1. Are there specific mortgages for Key Workers? How will I know if I have the best deal?
There aren’t specific mortgages for key workers. However, there are specific mortgages for people purchasing properties on different schemes like Help to Buy or Shared Ownership. In order to be sure you have the best deal, you need to speak to an independent mortgage adviser who will have access to deals across the market. They will be able to show you all the options that suit your particular set of circumstances, and explain the reasons why they have chosen the deal for you. They will also explain why they may have excluded options that perhaps look like they are better on paper but would not be an option for you.
2. What challenges do key workers face when securing a mortgage?
Key workers in London are often forced to live in areas where the price of property is outside their affordability limits. This is where schemes such as Help to Buy and Shared Ownership come into their own, by lowering the cost of entry to the housing market.
Censeo currently is offering £0 broker fee for NHS staff applying for a mortgage.
3. What should come first? The property or the mortgage?
The mortgage affordability should always come first but you should not be applying for the mortgage until the property has been secured. The correct order should be to firstly check with an adviser what you can afford. Then find a property that fits within those limits. Then put an offer in on that property, before returning to your adviser to make the mortgage application. Before all of these I would suggest getting all your documents ready – Proof of Address, Proof of ID, 3 Months Bank Statements for each of your accounts, Proof of Income (Payslips – 3 months worth, SA302s and Tax Overviews – up to 3 years worth, or Company Accounts – up to 3 years worth)
4. What are the different types of mortgages that are on offer?
There are two ways of paying off your mortgage. Capital Repayment (often just called Repayment) and Interest Only.
Repayment works in the same way as a normal bank loan in that if you pay your monthly payment each month for the whole of the term, you will be left with no debt and you will own the property outright. All Shared Ownership and Help to Buy properties have to be bought using this method of payment.
Interest Only is very different and is rarely suitable for a first-time buyer unless they are particularly financially astute. There are two main ways that interest is calculated. Fixed and Variable (sometimes known as Tracker Rates).
For the vast majority of first-time buyers, or those purchasing affordable housing, Fixed will be the best choice as your monthly payments are guaranteed to stay the same for the initial period of the mortgage. This allows you to budget each month and stops there being any nasty surprises. There are a small number of cases where a Variable rate may be more suitable. Your mortgage broker will guide you on this during your meeting.
There are various lengths of time you can choose to take your mortgage over, as well as different lengths for the initial fixed period. The decision on these aspects on the mortgage are based around your age, affordability and your future plans for the property and your life in general. Your adviser will be able to explain the advantages and disadvantages of each period of time during your meeting.
5. What should first time buyers avoid doing in the run up to securing a mortgage?
It is best not to take out any new credit in the 6 months before applying for a mortgage as this may affect your credit score and affordability. On the flip side, it is best to check your credit report regularly at all times, but particularly in the months before applying for a mortgage.
6. Top tip(s) for securing a mortgage
Get you credit score checked and your affordability assessed as early as possible. The latter of these is best done by speaking to an independent mortgage broker.
Reduce your level of debt, and credit applications by as much as possible, and do not have credit cards that are constantly at their limit, even if that limit is relatively low.
Consider all your outgoings to be sure that you are prepared for all the costs in the new property
Get all your proof’s as mentioned in Q7, ready as early as possible. If there are any anomalies then try to get proof of why those are there.
Make sure all your financial and otherwise affairs are linked to your current address. This includes Statements, Driving Licences, Council Tax, Electoral Role.
7. Other than a deposit what are the other factors I need to take into consideration? E.g. building survey, broker fees etc.
There will usually be broker fees, especially if you are looking for a specialist in a particular type of mortgage. It is a good idea to consider this as many advisers do not get a lot of practice in these areas and can make mistakes. The broker fee can range from zero to a few thousand pounds. Usually paying in the region of £500 will mean that the service is more bespoke than the free options without paying over the odds.
There will be solicitor fees, which vary depending on a number of factors such as the price of the property and whether it is leasehold or freehold, and a few other factors. The cost of this service will probably be between £1,000 and £2,000.
As with mortgage advisers, it makes sense to use a specialist solicitor, if you are purchasing using a government scheme like Help to Buy or Shared Ownership. There may or may not be a survey fee. This will depend on the deal that you choose but will be factored in to the adviser’s decisions. This could cost up to about £500 but is often in the region of £250. The lender may have a fee for taking out the mortgage which can often be added to the loan to reduce upfront costs. The cost of this fee will also form part of the adviser’s decision on which mortgage to recommend.
8. What is the benefit of using a mortgage broker?
An adviser in a bank will only be able to offer products from that particular bank, where as an independent broker will have access to a larger range of options from different banks and building societies. For that reason, they can very often find a better deal for you than your bank would offer.
It is important to use a broker who has access across the market and if buying using a specialist scheme, then to use a broker with that same specialism.
9. What mortgage brokering service do you offer?
Censeo specialise in providing mortgages in the affordable housing sector. Every adviser has many years of experience of both Shared Ownership and Help to Buy purchase and re-mortgage (including staircasing). We have access to deals from 28 different lenders, which makes up the whole of the market for Shared Ownership.
10. Will having a guarantor alter the type of mortgage I can receive?
Some lenders offer mortgages where there is a guarantor aspect to the relationship. These tend to change more regularly, and therefore it will depend what is on offer at the time of your application. The guarantor option will mean that another person has a financial commitment, so each party needs to consider independent legal advice before moving forward.
Other options are a gift of money for the deposit, which is currently very popular, or sometimes buying with others, often parents, can be considered but will reduce the length of time the mortgage can be taken out over. All these options are worth speaking to your adviser about. They will be able to explain the various options.
11. What could cause a mortgage to fall through?
There are a number of things that could cause the mortgage not to reach offer stage. This is more true now than ever before as people’s income is rapidly changing due to furlough and redundancies. If there are any changes to your circumstances during an application you must let your adviser and lender know to ensure you are not offered a mortgage that is unaffordable. In addition, there have been changes of criteria in recent years that have meant lenders decide not to offer. Your adviser should pick up the vast majority of these criteria nuances before application, but being totally open and honest about your current and planned situation is paramount for ensuring there are no surprises later down the line.
Other than that, the most frequent reasons for lenders not offering is if something comes back in the survey. In 2019 and 2020 this was often for reasons related to cladding. Lenders did not say no, but did ask for reports to prove that cladding was considered to meet new regulations. In virtually all cases this did not stop a mortgage being offered but slowed the process down and sometimes meant a reapplication later down the line.
New properties almost never have any other problems with surveys, but if you are buying an older property then the surveyor may well pick up other issues that mean a mortgage might not be offered. In this last case this is probably good news as you will not be purchasing a defective property.
Disclaimer: Photography is of the show home at Colindale Gardens.