
With changes always happening to taxes, it’s looking ever positive for tenants of properties who are looking to purchase the place they already occupy.
Many landlords look to sell properties in their portfolio through various standard means like an estate agent, though you’ll find that there are some out there who are also willing to sell their houses to the whoever is already living in the property in question.
If you are living in a rental property and would like to purchase it from your buy-to-let landlord, it is definitely recommended that you discuss the offer with them directly on a priority basis.
One of the main factors as to why more tenants now have the ability to purchase their home from their Landlord, is because of changes the government made previously, in order to crack down on tax relief relating to Buy to Let purchases.
The changes that they made took effect over the course of 4 years, and the impact of these changes are now being seen as Landlords receive their tax bills.
The temptation of the profit margins in buying and selling properties has always been something that attracts landlords as joining the property industry can come with great reward.
This profit is why a lot of different property investors chose to instead tackle the taxes head on and enjoy the the great profits that came from being involved in the property market.
Though there are positives regarding the industry, there are also negatives, with these changes being a major factor as to why some landlords have previously and still continue to leave the world of property investing and move onto something else.
A lot of the reasons have been noted for this happening including complications with tax, financial demands, and even the mental stress of trying to take on such risky deals.
If you are a tenant of a property owned by a landlord and are willing to buy your home, your landlord may very well be open to selling the property to you. Often these sales come with deals too.
These deals occur as there will be generally be no need for estate agents to get involved, as well as various other external services, meaning the landlord is likely to save some money.
Perhaps a landlord is looking to sell his house, and the tenant takes quite a long time to leave the property. Whilst this is going on, it can mean that there may be a lapse in income for the landlord, due to no rent.
If a sitting tenant agrees to buy the property from the landlord, the transition of ownership will be a lot smoother and so will be flow of income to the landlord.
This is because the landlord will keep getting rent from the tenant until the deal is finalised, at which point he will receive the full payment for the property.
If the tenant of the property decides to move out and takes everything with them, the landlord will have to inspect every little detail of the house and make any necessary repairs.
If you consider the various costs of bringing in painters and cleaners, as well as anyone else that is needed to make repairs, this can be quite financially draining to the landlord.
They can save a lot of money on all of these expenses if the tenant decides to buy the house, because they already live there and will be willing to buy the property as is. Because of this, the landlord won’t have to fork out on many of the expenses they otherwise would’ve.
With this sort of process, there are many different perks for the tenant. You know the property inside and out, knowing exactly what needs work.
Any non-tenant purchases run a risk of any issues going unfixed and unreported, only cropping up once they’ve already bought it.
In those cases, you can end up spending a lot of money to fix any of the problems with the property.
Buying the property allows you the freedom to make any of the changes (so long as planning permission is approved when required) that your landlord may have otherwise not agreed to.
Again, you may require authorisation from the council to make additions to your land, but for the most part you will be able to do whatever you want.
If you have been a tenant for years on end, always moving between properties, you know about the difficulties of waiting for the person in front of you to move, so that you can move in.
In these instances, the previous tenants may have struggled to find another house, or are ready to move but they too are waiting on someone else. Buying the property you already live in can be a way to avoid this.
Your mortgage deposit will generally need to be for at least 5% of the value of the property you are buying in. For example, if you are looking to purchase a home in Newcastle that costs £180,000, you will need to save up a minimum deposit of £9,000.
Ideally, however, you should aim to save more than 5%, as the more significant the deposit you can build up, the more comprehensive your choice of mortgage options will be. You may also benefit from lower and often better mortgage rates.
In the past, it was common to find 100% mortgages. Back then, Northern Rock were offering 125% loan to value mortgages, meaning if you were purchasing a property valued at £180,000, they would lend you up to £225,000.
The reason why lenders need a deposit is to reduce the risks when they are lending. If they lend you 100% of the purchase price and you happened to fail to keep up monthly repayments, they would then have to take possession of the property. All it takes is a slight dip in house prices for them to be at a loss.
Look at it from a Lender’s perspective, if you can’t save up for, or get help to make up at least a 5% deposit for a property, then you probably aren’t quite ready to take that step onto the property ladder.
If you can save 5% of your funds for a deposit, you could qualify for the Government’s Help to Buy equity loan scheme. This scheme applies to new build properties only and you have to be a First Time Buyer in Newcastle. How it works is that you put in 5%, and the Government tops the deposit up by loaning you up to 20% of the property purchase price, making up a 25% deposit. After 5 years, the loan will be interest-free, afterwards, it will increase at a starting interest rate of 1.75%. Some people choose to either remortgage or pay back from savings they have made over that period.
Generally, 5% is enough for most mortgage types. Although it does vary on the lender, some will accept only a 5% deposit. To access a 95% deal, 9 times out of ten you’ll need to have a good credit score. There are lenders out there that may consider you for a 95% mortgage with a lower credit score, but the interest rate might be higher.
It has always been necessary for the Landlord to put down a larger deposit for Buy-to-Let Mortgages, and most lenders at the moment are looking for at least 25%.
In theory, this could be possible, but most lenders won’t let you do this, as essentially, this would still be 100% lending, which no longer exists due to the aforementioned risk involved with such a venture.
Yes, this happens constantly. You might have heard the term the “Bank of Mum and Dad” (both birth and adopted parents, as well as carers & legal guardians) gifting the deposit or other family members such as Aunties & Uncles.
As long as they can evidence the funds, prove who they are and confirm they are not expecting repayment of the gift at any point in time. For more information, we check out our article all about Gifted Deposit in Newcastle.
If you are buying as a sitting tenant and your Landlord or family member has given you a discount from the open market value, or if you qualify for a discount under the Right to Buy scheme. Then typically, you don’t need to put any of your own money in as a deposit. This is due to the equity being already “built-in” in the deal.
A Gifted deposit can be either a portion of or the full amount of a deposit that is Gifted to you by a family member or friend, with an agreement that it is a loan and you don’t need to repay the money.
Gifted Deposits are useful for when you have enough money to cover your monthly repayments but can’t afford the initial deposit on the property, maybe down to a smaller salary or possibly something else. Having more Gifted Deposit available may present you with options for better rates from a lender.
Generally speaking, it is your parents who can gift you the deposit. This is acceptable both birth and adopted parents. You may see this mentioned online as the “Bank of Mum & Dad”, though there are potential other family members who could also be considered as options for a Gifted Deposit. This depends on individual lenders though, so would require care when trying to find the right mortgage lender.
If the person gifting you a deposit is over the age of 55, they may be able to help you out through taking out a Lifetime Mortgage and an Equity Release in Newcastle.
We often find that clients don’t always know that their parents can help with their mortgage, or if they do, they don’t feel like they can ask them for help. The truth of the matter is that most parents are more than happy to help their children in any way they can in getting on the property ladder.
It’s widely believed that taking out a mortgage is a better option than renting, due to you being able to potentially pay less per month. Your deposit can often come from inheritance, although parents have been known to gift it earlier on in life, especially if they already have enough saved or have released equity from their own home.
The majority of lenders won’t accept a loan as a means of funding your deposit. This is down to the uncertainty that you’d have enough disposable income to pay back both the loan and the mortgage at the same time.
There is no maximum limit on the amount someone can gift you, though there are at least a few lenders that will insist you put in at least 5% deposit from your own funds.
If you are a First-Time Buyer in Newcastle or Moving Home in Newcastle, a Gifted Deposit will be greatly beneficial to you. It can also be useful when in conjunction with a Help-to-Buy in Newcastle. This is because the required 5% deposit, depending on the lender you go with, is acceptable to be paid via Gifted Deposit.
Typically, all lenders will require a Gifted Deposit form. Depending on your lender, you may be asked to provide further proof of these funds, such as the donor’s ID or bank statements.
From First-Time Buyer Mortgages in Newcastle to Moving Home in Newcastle, to Remortgages in Newcastle – When you start out looking for a mortgage it will quickly become apparent that you have a whole array of mortgage types available for you to choose from.
Below you will see a list of the most popular types of mortgages we encounter on a regular basis that are available on the market. If you have any questions regarding one of these mortgage options, then please do not hesitate to contact us and an experienced mortgage advisor in Newcastle will be in touch to see how they can help you get the ball rolling.
A fixed rate mortgage means that your mortgage payments are going to remain as they were for the length of time that has been agreed on between you and the lender. You are the one who can set the length of which you want to fix your payments for, with the usual options customer opting for being 2, 3 or 5 years or longer.
Regardless of what happens to inflation, interest rates or the economy, you can rest assured that your monthly mortgage repayments, usually your biggest financial outgoings each month, will remain as you are used to, providing financial stability for you.
A tracker mortgage means that your interest rate will follow along with the Bank of England’s base rate. What this basically means, is the lender that you are with is not the one who sets your mortgage rate and you will be paying a percentage above the Bank of England base rate.
In an example, if the base rate is 2% and you are tracking at 1% above base rate, that means you will be paying a rate of 3%.
When you take out a repayment mortgage this means that each month you are paying a combination of both interest and capital.
So as long as you are able to keep up your monthly mortgage repayments for the full length of the mortgage term, the mortgage balance is guaranteed to be paid off at the end and the property will then become yours completely.
This is the most risk-free way to pay your capital back to a mortgage lender. In the early years of your mortgage term, it is mainly the interest that you are paying and your balance will reduce at a very slow rate, especially if you have taken out a mortgage that stretches over 25, 30 or more years.
This situation then changes in the last ten years of your mortgage, where your payments are paying off more capital than interest and the balance will be reducing at a much quicker rate than it was at first.
Most buy to let mortgages are set up on an interest-only basis, however, landlords may find it much more difficult to get a residential property with this type of mortgage.
Nowadays, finding a lender who is willing to offer this will be hard to come by, though there are certain circumstances where this can be an option. These include downsizing your home when you are older or have other investments what you will use in order to pay back the capital.
Lenders are very strict when it comes to offering these products now and the loan to values are a lot lower than they were in previous years.
With an offset mortgage, the lender will set you up a savings account to go alongside your existing mortgage account.
How this works is that let’s say you have a mortgage balance of £100,000 and £20,000 is deposited into your savings account, then you will only pay interest on the difference, which in this case would be £80,000.
This can be a very efficient way of managing your money, especially if you are a taxpayer that pays much higher rates than others.
Once you have passed the Lenders credit score to qualify for a mortgage, you will be granted an Agreement in Principle. You may see this talked about online as an Agreement In Principle. By obtaining this, you will then find yourself in a much better place to make an offer on a property. It’s also useful when negotiating the asking price, as the seller knows you’re serious and ready to go.
How an Agreement In Principle can possibly affect your credit score is entirely dependent on the type of search the lender opts to go with. These include Soft and Hard Credit Searches, of which will be explained below;
Nowadays you will find that most lenders will prefer to carry out Soft Searches. They’re similar to Hard Searches, though they will usually require less strict information and can leave your Credit Score, for the most part, unaffected
As detailed above, Hard Searches are a lot more in-depth than Soft Searches. The main difference between the two is that taking too many Hard Searches over time could drastically hurt your credit score in the long run. This should not be a problem however if you already know you have a good score, prior to this.
Whilst obtaining an Agreement in Principle is incredibly helpful with the mortgage process, it will not guarantee a mortgage. You will still be required to provide the lender with documents and then a final decision will be made by their underwriter. Agreements in Principle may often include small print that goes unnoticed by customers.
We find that when customers have gotten in touch regarding their Agreement In Principle, they may have been turned away at full mortgage application stage. This is especially often the case for First-Time Buyers in Newcastle or people enquiring in Right to Buy Mortgages. It can also come into play when Moving Home in Newcastle.
The documents required include ID, Payslips, Bank Statements and more. As your Mortgage Broker in Newcastle, we take pride in helping you with Getting Prepared For a Mortgage in Newcastle.
Technically you can go through the process without one, although any credible Estate Agent will want you to provide evidence that you are able to proceed with the purchase in question.
Usually, your Agreement In Principle lasts around 30-90 days, although there is no need to worry, you do not have ‘limited time’. The main reason we recommend getting one so early is to avoid you finding a property that is perfect for you, only to be told a Mortgage is not obtainable based on your circumstances. As such, you don’t always need to buy the first house you see after you get your Agreement In Principle. It’s quite quick and easy to obtain, so if it expires you can get another relatively soon after.
For more information on Mortgage Agreements in Principle and Credit Scores, please get in touch with a Mortgage Broker in Newcastle and we’ll advise you the best we can.
COVID-19 has had a noticeable effect on the mortgage market thus far, but that won’t stop us from providing the same level of Mortgage Advice in Newcastle our customers know and love. At Newcastlemoneyman, we are still working the same way we were before these hardships.
We still have hardworking Mortgage Advisors working remotely from their homes in order to answer all of your mortgage questions. Our number one aim is to ensure all customers have the option to speak to a Mortgage Advisor in Newcastle if they need to.
You may be worried you’re unable to meet your monthly mortgage payments or you’ve reached the point where you are looking for a better remortgage deal. We have noticed that these two situations have been mentioned by quite a few customers.
As a Mortgage Broker in Newcastle, we would highly recommend speaking with one of our advisors before you go directly to the bank or lender. We’re able to assess your personal and financial situation, in order to recommend the best route for you to take.
We’ll do our best to help all those who come to us for help with their mortgage during these difficult months. We’re all in this together and look forward to you getting in touch.
We’re still working through various different situations every day, keeping our business flowing as usual. We won’t let anything get in the way of us providing expert Mortgage Advice in Newcastle.
Customers have still been leaving excellent reviews over the last few weeks, something we’re incredibly proud of. We take great pride in our work and it warms our hearts to know that as a Mortgage Broker in Newcastle, we’ve done right by our customers.
Here is what a few customers have recently said about our service here at Newcastlemoneyman:
“Absolutely fantastic service from Chris setting up my application, to Kayleigh sorting out the right remortgage for me, nothing was too much trouble. Cannot recommend them enough for sorting this out in a timely manner and during this pandemic. Thank you to each and every one of you.” – Mandy H
“Brilliant service from Jonathan and Megan, very smooth process and they have secured me a great mortgage deal. Will highly recommend Newcastlemoneyman. Thank you.” – Daniel D
Remember, we’re still available for you to get in touch 7 days of the week. Sincerely from everyone here at Newcastlemoneyman, we hope you’re safe and well. We look forward to hearing from you soon.
We won’t let anything get in our way, especially during the COVID-19 outbreak. It’s still our aim to help with all your mortgage problems, it wouldn’t be fair to just leave you confused and concerned. We’ll do our best to get you over these hurdles and through the mortgage process with ease.
With the Brexit deadline once again being extended, we’re thinking about what the next move is. With everything up in the air and uncertainty becoming the norm, it can be hard to find reliable advice about anything, including mortgages.
We have found that many people are sitting on their hands when it comes to property. No-one is quite sure what right path is. As a result, people are potentially missing out on golden opportunities which could have benefitted them in the long-term.
With previous experience of how the market has been influenced by external factors such as national political issues, our Mortgage Advisors are looking towards the future to evaluate the potential outcomes for customers post-Brexit. And in our opinion, there is lots of pent-up demand out there.
Because of this, we are advising clients to research all their options. Especially if their current plan is to “wait and see” because that approach may not work out in their favour.
If you’re planning to move in 2020, then it would be advisable to chat with us sooner rather than later. Now is a great time to reach out to us and to look at getting your home valued because Estate Agents are quiet.
Getting your home prepared to go on the market typically takes a few weeks. This is because time is needed for 2 or 3 valuations, choosing your preferred Estate Agent, signing your agency agreement and getting the photos finalised. This can be a timely process and could, unfortunately, be delayed at any stage.
Furthermore, if everyone else looking to enter the market has the same “wait and see” mindset, it will work against you. By the time your home goes live, so will theirs. This means there are more houses on the market, meaning there are more options for a potential home buyer, therefore driving prices down.
There a few benefits to getting ahead of the market and getting your home valued now.
So, if you’re thinking of moving home in 2020 or the near future but are concerned about Brexit, contact us to discuss your mortgage options. We offer all customers a free no-obligation consultation.
Whether you are a first time buyer actively viewing properties or a home mover with your house on the market, you may have noticed that some of the larger estate agents and builders are very keen for you to use their in-house mortgage advisor and conveyancing services.
Being part of a stand-alone mortgage business we receive lots of feedback as to what sales tactics can be used, examples of this are;
Remember, when negotiating a purchase price, do you really want the seller of your property having access to your personal financial situation and potentially knowing your maximum borrowing?
Here at Newcastlemoneyman, we work solely for you!
We are open and honest and only have your best interests at heart. As first-time buyers, we know it can be stressful. We’re here to save both your time and money.
To answer this question, we need to look back at previous lending systems. This will help us understand why the current system is the way it is and help explain what lenders are ultimately looking for.
Back in the 80s and 90s, there was very little technological intervention in the mortgage process.
Back then you would make an appointment with your Building Society Manager who would encourage you to a bank and save with them if you weren’t already.
This would allow them to judge whether you were creditworthy. If you were, they would grant you the equivalent of an Agreement in Principle, followed by advice on how much they were prepared to lend you.
Arguably, this was a highly personalised, common-sense approach. However, it often resulted in inconsistent decision-making as the Building Society Manager interpretation of the guidelines themselves and lending based on their view of the criteria.
With a view to eradicating the inconsistencies and to cut costs, lenders moved to automated affordability calculations. This resulted in multiplier caps being applied so that managers couldn’t lend you more than, say, 3 or 4 times your household income.
As the 2000s progressed, lenders became more generous in how much they would lend. Some even offer self-certified mortgages, which required no background checks.
In 2008, as we all remember, the market crashed which led to a difficult couple of years for those trying to get on the property ladder. The lenders battened down the hatches and opted for a much more cautious lending approach.
In 2014, following the recovery of the market, the regulator launched the Mortgage Market Review (MMR). This was a new set of guidelines for lenders to adhere to which said goodbye to the old-style income multipliers and brought into play other factors such as household expenditure.
Before 2014, two applicants with the same income could borrow roughly the same as each other. This was irrespective of how much they spent each month. The new affordability models took a much more in-depth review of how applicants managed their money on a monthly basis.
There is still a “cap” in place with most lenders not going past 4.75 times your annual income. However, they also analyse your spending habits. For example, if you have high childcare costs, lots of credit commitments and a student loan, they will offer you less than your colleague who doesn’t have any of that expenditure.
We are constantly surprised by the large variations from lender to lender. For example, some lenders seem to penalise low earners and others see pension contributions as a fixed outgoing. Both factors can have a significant impact on the amount they will be willing to lend you.
When it comes to finding a lender, it really is horses for courses. If you need to maximise your borrowing capacity to obtain the home you need to buy, then you’ll benefit from using a Mortgage Broker. They have the experience and knowledge to research the market on your behalf to see if anyone will lend you the amount you need.
If you’re wondering “How Much Can I borrow?” and looking to take out a mortgage, our expert Mortgage Advisors in Newcastle can work out your finances to ensure that the repayments feel comfortable to you.
People who are married and seeking a mortgage tend to opt for a joint mortgage rather than a sole name mortgage. This is because the combined salaries help them qualify for larger mortgages. This is beneficial because house prices have been increasing at a faster rate than wages.
Despite this, there are cases where it is best to only have one name on the application. We’ll explore these scenarios further in this blog post.
If one applicant has had a previous credit problem which is stopping them getting a mortgage, a sole name mortgage could be the right option. This is providing that the spouse or partner is not connected to the issue.
It is worth noting that the person applying would need to be careful to try and avoid creating a financial association with their partner. This is to guarantee that their own credit score remains unaffected by the issue.
When one applicant is not working, you might also want to consider making a sole name mortgage application. This is because the maximum borrowing capacity of the couple will, generally, be lower than if the working applicant opted for a sole name mortgage.
Age can also come into the calculation if you have one applicant in their 50’s. For example, if you buy with a younger partner who is a good earner, then it’s possible they could borrow more like a sole applicant.
It may simply be that there are stamp duty or other tax implications which would lead to an applicant preferring to apply on their own.
Some lenders are quite strict about married applicants having to apply for mortgages in joint names. Luckily not all lenders share this view, but it can be an exhaustive task identifying which ones hold this view.