Questions to ask mortgage advisor First Time Buyer
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Questions to ask mortgage advisor First Time Buyer (Part 1)
Xavier runs through a list of questions to ask a mortgage advisor if you are a First Time Buyer. Part one of two, recorded in June 2024.
What sort of deposit do you recommend I save up?
In short, the more you could save, the better. There are lots of different lenders out there and some will actually allow no deposit, if you have a track record of renting for 12 months or more. That was a new scheme introduced last year [podcast recorded in June 2024].
However, that is, of course, all subject to affordability and credit scoring, which we’d go through with our clients. On a traditional mortgage, the minimum is 5%, so you need at least a 5% deposit. If you could save up more, you could access lower Loan to Value brackets. Essentially, the higher the deposit you have, the less risk there is to the lender so they offer you lower rates and better costed products.
A higher deposit reduces any risk further down the line, as well. If property prices fall, a bigger deposit reduces the risk of you ending up in negative equity, which is a situation hopefully no one listening will ever have to go through.
With a 5% deposit or less, you run the risk of the property value falling below your loan amount – so you owe more than the property is worth. It’s quite rare, but having a high deposit helps counteract that.
Some lenders may also require a higher deposit depending on the type of property and your credit score. Some lenders require a higher deposit for flats or for new build homes rather than pre-owned homes. But there are mortgages out there for people with all different deposit sizes.
Who do I pay my deposit to?
The deposit gets paid to the solicitors. They’ll let you know exactly when and where to send the money, near the point of completion. As mortgage advisors, we may ask for proof of your deposit monies, but we won’t actually be the ones you’ll pay it to.
Once the solicitors have completed all the legal work, you’ve got your mortgage offer and you’re at the point of exchanging contracts, they’ll typically ask you to pay a 10% deposit. If you’re paying more than a 10% deposit, you pay the rest at the point of completion.
The solicitors will give you the bank details for where that money needs to be sent, but do always call them back to double check. Unfortunately there are fraudsters out there who send emails that look like they are from the solicitor, trying to get you to send your deposit monies to a fake account. We don’t want you to be putting your money at risk.
How much can I borrow?
That’s the one thing people usually want to know – it determines what kind of property you could buy. But the amount you could borrow really depends on your own circumstances. It’s different for every individual person.
Factors that impact what you could borrow are your age, income, expenditure, line of work and if you’ve got any dependents.
Lenders loosely use a calculation called loan to income, which is a multiple of your annual income. But in more recent times, they have begun to take down your full income and expenditure and work out what your disposable income is.
That way they could make sure your payments are actually affordable, even with any potential interest rate rises in the future. When you come to remortgage your property further down the line, rates will be different.
At Asset Harbour we would run you through a full income and expenditure budget with you to ascertain exactly what you could borrow, the most appropriate lender for your circumstances and that you’re financially resilient should rates change.
Can I negotiate from the asking price?
Negotiations do happen quite frequently, especially when there’s quite high demand for a property. You could offer lower than the asking price and, depending on the seller and other offers they’ve received, they may be open to negotiating with you to see if they could budge on the price at all.
It’s worth noting that estate agents are legally obliged to pass on any offers to the sellers. But you do need to make sure that your offer is still fairly reasonable. Otherwise it may deter them from accepting an offer from you in future.
Is it worth speaking to a mortgage advisor?
Definitely, 100% and especially if they are advisors like ourselves. We have access to just over 100 different lenders, which all have very different criteria, rates, products and affordability calculations.
We could point you in the right direction. People’s circumstances vary so much, so without speaking to an advisor there’s no way of guaranteeing you’ve found the most suitable lender for your circumstances.
A lot of people think it’s right to approach their own bank – but that’s not always the case. The high street names like Nationwide, Barclays or Halifax may not always be the most suitable for your needs and your circumstances.
Some people have slightly more complex income streams or scenarios around what they’re looking to do. Speak to an advisor to make sure that you get the right outcome possible.
How much do mortgage advisors charge?
It differs from company to company. Our fee structure differs depending on the type of transaction. If you’re buying a property, we charge £549, split down into two amounts.
All the initial research and our initial conversations, plus getting you a Decision in Principle is completely free of charge. There really is no obligation up front. When we submit a full mortgage application, we charge the initial £299. Then, once we get you your mortgage offer, and the transaction is handed over to the solicitors for the legal side, we then charge the final £250.
Now that structure works the same on a remortgage, but because there’s slightly less work involved we charge a slightly lower fee. It’s £395 in total, £200 on application and £195 on offer.
The last type is a product transfer. You might look to change your rate and it turns out that it’s right for you to stay with your current lender, which is called a product transfer or a rate switch. We just charge a £99 admin fee for those, at the point of application [podcast recorded in June 2024].
How do I prepare for a mortgage meeting?
A lot of the information we need is simple – your name, date of birth and address. But it is also handy to have other details such as your income and employment, and what expenditure you have, whether that be contractual commitments like loans, credit cards and car finance, to more regular expenditure such council tax, food and utilities on a month to month basis.
We’ll also ask about your existing mortgages if you have any and other properties that you already own. But if you don’t have all the details to hand at the time, it’s not a problem. We could always get it from you later on.
What will a mortgage advisor want to know?
Similar to what we just discussed, we will ask questions about your personal details, income, expenditure, and try to find out about your current situation. We explore what you’re looking to do and your future objectives. As I mentioned earlier, everyone’s circumstances are completely different.
We may have other questions depending on your answers and information you give us. It’s all to better understand your circumstances and how we could give you accurate advice.
What happens in the first meeting with the mortgage advisor?
Our process is quite structured to make it easier for everyone involved. We do explain this to clients when we have our initial meeting, but I’ll go through it with you now.
In the initial meeting, we’d have a short introduction and read out our initial disclosure document and GDPR statement, to make clients fully aware of who we are, what we do and our fees, so you have a good idea on who you’re dealing with.
We recognise that it could be quite daunting to pick up the phone and speak to a stranger on the other end of the line.
We’ll then go through our mortgage fact find, which usually takes about 25 to 30 minutes, to gather all the relevant information so we could offer advice. That’s all of the things we just talked about, finding out about your circumstances and what you’re looking to do.
Once we’ve had that call, we’d request some initial customer due diligence documents, which is an FCA requirement. It means we could validate the information we’ve been given and make sure it’s 100% accurate. Once it’s received, we could then research the most suitable mortgage options and share our advice.
We take the process from there – the next step might be a Decision in Principle, so the client could go and look at property, and then we go into a full mortgage application once they’ve found one.
Anything else to highlight ahead of Part 2?
No, I think we’ve covered quite a lot there. All I would say is that if anyone listening does have any further queries or there’s anything we haven’t covered, as always, please don’t hesitate to reach out.
All our contact details are listed on the website. Please just pick up the phone and give us a call. We’re always here to help.
Your home/property may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it.
There may be a fee for mortgage advice. The precise amount of the fee will depend upon your circumstances but will range from £99 to £549, and this will be discussed and agreed with you at the earliest opportunity.
Asset Harbour Mortgage & Protection Ltd trading as Asset Harbour Mortgage & Protection are an appointed representative of HL Partnership Limited which is authorised and regulated by the Financial Conduct Authority.
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Questions to ask mortgage advisor First Time Buyer (Part 2)
Xavier is back to continue the conversation on questions to ask a mortgage advisor if you are a First Time Buyer. Episode two of two, recorded in June 2024.
What documents do I need to show to get a mortgage as a First Time Buyer?
The standard documents you’d need to provide are proof of ID and proof of address. That may be a copy of your passport and driving licence, and for proof of address you could also use other documents such as bank statements, utility bills and council tax bills.
We’d also ask for proof of income, and that differs quite a lot from person to person. If you’re employed, we need pay slips for the latest four months. If you’re self-employed, it would likely be your latest two years’ SA302 tax calculations and corresponding tax overviews. For a limited company director we might need your company accounts.
On top of that, we’d ask for three months bank statements and your proof of deposit as well. If the deposit is being gifted, we may ask for further documents from the donors to show where that money’s coming from.
You could also be asked for additional documents, depending on your own circumstances. We may ask for P60s and proof of right to reside in the UK if you aren’t a UK citizen.
Do mortgage lenders check council tax?
This differs from lender to lender. Some will use the specific council tax figure for the property you’re buying, whereas some will just use a generic figure from the Office of National Statistics instead. Each lender is slightly different on that.
It is always wise to check the council tax you will be paying and have this to hand. Estate agents will be able to give you the council tax band that you’ll be in for the property that you’re buying. There are also tools online to tell you what your annual council tax will be.
If you’re not too sure, you could always ask us as your advisors and we could find out for you. As I previously mentioned, your council tax bill is one of the documents you could use to prove your address.
Mortgage lenders will also carry out a credit search as part of giving you a Decision in Principle. It’s usually a soft credit search, but it may be a hard credit check at full application. As part of that search, they’ll check to see if you’re registered on the electoral roll. So it’s always wise to make sure that you are on that roll to boost your credit score, as that’s how most credit commitments are picked up.
Can a mortgage broker save me money?
I certainly hope so. We have access to just over 100 different lenders and it’s all about utilising the lender that is most suitable for your own circumstances, which in turn could save you money.
Using the wrong lender could also mean an application is declined if you don’t specifically fit their criteria. Each lender has very differing criteria so it’s important to speak to an advisor to make sure that you’re using the most appropriate lender for you.
We don’t charge for our initial research, so get in contact with an advisor like ourselves and let us tell you exactly who the appropriate lender is – we usually end up saving you money.
What is the interest rate and will this change?
The interest rate is the amount of interest that you’ll be paying, displayed as a percentage of the loan amount you’re borrowing. At the time of recording being June 2024, the current Bank of England base rate is 5.25%.
Should the Bank of England reduce the base rate at its next review, it’s probable that mortgage interest rates would follow soon after. However, that’s not a given. We’re not too sure what the Bank of England is going to do at this moment in time.
The most popular mortgage products are fixed rate mortgages, where essentially the interest you’re paying won’t change for a specified period. Once the fixed rate period comes to an end, you would select a new rate based on what’s available at the time.
Of course there’s no way of predicting exactly what the rates will be like in the future. I wish we could!
There are also variable interest rates for those who may be a bit more open to risk. These rates could change at any point over the initial term of the product. They are less popular because a lot of people would rather know exactly what they’re paying each month, as it helps them budget.
We always make our clients fully aware of the interest rate they’re paying, how long they’ll be paying it for and when that could potentially change.
What happens after an offer has been made?
A mortgage offer is the lender agreeing to lend you the money. Once they’ve done all their checks and they’re happy, they’ll issue you with the mortgage offer.
Depending on the lender, mortgage offers are usually valid for between three to six months, to give you plenty of time to get all of the legal work done with the solicitors and complete on your purchase or remortgage.
The offer is issued to both ourselves and our clients, and a copy is sent to the solicitors as well, to begin the legal process of the purchase. For many mortgage advisors, if I’m brutally honest, their job finishes at this point. They’ve secured their client the mortgage. However, we’re a little bit different here, and we know exactly how stressful the solicitor process is.
It may be really strenuous and long-winded, so we help our clients all the way up to and beyond completion, to make this process as smooth as possible. We work with you and the solicitors to satisfy any outstanding requirements and keep things moving along.
Is it the mortgage or the deeds which show who owns a house?
The title deeds show who owns the property, whereas the mortgage shows who’s responsible for servicing the loan secured against that property.
Usually these two will align because the people on the mortgage are the property owners. However, that’s not always the case. There are situations where there may be a guarantor on a mortgage. That might be a parent or family member who is helping a buyer out with their borrowing as a way to get them their dream home.
The guarantor will be a party to the mortgage, but they wouldn’t necessarily be on the title deeds because they’re not living in the property.
Are there any restrictions on my mortgage as a First Time Buyer?
As a First Time Buyer, the only real restriction you may encounter is if you haven’t had time to build up a credit record. As a result, some lenders may require a higher deposit of 10% or 15% instead of the minimum of 5%. It’s just because you don’t have that track record of paying back debt.
But the benefits of being a First Time Buyer in today’s market, in June 2024 do actually outweigh the drawbacks.
For example, at the moment you get stamp duty relief up to £425,000 when you purchase a property – which as a home mover you wouldn’t get. Some lenders will also lend you more as a First Time Buyer to help you get on the property ladder.
Some lenders have schemes to allow First Time Buyers to borrow slightly more, just to help them get into their own home. You do also get some lenders offering incentives such as cashback or free solicitors as a First Time Buyer just to make it a little bit easier.
What can stop you from getting a mortgage?
As I just mentioned, if you’ve got a lack of credit history – or a poor credit history for that matter – that could prevent you from getting a mortgage. If you’ve missed payments in the past or haven’t built up that track record of repaying debt, that may go against you.
Also, having a lack of evidence of income could be an issue. The most common time we encounter this is with clients who were employed and recently changed to self-employed.
For self-employed applicants, lenders require two years’ tax calculations and overviews – but if you’ve only just gone self-employed, you won’t have that. So it’s important to know that if you’re thinking of going self-employed. Some lenders will work off one year’s accounts, but you would be restricting yourself to a smaller number of mortgage options.
There are also a few other points that could go against you. If you’ve got poor conduct on your bank statements, that wouldn’t necessarily make lenders feel comfortable. If your expenditure is outweighing your income, that might also cause concern.
So it’s always important to speak to an advisor, like ourselves, because we could discuss this with you and help you put yourself in the strongest position going forward. Then, when it is time to apply for a mortgage, you’re more likely to be accepted.
What could cause the mortgage to fall through? Would we lose money?
As advisors, we do everything that possible to make sure your application is successful. We try to preempt all eventualities to be as confident as possible that your application will be accepted.
But unfortunately, as life is, we can’t always foresee all eventualities. There could be instances where a property is down valued, for example, or it might be declined. A valuer is instructed by the lender to go and value the property, and at times they don’t think the property is quite worth what you’re buying it for, or they’re not happy with the state of the property.
There could be structural problems they’ve noticed. Things like that could cause them to decline the property, and of course we can’t control that as advisors.
There may be instances where the chain falls through, which again is outside of our control. You might have your mortgage offer, but the person you’re buying from has lost their property. If you’ve paid any legal fees up to that point, those may not always be refundable and you may lose that money.
There is always a risk that could happen. Luckily, it doesn’t too often.
Does the mortgage move with us if we move house? What if the new property is more expensive?
Some mortgages are portable, which means you could move the existing product and the existing rate to a new property.
If you’ve got a nice low rate, you want to move home and rates have risen higher, you’d obviously want to do everything possible to keep your lower rate, paying less interest. Some mortgages are portable, but you will be completely reassessed based on your updated income and expenditure at the time you’re looking to move.
If the new property is more expensive, you could borrow more on top of that existing rate to bridge that gap. Again we need to assess whether that’s manageable, both with the lender and within your own disposable income at the time of application.
What else do we need to know about seeing a mortgage advisor as a First Time Buyer?
There are loads of ways that advisors could help. To summarise, we could help you with finding the most suitable mortgage for your circumstances. Everyone’s circumstances are completely different and some lenders out there will be more suitable to certain people.
We’ll help reduce the risk of being declined. As every lender has different criteria, it’s recommended to get an advisor to have a look at it for you to make sure you’re within that lender’s criteria before we apply.
We’d set expectations regarding the borrowing early on, to prevent you potentially wasting time viewing properties that might be outside of your borrowing power. We wouldn’t want anyone falling in love with a home just to find out that they can’t get the mortgage they need to buy it.
Finally, we’d guide you through the process step by step, to make it as seamless as possible and hopefully saving you money at the same time.
Your home/property may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it.
There may be a fee for mortgage advice. The precise amount of the fee will depend upon your circumstances but will range from £99 to £549, and this will be discussed and agreed with you at the earliest opportunity.
Asset Harbour Mortgage & Protection Ltd trading as Asset Harbour Mortgage & Protection are an appointed representative of HL Partnership Limited which is authorised and regulated by the Financial Conduct Authority.