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We need a bigger house so how can we get a bigger mortgage?

Sallie Bright
/in /by Sallie Bright

Growing Family – Your Questions Answered

The romantic cottage for two or the one bed apartment may have suited you before children but as your family gets larger, so may your need for space – how can you make this happen and what are the options?

 

Do we extend our current house or buy a new home?

This is the question that parents often ask but there is much to consider and questions to ask before making this major financial commitment. Timing, budget and inconvenience are all things to think about.

To start with, it’s worth considering what extra space you need – another bedroom, a bigger kitchen or larger garden?

Are you maximizing all your available space? Could you reorganise your home or extend a room giving you more space, but saving you the cost of a house move?

 

How do we finance an extension to our house?

Remortgaging your property is a common way to fund an extension. This could be more affordable because interest rates have fallen, or your salary has increased since you took out your current mortgage. Alternatively, the value of your house may have increased. You can remortgage at any time, and you may get a better deal by changing lenders, but there may be early repayment charges to pay if you are not at the end of a fixed term mortgage.

Alternatively, you could apply for a further advance, especially if your house has increased in value since you bought it. A further advance is a second loan from your current lender. The interest rate may be different to your main mortgage; however, it might be cost effective if you are in a fixed mortgage with early repayment charges or have a very competitive existing interest rate. You may also be able to spread your payments over a longer term and rates are usually lower than a personal loan.

 

We want to move so how do we get a bigger mortgage?

If you decide to move, rather than extend your current property, how do you maximise your ability to secure a bigger mortgage?

 

Work out how much you think you can afford.

You should work out your own budget before you apply for a mortgage. You need to know that you can afford the costs and fees of moving as well as able to borrow enough to purchase a property.

You can use our outgoings worksheet to help work out how much money you spend and our cost of moving worksheet to calculate how much the move may cost.
Mortgage repayments will be made monthly, and they depend on how much you want to borrow, over what time period, and the interest rate the lender will charge. Our mortgage calculator can help with this.

 

Check your credit score

Credit scores really matter, you can get a copy of your credit report from credit reference agencies such as Experian or Equifax. You will then be able to review what lenders will see when they look at your mortgage application.

If your credit rating isn’t great, you can boost the score with a few simple actions – check you are on the electoral roll and close down any credit card accounts that you do not use.

 

Get rid of debts

Lenders do not like lending money to people who already have a lot of outstanding loans. Before you apply for a mortgage try to reduce any debts you have. This will potentially allow you to borrow more when lenders calculate your affordability.

Proof of income or accounts if you are self employed
You will probably be asked by the lender for three months’ worth of bank statements and pay slips so that the lender can see how much is coming in and going out of your bank account. Make sure these have any promised pay rises, or bonuses showing.
If you are self-employed, you may need the last three years full accounts, tax calculations and tax year overviews from HMRC or an accountant’s reference.

 

Job stability

It’s often said that it is best to stay in the same job if you are considering applying for a mortgage, and although this is not factually incorrect, today’s lenders are much more flexible and will often lend even if you have a new job offer, so don’t think you can’t apply for a new mortgage just because you are waiting to start a new job!

 

Size matters – when it comes to the deposit

The bigger your deposit, the greater the choice of mortgages that will be available to you. This could mean the ability to borrow more, a more preferable interest rate and lower monthly payments.

 

Two incomes can be better than one

If your current mortgage is in one person’s name, then buying with two of you can often increase your chances of success in securing the right mortgage, especially if that other person has a good credit history and a decent income. Your mortgage may not be the only thing you share if you have a family, but it is worth considering how committed you are and work out what might happen if one of you wishes to move out in the future.

 

Check the terms of your current mortgage

If you already have a mortgage and are planning to move, many mortgage lenders will apply an early repayment charge if you repay your mortgage early. This can cost you up to 5% of the mortgage although this will often reduce with time (ie 5% in year 1, 4% in year 2 etc.). You are penalised for breaking the deal early and the lender uses the fee to recoup some of the interest it is losing. If you don’t want to pay this fee, then make sure you don’t complete on a new house purchase before your mortgage incentive period ends.

 

Get good advice

An independent mortgage broker can advise you on how to make the most of your application. They will often be able to advise you on how to maximise your borrowing ability and which lenders are more likely to look preferably on your individual situation giving the best rates. They will research the market, recommend the best products and assist you with the application.

If you would like to discuss getting a bigger mortgage or protection, J Finance will be happy to help. Please contact us without obligation.

Established in Berkshire in 2004, J Finance Ltd is one of the leading financial planning companies in the area. They serve clients across England and Wales. If you would like to discuss your mortgage or protection, please contact them on 01635 521 300 or email [email protected] You can find out more about J Finance on their website at www.jfinance.co.uk.

YOUR MORTGAGE IS SECURED ON YOUR HOME, WHICH YOU COULD LOSE IF YOU DO NOT KEEP UP YOUR MORTGAGE REPAYMENTS. BE AWARE THAT INTEREST RATES MAY CHANGE SO ENSURE YOU CAN KEEP UP REPAYMENTS.

 

 

Maternity Leave Mortgages

Lorraine Collie
/in /by Lorraine Collie

Disclosure: This article may contain affiliate links, this means at no cost to you, we may earn a small commission if you purchase a product through them.

Maternity Leave Mortgages

Today we are speaking to our expert mortgage advisor from Bishops Stortford Lorraine Collie from Zing Mortgages. Lorraine discusses everything you need to know about maternity leave mortgages.

Finances during maternity leave and mortgages

Whilst having a baby is an amazing experience- it can also be quite scary for working mums! You may be wondering, how will our finances be affected? What will they look like? Will you be able to manage money-wise?

There are lots of different ways you can try and save money whilst you are on less income.

Thinking of applying for a mortgage?

Since your income will most likely be reduced whilst on maternity leave- especially if you are only receiving SMP (Statutory maternity pay)- you may be worried about passing a mortgage lender’s affordability checks.

The good news is that mortgage lenders will most likely accept your return-to-work salary as your income- which means that you should pass the affordability checks regardless of you no longer receiving your usual full-time wage.

Are you thinking about reduced hours after maternity leave?

Of course, it may mean that you’ll face difficulties paying your mortgage if you are going to be on a reduced income for a long period of time which is why it is important to think ahead and take into account childcare costs when you go back to work.

We understand how difficult managing your finances on maternity leave can be- especially if you are committing to additional big financial outgoings, such as a mortgage.

Our Expert Lorraine Collie answers commonly asked questions on Maternity Leave Mortgages

Today we are joined by our trusted expert Lorraine Collie- from Zing Mortgages in Bishops Stortford- Lorraine answers everything you need to know about managing your mortgage on maternity leave.

What would I do if maternity leave and one full time wage leaves us struggling to pay the mortgage?

You need to contact your lender immediately, in any situation where you are struggling to pay your mortgage you should contact them directly and ask for help.  What arrangement they come to will be down to your lender and your specific circumstances, we’ve seen from the pandemic that they can help in times of need.

 

What are the different options when it comes to mortgage breaks and holidays?

This will depend on your lender and your individual needs.  I have seen them in the past offer payment holidays or switch you to an interest-only payment reducing your payments dramatically.  This is assessed on an individual basis and would have to be discussed with your lender.

Can I apply for a mortgage on Maternity leave?

Yes, the lenders won’t discriminate because you are on maternity leave.  Each lender has their own criteria surrounding this, more commonly they will ask for a return to work letter from your employer confirming your return date and terms you will returning on i.e same as before or part time.  If you are at the beginning of your maternity leave and only receiving Statutory maternity pay they may want to see savings to cover your income whilst off to ensure the mortgage payments would be covered.

 

Does maternity leave affect future mortgages?

No, unless you return on a lower wage then it shouldn’t effect any future borrowing.  If you do change your job/hours then you would be reassessed based on your new earnings for future purchases or further advances.

 

Can I re-mortgage whilst on maternity leave?

Yes, they won’t discriminate against you being on maternity provided you intend to return to work on the same terms.

 

Top tips for getting a mortgage during maternity leave?

You would be asked to show your last payslip prior to maternity, a return to work letter stating dates and terms of return and if you are on Statutory maternity pay you may be asked to show savings to cover the shortfall in earnings.

Is there a limit to how much I can borrow for a mortgage on maternity leave?

The affordability limits will vary lender to lender, you can work with your salary provided you are returning to work.

 

Will maternity leave impact joint mortgages?

Not unless your circumstances are to change and you are looking to renew or purchase further.

 

How do things work for me on maternity leave as a self employed mum-to-be?

Self-employed income works differently, currently they will assess your latest 2 years earnings and ask to see 3 months business bank statements to show the income is sustainable going forward, as this will be lower then they will request to see savings to cover the earnings whilst you are off.

Could I still apply for Buy to Let mortgages?

If you are purchasing your first Buy to Let property then your income is assessed as if you were purchasing the property for yourself as they want to ensure any rental voids are affordable.  If you are purchasing further buy to lets to add to your property portfolio then this will be assessed on rental income.

Get Mortgage Advice from a trusted Mortgage Lender

In all instances, it is advisable to contact an adviser to chat over your options.  The lenders change criteria constantly so talking to an adviser like myself will give you a overall view of the current market rather than looking at an individual bank.

Mortgage Broker with FREE advice

My initial consultation is free of charge as I like to know I can help you before charging a fee.  A quick chat over your options can give you that peace of mind going forward, whether that be now or in the future.  Planning ahead is key when it comes to mortgages so please call and chat over your future plans.

You can contact our expert Lorraine Collie for mortgage advice, check out her listing with us here.

Is there such a thing as a family mortgage?

Sallie Bright
/in /by Sallie Bright

Family Mortgages Explained

Getting on the housing ladder has never been so difficult – and for new parents or young growing families, getting help from family may be the only option. But if your parents don’t have the cash for a large deposit sitting in a savings account, how else can they help?

There are several different ‘family’ mortgages that enable parents or other family members to give a helping hand to younger family members who want to get onto the housing ladder but don’t have the large deposit needed.

The first thing to point out is that interest rates are generally higher for this type of mortgage, normally because there is a high loan to value figure (ie. you are borrowing all or most of the money for the new property). Some lenders even offer cashback deals to act as an incentive. The interest rate should not necessarily put you off, but it is something to bear in mind. In a market where property rental rates are far higher than mortgage repayments, and where 100% mortgages are both expensive and hard to find, interest rates are often less of a concern. However, every situation is different and there is no substitute for expert individual and independent advice.

So how do family mortgages work?

Family mortgages – unlike ‘springboard mortgages’ (which we mention further down) use the equity in the parents’ (or other family members’) house as security on the new mortgage.

It is also important to point out that using these family mortgages does not mean that the helping family owns any part of the property. The mortgage will still be in the names of the first-time buyers.

At this moment in time, there are only a handful of family mortgages on offer, but as mentioned, availability and offerings change with great regularity within the mortgage arena. Below we detail three of the main products:

The Family Mortgage  requires the purchaser to have a 5% deposit, which can be gifted from family, as well as security offered by family savings or using a property as a guarantee.

The Family Deposit Mortgage requires helpers to have an existing mortgage with Nationwide – and instead of depositing funds into a savings account, the equity in their home is used as security. This could put their home at risk if payments aren’t made, but it does mean they don’t have to stump up any actual cash.

The Family Link Mortgage is similar. The Post Office lends 90% of the property value, with the other 10% coming from equity in the helper’s mortgage-free home. The 10% must be paid back within five years.

Family springboard mortgages

‘Springboard’ mortgages are another kind of mortgage that requires a family member or members to deposit funds into a savings account, where they are held for anywhere between three and five years. As long as payments are met, the money is returned, usually with a favourable interest payment. These include the Barclays Springboard Mortgage and Lloyds Lend a Hand Mortgage.

Any other options

There are also another couple of options. A mortgage with a guarantor requires a family member to secure your mortgage with assets such as savings or their own property. It can be risky for the guarantor if repayments aren’t made.

A mortgage with a gifted deposit is where the family member gives you the money for a deposit. In this case the lender will want to check that the money comes from a credible source – such as their savings – and not from a loan from elsewhere.

Joint tenants or tenants in common

Another thing to consider is whether you are ‘joint tenants’ or ‘tenants in common’. Joint tenants hold an equal share of the property, and full ownership automatically passes to the other. If one of you (or your family) has invested more cash than the other, it is possible to divide your ownership rights to reflect this, in a ‘tenancy in common’ agreement – if you die, your share of the property will go to the person named as your recipient in your Will.

As you can see, there are a number of different options available, depending on the borrower’s and the helper’s circumstances, so it is important to get advice before committing yourself.

If you would like to discuss family mortgages or any other financial matter, J Finance Ltd will be happy to help. Please contact us without obligation.

Established in Berkshire in 2004, J Finance Ltd is one of the leading financial planning companies in the area. They serve clients across England and Wales. If you would like to discuss your mortgage or protection, please contact them on 01635 521 300 or email con[email protected] You can find out more about J Finance on their website at www.jfinance.co.uk.

YOUR MORTGAGE IS SECURED ON YOUR HOME, WHICH YOU COULD LOSE IF YOU DO NOT KEEP UP YOUR MORTGAGE REPAYMENTS. BE AWARE THAT INTEREST RATES MAY CHANGE SO ENSURE YOU CAN KEEP UP REPAYMENTS.

Remortgaging on Maternity Leave

Siobhan Holbrook
/in /by Siobhan Holbrook

Disclosure: This article may contain affiliate links, this means at no cost to you, we may earn a small commission if you purchase a product through them.

 

With thousands and thousands of babies born each year in the UK, remortgaging whilst on maternity leave is a common concern. Remortgaging during this period can sometimes cause confusion and worry. If you’re having a baby, your life and your financial situation is likely to have changed a lot since your last application.

It doesn’t need to be a headache though. We’ll talk you through how and why being on maternity leave affects a remortgaging application and the best way to approach this to make sure you can successfully remortgage your home.

Why does being on maternity leave affect remortgaging?

How much you can borrow for your mortgage is directly linked to how much money you and your household earn. This is because all lenders have a responsibility to ensure that your total monthly income can cover all of your household’s financial outgoings, including your mortgage repayments.

Let’s say that your income is £40,000 a year. When remortgaging, lenders will make their affordability assessments based on that figure. When on maternity leave however, you’re likely to be on reduced pay for some or all of that period, which puts you in a different financial position. Lenders will need to make assessments based on this reduced income figure and this could make it difficult to meet their affordability criteria.

That being said, there are many lenders that will accept your income prior to going on maternity leave as long as they can obtain a letter from your employer stating when you will be returning to work and what those new terms will be. Remortgaging whilst on maternity leave is possible – you just need to find the right lender for you. To avoid a string of declined applications, enlist the help of a mortgage broker. We have access to the entire market and the know-how to find you the right lender for your situation.

How does being on maternity leave affect remortgaging?

This will depend a lot on a lender’s approach, and each is likely to be different. Some lenders might base their assessment on your maternity pay at the time, which reduces the amount they’ll lend you. Others might take your assurance that you will return to full time employment, at your previous salary, and that you have sufficient savings to tide you over.

A lender is unlikely to directly ask you if you are currently on maternity leave or whether you will be soon. You may be asked on your application if there are any circumstances that may affect your ability to repay a mortgage. Maternity leave certainly falls into this category, so it’s vitally important to be upfront and honest about this at the point of any application.

Keeping things from a lender can be classed as ‘non-disclosure’. Being on maternity leave does not necessarily mean that you will be unsuccessful in remortgaging, but providing false information or failing to provide material information is likely to have consequences.

How can I remortgage on maternity leave?

It’s a good idea to do what you can to show lenders that your decrease in salary is only temporary and you’ll soon be back to full salary. Give a lender confidence by providing past payslips as proof of income, current payslips to show that you are receiving maternity pay, and if possible a letter from your employer that details your return date (if that has been decided yet), and what your salary will be upon your return to work.

This may be enough information and reassurance for many lenders to go ahead with the application using your previous or projected salary. However, if you are going back to work on reduced hours, or into a different role, it’s important to remember that this is likely to affect your pay and therefore could have an impact on your affordability and borrowing capacity.

If your remortgage application is in the joint names of you and your partner, then lenders will make their affordability assessment based on the combined income of both applicants. It may be that the income of the one applicant remaining in full time employment is sufficient on its own to meet the bulk of the lenders affordability criteria, in which case the remortgage should be a fairly straightforward process.

If you are finding it difficult to get accepted with a different lender, then you may find it easier to move to a different deal with your current lender – a ‘product transfer’. You’ll already have an existing relationship and track record with your current lender and they will not need current wage slips.

What about if I’m self-employed?

Remortgaging on maternity leave when self-employed is a slightly different story. In these cases, most lenders will use your year-end accounts or SA302 to assess the level of lending that you will be eligible for.

Depending on your circumstances, the type of business you run and whether you have employees to run the business for you in your absence, you may be able to argue that your business won’t be very affected during your leave and therefore neither will your income. If however, your presence is essential to continue to generate the same level of business income, then remortgaging could be slightly more challenging.

Can I wait until I am back at work before remortgaging?

You don’t have to remortgage as soon as your mortgage term ends, so you could always wait until you’re back in full time employment. Just be aware that during the interim period, you may drop onto your current lender’s standard variable rate (SVR), which might mean you may be paying more than you were previously.

Once you are back at work and have a regular wage coming in you can remortgage to come off this rate and find a more suitable deal. Each lender will have a different approach to maternity leave and each applicant will have a different set of circumstances regarding their employment status and plans for the future.

When remortgaging on maternity leave, using the expert guidance of a mortgage advisor or broker means you can explore the entire market to find a lender and deal that works for your new circumstances. We at Mortgage Light will walk you through this process and do the deal-searching for you, meaning you can focus on the things in your life that matter most right now.

If you’re on maternity leave and confused or concerned about remortgaging, get in touch with us at Mortgage Light today. We’ve helped so many people just like you to get a suitable deal on their remortgage at this time.