Category: Mortgages

If you’re self-employed in the construction industry in the UK, you’re not alone.

According to Statista, in the second quarter of 2023, around 783,000 workers who are self-employed live in the UK’s construction industry.

Buying a house can be overwhelming, especially financially.

If you work in the construction industry, you may find yourself wondering if you’ll even qualify for a mortgage in the first place.

You may have heard the term “construction industry scheme” mortgage or CIS if you’re trying to get a mortgage and work in the construction industry.

While there is no official CIS product in the UK, mortgages are available for construction industry workers.

It’s sometimes called a CIS mortgage if an applicant applies for a mortgage using the CIS scheme.

In this guide, we cover how to go about getting a mortgage as a construction worker using the CIS scheme.

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What are CIS Mortgages & How Do They Work?

If you don’t have 3 years of accounts or declare a low net profit, CIS mortgages are the ideal option.

The reason for this is that instead of using filed accounts, construction workers are allowed to apply for mortgages using the gross income on their payslip.

For self-employed individuals, CIS mortgages prove to be helpful in getting a better mortgage deal.

Self-employed individuals usually aim to write off as many of their expenses as they can against their earnings in an effort to reduce taxes.

For a self-employed person, this can have a negative effect on their mortgage application because lenders will base their affordability assessment and decision on the person’s net profit figures.

In such instances, self-employed people find themselves qualifying for low mortgage amounts.

The HMRC created the Construction Industry Scheme (CIS).

The scheme allows contractors to deduct money from subcontractors to pay the HMRC.

These are advance payments as contributions to a subcontractor’s National Insurance and tax.

Contractors do not need to register for the CIS, but contractors must.

If subcontractors fail to register for the scheme, the deductions from their earnings will be higher.

Subcontractors receive payslips that detail both net and gross income. This proof of income can be used when applying for a mortgage.

Using the Construction Industry Scheme, lenders can calculate whether the loan is affordable by assessing the gross income instead of net income.

When possible, the mortgage amount the individual qualifies for may be increased.

Related reading: 

• Reasons for remortgaging.
• Remortgaging to release equity.
• Remortgaging to buy another property.
• Remortgaging with bad credit.
• Remortgaging for home improvements.
• I own my house outright can I remortgage? 
• Capital raising mortgages.

Quick Overview of CIS Mortgage Benefits

Several benefits are expected when applying for a mortgage through the construction industry scheme.

For starters, CIS workers can borrow more, as lenders will assess their gross income instead of their net income.

As a result, you’ll have access to more viable deals.

While lenders usually need around 3 years of accounts to qualify, CIS workers can often provide just 1 year.

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Eligibility Requirements for CIS Mortgages

The CIS is a scheme that’s only available to self-employed people working within the construction industry.

You’ll have to apply with a specialised lender, as not all cater to CIS scheme applications.

Lenders have their own criteria and assess each application based on individual merit.

Generally, criteria include:

• 6 months CIS payslips (minimum of 3 in some instances
• 6 months most recent bank statements (minimum of 3 in some instances)
• Tax at 20% must be deducted on the scheme

How Much Can CIS Workers Borrow, and What is the Required Deposit?

How much you can borrow will depend on the overall affordability of the loan.

When applying via the CIS, the lender will review the last 3 to 6 months of the applicant’s bank statements.

A person’s gross income is used to calculate how much they make annually.

Of course, the average monthly expenses, other financial arrangements such as loans and credit cards, and credit scores will be used in the assessment process.

There’s a limit to how much an applicant can borrow, usually capped at four times their annual income.

A 10% deposit is recommended, but in some instances, mortgages can be made available with a 5% deposit.

Applicants looking for the best mortgage deal can benefit from saving more for a deposit.

A 15% to 20% deposit would be best advised in such instances.

Steps to apply for a CIS Mortgage?

The first step should always be to consult with a professional mortgage advisor.

The advisor who understands the industry and the construction industry scheme will be able to advise you on the ins and outs of applying for a CIS mortgage.

You should also follow these steps:

• Check your eligibility

Working in the construction industry doesn’t automatically qualify you for a CIS mortgage.

In addition to proving your profession in the industry, you will need to prove the affordability of the loan instalments.

A professional mortgage advisor can be consulted to determine if your earnings will be eligible for the mortgage you’re interested in.

• Have payslips available

You will need to provide your last 3 to 6 months of payslips for the lender to assess.

These will be compared with your bank statements.

• Ensure your credit profile is accurate

It’s a good idea to check your credit profile on a regular basis to ensure it’s accurate.

If you’re worried that checking your credit score will negatively impact it, don’t be.

Checking your credit score is allowed and will give you an idea of what lenders can see when they do a credit check on you.

If you have bad credit, only certain lenders may be willing to assist you, but the rates may be higher while the mortgage amount is lower.

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Construction Industry Scheme Mortgages Conclusion

If you’re a self-employed person in the construction industry in the UK, you’ll have access to better deals by applying via the construction industry scheme.

Registering with the scheme is a great step in the right direction.

Call us today on 01925 906 210 or contact us to speak to one of our friendly advisors.

According to Statista, as of July 2023, there are 4.24 million self-employed individuals in the United Kingdom.

Understandably, many self-employed individuals and those in a limited liability partnership believe they’ll struggle to get a mortgage because of how income is assessed when you’re self-employed.

For some, limited liability partnership mortgages (LLP) are the solution to buying property as a company. They can also be used for residential purposes.

While LLP mortgages are a solution for some self-employed, the application process can be anything but simple.

In this guide, we discuss how to get an LLP mortgage…

Applying for a Mortgage with an LLP

The mortgage application is generally affected by how your LLP business is structured.

The type of LLP mortgage offered depends on the total number of directors, trading history, and equity shares.

When advisors assist with setting a mortgage in place for an LLP, they will need to know more about the LLP’s nature and how it’s structured.

There are more hoops to jump through when applying for a mortgage with an LLP, as the underwriters need to look far closer at how income is earned and how much than with an employed individual.

All mortgages through an LLP are classified as “self-employed mortgages.”

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Eligibility Criteria for a Limited Liability Partnership Mortgages

One of the biggest differences between a self-employed (or LLP) and employed individuals’ application for a mortgage is how income is assessed.

As an LLP, the lender will scrutinise the following criteria:

• How long the LLP has been operating for
• The LLP structure in terms of partnerships, directors, and shares
• Total income received or declared net profit
• Any outstanding debt belonging to the LLP
• Nature of the business

It’s not unheard of for lenders to apply higher rates on mortgages for limited companies and limited liability partnerships.

Is there a Cap on How Much an LLP Can Borrow for a Mortgage?

Maximum mortgage amounts are calculated on different variables and dependent on the lender.

Most lenders will allow borrowers to access funds between three and five times your total income.

Affordability is a top priority for lenders, so income needs to be proven.

This is where it usually gets tricky for self-employed borrowers. Self-employed individuals don’t have payslips like employed people do, making it challenging to prove income.

As being self-employed is run like a company, the company income is assessed.

This is based on SA302 documents or finalised accounts. An LLP’s documents must be officially HMRC-provided or signed off by a professional accountant.

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Can Limited Liability Partnerships in Debt Get a Mortgage?

Any person or entity in debt or with a credit problem will find it challenging to get a mortgage, and it’s the same for LLPs.

While it’s not easy for an LLP to get a mortgage while in debt or with bad credit, it is still possible.

LLPs in debt or with bad credit are high risk applicants, but lenders may consider providing funding after assessing the type of debt or the reason for bad credit.

Lenders will scrutinise the following when considering mortgages for LLPs in debt or with bad credit:

• A general overview of the company’s credit history
• How many creditors are involved
• How much debt the company is in

Some lenders may specialise in offering mortgages to LLPs with bad credit, but this usually requires higher deposits and rates.

Related reading: 

• Reasons for remortgaging.
• Remortgaging to release equity.
• Remortgaging to buy another property.
• Remortgaging with bad credit.
• Remortgaging for home improvements.
• I own my house outright can I remortgage? 
• Capital raising mortgages.

Can New LLPs Apply for Mortgages?

The LLP’s age can have a bearing on the outcome of a mortgage application.

This is because LLPs operating for many years will find it easier to prove financial stability than those that have been around for just a few months or a year.

Most lenders require an LLP to operate for at least three years to consider a mortgage application.

This is because three years is a suitable amount of time to prove financial stability. Sometimes, lenders may provide a mortgage with 2 years of financials.

That said, not all LLPs that have been trading long-term can show financial stability.

Some might be in debt or earning a minimal profit, which can have a detrimental impact on the mortgage application outcome.

In rare cases, mortgages may be provided with just one year’s filed accounts, but other factors will influence the outcome, such as how much profit the business generates and if it’s in any debt.

Of course, decisions on LLP mortgage applications are determined on a case-by-case basis, so it’s best to get the advice of a mortgage advisor to ensure you’ve covered all your bases.

Can a Limited Liability Partnership Apply for a Buy-to-Let Mortgage

In some instances, it’s simpler to get a buy-to-let mortgage as an LLP than it is to get a residential mortgage.

Various lenders in the UK only offer buy-to-let mortgages for companies, which makes it simpler for LLPs.

There’s increased risk to the lender, however, which means you may have to pay higher rates.

Why is there an increased risk to the lender? This is because the business in an LLP has limited liability.

If the mortgage isn’t paid, the individuals who form the business aren’t liable for the debt.

Some lenders may recognise the risk and include special clauses in the mortgage agreement that stipulate each director is responsible for the mortgage debt if the mortgage falls into arrears.

All buy-to-let mortgages require an inflated deposit than residential mortgages.

Many lenders offering buy-to-let mortgages require a 25% with LLP mortgage rates generally starting at 60% loan to value.

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This is only sometimes the case, as the market does show some lenders allowing buy-to-let mortgages with deposits as low as 15%.

If the property is for a buy-to-let purpose, the lender may find the mortgage more favourable as it will receive monthly rental income, thus securing the loan to some degree.

This is viewed in conjunction with the borrower’s personal income amount.

The reason for both the rental and personal income to be assessed is to ensure that the mortgage instalments will still be paid, even when the property is vacant and not generating a rental amount.

Limited Liability Partnership Mortgages (LLP) Conclusion

If you have an LLP and would like to get the best possible mortgage deal, it’s a good idea to consult with a professional mortgage advisor.

The right advisor will be able to advise you on the best options and what to expect when applying.

Call us today on 01925 906 210 or contact us to speak to one of our friendly advisors.

Lenders have continued to tighten their credit criteria in response to a reduced supply of home loans caused by economic uncertainty, high inflation levels and interest rates.

Data from the Bank of England shows a 10% decrease in mortgage approvals (from 54,600 to 49,400) between June and July 2023.

With decreases predicted to increase further this year, understanding what a credit check for a mortgage entails and how it affects your application can help you take the necessary steps to improve your chances of approval.

Here’s everything you need to know about mortgage credit checks in the UK.

What Are Mortgage Credit Checks?

Mortgage credit checks involve assessments of your financial history to determine whether you’re a reliable borrower and the risk of offering you a mortgage.

Lenders will look at how you’ve handled borrowing in the past and your ability to afford mortgage repayments before approving your application.

Most lenders look at credit reports from credit reference agencies when performing a credit check for a mortgage.

Credit reports provide records on your borrowing and repayment habits, payment history and the amount owed, which helps lenders assess whether you’re likely to repay the mortgage as agreed.

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Types of Mortgage Credit Checks

There are two types of mortgage credit checks:

Soft Credit Checks

A soft credit check involves a basic assessment that doesn’t leave a footprint on your credit report.

It’s a less intrusive review to get a preliminary understanding of your credit history and financial situation and pre-qualify you as a suitable candidate for a mortgage.

Only you and the lender can see the soft credit search on your profile, so it won’t affect your credit score or rating.

Hard Credit Checks

Hard credit checks involve in-depth reviews of your credit profile, and lenders perform them when you make a full application for a mortgage.

The lender requests a full credit report from one or more credit reference agencies and evaluates your credit history in detail, including all the times you’ve borrowed and any issues with repayments.

A hard credit check for a mortgage will leave a footprint or mark on your credit report and remain visible to future lenders.

Your credit score may also reduce temporarily, especially if you have multiple hard searches within a short period.

What Does A Credit Check for A Mortgage Show?

A credit check for a mortgage will show a range of information, including:

• Personal details – Information like your name, date of birth and residential address.
• Credit Histories – Details on your credit engagements, including personal loans, mortgages, credit cards, overdrafts and debts. It can outline details on the lender, commencement date, account number, credit limits and remaining balances.
• Payment History – Details on your payment habits, like whether you make payments on time or there are missed or delayed payments.
• Financial Ties – Any financial connections with other people like a shared bank account or joint mortgage.
• Public Record – Details on public records like County Court Judgements (CCJs), Individual Voluntary Agreements (IVAs), bankruptcies and insolvencies.
• Electoral Roll Data – Data on your registration on the electoral roll that can help validate identity and previous addresses.
• Credit Inquiries – A log of individuals or entities who have viewed your credit record.

When Does A Lender Perform A Credit Check for A Mortgage?

Lenders can perform different credit checks at various stages of the mortgage application process.

Most lenders will perform a soft credit search at the mortgage in principle (MIP) step, but some lenders, like banks, can do a hard credit check even for an initial application, so it’s worth clarifying.

All lenders perform hard credit checks when you submit a full mortgage application before they send you an offer or at the end of the purchase process.

Lenders will perform initial searches to see whether you have some credit history or evidence of bad credit, like missed payments, defaults, and arrears.

They can also perform later assessments to confirm your credit history and details and see whether your situation has changed after making your application.

Changes at any point in the process, like additional borrowing or the removal or addition of another person, will prompt the lender to perform the check again.

How Do Mortgage Credit Checks Affect Credit Ratings?

The type of mortgage credit check will affect your credit rating differently.

Soft credit checks don’t affect your credit rating because they don’t leave a footprint and aren’t visible to other lenders.

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Hard credit checks leave a footprint, and too many checks within a short period, usually six months, can negatively affect your credit rating.

Hard credit checks can stay on your report for up to 12 months, and multiple checks in a short timeframe can tell lenders that you’re too reliant on borrowing or going through financial hardship.

This can increase the chances of missed repayments and make you a risky borrower, reducing the number of lenders willing to accept your application.

Related reading: 

• Reasons for remortgaging.
• Remortgaging to release equity.
• Remortgaging to buy another property.
• Remortgaging with bad credit.
• Remortgaging for home improvements.
• I own my house outright can I remortgage? 
• Capital raising mortgages.

How Do Credit Checks Affect Mortgage Applications?

If a credit check shows too many red flags on your credit history, some lenders may reject your application outright.

However, attitudes towards poor or bad credit vary substantially between lenders, as they use different ways to evaluate the findings of a credit report.

The type of credit issue, when it occurred, and how you’ve managed your finances since then can affect your mortgage application differently.

Depending on the lender, issues like bad credit may not automatically disqualify you from being accepted for a mortgage.

Some lenders specialise in offering mortgages to bad credit borrowers and can feature slightly different criteria like requiring a higher deposit or setting a higher interest rate.

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Can I Get A Copy of My Credit Report Before Applying?

Yes. Simply request a copy of your credit file from a credit reference agency, so you know what’s on your credit report and confirm that the information listed is accurate.

Knowing where you stand allows you to take the necessary steps to rectify any inaccuracies and improve your credit score.

Mortgage Credit Checks UK Final Thoughts

It’s always a good idea to review your credit report before applying to check for errors or discrepancies that can negatively affect your application.

Consulting an independent mortgage advisor or broker can also help you identify how to improve your credit score and application to improve your chances of success.

Call us today on 01925 906 210 or contact us to speak to one of our friendly advisors.

Lying on a mortgage application is a criminal offence, and it’s considered mortgage fraud.

UK mortgage fraud statistics show that almost half (49.43%) of all fraudulent mortgage cases involve applicants lying about who they work for or how much money they earn.

You may be tempted to lie on your mortgage application because you think an aspect of your situation will limit your chances of success.

However, there are better ways of improving your chances of approval that don’t involve committing mortgage fraud by lying on a mortgage application.

Here’s everything you need to know about the consequences of lying on a mortgage application in the UK.

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Can I Get Away With Lying on A Mortgage Application

The chances of getting away with lying on a mortgage application are very slim.

Lenders perform high-level checks to verify your details, and the underwriting process usually involves confirming that all the details you provide are correct to prevent mortgage fraud.

The lender may require you to provide evidence if they have any doubts, so lying about yourself or your finances will be discovered relatively quickly.

Lenders usually verify important data like personal information, eligibility and income details, so it’s difficult to get approved with falsified data.

What Are The Consequences of Lying on a Mortgage Application?

Lying on a mortgage application is illegal and punishable by UK Law under section 1 of the Fraud Act 2006.

If you dishonestly enter information that you know is untrue or misleading with the intention of making a gain for yourself or causing loss or risk of loss to another person, you can get imprisoned for ten years or pay an unlimited fine or both.

There are usually two overarching categories of mortgage fraud, and the penalty you get will depend on where the fraud is classed.

These include:

• Opportunistic Mortgage Fraud – This type of mortgage fraud is usually committed by individuals looking to acquire ownership of a property by lying on their mortgage application. It can involve lying about factors like their income or employment in an attempt to borrow more money.
• Large-Scale Mortgage Fraud – This type of mortgage fraud usually involves money laundering and organised crime through property. It’s performed by individuals or in collaboration with individuals with knowledge about the industry with the aim of stealing from homeowners and lenders. Organised crime groups can use crime proceeds to secure deposits or launder money through mortgage fraud. They can also flip properties by selling them at inflated prices immediately after finalising the purchase.

Mortgage fraud will result in an automatic disqualification, and you’ll likely get disqualified from future borrowing.

Even a minor falsification can quickly land you in a punishable legal situation, and the consequences can have long-term damaging effects.

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Why Do People Commit Mortgage Fraud?

Most people commit mortgage fraud because they don’t feel like they’ll get approved for a mortgage using honest information.

Such borrowers choose to omit or lie about relevant information related to factors like their income or employment to increase their likelihood of approval or get more favourable terms.

Industry professionals can also commit mortgage fraud by lying about their client’s financial information, so they can maximise profits on the transaction.

Related mortgage guides: 

• What to do if your mortgage expires.
• Disadvantages of paying your mortgage off.
• Best mortgage brokers in the UK.
• Should you pay off your mortgage early?
• 50-year mortgages UK.

What Can Lying on a Mortgage Application Involve?

Some common falsifications in mortgage fraud include:

• Lying about income – This is a common fabrication in mortgage fraud and is usually done by people who don’t think they earn enough income to qualify for a mortgage. Most times, lying about your income is unnecessary because, with the right mortgage advisor or broker, you can access suitable lenders who can consider supplemental income when assessing your application and offer high-income multiples.
• Lying about being a first-time buyer – Some borrowers may lie about being first-time buyers to take advantage of attractive deals or allowances. However, it’s easy to get unmasked even if you’ve owned properties abroad, and your mortgage can get withdrawn.
• Lying about debts and credit issues – The lender will certainly know if you fail to declare any debts or credit issues you have or have had in the past, since they’re usually listed in your credit report. Instead of lying, it’s better to approach bad credit lenders who specialise in offering mortgages to borrowers with all kinds of credit scores.
• Lying about dependents – Some people fail to disclose whether other people are relying on them due to fear that it might affect their affordability or creditworthiness. It’s better to be honest and transparent to avoid getting disqualified and ensure you get a mortgage amount you can realistically afford without getting into financial hardship.
• Lying about spouses – Borrowers can also lie about whether they’re married or whether their partners have credit issues. However, such lies are unnecessary because you’re not mandated to take out a mortgage with your spouse because you’re married. Most lenders are flexible and will offer different options to consider, including sole proprietor mortgages.

Are There Things You Should Not Tell Your Lender?

No.

Any type of lying on a mortgage application is prohibited, so you should ensure you’re always 100% transparent.

You shouldn’t falsify or hide any facts about your details, finances, or circumstances because the truth will eventually come out, and you may end up getting charged with mortgage fraud.

What Should I Do If I’ve Already Lied on the Application?

If you’ve omitted or falsified information on your application but haven’t submitted it to the lender, you can start again from scratch and provide honest details.

Most lenders will work with you to ensure your mortgage application is successful and feature favourable terms.

If you’ve already submitted the application with dishonest information, simply request the lender to give it back to you so you can make some amendments before it proceeds further.

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Lying on Mortgage Application UK – Is It Illegal? Final Thoughts

Lying on a mortgage application is illegal, and you may end up facing serious consequences for mortgage fraud.

Instead of lying when you’re feeling unsure about your situation, it’s better to consult an independent mortgage advisor or broker who can work with you to find the best deals and connect you to lenders likely to approve your application based on your circumstances.

Call us today on 01925 906 210 or contact us to speak to one of our friendly advisors.

Having to work out how to buy someone out of a house is not that unusual, with government data showing that thousands of divorce and separation applications are made every few months in the UK.

If you share your mortgage with someone else, there may come a time when you need to buy them out due to a breakup or divorce, or because they’ve simply decided to move out.

Buying someone out of a house or performing a mortgage buyout can seem like a complex process, but with the proper guidance, it doesn’t have to be.

Here’s everything you need to know about how to calculate buying someone out of a house.

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What Does Buying Someone Out of a House Mean?

Buying someone out of a house means purchasing their share of the property you own together.

It involves one property owner purchasing the equity share of the other owner.

For example, if you and your friend, ex-partner, or sibling own a house together, and you want to get sole ownership, you’ll need to buy them out of the mortgage.

Once you buy out the other person, you can remove their name from the property’s title deed or any other documents related to the property and release them from the mortgage.

You’ll then remain as the only homeowner, solely responsible for the mortgage repayments and property.

Related reading: 

• Reasons for remortgaging.
• Remortgaging to release equity.
• Remortgaging to buy another property.
• Remortgaging with bad credit.
• Remortgaging for home improvements.
• I own my house outright can I remortgage? 
• Capital raising mortgages.

How to Calculate a Mortgage Buyout

You can calculate a mortgage buyout through the following steps:

1. Determine the Property Value

Start by getting an up-to-date property valuation to determine how much the property is worth.

You can get a valuation from your lender at a fee, or look for a free valuation from real estate agents. Most agents can send you a valuation within hours.

You can also hire a professional chartered surveyor for a more formal valuation, but it will require payment, and you may need to wait a few weeks or days.

2. Identify What You Still Owe on the Mortgage

You can determine how much you have left on the mortgage by asking for a redemption statement from your lender, which shows how much you have left to pay, any due interest, and associated redemption fees.

3. Ascertain Each Parties Share of the Equity

Work out how much equity you each have in the property.

The total equity will be the total property value minus the outstanding mortgage.

For example, if the total property value is £400,000, and you have £100,000 left to pay on the mortgage, then the total equity in the property would be (400,000 – 100,000) = £300,000.

Once you determine the total equity in the property, you simply need to calculate the percentage you each own to determine the other party’s share.

If you have an equal share, divide by two to determine how much you need to buy the other party out.

If you’ve contributed different amounts for mortgage repayments or the deposit or the home is part of a divorce settlement, the calculation can be more complicated, and you may need your lawyer to manage it on your behalf.

How Can You Finance a Mortgage Buyout?

A mortgage buyout may require a hefty sum, but you can fund the purchase through various ways, including:

• Remortgaging – You can remortgage from a joint to a single mortgage and free up the extra cash you need for a mortgage buyout. The remortgaging process is similar to taking out a new mortgage, and the lender will still check your credit score, eligibility, and affordability. The biggest issue will be affordability, since the previous mortgage featured two salaries instead of one. However, the process can be relatively straightforward, provided you tick all the boxes.
• Using Personal Savings – Buying someone out of a house can be an excellent way to invest your savings because you’ll become the sole owner of the property.
• Take Out A Loan – You can take out a secure or unsecured loan to finance a mortgage buyout, but you must ensure you can afford mortgage repayments and the additional loan repayments.

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Are There Other Options for Buying Someone Out of a House?

Yes.

Other options available to you include:

• Selling the property and sharing proceeds – You can sell the property, repay any outstanding mortgage debt, and share the remaining balance. This option will require you to find a new property to live in, and you can use the proceeds from the sale as a deposit for a new home.
• Maintaining joint ownership – Maintaining joint ownership can be a suitable option if you’re on good terms with the other party or there are kids involved. You can keep the current arrangement instead of selling the property, but you’ll have cash tied up in the home and will have to share all the costs involved.

What Costs Are Involved in a Mortgage Buyout?

You’ll need to factor in some costs when buying someone out of a house, including:

Penalty Fees

You may need to consider an early repayment charge (ERC) penalty fee when exiting a mortgage to buy someone out of a house.

The penalty can vary between lenders and is usually a percentage of the outstanding mortgage balance.

You can check your mortgage contract or contact your lender to determine how much you’ll pay.

Solicitor and Land Registry Fees

You’ll need a solicitor to complete the necessary paperwork and register the change in ownership at the Land Registry.

The precise fees for the solicitor and land registry can vary depending on the solicitor and the value of your property.

Stamp Duty

Depending on your circumstances, you may need to pay stamp duty when buying someone out of a house.

If you’re dissolving a civil partnership or are married and divorcing, you may not need to pay stamp duty.

However, if you own a house together as an unmarried couple and are separating, you’ll have to pay stamp duty when buying out the other partner if the buyout is above the £250,000 threshold.

How To Calculate Buying Someone Out of a House Final Thoughts

Navigating the mortgage buyout process alone can be overwhelming, especially if you’re also dealing with a divorce or separating from someone you don’t get along with.

You can make things easier by consulting an independent mortgage advisor or broker who can support you and guide you through the process.

Call us today on 01925 906 210 or contact us to speak to one of our friendly advisors.

The Bank of England estimates that around four million households will be exposed to mortgage rate rises, and coupled with rising costs of living, it will be harder to afford mortgage repayments over 2023.

With inflation currently elevated, it’s vital to know your mortgage affordability to ensure you only borrow what you can comfortably repay without overstretching your finances.

If you’re wondering about the size of mortgage you can afford in the UK, a mortgage affordability calculator is an excellent place to start.

However, it only provides a rough estimate since mortgage providers consider different factors to determine your affordability.

Here’s everything you need to know about how much mortgage you can afford.

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What Are Mortgage Affordability Calculators?

Mortgage affordability calculators are online tools you can use to know how much you can afford to borrow based on your financial situation.

Simply fill in various details like your income, monthly expenses, and the desired loan term, and the mortgage affordability calculator will show you estimates of the maximum amount you can afford.

It also allows you to adjust input values to determine how changes in income, expenses, and loan terms can impact your affordability.

A mortgage affordability calculator is valuable since it shows how much you can comfortably afford without overextending yourself.

However, it should only be used as a starting and not a guarantee, since lenders will conduct a more comprehensive assessment before approving your application.

Factors that Influence The Size of Mortgage You Can Afford UK

The Lender

All lenders are different and feature their own affordability criteria when determining the size of mortgage you can afford.

Some use manual processes, while others use automated systems based on your credit score, and you’ll find that you can borrow different amounts depending on the lender you approach.

Lenders have traditionally used income multiples or loan-to-income (LTI) ratios to determine mortgage affordability, where they use information like your net disposable income and monthly expenditure to determine the maximum loan repayments you can afford.

Different lenders can feature different lending caps like 3x, 4x, or 5x your income, so it’s wise to shop around and compare various mortgage providers to ensure you get the best deal.

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Credit Score and History

Your credit score can significantly impact mortgage affordability, since it influences the maximum amount a lender is willing to offer and the number of lenders willing to consider your application.

Mainstream lenders can reject you outright if you have low or adverse credit scores, and you may need to approach a specialist lender to get a mortgage.

The severity of your credit issue and when it occurred will impact your mortgage affordability assessment and the lenders willing to consider you.

Income Type

The type of income you have can also affect how much a lender is willing to offer, depending on whether the income is enough and secure to make repayments now and in the foreseeable future.

You may need to jump through a few hoops if you have a complex income type, and not all lenders will consider every penny you earn when assessing mortgage affordability.

Certain income types, like salaries paid in cash, can be deemed unacceptable, while non-standard and variable income types can be considered a higher risk as they’re difficult to predict.

Monthly Expenditure

Lenders will also closely examine your regular monthly expenditures or outgoings to determine the size of mortgage you can afford UK.

Rule changes implemented under the Mortgage Market Review require a more stringent assessment of monthly spending when determining mortgage affordability, and this involves answering detailed questions about your spending habits and lifestyle.

Lenders will look at how much money you spend on all sorts of things, including debt payments, regular bills, insurance, childcare, memberships, clothing, holidays, entertainment, and travel.

Lenders will also want to know if your outgoings are likely to change significantly in the coming years, like if you plan to start a family, to determine how much you can afford to borrow.

Related reading: 

• Reasons for remortgaging.
• Remortgaging to release equity.
• Remortgaging to buy another property.
• Remortgaging with bad credit.
• Remortgaging for home improvements.
• I own my house outright can I remortgage? 
• Capital raising mortgages.

How to Improve the Size of Mortgage You Can Afford UK

A few steps you can take to improve the size of mortgage you can afford UK include:

Improving Your Credit Score

Your credit score not only affects whether your application is successful, but also influences how much your monthly repayments will be, therefore affecting the size of mortgage you can afford.

Enhancing your score is one of the most effective things you can do when preparing for your mortgage application.

Request a credit report and ensure all the information is correct and up-to-date.

You can also repay old debts, close unused bank or credit card accounts, reduce your use of credit, and repay your bills on time to improve your score.

Apply for a mortgage today

Reduce Your Spending

Lenders will look at your monthly spending habits to determine whether you manage your money well or you’re living beyond your means.

Regular monthly outgoings towards certain things like high-risk or unnecessary items and gambling can impact your ability to repay and make you an unappealing mortgage applicant, reducing how much you can afford to borrow.

Prove You Can Manage Debt

Repaying your debts in full every month and paying off any outstanding debts can show you’re a reliable borrower while also improving your credit score.

Lenders will view you more positively when you don’t have any other significant financial commitment, and you’ll have more disposable income that will make it possible to afford a larger-sized mortgage.

Increase Your Deposit

Although the deposit size doesn’t affect affordability models, it can impact your borrowing potential or what house you can afford to buy.

The deposit will affect the loan-to-value (LTV) ratio, which is the amount you’re borrowing compared to the overall cost of the loan.

The lower the LTV, the lower the risk to the lender, making you a more attractive borrower.

However, a higher LTV can make it challenging to borrow the amount you want, resulting in higher rates and fees that limit how much mortgage you can afford.

How Much Mortgage Can I Afford? Final Thoughts

Ensure you only borrow the size of mortgage you can afford comfortably without struggling, instead of borrowing the maximum amount your income can allow and straining your finances.

You can use a mortgage affordability calculator to get a rough idea of how much you can afford, or consult an independent mortgage advisor or broker with whole-market access to gain a better understanding of your situation and options.

Call us today on 01925 906 210 or contact us to speak to one of our friendly advisors.

If you’re looking for a mortgage without a credit history in the UK, you’re not alone.

Data shows that around 5 million Brits, or 10% of the adult population in the UK, are credit invisible, meaning they don’t have a credit history.

Although not having a credit history can make things challenging, you can still qualify for a no credit mortgage and secure the financing you need to buy a home with the right help and guidance.

Here’s everything you need to know about how to get a mortgage with no credit history in the UK.

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Why Is A Credit History Important?

A credit history provides a record of your past borrowing and repayment activities and is usually recorded in your credit report.

It simply shows that you’ve taken out loans, used credit cards or participated in other credit-related financial transactions reported to credit reporting agencies or bureaus.

Lenders use your credit history to determine the risk of lending to you by assessing how well you manage credit and whether you make repayments on time and use credit facilities responsibly.

Having no credit history means you don’t have enough credit activity to make up a credit score, which lenders want to see before deciding whether to offer you a mortgage.

Lenders will have no information to assess, making it difficult to determine whether you’re a reliable borrower who can manage a mortgage.

Related reading: 

• Reasons for remortgaging.
• Remortgaging to release equity.
• Remortgaging to buy another property.
• Remortgaging with bad credit.
• Remortgaging for home improvements.
• I own my house outright can I remortgage? 
• Capital raising mortgages.

Can You Get A Mortgage Without A Credit History?

Yes. Although your options may be limited, you can still get a mortgage without a credit history among specialised lenders with more flexible criteria for assessing your eligibility.

Such mortgages are usually called no credit score mortgages or no credit mortgages.

To get a mortgage without a credit history, you’ll need proof of your ability to repay the mortgage.

Some lenders are more inclusive and will consider other personal and financial circumstances that help determine your eligibility when assessing your application, including employment history, income, and overall wealth.

How to Get A Mortgage Without A Credit History

You can get a no credit mortgage through the following steps:

Determine Why You Don’t Have A Credit History

Identifying why you don’t have a credit history is an excellent first step in rectifying the situation and improving your chances of getting a mortgage.

Some valid reasons why you may not have a credit history include:

• You’ve just turned 18 and are yet to borrow or build a credit history.
• You live with your parents or family and don’t have any bills or bank accounts in your name or a record of rent payments.
• You recently moved to the UK as a foreigner or have moved back after a long period abroad and can’t transfer credit histories from another country.
• Your credit history has become outdated. Credit records only feature transactions from the last six years, so if you haven’t borrowed or made a mark for six years or more, you may find yourself in the shadows.
• You’re not registered on the UK electoral poll.
• You don’t have a fixed or permanent UK address.
• You don’t have an employment history in the UK.
• You don’t have a UK bank account.

Build Up Some Credit History

You can quickly build up your credit rating through some simple actions like:

• Opening a bank account – An excellent first step is opening a bank account in your name, and it’s suitable if you just turned 18 or have been living abroad or with your parents. Have some money going in and out of the account regularly to show good management.
• Registering as a voter – Registering as a voter and getting listed on the electoral register is quick and easy and will help prove where you live.
• Taking out a utility bill in your name – Take responsibility for some utility bills like internet, energy or water by making yourself the account holder and setting up direct debits from your bank account.
• Taking out a mobile phone contract – If you’ve been using someone else’s mobile plan, consider taking out a mobile phone contract on your own. It will get captured on your credit file and is suitable for showing you reliably pay your bills.
• Using any regular payment as evidence – Some credit agencies feature services that allow you to capture standard payment information like subscription payments to Netflix or council tax from your bank account as proof of regular, timely payments.
• Taking out a credit card – taking out a credit card is one of the simplest and most effective ways to show you can manage borrowing, and you don’t have to make unwanted expenditures. You can use the card to pay for regular items like food shopping and pay it off at the end of every month to show you can make repayments on time without fail.

How Does the Lending Criteria for No Credit Mortgages Differ?

Without a credit history, the risk is significantly higher for lenders, which can impact the lending criteria in the following ways:

• Capped borrowing – You’ll only be able to borrow up to a certain amount, as most lenders will not be willing to offer higher income multiples. Instead of providing 4 to 4.5 or 5 times your salary, lenders may limit borrowing to 2 or 3 times your salary.
• Higher deposit – Lenders will likely ask for a higher deposit to mitigate the risk of a no credit mortgage, so ensure you save as much as possible before applying.
• Higher Interest Rates – Lenders may also charge higher interest rates because of the risk of providing a mortgage without a credit history.

Apply for a mortgage today

How To Get A Mortgage With No Credit History UK Final Thoughts

Getting a mortgage with no credit history in the UK can be challenging, so it’s wise to proceed cautiously.

You can improve your chances of getting a mortgage without a credit history by consulting an independent mortgage advisor or broker with experience helping borrowers with no credit history get approval for a mortgage.

They can show you how to build up a credit history quickly and introduce you to lenders likely to approve your application based on your situation.

Call us today on 01925 906 210 or contact us to speak to one of our friendly advisors.

Since 2022, the increased rates introduced by the Bank of England has impacted mortgage affordability for the average Brit.

Hikes have made it almost impossible for some trying to get onto the property ladder for the first time or working with a tighter budget.

The solution? Mortgages with a guarantor!

Guarantor mortgages are certainly not new to the UK market, and they’re best known for providing first-time and budget buyers with inroads to the property world.

Apply for a remortgage today

Getting a mortgage isn’t easy for everyone, especially if your earnings don’t reach the minimum requirement, the accrued savings for a deposit aren’t high enough, or you have a less-than-stellar credit rating or haven’t built one up yet.

While a guarantor loan might seem like a financial saviour, it doesn’t come without risks and challenges – for both buyer and guarantor.

To better understand if a guarantor loan is the most viable option, here’s what you need to know…

Guarantor Loans – What Are They?

Guarantor loans allow applicants to use a relative to co-sign the mortgage agreement to act as a guarantor for the debt.

This means that the guarantor will agree to settle the outstanding amount if the home buyer defaults on their mortgage payments.

Getting someone to agree to be a guarantor is tricky, as they will be required to provide collateral, usually in the form of their accrued savings or their own home or assets.

As a guarantor, there’s a lot of risk involved. While they are required to cover costs that the home buyer cannot, they will never own equity in the property.

Types of Guarantor Loans Available in the UK

More mortgage providers are developing products that allow close family members and parents to assist borrowers in qualifying for a mortgage.

Here’s an overview of each product type for your consideration.

Family Springboard Mortgages, aka Deposit Boost Mortgages

These mortgages make it possible for family members to help the buyer by offering their savings as collateral for the mortgage.

Some well-known financial services providers offer this type of mortgage, including Family Building Society and Barclays Bank.

While each lender has different requirements, they usually work similarly.

Related mortgage guides: 

• What to do if your mortgage expires.
• Disadvantages of paying your mortgage off.
• Best mortgage brokers in the UK.
• Should you pay off your mortgage early?
• 50-year mortgages UK.

Some institutions allow first-time buyers to get a mortgage with zero deposit if a family member puts 10% of the property value into a linked savings account.

After a set number of years, and all mortgage instalments have been paid according to the mortgage agreement, the family member can receive their 10% deposit back with the added benefit of interest included.

If the home buyer cannot afford their payments, the 10% can be used to cover costs.

Joint Borrower Sole Proprietor Mortgage (JBSP)

Joint borrower sole proprietor mortgages are very sought-after. This type of mortgage requires a family member to share liability for the mortgage.

While only the buyer is listed on the property deeds, the family member will be jointly liable for the debt.

Not being listed on the deeds makes it simpler for the assisting family member to avoid the cost of tax, stamp duties, and other fees often associated with owning equity in a second home.

Even with a co-signatory, the home buyer can benefit from the exemptions offered on stamp duties for first-time buyers.

The costs of a JBSP are best discussed with a mortgage broker, but in most instances, these loans are offered at the standard rates of the lender and based on the loan to value.

Not all lenders offer this type of mortgage as it’s quite a niche product that could be impacted by the age of the family member offering assistance, and of course, there’s risk to all parties.

Apply for a remortgage today

Advantages of Acquiring a UK Guarantor Mortgage

One advantage for guarantors is that a parent or close family member can help a loved one buy their first home without having to gift them money to use as a deposit.

For some people who already own their own home or have a large savings, this is the ideal situation.

Guarantors aren’t expected to pay anything towards the mortgage if the buyer keeps on top of their monthly repayments.

Any cash that the guarantor offers as collateral for the mortgage is given back to them after the arrangement comes to an end.

It’s only used if the buyer defaults on the mortgage payments or can no longer afford the instalments.

Is A Guarantor Mortgage the Right Fit for Me?

Guarantor mortgages aren’t well suited to everyone.

If you’re a first-time buyer and don’t have a big enough deposit or your income isn’t high enough to meet the stipulated requirements, a guarantor mortgage may be the best choice for you.

Some buyers have no credit history because they have never been in debt or have a poor credit history – in both of these instances, guarantor mortgages can be beneficial.

In such instances, the guarantor will need to be financially stable and have a good credit history in order for the mortgage to be granted.

One of the biggest perks of guarantor mortgages is that you can possibly borrow 100% of the property value instead of having to put down a hefty deposit.

Apply for a remortgage today

Who Can You Ask to Be a Guarantor On Your Mortgage?

Some terms and conditions govern guarantor mortgages.

For instance, the guarantor must be a parent or close family member.

You’ll need to ask a family member who is financially stable with a good credit history, as the lender will assess their creditworthiness as if they are the home buyer.

In most instances, the guarantor must meet all the lender’s qualifying criteria.

Sometimes, the rules are slightly different – as with offset and family springboard mortgages.

Lenders pay close attention to the guarantor’s financial situation to ensure that the person signing surety on the mortgage can realistically afford to cover the costs of the entire mortgage if the buyer defaults on the loan or can no longer afford it.

If you’re wondering if retired parents can be your mortgage guarantor, the answer is yes.

In such instances where the guarantor is retired, the mortgage provider will assess their savings and assets that they can provide as collateral along with their current credit rating and pension income, if any.

Some lenders see age as a factor when assessing whether a guarantor is fitting or not.

Before applying for a guarantor loan with a retired guarantor, it is best to consult with a professional mortgage broker to see the likelihood of being accepted and also to ensure you’re considering all of your options.

Apply for a remortgage today

What Are the Risks of Guarantor Mortgages for Both Buyer and Guarantor?

The table below presents some of the risks faced by each party:

• Risks to the Guarantor Risks to the Buyer
• Responsible for the debt if the buyer defaults on the agreement
• If a guarantor passes away, the buyer must find a new guarantor
• Responsible for the fees on late payments
• If a 100% mortgage is acquired and house prices dip, the buyer could be in negative equity in the home.
• If the property is repossessed and sold to defray costs, the guarantor is responsible for the shortfall between the sale price and outstanding mortgage amount.
• The buyer is financially linked to the guarantor for the foreseeable future, which could make family ties awkward in the long run.
• Any property or assets offered as collateral are at risk if the mortgage amount cannot be covered.
• Savings could be lost if used as security, and the home buyer cannot pay the outstanding mortgage
• Could impact the guarantor’s ability to get approval for other credit types, as they may be seen as financially overextended in terms of responsibilities.

Related reading: 

• Reasons for remortgaging.
• Remortgaging to release equity.
• Remortgaging to buy another property.
• Remortgaging with bad credit.
• Remortgaging for home improvements.
• I own my house outright can I remortgage? 
• Capital raising mortgages.

Is It Possible to Switch From a Guarantor Mortgage to Another Type?

All lenders have their own terms and stipulations when it comes to guarantor mortgages.

Generally, lenders will require the home buyer to build a decent amount of equity in the property before they can switch to a guarantor-free mortgage.

This is usually around 20%, but it’s lender-dependent.

Most lenders anticipate a buyer’s income increasing over time along with their equity in the property, which means that the guarantor will no longer be needed in time.

At such a time when the buyer is in a better financial position, they can remortgage the property and hopefully get a better interest rate without the need for a guarantor.

Sometimes, that’s impossible, and remortgaging may still require a guarantor.

Apply for a remortgage today

Mortgage with Guarantor in the UK Conclusion

If you’re unsure if a guarantor mortgage is the best route for you, chatting with an unbiased professional mortgage broker can help you better plan and put things into the right financial perspective.

Call us today on 01925 906 210 or contact us to speak to one of our friendly advisors.

According to Statista, mortgage rate increases broke records in 2022, seeing the Bank of England introduce several bank rate hikes that resulted in higher mortgage rates.

With increasing mortgage rates, many Brits have looked into switching mortgage deals to enjoy better rates.

New deals have hit the market, and you might even find yourself shopping around for better options.

What happens if you come across a variable rate mortgage? Should you get one, or are there more viable mortgage types for you?

You may even wonder if you should consider tracker mortgages or SVR mortgages (Standard variable rate) before considering a discount variable rate mortgage.

One of the biggest driving forces behind switching mortgage types is costs, and if you’re looking to save and think that a discount variable rate mortgage is the way to do that, there are a few things you’ll need to know about this kind of mortgage first.

Apply for a remortgage today

How Discounted Variable Mortgages Work in the UK

The first thing you should be aware of as someone on the property ladder is that all mortgage companies have what’s called a standard variable rate.

This is an interest rate that the lender itself determines.

The Bank of England’s base rate then influences how the lender’s interest rate fluctuates, but it’s not strictly linked to that base rate.

If you are on a tracker or fixed-rate mortgage, and the initial term ends (usually 2 to 5 years), your mortgage will revert to a standard variable rate.

You can remortgage when that happens or just before.

For many, a discounted variable rate mortgage is alluring because it sets the interest you’ll pay at just below the provider’s standard variable rate for a set term.

The interest rate isn’t fixed, though, so it will rise and fall as the mortgage provider’s standard variable rate does.

In this way, discounted variable mortgages work rather similarly to tracker mortgages.

Of course, they’re not tracking the Bank of England’s base rate but rather the lender’s standard variable rate at a discounted amount.

An example of how a discounted variable rate mortgage works:

• Your lender has a standard variable rate of 3%, and if you’ve been given a 1% discount, you’ll be paying 2% interest.
• If the lender’s rate suddenly increases to 4%, your interest rate will increase, but only to 3%.
• Mortgage providers can fluctuate their interest rates at any time.

Related mortgage guides: 

• What to do if your mortgage expires.
• Disadvantages of paying your mortgage off.
• Best mortgage brokers in the UK.
• Should you pay off your mortgage early?
• 50-year mortgages UK.

How Discounted Variable Rate and Tracker Mortgages Compare

You’ll find that discounted variable rate mortgages and tracker mortgages have a similar format, but there’s one area where they are different.

A tracker mortgage will closely follow the base rate of interest put out by the Bank of England.

The result is that borrowers on this type of mortgage often enjoy a lower interest rate than other mortgage types.

Discounted variable rate mortgages are different in that they track the mortgage provider’s standard variable rate.

Essentially, this means that they can sometimes be cheaper than standard variable rate mortgages, but the rate can jump and fall without warning, unlike tracker mortgages.

Pros and Cons of Discounted Variable Rate Mortgages UK

Advantages

Not all discounted variable rate mortgages in the UK are the same.

The products may have differences, but here are some of the most common associated advantages to expect:

• If the Bank of England happens to reduce its interest rate and your lender responds by dropping its interest rate, you could benefit from an even lower interest rate.
• As long as your deal is in place, your interest rate will be lower than your mortgage provider’s standard variable rate.
• Associated early repayment charges are usually lower when you have a discounted variable rate mortgage. This is beneficial if you wish to pay a little more each month to pay down the debt sooner.

Disadvantages

• Monthly instalments on a discounted variable rate mortgage are not fixed, meaning that even half a per cent rise in the interest rate could increase your monthly instalment exponentially.
• Fluctuating mortgage payments can make it hard to budget each month.
• Lenders typically apply a collar to discounted variable rate mortgages. This is a limit to the level that your interest rate can drop to.

Apply for a remortgage today

Costs Associated with UK Discounted Variable Rate Mortgages

All mortgages come with fees, but discounted variable rate mortgages come with additional fees that some other mortgages simply don’t have.

Before acquiring a discounted variable rate mortgage, check that the fees won’t negate any anticipated savings.

Some fees to enquire about include the arrangement or establishment fee and any penalties you might face, such as early repayment charges and exit fees.

To get the best possible deal, it’s always recommended to use an experienced mortgage broker who can find the best deals and investigate the fees before you sign anything.

A mortgage broker can also advise you if the discounted variable rate mortgage is best for your specific financial situation and affordability.

Related mortgages guides: 

• What to do if your mortgage expires.
• Disadvantages of paying your mortgage off.
• Best mortgage brokers in the UK.
• Should you pay off your mortgage early?
• 50-year mortgages UK.

What To Do If I Can’t Afford My Discounted Variable Rate Mortgage Instalments?

Sometimes life and finances become a bit challenging and the fluctuating interest rate of a discounted variable rate mortgage can become difficult to afford.

In such an instance, there are various courses of action you can take.

• Remortgage and move onto a different mortgage deal – this could incur early repayment charges
• Switch to an interest-only deal
• Take a break from your repayments

All of these will help you immediately experience financial relief, but may increase the overall cost of your mortgage in the long run.

Apply for a remortgage today

FAQs

What Are Variable Mortgage Rates UK 2023?

It’s difficult to pinpoint an exact variable mortgage rate UK 2023 as each lender determines their own variable rate.

That said, the common average variable mortgage rate is around 8%.

What is a Discounted Standard Variable Rate Mortgage?

This is a type of variable rate mortgage with an interest rate that’s discounted from the lender’s standard variable rate, but still follows its fluctuation patterns.

How Long Are Typical Discounted Variable Rate Mortgage Terms in the UK?

In the UK, discounted variable rate mortgage terms usually run for 2 to 5 years before the deal will revert to a standard variable rate mortgage, or the borrower can remortgage.

Call us today on 01925 906 210 or contact us to speak to one of our friendly advisors.

Rumour has it that 50-year mortgages will soon become available in the UK, but understandably, many Brits are unsure about whether they should lock their mortgage in for the next half-century!

For many, thinking ahead to next month or next year is tough.

The average mortgage, which usually lasts 25 to 35 years, can even be daunting.

With 50-year mortgages on the horizon, even more forethought may be required when considering buying a property.

One particular lender has been given the go-ahead to offer such mortgages, and it’s got the property market in a fluster, especially where fixed rates are typically available between two and five years.

Are 50-Year Mortgages a Complete Surprise to the UK Market?

While only one lender is licensed to offer 50-year mortgages in the UK, it’s rumoured that more lenders will join in quite soon with similar offers.

These could be referred to as “ultra-long fixed term” mortgages.

Of course, the mortgage market has been heading in this direction for quite some time, with some mortgage lenders already offering credit between 11 and 40 years.

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What’s the reason behind 50-year mortgages getting granted?

It’s said that the Government wants to promote intergenerational lending to assist younger investors in entering the property market.

50-Year Mortgages UK – What’s the Catch?

A 50-year mortgage comes with a longer repayment period, providing better cashflow each month.

But, and it’s a big one, 50-year mortgages are more expensive than regular-term mortgages.

Advantages of 50-Year Mortgages

Despite the higher rates attached to long-term loans, they’ve still received a lot of public interest.

A 5% deposit is required in most instances, which is highly attractive to first-time buyers trying to get onto the property ladder.

With fluctuating interest rates causing uncertainty, it is no surprise that the fixed rate is attractive.

Another drawcard for 50-year mortgage providers is that they can offer property buyers less stress and greater convenience, as they won’t have to worry about remortgaging the home every 2–5 years.

The length of the fixed term also allows people to plan their financial futures with more certainty.

Knowing your mortgage monthly instalments for the foreseeable future can be a comfort.

Of course, there’s the issue of financial stress tests that borrowers have to pass to get the mortgage they apply for.

This test determines if they can afford the mortgage if there are upward changes to the interest rate in the future.

This may not mean that lenders no longer bother with stress tests, but the basis of these tests may make it simpler for borrowers to pass them.

Restrictions on how many borrowers can access will certainly apply.

Apply for a remortgage today

Disadvantages of 50-Year Mortgages in the UK

One of the biggest downsides of a 50-year mortgage is probably the risk involved.

There’s simply no knowing how a person’s financial situation or even living situation might change in the next 50 years.

And there may be hefty repayment charges if you wish to settle the amount earlier.

A possible disadvantage to be aware of is that while rates are astronomical and ever-increasing right now, that’s not to say it will always be that way.

Some borrowers may lock themselves into a fixed rate for the next 50 years, only to find that rates drop in the near future to lower than their current fixed rate.

It’s thought that if lenders consider waiving early repayment charges on their long-term fixed mortgages, they may become even more popular.

They may even become more popular if it’s possible for borrowers to acquire more than 15% of their mortgage above 4.5 times their income, but right now, that’s speculation.

Those who are looking to buy a family home to live in for the rest of their lives will find the 50-year mortgage a very viable option.

Apply for a remortgage today

How Will Brits Respond to the 50-Year Mortgage?

One of the big questions surrounding 50-year mortgages is how Britons will accept it, if at all.

Industry experts imply that it may remain a niche product because the general British mindset is on two-year fixed-rate mortgages.

Lenders and banks typically see longer-term loans as riskier, so the criteria to qualify may be fairly strict, or some lenders may simply not be keen to offer such products.

The consensus is that the 50-year mortgage will appeal to certain customers based on their unique financial situation and stage of life.

Some say that there are rumblings of a new product that may come after the 50-year loan, where children can inherit property with an existing mortgage to get into the property market.

There’s always the risk that inheriting children may not afford the instalments of the existing mortgage, which could mean it’s a while before such a product hits the market.

50-Year Mortgages UK Conclusion

Whether a 50-year mortgage is for you will come down to the intricacies of your personal financial situation.

To ensure that you make the right financial decision for you, it’s recommended to chat with a qualified and experienced mortgage broker who can present the various options available to you and assist you with making the right choice.

FAQs

How Does a 50-Year Mortgage Work?

When a mortgage is spread over 50 years, the monthly instalments will be around 50% of what would be on a standard-term mortgage.

Borrowers can then expect to have more cash flow for everyday life.

Related mortgage guides: 

• What to do if your mortgage expires.
• Disadvantages of paying your mortgage off.
• Best mortgage brokers in the UK.
• Should you pay off your mortgage early?
• 50-year mortgages UK.

Is a 50-Year or 30-Year Mortgage Better?

A 50-year mortgage may be more appealing because it comes with slightly lower monthly instalments than a 30-year mortgage.

The disadvantage, however, is that you’ll be paying off the property for longer and may have higher fees to pay.

Are Banks Offering 50-Year Mortgages?

Currently, only one mortgage lender, Perenna, is offering 50-year mortgages, but it’s believed that other lenders and banks will offer similar products in the future.

Call us today on 01925 906 210 or contact us to speak to one of our friendly advisors.