Introducing Jubilee Finance
At Jubilee Finance, our expertise is capital raising for every stage of the property ladder. From first time mortgages to get you on the first rung, to remortgaging to keep you there with the best deal around… right through to accessing your home equity through a remortgage offer so you can make the most of what you’ve already paid towards owning your own home.
First time buyer mortgages
Jubilee Finance is experienced at helping people get onto the first rung of the property ladder. It’s a huge step to take and one we don’t take lightly. We recommend you don’t take it lightly either.
Prior to searching for a first-time mortgage deal, planning is essential. At the very least, you’ll need to know your income and expenses. Lenders will ask for this information. Your first task to getting on the property ladder is to review your personal budget to ensure you know and can prove what you can afford to pay towards your mortgage repayments.
To help with this stage, there’s a free budget planner tool you can use here.
You also need to factor for additional home buying costs
Buying a property is a complex purchase. As an example of the associated costs, the fees listed below are areas Jubilee Finance will advise you on prior to entering into a mortgage as a first time buyer.
Additional home buying costs include:
This is applicable to England, Wales and Northern Ireland. The rates you pay are based on the price of the property you buy and are payable to both freehold and leasehold properties, so it doesn’t matter if your first home loan is for a flat. There may still be Stamp Duty to pay.
The first £125,000 of the property price is free. Between £125,000 and £250,000, there’s a 2% Stamp Duty fee.
As an example, should your new home cost £150,000, you’d pay Stamp Duty on the portion that’s above the threshold, so in the case of £150,000, there’s a £25,000 difference for which you’ll pay 2% Stamp Duty. That’s £500.
The percentage rates do go higher for homes that cost above £250,000, however for a first-time home to get you onto the property ladder it’s unlikely you’ll be trying to buy your dream home.
If you do need to pay Stamp Duty that must be factored into your budget because you may not have as high a deposit as you thought. The tax needs paid within 30 days of the completion of the sale.
In Scotland, the equivalent to Stamp Duty is called a Land and Buildings Tax Transaction. The threshold for Scottish properties is higher as your first £145,000 is exempt. Between £145,000 and £250,000 is the same 2%.
To find out if you need to factor this cost in, use the Tax Service’s Stamp Duty Calculator here. This is applicable for homes in England, Wales and Northern Ireland.
If you’re buying a home in Scotland, use the Revenue Scotland LBTT calculator to get the correct figures.
The average cost for a mortgage arrangement fee is £1500. It can be lower or higher as the fee will vary by lender. If you can't pay the arrangement fee upfront, most lenders will let you add the cost to your mortgage. Keep in mind that the interest will be added to the total cost of the loan if you choose to add it to your mortgage.
First time buyers find high loan to value (LTV) offers attractive because it’s less of a deposit you need to get onto the property ladder. Some first time buyer mortgages can be as high as a 95% LTV meaning you only need a 5% deposit to access them, so it makes home ownership affordable to more people.
However, what lenders do that isn’t blatantly obvious is they have a threshold for the amount of risk they’re willing to take on. That could be a 75% LTV ratio, but they’ll still offer above that such as 90% LTV mortgages and higher. To cover the risk, there’s a premium added called the Higher Lending Charge. It’s used as a sort of insurance for the lender to cover the additional risk above the LTV ratio they’re comfortable with.
The HLC charge isn’t added to the total sum for your mortgage but instead to the LTV percentage difference to the lenders threshold. If you take out a 90% LTV with a lender using a 75% LTV threshold, then the 15% difference of the homeowner loan will have an HLC added to it.
This can vary between 4% and 8% with the 8% levy being added to the 95% LTV loans for which you only need a 5% deposit to access the offer. This can be added to your mortgage, or you could get the option to pay it as a one-off fee.
There are lenders who insist on not charging Higher Lending Charges so it’s definitely worth investigating before entering into a mortgage for a first time buyer.
As you can imagine, it’s imperative that you get expert advice for first-time mortgage products because written into the small print could be figures that cost you thousands extra.
In addition to the HLC and arrangement fees, there are also the valuation report costs to account for in addition to any optional surveys you want done.
Some of those are listed here:
Property Survey costs for First Time Buyer Mortgages
This is required by all lenders. The lender will arrange it but sometimes (not always) you’ll pay for it. Typical costs are from £200 to £400. The intent of this report is to verify that the property is worth the amount of money you’re asking the lender to secure against it.
It’s important to note that the loan to value ratios is based on the properties valuation price and not the guide price the home is on sale for. For that reason, you could find that you’re asking to secure a mortgage for £125,000 for a home that’s valued at £115,000. In the case of valuations coming back as under the asking price, the lender will use the value of the property to determine how much they’re prepared to loan you.
Other types of surveys (not always mandatory but optional)
This is the cheapest option and it’s most suitable for homes that appear to be in good condition and also for newer-build properties. The cost for this is around £250 but it’s only a guidance report and does not include any advice for buyers or take into account the value of the property.
RICS Reports (Royal Institution of Chartered Surveyors)
This type of report will survey the visible aspects of the property. Some providers may include a valuation, while others will only provide guidance on notable repairs that could be done to improve the property.
Where this could prove valuable is with older properties that may have underlying issues such as rising damp. The cost for this is around £400, and whilst it won’t always give a valuation, even if it doesn’t, when it does indicate that home improvements are required, as a buyer, the report can be used to negotiate pricing based on the cost of remedial work identified by the surveyor.
This is carried out similar to a structural survey but uses a point based system to address issues. Based on the points addressed in the Home Condition Survey, there’ll be advice sheets provided to advise you on how to deal with the issues identified. The cost for this is around £500.
This is the most comprehensive report available. It’s something worth considering if you’re planning to buy an older property that could have issues that aren’t visible. The surveyor won’t be looking under floorboards or the likes, but they will give a detailed inspection looking for clues of possible issues that could rise in the future.
The cost of this can vary between £600 and £1,200.
The only mandatory report required by lenders will be the valuation report. Should you choose to have any additional surveys carried out to ensure you know what you’re buying and to protect you from unwanted surprises, you will need to factor the additional survey costs into your budget.
Should you have optional surveys carried out that reveal a different valuation to the lender, you can use that to dispute the lenders valuation report if it works out in your favour by revealing the value of the property to be higher than the mortgage lender deemed it to be.
Legal fees for a Conveyancer Solicitor
The legal fees vary by solicitor as some will work for a flat-fee while others charge based on a percentage of the property price.
There are mortgage lenders around that do include legal fees as part of their arrangement fee, however for first time mortgages, this will usually be an additional cost you’ll need to factor in as it’s not as straightforward as a remortgage for a home owner loan already approved. You will have your name or in the case of joint mortgages, both names to be added to the properties Title Deeds, and for those details to be registered with the Land Registry (England and Wales) for which there are additional fees again.
First time buyer mortgages are complex and best approached with expert advice and it’s an area Jubilee excel in.
We understand the mortgage market, all the fees applicable to every offer by all lenders and take into account the total upfront costs, comparing against the long-term financial costs that represent your true cost of homeownership.
For truly impartial advice on what deal’s going to cost what, and to figure out what’s best for your situation, contact us.
Help-To-Buy May Be Available
Throughout the UK there are government Help-to-Buy schemes in place. The main government scheme operating just now is the Help-to-Buy scheme, which is essentially a type of shared ownership mortgage option.
There are three stages to a Help-to-Buy mortgage:
You pay a 5% deposit of the total amount you’re borrowing
The government will provide a further 20% funding
The lender only needs to provide a lower 75% Loan of the property value
In the case of the 3rd aspect, this is of relevance to the Higher Lending Charge because the lenders, who do add this to their higher LTV offers, won’t need to because of the additional funding from the Help-to-Buy scheme.
For the 20% that the government pay towards your mortgage, you only pay £1 per month for six years. That’s an administration charge. After the six years, there’s then a 1.75% interest charge payable on the remaining 20% of the home loan that government financed.
After the six-year term when the 1.75% interest becomes due on the 20% additional funding made available, it could work out more favourable to remortgage your home for a higher amount to pay off the 20% funding provided by the government.
To be eligible for the Help-to-Buy scheme, the property you mortgage must be your sole residence so this isn’t an option for purchasing a second home.
About the Right-to-Buy Scheme
The Right-to-Buy scheme is another type of Help-To-Buy government initiative that can help you get onto the property ladder. In some areas it’s ending, and in Scotland it’s already finished.
Social Housing Tenants who have lived in their home or in the same local council borough for more than three years may be eligible for a discount when buying the home from the council or the housing association. The discount available is based on the number of years you’ve been living in the property or the borough.
The discount rates do vary, however, for Wales the scheme will end in 2019 just as it already has in Scotland.
Mortgages for Self-employed Contractors
Self-employed contractors will have difficulty obtaining a home owner loan of any sort from traditional lenders due to the trading complexities. Lenders will take into account how you are trading, such as trading as a sole trader, through a Limited Partnership, or Limited Liability Company.
Regardless your situation, Jubilee will be able to advise on what we can and can't do for you based on our knowledge of the wide selection of partners we work with.
Some things to consider that affect Contractor Mortgages include:
In terms of trading history, the majority of lenders Jubilee work with will offer a Contractor Mortgage based on 12-month trading history. Should you only have six-months, the selection of lenders will be narrower but it is still possible as there are other considerations that can more than make up for a lack of the additional six months.
The most likely scenario though is the LTV ratio will be restricted to under 80% so expect at least a 20% deposit requirement.
Professional Contractor Mortgages, for instance in the finance field, legal and medical profession (although the word professional can include tradespersons with some lenders) can also take into account daily rates, and your service history when making a lending decision on whether to approve or decline a mortgage agreement in principle.
For the majority of lenders offering Contractor Mortgages, the type of mortgage available is narrower. Many will only approve on a Repayment Mortgage, so if you're after an Interest-Only mortgage, you may find it difficult to find a lender offering that type of finance.
About Zero Hour Contract Mortgages
Contractor Mortgages don't necessarily just apply to Contractors. In certain situations where employees are on zero hour contracts, this type of lending can be applicable provided you can prove a consistent earnings history for 12-months minimum – a Contractor Mortgage may be more beneficial even though you’re technically not self-employed, but you can prove a track record of consistent earnings.
Jubilee have assisted on many residential mortgage products often encompassing some challenging issues, so whatever you feel to be an obstacle, we’ll be able to advise on the best course of action and type of mortgage product most suited to your situation.
Are you approaching the end of a fixed-term deal?
Remortgaging is often the way to go to lock in a better rate and keep your monthly payments down, while continuing to repay on the capital of your home loan.
It's not always your best move though, and we do advise that this is done with professional advice because it can be costly. Especially if you remortgage before your existing mortgage deal expires due to cancellation costs that your current lender will insist on.
Making changes to high-level finance agreements isn't free. There are the arrangement fees to take into account, any applicable legal fees - even if the lender states they cover the legal fees because that's only going to cover the aspects that they need and not necessarily what you need done.
And if your existing mortgage isn't due to expire, early repayment fees can be as high as 5% so don't take the decision to remortgage lightly. We certainly don’t.
The majority of remortgage applications are straightforward with Jubilee, provided it's an end-of-term mortgage that's being refinanced. Should that not be the case, we can advise on the potential costs that would be involved and whether or not this would be your most suitable form of borrowing as it may be that a home equity loan or other sort of secured home loan would be more beneficial.
While we do specialise in the residential mortgage market, we are aware that remortgaging your home isn't always the best way forward. Whatever your situation, we can assure you that we will always act in your best interest.
A Further Advance May be More Beneficial to Remortgaging
Prior to considering a remortgage, a Further Advance is usually available from your existing lender. It’s a separate way to borrow using your home equity but it’s based as a second charge rather than a first charge. So it’s effectively a secured loan from the same lender you have your mortgage with.
This is often the way forward when you need to raise capital for unexpected home repair costs, home improvement, or for financing a second property. This may also be worth inquiring about if your property value has increased since you bought it, which will effectively mean you can borrow more, provided it’s within your means.
When you’re considering a remortgage, financial advice is imperative.
Jubilee Finance have a wide knowledge of the finance options available to home owners and can advise on which method of borrowing is best suited to your situation.
Second Home Mortgages / Second Home Homeowner Loans
A second home mortgage is not the same as a remortgage or second charge loan.
A standard residential mortgage product is suitable for financing your primary place of residence. When you're buying a second home, that's when this type of mortgage is applicable, but only when it's for your own use. Not for the purposes of renting the property out.
Should you be buying a second home with the intent to rent it to family, lenders will not take into account the potential income for stress testing because most lenders will not allow you to charge family members rent. This is due to tax implications and other issues that could arise.
Should you be intending to buy a second home for someone else to live in that you aren’t going to charge rent, you would need a second home mortgage. The difference to this type is that there's usually a minimum requirement of a 25% deposit. If you have an existing mortgage in place for your current main residence the interest rates will need to be considered for your affordability assessment as you must be able to satisfy the requirements of being able to afford the repayments on both home loans.
A second home mortgage is suitable for buying a second property that you'll live in and use part of the time. It’s for personal use only and not for commercial purposes such as renting the property for financial gain.
Professional mortgages are the same as any other type of residential mortgage with one distinct advantage. Favourable interest rates and more competitive terms may be made available to those in certain recognised professions.
What’s meant by the term Professional Mortgages, or Mortgages for Professionals is that the lender will look at the career and the progressive career paths available. As you progress through your career, your salary will rise and this can be taken into consideration by certain lenders offering this type of mortgage.
Careers that could be considered for a Professional Mortgage Product include:
Any career that follows a typical progressive career plan, where you rise up the ranks until you reach a senior position (with salary increases along the way) can be considered as a profession and therefore be indicative of salary increases and job stability, which can be reflected by better terms and interest rates on residential mortgage products. The idea behind a Professional Mortgage is that over the longevity of a 25-year mortgage (as an example) you’ll have had a few salary increases throughout the term of the mortgage period. Some lenders make these products available to graduates too so it’s definitely something to consider if you currently work in a profession or are just getting started within a recognised profession with a proven career path.
Jubilee Finance Offer Unrivalled Expert Assistance by Expert Residential Mortgage Brokers
Whatever situations you find yourself in, Jubilee Finance have the experience and the expertise to assist in advising and arranging any type of residential mortgage product.
Get in contact with us and we’ll do our utmost best to assist you in whatever way we can in a way that always works out in your favour.