Mortgage advice please..

[Plunk13]

I was wondering if any of you guys with mortgage experience could give me advice?
Obviously it's the first time for me, and I'm quite thick. I'm doing research and what not on applying for a mortgage, rates, fees/costs etc. Of course, at some point I'll go and see a proper adviser. But in the meantime could someone explain to me the usual process of paying off the mortgage?
For example, say I took out a 25 year mortgage with a fixed rate deal at 5.5% for the first 5 years, then standard rate for the remainder, what does the typical borrower do after 5 years? Does he or she go to another lender for each of the subsequent 5 (or whatever length)year fixed rate periods?
I.e. you wouldn't stay with the same lender for the whole period.

 

[HangTime]

Simple Answer: Yes, you go to another lender at the end of the fixed rate period

However, this obviously depends on a few factors:

-Any exit/redemption fees on your existing mortgage
-Setup costs associated with the new mortgage
-The standard variable rate you revert to at the end of the fixed term
-Changes in circumstances e.g. you come into some money or need to spend a lot more

So essentially when your fixed rate is approaching the end of term, start shopping around and seeing what other offers are out there. You need to make sure that any saving is greater than any exit/setup fees etc that you will end up paying. Don't forget most mortgage lenders will require legal fees and/or valuation fees too, although some will waive these for remortgages.

Remortgaging is (relatively) straightforward but it is still a hassle and you need to make sure you know exactly what you are getting. I recently completed a remortgage to a tracker, not the best rate out there but completely fee free and with no early repayment charges. Essentially it's the same as a standard variable rate mortgage in terms of flexibility, but obviously at a lot lower rate.

 

[Plunk13]

Cool. Thanks.

Another question : does a decent deposit make a difference these days? Would a higher deposit give me (a better chance of getting) a bigger mortgage?

 

[Slam62]

yes

 

[The Mad Rapper]

Cool. Thanks.

Another question : does a decent deposit make a difference these days? Would a higher deposit give me (a better chance of getting) a bigger mortgage?

Aim for a minimum of a 10% deposit if you'd like to secure the best mortgage. That said, the property market is currently crashing, so I'd suggest you rent until it bottoms out.

 

[Mad old tory]

Aim for a minimum of a 10% deposit if you'd like to secure the best mortgage. That said, the property market is currently crashing, so I'd suggest you rent until it bottoms out.

Bit strong that terminology isn't it. A few months of small falls/levelling off is hardly a crash.

 

[Jon Frost]

Aim for a minimum of a 10% deposit if you'd like to secure the best mortgage. That said, the property market is currently crashing, so I'd suggest you rent until it bottoms out.

Yeh. Totally. My house really dropped in value last month, and the month before, and... etc.

 

[The Mad Rapper]

Bit strong that terminology isn't it. A few months of small falls/levelling off is hardly a crash.

Not at all - there are so many negative events happening at the same time, you have to see this as part of the big picture. House prices have been artificially increased as a result of lax lending (crazy multiples, extreme LTV loans, self cert 'Liar Loans').

Have a look at the latest Land Registry figures for example which relate to the end of last year - falls of over 10% in some areas.

Mortgage approvals at their lowest level for the last 7 years, etc.

Then look what's happening in the economy, UK PLC is bankrupt and the banks are all ******.

All of this information is freely available - do some research and draw your own conclusions...

 

[Third Opinion]

To get a really good mortgage deal you will probably need a 20% deposit as a first time buyer.

This week has been particularly poor for mortgages as all the lenders have now withdrawn their infamous 125% deals, Northern Rock being the last. On top of that a good many will no longer lend 100% mortgages, which really looks like they expect the market to drop this year.

It's pointless talking about crashes at this stage, although there have been steady falls in the last three months the reality tends not to sink in until it gets very dire. The last crash in the 90's some newspapers were still reporting rises in London when a 1/4 million people were on the brink of having their homes reposessed.

I found an interesting article here in the mean time.

http://business.timesonline.co.uk/tol/business/money/borrowing/article3422372.ece

Mortgages for up to 95% are also disappearing fast. Alliance & Leicester, West Bromwich, Britannia and Barnsley building societies have all reduced the maximum they will lend from 95% to 90% of the value of the property.

Brokers said it would not be long before borrowers need a deposit of at least 10% to get a decent rate. Melanie Bien of broker Savills, said: “Aspiring homeowners as well as remortgagers could soon need equity of at least 10% to find affordable deals as the combination of the credit crunch and falling house prices has forced lenders to readdress their attitude to risk.”

Looks like 10% is quickly being considered minimum which will not leave you much room to negotiate good rates.

 

[Plunk13]

At the moment I could provide a 15% deposit plus more saved for fees and money for doing up the house. I don't plan to go for anything above 85% mortgage. I can see why the 125/100% ones are disappearing. Way way too much risk, and I wouldn't be able to afford it anyway.

Thanks for the Times link. I keep forgetting to check on there for the finance info.
"House prices set to fall by 7% in next two years as credit squeeze bites". Hmm
I'm giving it a few more months of saving, so I'll see what happens in the meantime. Hopefully I can time it just right.

Thanks for the info guys

 

[HangTime]

does a decent deposit make a difference these days? Would a higher deposit give me (a better chance of getting) a bigger mortgage?

It does, when we bought our house I was surprised to learn how much weighting was given to the deposit, as this isn't something that is heavily advertised or obvious from looking at online calculators etc which focus primarily on income. We ended up being offered far more than I thought would be available to us.

Basically if you can get an LTV of 75% or under this will pretty much open up the whole market to you (I don't think there is any gain from less than that, but I may be wrong). Anything over 90% and the best deals will likely not be available to you, with the spectre of HLC raising it's head too.

 

[pabloB]

Get a Minimum of 10% together, this should also see you avoid any MIG's (Mortgage Indemnity Guarantee) that lenders will stick on sometimes which can be between 1-3% of the loan amount. (A MIG is where the lender is effectively taking out an Insurance Policy against you defaulting on your mortage - and YOU get to pay the premium for that!!!)

Also beware at the moment that mortgage lenders are charging huge set up/admin fees at the moment as a way of making money back fast, I've heard of 3-5k which is crazy, think around £1k is more the norm so please check this when you see your advisor and also make sure that any APR quoted includes all the fees which off course also incurr interest (that's off course if you're adding these to your loan).

Remortgaging is easy, think of your mortgage as a backpack you take it with you wherever you and change it at the end of the fixed period.

The only other thing I'd say is try and avoid interest only mortgages. Yes they're cheaper but don't forget at the end of the term you'll have a large lump sum repayable to the lender as all you've paid is the interest. In thoery you are supposed to make wise investments that will in the future cover this but as hyou know investments can go down as well as up.

Good luck! I can let you have details of a quality advisor if you wish and they don't charge for their advice as they recoup this back from charging the lender brokerage.

Edit

Also make sure when you go and see and advisor make sure their Panel isn't limited to say 10 providers, i.e. make sure they aren't tied. Basically this means they'll only look at about 10 or Lenders which limits the products they'll be able to find for you. This is one of the first questions you should ask!

 

[The Mad Rapper]

Thanks for the Times link. I keep forgetting to check on there for the finance info.
"House prices set to fall by 7% in next two years as credit squeeze bites". Hmm
I'm giving it a few more months of saving, so I'll see what happens in the meantime. Hopefully I can time it just right.

Thanks for the info guys

7%? House prices have already fallen by almost twice that in some areas since the start of this year.

Keep reading the Times, it's been particularly Bearish recently

 

[The Mad Rapper]

It does, when we bought our house I was surprised to learn how much weighting was given to the deposit, as this isn't something that is heavily advertised or obvious from looking at online calculators etc which focus primarily on income. We ended up being offered far more than I thought would be available to us.

Basically if you can get an LTV of 75% or under this will pretty much open up the whole market to you (I don't think there is any gain from less than that, but I may be wrong). Anything over 90% and the best deals will likely not be available to you, with the spectre of HLC raising it's head too.

If you can put down any deposit over 10% you will also have access to the best available rates - you're pretty much considered 'Super Prime' in that situation.

 

[GarethDW]

Then look what's happening in the economy, UK PLC is bankrupt and the banks are all ******.

I'm sorry but this sounds like scaremongering to me. As I work in the finance industry, I find the comment that "the banks are all ******" to be factually incorrect.

Let's take Barclays, for example. This week they announced that their profits had slipped 1% compared to last year, and so they only made £7.08 billion profit (yes, that's profit, not turnover). And this figure incorporates a £1.6 billion credit market write-down!

Similarly, RBS is supposed to be posting record profits this year of approximately £10 billion.

HBOS will announce their profit later this week, but it is widely anticipated to be in the region of £5.8 billion, an increase of 4% compared to last year's results.

Lloyds TSB yesterday posted pre-tax profits of £3.9 billion, up 6%.

Abbey performed very well this year and have posted a 32% increase in pre-tax profits to £1.11 billion.

The only banks to have been hit financially are the Rock and Alliance & Leicester... and even then, A&L still managed to make £73.1 million pounds profit, so it's not all bad. Chances are the Leicester will get bought out later this year, in any case.

 

[The Mad Rapper]

I'm sorry but this sounds like scaremongering to me. As I work in the finance industry, I find the comment that "the banks are all ******" to be factually incorrect.

Let's take Barclays, for example. This week they announced that their profits had slipped 1% compared to last year, and so they only made £7.08 billion profit (yes, that's profit, not turnover). And this figure incorporates a £1.6 billion credit market write-down!

Similarly, RBS is supposed to be posting record profits this year of approximately £10 billion.

HBOS will announce their profit later this week, but it is widely anticipated to be in the region of £5.8 billion, an increase of 4% compared to last year's results.

Lloyds TSB yesterday posted pre-tax profits of £3.9 billion, up 6%.

Abbey performed very well this year and have posted a 32% increase in pre-tax profits to £1.11 billion.

The only banks to have been hit financially are the Rock and Alliance & Leicester... and even then, A&L still managed to make £73.1 million pounds profit, so it's not all bad. Chances are the Leicester will get bought out later this year, in any case.

Nonsense - banks are in business to make money by lending. Almost every single bank, including the two you mentioned have changed their terms and conditions (much higher interest rates, removal of high LTV products) recently because their capital reserves are at an all time low. They are desperate to increase their reserves which have taken a severe beating as a result of the credit derivatives issues.

Quoting profits is exceedingly misleading - profits are reported over a year, where as the credit crunch only really started towards the end of last year (the run on the NR aside). I can assure you that their profits next year won't be anywhere near as glowing.

For someone who works in finance as a job, you're surprisingly uninformed. A&L will be the next bank to go under IMHO, it's already teetering on the brink. Then B&B will follow it.

I perhaps phrased my expression slightly too strongly; the majority of UK banks ought to survive, but I stand by the general suggestion of what I posted. Perhaps I ought to have typed 'Any UK bank which has employed an aggressive business model based upon sourcing funding from wholesale markets and then selling on obligations as CDOs are ******'.

 

[GarethDW]

If you had posted that, then I would have agreed with you

I don't think that A&L will go under... they'll be bought before that happens. Either Lloyds TSB or Santander will swallow them up.

Oh, and I forgot to say that I work in IT within the finance sector, so I probably am pretty well uninformed about the markets... but I do my job pretty well

 

[The Mad Rapper]

If you had posted that, then I would have agreed with you

I don't think that A&L will go under... they'll be bought before that happens. Either Lloyds TSB or Santander will swallow them up.

Oh, and I forgot to say that I work in IT within the finance sector, so I probably am pretty well uninformed about the markets... but I do my job pretty well

Perhaps, I am not sure what their sentiment toward a purchase is. Raising the cash for a takeover must be difficult at the moment.

 

[CurlyWhirly]

Get a Minimum of 10% together, this should also see you avoid any MIG's (Mortgage Indemnity Guarantee) that lenders will stick on sometimes which can be between 1-3% of the loan amount. (A MIG is where the lender is effectively taking out an Insurance Policy against you defaulting on your mortage - and YOU get to pay the premium for that!!!)

Bloomin' cheek if you ask me!


I'm currently looking to remortgage as I'm with Northern Rock on their SVR and they aren't passing on the full 0.50% reductions from the BoE with the 2 interest rate reductions.

I was originally on 7.84% and this was reduced to 7.69% and then reduced to only 7.59% so in reality my mortgage rate has only dropped 0.25% as opposed to 0.50% but I expect it's to be expected with the 'credit crunch'.

I know that Northern Rock is in a different league to other banks but I know of a few other High Street banks that also haven't passed on the full reduction.

 

[pabloB]

Bloomin' cheek if you ask me!


I'm currently looking to remortgage as I'm with Northern Rock on their SVR and they aren't passing on the full 0.50% reductions from the BoE with the 2 interest rate reductions.

I was originally on 7.84% and this was reduced to 7.69% and then reduced to only 7.59% so in reality my mortgage rate has only dropped 0.25% as opposed to 0.50% but I expect it's to be expected with the 'credit crunch'.

I know that Northern Rock is in a different league to other banks but I know of a few other High Street banks that also haven't passed on the full reduction.

Friggin A that's a rate! I remortaged 2 months ago and got 5.89% fixed!