Meeting a mortgage adviser for the first time can feel quite intimidating, and anyone trying to get on the property ladder for the first time may feel understandably confused by all the terminology used by mortgage advisors.
To help you along your way to getting a shared ownership mortgage, our trusted expert Jon Lord, Managing Director at Metro Finance has provided some advice to make obtaining a mortgage as pain-free as possible.
What happens when getting a mortgage for Shared Ownership?
If you're buying a Shared Ownership home, once you’ve found a home you love in an area that meets your needs, you’ll then need to choose a mortgage advisor or you may be recommended a friendly firm like Metro.
Decide on the share size that is affordable for you
Our job is to work out what ownership share size is most affordable, we usually advise that you purchase the maximum share you can afford, meaning you’ll also pay less Shared Ownership rent once you complete on the property.
After establishing the percentage share size suitable for you, Jon details what you can expect next:
- You’ll be asked to provide your mortgage advisor with various documents such as income proof, deposit evidence, ID etc. This acts as evidence that you can afford to take out the mortgage and to ensure your deposit is from a legal source. This part is done because Shared Ownership is a regulated Government scheme.
- You’ll have more of an in-depth conversation with your mortgage advisor to make sure you understand the terms and requirements of buying a Shared ownership home. This is your chance to ask all the questions you have and make sure you are clear on the process during your purchase journey.
Get a clear understanding of your home purchase journey & mortgage products available
Your adviser should make you feel totally comfortable, it should be all about you and your property requirements. They'll ask you lots of questions about what you want and what your future intentions are for your home.
To get to the point of finding the correct mortgage product the adviser will need to carry out a fact find, basically asking a lot of probing questions about your lifestyle and spending habits etc. They gather all these facts to narrow down the 1000’s of mortgage products, to just one – your one.
You should expect to see an ESIS document also known as a mortgage quote and a document detailing specifically why the adviser is recommending what they have. We, at Metro Finance, call that a ‘Reason for Recommend’ document.
The most important thing is that you come away with a complete understanding of things such as:
- The number of years fixed rate on your mortgage recommended by your mortgage advisor.
e.g. if it’s a 5yr fixed rate rather than a 2yr fixed rate, why?
- The mortgage term of your product eg. how many years you'll be paying the mortgage back for.
And why the term is a certain number of years, could it be less?
- How the Adviser has worked out which deal is cheapest This may sound obvious, but you don’t want the lowest rate, you want the cheapest mortgage. E.g. the lowest rate may well have big fees attached – and some products you might benefit from cash-back
- Whether your mortgage advisor specialises in Shared Ownership mortgages and has completed many in the past.
You should totally comfortable with which mortgage product you finally decide on, and your mortgage adviser should be helping you understand all the different options and why one is right for you. After speaking to your adviser the purchase process should feel like it's becoming clearer.
At this point in your journey:
- You know what share size is affordable
- You’ve had a call with your mortgage adviser explaining everything about your circumstances
- The adviser has narrowed down the products available to the one that suits you best
- You’ve had everything properly explained and now you totally understand the process
Getting your mortgage approved by the lender
The next thing will be to get your mortgage agreed by the lender, there are many different names and abbreviations for this:
- AIP (Agreement in Principle)
- DIP (Decision in Principle)
- MIP (Mortgage in Principle)
- Mortgage Certificate
They’re all the same thing, and this is the lender saying ‘you’ve passed the credit check and we’re ok to lend, subject to what you told us being true’. This is why they ask you for pay slips, bank statements etc and why it’s super important to be upfront and honest with the mortgage adviser from the beginning. This stage is known as underwriting.
Expect this stage of providing documents to the lender, to take 2-4 weeks dependent on which lender you apply to.
Then… it’s mortgage offer day, this is the goal! You’re mortgage offer is the legally binding contract between you and the lender and the terms should match that original ESIS document your mortgage adviser provided (also known as the mortgage quote).
Your solicitor will take it from here
After you receive your mortgage offer, your appointed solicitor handling your property purchase will now handle the process from here until the point of completion.
Article contributed to by Jon Lord, Metro Finance.
Purchase a Shared Ownership home with Peabody
Shared Ownership is a part buy/part rent scheme that makes it possible for first time buyers to purchase a property that otherwise would not have been affordable.
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