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Should I Remortgage? – A Comprehensive Guide

What is a ‘remortgage’?

When you remortgage you are simply taking out a new mortgage on a property you already own – either to replace your existing mortgage, or to borrow money against your current property. You can remortgage by taking out a new deal with your existing lender or move to a new mortgage with a different lender. This is especially beneficial if your home has recently raised in value.  

Your mortgage is probably the biggest financial commitment you will make in your lifetime. A remortgage is as important a decision as when you first got your mortgage. There are lots of different mortgage options to choose from, and many willing  lenders on the market  with  competitive rates that change almost daily.  So, it’s vital you make the right choice to ensure you don’t end up paying more in the long term.  

If you think that taking out a remortgage is uncommon, don’t! Around a third of all home loans made in the UK are remortgages.  

5 reasons you should remortgage

1. My current mortgage term is coming to an end

Lots of lenders will  offer a fixed-rate mortgage for a set number of years – typically  2,3 or 5. After this, they’ll move you onto their Standard Variable Rate mortgage, which sometimes can be  twice as expensive on average. The move to the SVR mortgage will happen automatically so be prepared to switch, or you’ll be paying more money!

2. I want to reduce my monthly mortgage payments 

You may be looking for a cheaper mortgage deal to reduce your monthly out goings. Finding a better mortgage deal with better rates, even if you have to pay fees to exit your current deal, could ultimately save you money in the long run. But make sure you take financial advice from a broker. 

Many people when making an initial house purchase, especially if they have adverse credit, are a first-time buyer and/or had a low income, may have taken a mortgage deal relative to their circumstances at the time. When your circumstances improve, you may be able to access to a better mortgage deal. If you improve your credit score, you will be able to access a better mortgage rate. 

3. I want to increase my borrowing to free up cash for a major expense 

Remortgaging might enable you to raise money with lower rates than other forms of borrowing, for example an unsecured loan.

Also, as a remortgage is secured against your property it will be easier to raise money than other forms of borrowing if you have a lower credit score. 

You can remortgage to release equity in your property and receive a  sum of cash. You can then use this money for other purposes; common reasons are: 

  • Include home improvements
  • Property development
  • Pay for a large event, such as a holiday or a wedding
  • Gift money to family or friends
  • Consolidating other debts
  • Pay off a new car purchase
  • Help pay for costs associated with inheritance
  • Resolve payments resulting from Divorce and Separation

Borrowing more money will increase your debt and monthly repayments so check your affordability before proceeding with a remortgage. 

4. My house value has increased

If the value of the property has risen rapidly since you took out your mortgage, which is common with the current house market boom, you may find you’re in a lower loan-to-value band, and therefore eligible for much lower rates.  

You can check the current value of your home by using free tools such as Zoopla 

5. I want to pay my mortgage off quicker

Remortgaging is an excellent way of getting your current deal to match your circumstances. If you have more disposable income then when you initially took out your mortgage, you may decide to reduce the mortgage term and pay it off quicker. 

Alternatively, you may require a flexible mortgage that allows you to overpay each month. However, not all mortgages allow you to do this; lenders want you as a customer for as long as possible so blocking over payments is an efficient way of doing that. A remortgage customer is a desirable customer type, especially to a new lender, so it’s your chance to negotiate and get terms that suit you. 

5 tips for remortgaging your property 

1. Don’t remortgage with your existing lender without researching the market 

You may be tempted to accept a new deal from your existing lender. However, the mortgage market is incredibly competitive and it could be that you find a more suitable deal for you by searching through a wider selection of lenders. Furthermore, if you instruct a mortgage broker they get access to exclusive deals that are not accessible by the general public, and they will find the best deal based on your situation.

2. Seek professional advice 

You can search the market and hopefully find the perfect deal yourself, but taking advice from a broker will really make all the difference. If you do instruct a mortgage broker make sure you find an independent broker who will put your needs and circumstances first, and will offer tailored advice. Whilst brokers do charge a fee, they may save you money in the long run (and not to mention do all the hard work for you). However, any broker worth working with will happily offer a free consultation and offer some advice for free with no obligation.   

3. Don’t ignore the fees involved with remortgaging 

When you remortgage there will likely be a number of fees involved. Don’t just look at the rate or repayments when comparing deals, look at the overall cost of the mortgage. Fees you should keep an eye out for are Early Repayment Charges, Exit Fees, Legal Fees and Valuation Fees. A decent mortgage broker will explain all of these options to you. 

4. Don’t leave it too late 

If you’re on a fixed term mortgage arrangement, it’s important that you secure a new mortgage deal before your existing one comes to an end. Otherwise, your current lender could move you to the standard variable rate which could cost you money.  

Ideally, you should start considering your remortgage options 3-6 months before your deal comes to an end. If you secured your original mortgage through a mortgage broker, they should contact you to remind you with plenty of time to spare.

5. Consider changes in your personal circumstances

When you start to plan for your remortgage, it’s vital that you consider whether any of your personal circumstances have changed since you last secured a mortgage. For example, has the amount you get paid each month changed? Have you had a child? Have you paid off a loan? Taking all of this into consideration will help ensure you can afford to keep up with your future monthly mortgage payments. 

If you do work with a mortgage broker on your remortgage, they will go through every scenario with you and look through all your personal circumstances, including your credit score, and really find a deal that perfectly reflects your current situation. They will also advise you on ways you can improve your mortgage deal in the future, for example giving you advice on improving your credit score. 

Remortgaging with poor or bad credit 

While many lenders will not be forthcoming with offers for remortgaging if you have a lower-than-average credit score, it doesn’t mean you won’t be able to get the loan you need. A Bad credit history is an issue for banks as this makes you: 

  • Seem a higher risk to lenders
  • More difficult to get loan approval
  • Additional work is required for bad credit remortgage offers

Although a bad credit history does make banks cautious, some financial institutions are willing to look past this. A low credit score   doesn’t always mean you can’t afford remortgage payments. Some lenders are able to consider these circumstances and still offer remortgaging services. 

Independent Mortgage  advisors will be able to point you in the right direction. They will know which banks specialise in remortgages for people with bad credit. 

What next? 

Review your paperwork – Remind yourself of your current mortgage deal. What type of mortgage are you on? What is the current interest rate? How long have you got left to pay? What are your monthly payments? 

Speak to a mortgage broker – Most mortgage advisors offer a free consultation. But make sure you use an independent broker. independent brokers give you honest and tailored advice. A broker will search the whole of market for you and compare the rates for free.  

Make your mortgage application – A broker will do all the hard work for you here, or you can fill in the application to your desired lender and hope for the best. 

Get a conveyancing solicitor – If you remortgage with your current lender it’s considered a “product transfer” and requires no additional legal work. Otherwise, a remortgage will require you to have a solicitor or conveyancer, to help with the legal side of things. Ask for recommendations from a financial or mortgage advisor. 

How long will my remortgage take? 

There is no hard and fast rule here, but we advise between 18 – 45 days from application. This may be quicker if you instruct a broker as there will be less likely to be declined or encounter issues with the application.   

What are the barriers to remortgaging? 

Sometime remortgaging isnt plain sailing. You might find issues with your application if: 

  • You are in negative equity
  • There are issues with your credit rating, this can also affect your chances of a new mortgage. However you can improve your chances with a mortgage broker.
  • You’re self-employed you may struggle to remortgage if you can’t provide adequate evidence of your income and lenders will no longer allow you to self-certify. Again, a mortgage broker can improve your chances securing a mortgage if your’re self-employed.
  • Many of the bigger banks will lend into retirement but they will often have an upper age cap, with the majority asking for loans to be repaid before your 70th or 75th birthday. This means that if you’re aged 55 and over, you would have to pay the mortgage back in 20 years rather than the standard 25 years.
  • Lenders also sometimes demand higher salaries relative to loans and take into account your outgoings as well as your income when deciding to offer you a mortgage.

How Can Friends Capital help? 

Friends Capital are an independent and unbiased mortgage and loan specialists. We are experts in the field of financing residential property, buy-to-let mortgages, HMO’s and financing property development projects. We have access to the whole of the specialist finance market, and we also have access to exclusive deals with the leading, most established, and trusted lenders. 

Contact us for a free initial consultation, which enables you to chat to a mortgage expert, get an understanding of how much you can borrow with a no obligation quote.  

Two Steps to Contacting Friends Capital

Step 1

Either call usemail us or request a call back using our call back submission form.

Step 2

One of our friendly advisors will either call you back within 24 hours (usually the same working day), or will take details from you in order to best deal with your situation.

When you speak with us, we will take a ‘fact find’. At this stage we take basic details about your situation. We will then search the whole of the market and find you the best deal available.

If you are happy with the deal that we offer, we will then contact the lender for you and get you what is called a ‘decision in principal’.

If you’re happy with the decision in principal then we will secure this deal for you and deal with the application for you on your behalf.

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Bridging Loans Explained

Jump to section 

What can I use a Bridging Loan for?

Is a Bridging Loan a good idea?

How do Bridging Loans work?

How much is a Bridging Loan in the UK?

How long will it take?

How do I pay back the loan?

How much can I borrow?

What type of security can my bridging loan be secured against?

Can you get a Bridging Loan with bad credit?

 

What is a Bridging Loan?

A bridging loan (or ‘bridge loan’) is a loan which allows you to borrow money for a short period, usually up to one year. It can help to ‘bridge the gap’ to secure funding to buy a new property quickly. For example, bridging loans can help homeowners purchase a new home while they wait for their current one to sell. In this situation, your existing home will be used as collateral.

What can I use a Bridging Loan for?

A bridging loan is useful if you are:

  • Searching for short-term financing if you are buying property at an auction
  • Paying for renovations before resale or acquiring land for development
  • If you have found a new house without selling your current one, a bridging loan can cover you so you get the new home you want.
  • In a chain of homeowners looking to purchase new homes and a buyer pulls out, a bridging loan can close the loop so the sales go ahead
  • Purchasing a new business with a shortfall in funding
  • A business owner looking for working capital
  • Receiving a large tax bills
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Is a Bridging Loan a good idea?

It’s a fantastic option for short-term periods where quick and easy finance is required. However, bridging loans aren’t designed to be a long-term solution, and so aren’t a good idea for when you need finance for over two years. The benefits of a Bridging Loan are:

  • Funds are available very quickly
  • Interest rolled-up and paid on completion
  • Lenders are more open-minded about borrowers with bad credit histories
  • There are no exit fees for early repayment
  • Avoid wait times due to property chains
  • No repayments to make during the loan

How do Bridging Loans work?

Bridging loans are different to re-mortgages as they are not dependent on income, but are backed by the value of the property you own and/or looking to buy.  Typically interest rates are higher than other loans & mortgages as the interest is charged monthly, however these do not have to be paid until the end of the term when the borrower has secured permanent financing.

There are two types of bridging loan: ‘closed’ and ‘open’.

Closed Bridging Loans – With a closed loan, there is a fixed repayment date – you will normally be given this kind of loan if you have exchanged contracts but are waiting for your property sale to complete.

Open Bridging Loans – With an open loan, there is no fixed repayment date, but you will normally be expected to pay it off within one year.

Whichever kind of loan you take out, the lender will want to see evidence of a clear repayment strategy, such as using equity from a property sale or taking out a mortgage. They will also want to see evidence of the new property you are purchasing and the price you plan to pay for it, as well as proof of what you are doing to sell your current property if relevant.

How much is a Bridging Loan in the UK?

Bridging loans are priced monthly instead of annually because they are designed to be taken out for short periods only. Like all loans, some bridging loans can be expensive, and others are more reasonable. Fees are usually between 0.5% and 2% per month, which makes them more costly than a long-term loan like a mortgage.

There are also set-up fees, which is around 2% of your desired loan amount. Experts recommend bridging loans if you are confident that you will only need the money for a short amount of time.  

Many factors affect the kind of bridging loan rates you could get from a lender. If you want to take out a bridging loan for a house purchase, the lender will calculate the loan based on the value of the property you currently own and/or are looking to buy. Lenders of bridging loans will give an amount based on the maximum loan to value (LTV) amount, which is a maximum of 75%.

How long will it take?

Funds can be raised much quicker than a typical Mortgage application , typically between 3-4 weeks though  Friends Capital have raised  funds  quicker than this . Depending on your property`s valuation and the amount required it may not be necessary to wait for a physical valuation or to go through a complicated legal process. It’s possible to have your bridging loan within a week, however this is all depending on your personal circumstances. We will give clear expectations when you contact us.

How do I pay back the loan?

You pay back your bridging loan at the end of a set term, usually when you sell your house and typically within 12 months. Interest is calculated monthly, but you will need to show that you have a way to pay back the bridging loan at the end of the term. This may be when you sell your old home or by refinancing with a traditional mortgage.

If the bridging loan is for property development, with the intention of adding value to properties, the loan can be repaid when the house sells, or the loan can be repaid by arranging a buy-to-let mortgage.

How much can I borrow?

You can borrow up to £10 million with Friend’s Capital, but the amount you can borrow is calculated against the property’s value or properties if you have several properties. The calculation of how much you can borrow is called the loan to value. Friends Capital will provide a quote based on the LTV, which can be up to 75% of the property’s value or properties.

Friends Capital are mortgage and loan specialists. We are one of the UK’s leading brokers, with over 30 years of experience. Friends Capital work with all of the UK’s top financial institutions, bringing you the very best the market has to offer. We’ll find the perfect solution for your needs, clearly explaining the pros and cons of different options.

What type of security can my bridging loan be secured against?

A bridging loan can be secured on residential property, commercial property, building plots and land.

Can you get a Bridging Loan with bad credit?

Yes, you can get a bridge loan with a sub-par credit score. Another option in the case of bad credit is a non-status loan. A non-status loan doesn’t take into account the credentials of the borrower. Instead, they see the value in being involved in the overall purpose of the loan. Lenders use non-status loans to provide funding to developers. Non-status loans are much less common, and only specific lenders are willing to give them. They are suitable for when funds need to be released very quickly.

In the instance of non-status loan, the lender will consider the GDV (Gross Development Value) of the project in question instead of the credit, assets or cash flow of the borrower. GDV is a formula which provides a way to assess the financial value of a property development project. It takes into account a developer’s potential profit and the overall viability of a project. 

Apply for a Bridging Loan today

Property Development – How to Maximise Your Profit

Established property developers and letting agents, or anyone searching for a property development opportunity, need to focus on generating the highest return on investment from their projects. Now is an ideal time to start a property development project as you can make significant savings like never before, and here’s how.

1. Find Property Development Opportunities at Property Auctions

The benefits of buying property from an auction are huge. It’s possible to sweep up property below its open market value. There is also no larger marketplace of properties which can be renovated or converted for profit. There’s also no quicker way to find property development opportunities than at an auction, as the completion date fixed at 28 days from when the gavel drops.

It’s also important to carry out research before attending a property auction. Legal packs are available online prior to the auction. These packs include documentation gathered by the auction house and the seller’s solicitor. The packs include title deeds, relevant searches, planning permission, and tenant leases. There is no cost for viewing these documents, and it could save you buying a property with massive structural issues.

2. Stamp Duty Holiday Deadline

If you purchase property for £450,000, you would pay £13,500 in stamp duty charges. In contrast, you could now buy a property worth £463,500 without paying anything extra. The are no plans to extend the stamp duty holiday past the end of June. If you are searching for a property development opportunity, you will need to purchase your property before June 30th. You can check if any stamp duty is due by using this stamp duty calculator.

It’s also worth exploring a Bridging Loan, as these can be used to raise finance quickly. You can purchase property quickly and not have to wait for the mortgage lender and solicitors to complete. You can purchase the property in cash with a Bridging Loan, and guarantee that you make the savings.

3. Reduce Interest Rates

It’s always best to source finance that avoids high interest rates if possible. For those property developers that do buy with a mortgage or loan product, aim to get the house completed ASAP and sold on to fund your next project. Once you have raised finance, you can become a landlord to help offset the costs of future development projects.

Mortgages are often the best, low-interest source of funding for property development, however if you have a bad credit rating, it might not be an option. However, we can support property developers with most credit histories.

4. Seek Professional Advice

You may feel you have all the information you need for your property development project, and don’t need expert advice. Paying for professional financial advice may seem like an initial unnecessary cost. However, speaking with an independent mortgage advisor will help you find the best rates when raising finance and will give you access to most exclusive rates on the market. You are likely to save money in the long run and save time as the professionals will be doing all the work for you. Having a professional advisor supporting your project will give you peace of mind and they will offer invaluable advice which may make the process simpler and easier.

Friends Capital are independent and unbiased mortgage and loan specialists. We are experts in the field of financing property development, buy-to-let mortgages, HMO’s and funding residential renovation projects. We have access to the whole of the specialist finance market, and we also have access to exclusive deals with the leading, most established, and trusted lenders. If you would like to discuss your situation with us and discuss your property development project, you can email us at info@friendscapital.co.uk or call us on 0800 862 0811

How long does it take to get a bridging loan?

If you are looking for a bridging loan, then one of your concerns or questions will likely be about how long it takes to get a bridge loan.

Generally, from start to finish, the whole process can take a couple of weeks. However, it depends on the organisation of the broker, lender, and borrower.

The most convenient approach to attaining a bridging loan without delays is to fill out our application form and wait for a member of our team to call you back, which we are passionate about doing the same day. 

However, if you are looking to accelerate the process, you can follow these three steps:

  • Plan ahead: You should organise what you need for the application, put together your repayment plan, and prepare copies of documents such as …. (Awaiting info from client). We recommend scanning and emailing these rather than posting them, as this again cuts the time down by several days. It also saves on the costs of first class postage and tracking. You can complete this step over the weekend when most brokers will be closed.
  • Get in touch: You can email us all the information you have gathered and then call us up as soon as it has been sent to speak with one of our unbiased financial advisors. The financial advisor will ask a few questions to validate the information you have provided and offer the right product and solution. If you do this on Monday, you will improve your chances of approval in the same week.
  • Exercise patience: We appreciate that you are excited and impatient about getting your finance in place. However, you can sit back and relax for a while why we get everything in place and arrange the transfer of funds. With COVID affecting lenders and solicitors and with heightened demand for bridging loans, the process currently takes 2-3 weeks, from start to completion.

Preparing your repayment plan

Also known as your exit strategy, the repayment plan should state how you intend to repay the loan at the end of the agreed term. Your exit strategy might include:

  • Selling a property, you own.
  • Receiving an inheritance.
  • Refinancing the bridge loan with a regular mortgage.

If your repayment plan is to sell a property, the lender will want to arrange a valuation to ensure there is enough equity (money left over after repayment of any outstanding mortgage) to repay the bridging loan. If a remortgage is the intended exit strategy, then a decision in principle will be required as evidence that you can obtain the remortgaging finance.

Preparing to speak with our financial advisors

If the financial advisor determines that a bridging loan is the right solution, they will contact you to take brief details of the property involved, how much you intend to borrow, and what your exit strategy is. We will then approach the best lender to get a decision in principle on your behalf.

What about bad credit bridging loans?

Friends Capital helps clients find homeowner loans with bad credit. Homeowner loans with poor credit are not impossible to get approved because a bridging loan is offered based on the equity in the property or asset.

What about the stamp duty holiday deadline?

The stamp duty holiday is ending on the 31st March 2021. The government has confirmed that there will not be a stamp duty extension. There should still be time to arrange a bridging loan before the deadline, but you should not delay getting the process started.

If you follow our tips for accelerating the bridging loan process, you will acquire your funds in the quickest time frame. Please contact Friends Capital to further assistance.

Bridging Loan Application Form

How long does a mortgage application take

The length of time for a mortgage application to be approved is lengthening. The longer timescale is creating application anxiety for many eager homebuyers. Here we take a look at why the mortgage application process is lengthening, how long it will take, and what you can do to have your mortgage complete sooner. 

Why mortgages are taking so long to complete

The first reason that mortgages are taking longer to complete is that lenders are much more cautious in light of the COVID-19 epidemic and economic uncertainty. A more cautious approach with more stringent checks means that lenders take a lot longer to approve cases. Also, solicitors are working from home, and this is slowing their part of the process. 

A second reason for longer mortgage completions is strong demand due to the stamp duty holiday. The holiday means that stamp duty land tax (SDLT) is charged on properties over £500,000 instead of the usual £300,000. The stamp duty holiday deadline is 31st March 2021, and the government has ruled out a stamp duty extension.

How long did mortgages take to complete before COVID / how long do they normally take?

Property purchases used to take about 2-4 months, and remortgages used to take about 6 weeks from start to finish. Property searches used to take 2-3 weeks.

So how long will they actually take?

A property purchase takes anything from 3 months to 12 months, depending on the chain and choice of the lender and solicitor. A remortgage takes about 3 – 6 months now, and property searches are taking about 6 weeks.

How to get a mortgage completed quickly / sooner

Good planning and preparation will ensure your mortgage completes quickly. You can check your credit file beforehand and send Friends Capital a copy to ensure no time is wasted placing the case with the correct lender. You should ensure all correct documentation is ready to hand and chase your solicitor to keep the case moving.

Bridging loans

If you are anxious to move into your new home or meet the extended stamp duty holiday deadline, then a bridge loan may be the solution you need. A bridging loan provides short term finance so that you can move quickly. You can then refinance this loan with a mortgage after you have moved.

Bad credit bridging loans are also available. You can discuss homeowner loans with bad credit with the experts at Friends Capital. We have established strong relationships with lenders who specialise in home owner loans with poor credit, helping you get the finance you need.

Apply for a bridging loan today

Moving house with bad credit: homeowner loans

First-time buyers need a good credit rating when they get their first mortgage. However, for any number of reasons, homeowners can find themselves in a situation where they would like to move, but they or a partner has a bad credit rating.

Moving house with bad credit depends mainly on the current financial situation. A bridge loan is ideal for most as they are not dependent on credit rating or income, just the equity in the property and the property’s value to be sold.

Here are a few tips to help readers move with bad credit:

  1. Eliminate any unnecessary finances: Even those you think you can’t get out of (like your phone contract or car finance). Contact the lender and explain the situation and see what they are prepared to do.
  2. Get better deals on essential bills: Energy, insurance, internet etc. There are many apps out there that can help you, set a day aside and go through them starting with the most expensive.
  3. Improve your credit rating: Get a credit builder card, register to vote and stop applying for credit cards and loans! Hard credit searches affect your credit rating.
  4. Stabilise your income. This is often harder for those who are self employed or are subject to seasonal business, however having regular financial commitments can help. Consider having customers and/or clients pay monthly as opposed to one lump sum.

Once you have done what you can with your recurrent finances, the only thing you have left to do is lower your mortgage payments.

You could sell up & repay debts. However, with income issues and poor credit rating, the likelihood of getting a new mortgage would be unlikely for what could be years. This would mean that you would have to rent, which could be a challenge with a bad credit rating, making the remaining value from the sale of the property redundant. 

Alternatively, you could look into downsizing. The benefits of downsizing include lowering your mortgage payments while keeping as much equity in the house as possible. Bridging loans can be a good option. 

How bad credit bridging loans can help move

Getting homeowner loans with bad credit might be easier than you think because they are only dependent on equity. Homeowner loans with poor credit are:

  • Not dependant on income
  • Not dependant on credit rating

A bridging loan can help you:

  • Move immediately and instantly lower your bills
  • Sell out of a chain 

Selling out of chain offers many advantages and puts you in the driving seat. Your bridging loan is likely to be paid off sooner because selling your existing home out of the property chain is quick, and your old home is more desirable for buyers who also want to move quickly.

Please always speak to an unbiased mortgage advisor. Contact Friends Capital to learn more about our bridging loans for people with poor or bad credit.

Equity Release Options: Bridging loans vs remortgaging

A bridge loan or remortgage is a secured homeowner loan that allows you to release equity in a property. These types of mortgages allow you to borrow more money using the property you own as collateral.

You can remortgage to release equity or take out a bridging loan to purchase and develop a property to increase your income. Landlords and property developers can use bridging loans to turn properties around faster.

Bridging Loans

For homeowners, bridge loans are a fast way to attain short-term finance for several purposes, and they are even available if you have an outstanding mortgage. You can use them to bridge the gap between buying a new home and selling your old one if you are stuck in a property chain or have yet to find a buyer. You can use this short term loan to buy a property while you are arranging a long-term mortgage. You can borrow a large amount and also use bridging finance to renovate your home and increase the property value.

Property development also falls under the scope of this form of finance. You can use the loan for adding value to properties, but the funds can be used for other purposes such as generating an income, planning to downsize, moving quickly, or wish to buy any type of building or land. 

  • Closed bridging loans have a set repayment date, cheaper bridging loan rates, and more likely approval. However, there are large penalties if repayment terms are not met.
  • Open bridging loans are ideal when you do not know the exact date you can repay the loan. With no set repayment date, they are great for covering legal hold-ups. However, they are more expensive because of the increased risk to the lender.

A bridging loan can be arranged for one day to eighteen months and typically have no monthly payments. They also do not have the upper age restrictions you encounter when looking to remortgage.

Remortgaging

If you still have an income, you can remortgage and take advantage of lower interest rates. Remortgaging is better financially but takes a long time for loan approval, and repayment terms are usually set for five years or more. If remortgaging will not meet your needs, then maybe it is time to consider a bridging loan.

Contact us to learn more about the best options to suit your current situation from our unbiased financial advisors.

How to release equity on a mortgaged property with bridging loans

If you have equity in your property, you know that there is cash locked away. If you could access this equity, it could be handy. You could add an extension to your home, make renovations to increase its value ready for selling on the property market or put down a deposit on another property.

If you have an outstanding mortgage, you probably don’t want to remortgage and pay interest on the cash for the next ten or fifteen years. So, what is the solution? 

Solution: A Second charge bridging loan

It is possible to get bridging loans as long as you have enough equity in the property to fund the proposed development.

There are pros and cons to second charge loans, so it makes sense to review these before deciding if these home owner loans are right for you.

Pros: 

  • Access to larger amounts of money (25k – 5 million)
  • Quick access to funds / quicker completion
  • Paid off quickly
  • More freedom to spend how you choose
  • Low income / poor credit rating considered

Cons:

  • Higher interest rates
  • 12-month deadline

Staying in your home or selling your home?

Bridging loans are usually structured in two different ways. One works best if you are staying in your home, and the other will work for you if you are developing your home with the intention to sell.

If you are staying in your home, your bridging loan is arranged for the amount you need, and you pay this back over 12 months. This means that you clear the loan quickly and pay interest on it for the shortest amount of time, without affecting your existing mortgage.

If you intend to sell your home, your bridging loan can clear your original mortgage, provide the cash you need to develop the property and wrap these up in one loan.

For example, you own a house worth £250,000, and you have paid off £50,000, leaving you £200,000 left on the mortgage. You borrow £250,000, pay off the mortgage and use the remaining £50,000 for the property development. The bridging loan is then repaid with the sale of the property. 

Secured loans are also available to solve problems such as moving home before selling your existing home and purchasing a second home.

Second charge bridging loans with Friends Capital 

You can apply for a bridging loan with Friends Capital. We have the best rates and will help you find the right solution for you.

How to sell a house quickly (and get the best price!)

Selling your home is one of life’s greatest challenges. Some people have the luxury of time, while others want or need to sell their home quickly. Depending on the circumstances for selling the house, it can be stressful and overwhelming. Taking the right approach can make a huge difference and help you sell a house quickly. 

Reasons for Selling a House Quickly

The main reasons why you may need or want to sell your home quickly, are:

  • Buying a new house: If you have found a new home, it’s essential to move quickly, so you don’t lose out.
  • Bad financial situation: You might find yourself in a poor financial situation. If you’re unable to make mortgage payments, then the lending company may start the repossession process. You want to avoid this if you can because you will be liable for court costs and expenses, and a forced sale may not clear your debt. Furthermore, failure to make mortgage payments may damage your credit rating, making it difficult to borrow in the future. 
  • Better catchment area: Giving your children the best start in life is vital, and many parents move home to access better schools or shorten their existing school-run and get their child access to a better quality school.
  • New job/relocation: If you’re moving because you have a new job or want to live in a different area, then not selling your home or getting stuck in a property chain could cause you to lose out or leave you paying two mortgages.
  • Problematic tenants: You may be a buy-to-let landlord who has had enough of the stress and hassle of letting.
  • Retirement/downsizing: You may be looking to move somewhere warmer to make the most out of your retirement and enjoy the freedom that freeing up cash will give. Alternatively, once your children have flown the nest, you can release capital and spend it on other interests.
  • Inheritance: This can cause a financial strain with the costs of the property’s upkeep. If other family members have inherited the house with you, then selling quickly will put a halt to arguments you may be having.
  • Make the most of the season: If Christmas or the summer holidays are upcoming, then you probably want to get into your new home as quickly as possible.
  • Divorce: If you are separating, then selling your home will allow you to move on with your life.

Tips for Selling a House Quickly

Preparation can make all the difference and create the best conditions to sell a house quickly:

Choose the Best Time to Sell

Spring and autumn are ideal times to sell. Sunshine floods your home with light, and flowers are in bloom. Spring is popular with the end of the school year, while in autumn, buyers are keen to complete before Christmas. School holidays can stall property chains in the summer, and winter is difficult with bad weather.

Adjust the Advertised Price

When searching for houses online, users will often set their maximum budget meaning that if your house is listed as offers in excess of, it’s still not in budget. If your house falls directly on a bracket (ends in a multiple of 10,000) Try lowering or raising the advertised price by £1000 or so and change the listing to offers in region of. 

Get Planning Permission

This is an excellent way of adding value to properties, showing the potential value in property development as the new owners can build extensions and/or additional buildings. 

Redecorate

You can paint walls with neutral colours, modernise your decor, and hang large mirrors to increase the illusion of space. Remember, when a potential buyer visits your home they trying to envision themselves and their belongings in that home. If your house is decorated with statement wall papers, garish colours and outdated decor, it may put off potential buyers. 

Clean and Declutter

Ensure toys and ornaments are packed away, along with bathroom products. Research has shown that removing family photos gives buyers a blank canvass, allowing them to imagine themselves in the house. You should also tackle any outstanding DIY and declutter your hallway by removing excess coats and jackets.

Low Maintenance Garden

Show how easy it is to maintain the grounds by cutting your grass and clearing weeds from between slabs. Ensure your fence is in good repair, and pack away empty plant pots.

Scent

Ensure your home smells nice or bake bread to create a homely aroma.

Children and pets

If you have noisy children or pets, consider a babysitter or pet sitter.

How to Maximum Property Value

  • You could sell a house to a company that buys houses, however they often offer you a lot lower than the asking price. It could be ideal when moving for a new job, where your income may be higher, or for this in bad financial situations that need to get out of their mortgage. 
  • You could consider letting out your current house instead of selling it, and while that could be another great money earner, it doesn’t free up funds for your next home. 
  • If you are in a position where you can move before you sell your house, a bridging loan is the best solutions. Bridging loans are short-term, secured financing solutions that allows you to purchase a new home while waiting for your property chain to complete. They are also great for avoiding chain break, meaning that you don’t loose the house you want when you loose a buyer. 

If you would like to discuss your situation with us and discuss selling a house quickly, you can email us at info@friendscapital.co.uk or call us on 0800 862 0811

Contact Us

 

 

How to add value to your property

People do up their homes for various reasons, such as making them more attractive or repairing damage caused by wear and tear. However, adding value to the property is the number one motive. This motive is often fuelled by the desire to sell, now or in the future, to make a profit, whether the intention is to downsize, fund a new home, or develop a property.

Whatever the reason, you will only add value to your property if the money spent on the house is lower than the property’s ceiling value. Just because you spend £20,000 on a property doesn’t mean you will make a profit or even get it back. Most areas have a ceiling or guide price that you should check out before you make a decision. Click here to check the value of other properties in your area and speak to a financial advisor.

Investing in Property Value 

large changes to a house hold can increase the value of a property significantly, as long as it is still reasonable for the area. Here are a few of the top large investment ideas.

  • Basement Conversion: If your house has a basement that is not yet converted into a living space, get yourself a quote asap! Basement conversions on average increase property value by around 30%. While it may be possible to add a basement to an existing property, the complications of doing this can cause the cost to be very high and take a long time, meaning this may not be a profitable move.
  • Loft Conversions: If you can’t go down, try going up! Loft conversions are very popular these days as they can add an extra bedroom and even a bathroom to the house. Once you have been able to get planning permission that is. This is ideal if you have the space for a new stair case. If you have a flat roof, consider converting to a pitched roof!
    Garage Conversion: The garage space its self can easily be converted into an additional room, simply by converting the garage door into a brick wall with a window. You can also add a front door and ensuite bathroom to create a studio apartment, creating a perfect care home for elderly or unwell family members looking to retain their independence.
  • Barn Conversion: Barn conversions are a great way to add value, especially if they can be rented out. Not only do you have the benefit of profit when selling, but also throughout the year.
  • Layout changes: Sometimes properties are built with unusual layouts that do not fit with the way we live our lives. This doesn’t just mean adding bathrooms and moving kitchens, but also  building and knocking down walls, moving windows and doors, even stair cases if necessary!
  • Porches & Conservatories: Porches are a great little addition to any house, it creates a space where family members and guests can remove outdoor shoes and clothing, limiting the mess inside the house. Conservatories not also serve the same purpose as the porch, but also make great play rooms, offices and relaxation/entertainment spaces. Just make sure you invest in underground heating and a solid roof to help with temperature control.
  • Extensions: Many detached or semi detached houses have an entry way to the garden round the side of the house. Extending the house into this area will most certainly add value, whether it is for a garage/utility room, bedroom, apartment or simply to expand the size of existing rooms. You may even prefer an extension at the back of the property!
  • Landscaping: There are 2 ways you can use landscaping to add value to a house, the first option is to keep things simple, level ground with grass or slabs. The second way is to turn your garden into a paradise, add a pond plant beautiful trees and flowers, maybe even an outdoor kitchen or summer house!

Smaller Changes

If you don’t have the time and money to invest in your property, smaller changes can add value to make your home more appealing to potential buyers, and help ensure your property chain is motivated to reach completion. 

  • New windows & doors
  • New boiler & gas safety certificate
  • Electrical safety
  • Kitchen renovation
  • Bathroom renovation
  • Plastering
  • New flooring and carpets
  • Painting / Wall papering
  • Skirting & coving

While some of these must be completed by professionals, there are other ways you can increase the value of your property yourself without breaking the bank

Funding Recommendations

If you do not have sufficient savings to invest, you can consider financing improvements with a bridging loan. Bridging loans are large, short term secured loans that let you quickly release equity in your property to increase the overall value. Unlike a mortgage, there are no repayments until the property sells or the loan term ends. You can make the most of your bridging loan by making sure materials, planning permission, and contractors are in place, so work can begin and finish as soon as possible.

If you are ready to make a larger profit in a shorter time frame and move on to your next home, renovating is the key to selling quickly.

Friends Capital has access to lenders with the best bridging loan rates on the market today. Contact us to learn more or apply here.

Bridging Loan Application

A Simple Guide To Secured Loans

If you need money for any purpose, you may be considering a loan, and you will need to know the difference between an unsecured and secured loan. An unsecured loan is offered based on your credit score and circumstances, whereas an asset backs a secured loan with its financial value, making it easier to attain.

The financial asset could be a car or home, and the lender may use it to recoup the outstanding loan value if you fail to pay. This security gives lenders confidence to lend to you and motivates you to make your payments on time.

The benefits & drawbacks of secured loans

There are benefits and drawbacks to taking out a secured loan. Secured loans usually have a lower interest rate, and you can borrow a more considerable amount. However, your collateral is at risk, and approval usually takes longer compared to unsecured quick loans.

There are also different types of secured loans:

  • Vehicle loans – This type of loan is secured against a car, truck, boat, motorcycle, or lorry.
  • Bridging loans – These are short term loans lasting between 1 and 18 months. You can take out a bridging loan and use the money for any purpose. Interest is rolled into the loan, which means there are no payments until the loan’s end when the value and interest become due. At this point, you can either pay back the loan or refinance it.
  • Property development loans – These are similar to bridging loans, but they are for property developers. Developers use the funds to buy land, pay for renovation and building work, or free up working capital.

If a secured loan defaults, the lender may repossess your car, or you might lose your home or any other collateral you leveraged to attain the loan. The lender can put a lien on your asset, which is essentially a lender’s claim to the security. The loan company can take ownership and sell the property or vehicle to recover their losses. You may still end up owing money if the sale of the asset doesn’t cover the outstanding loan amount and interest.

Top 3 FAQs

  1. Are secured loans easier to get than unsecured loans? Yes, the security shows that you have the means to pay back the loan, even if you were to lose your income.
  2. Do secured loans affect your credit? If you default on the loan, you may end up with bad credit, and the default will remain on your credit report for up to seven years. If you get into financial trouble, make your lender your first call, who may be able to help by restructuring your payments.
  3. How can I get out of a secured loan? You can repay the loan or refinance the loan.

Friends Capital have access to the cheapest bridging loan rates available to any borrower on the market today. Contact us today to learn more about what we can do for you.

Options For When You Need A Short-Term Loan

For borrowers looking for short term loans, there are loads of great options. In this article, we are going to lay out the pros and cons of some of the most popular short-term loans, so that our readers can be as informed as possible. 

Payday Loans

Payday loans (also known as ‘quick cash’ or ‘quick loans’) are among some of the most accessible loans out there, often seen to be a good fit for people with bad credit who need money quickly. Some lenders even offer access to cash within 24 hours. Applications are quick and easy, either done over the phone or via an online form. The process can take minutes. The majority of loans, like mortgages or business loans, require extensive credit checks and personal information. Payday loan companies only need a few essential criteria to be fulfilled. These include having a stable income and a bank account. It is easy to see why quick and fast cash without many barriers would be attractive to borrowers. 

They also aren’t secured to a property, so if you’re unable to pay your house isn’t at risk. That doesn’t mean there aren’t huge risks. Payday companies are known for passing debts to collection agencies and taking debtors to court. Payday loans are highly expensive, with costs rising exponentially as the debt goes unpaid. It is by far the loan with the highest interest, two or three times higher than credit cards and personal loans. They don’t help you build a credit score, and are considered predatory due to their focus on people who are in desperate circumstances and can’t go anywhere else. 

Credit Cards

A credit card is a loan that gives you a line of credit of a pre-accredited amount, called a ‘credit limit’. When you spend that money, your bank or credit card company loans you that money to make a purchase. Credit cards involve monthly payments either for the whole debt, a partial amount or for a monthly minimum payment. Most card companies give users a grace period of 20 to 30 days before any interest is put on top of the amount they owe. 

With credit cards, you can buy now to pay later. You don’t have to set out a repayment schedule like with bridging and payday loans. The money is available, and you can organise how to pay it when it is convenient for you. Credit cards are flexible – you choose how much you repay. The minimum monthly repayment is often very low, between £5 and £25, so you don’t have to find the money right away or pay it off in one go at all. 

Credit card debt can build up gradually, making it dangerous for people with excessive spending habits. The cost of spending on a credit card and repaying it within a few months is often reasonable. However, when debt is left unpaid, debt can mount up quickly. Missing payments can significantly damage your credit score, affects your ability to make large purchases like buying a home.

We strongly recommend getting unbiased and free financial advice from sites like the moneyadviceservice.org.uk and moneysavingexperts.com or debt consolidation companies before going down either of these avenues so that you can learn more about sensible and responsible borrowing.

Bridging Loans

Bridging loans are different to the above lending options as they are large amounts secured against a property or asset.

Bridging loans act a bridge between when funds are needed and when funds are going to be released from an asset, most commonly a property. Individuals, property development companies, and corporations use bridge loans to provide funds on short-notice notice. Bridge loans can be small and large loans. 

Bridge loans are priced monthly instead of annually because they are designed to be taken out only for short periods. They have higher than usual interest rates because funding is easily and quickly accessible. Credit histories aren’t as relevant as, for example, mortgages because bridging loans are secured against an asset. 

Borrowers should be aware that they should have a clear repayment plan in place; this involves typically selling a property at a later date or remortgaging the house in question. Most bridging loans have predictable costs when there is an exact repayment schedule. 

We have access to lenders with the best bridging loan rates in the UK. Contact us to learn more or apply for a short term bridging loan here.

 

 

Who said 100% Mortgages were dead?

Not us…but yes there is a catch, well, sort of…

If you’re a first time buyer with parents (or grandparents ) that own their house with little or no mortgage and who are willing to lend a helping hand, then we could have the answer to getting on the property ladder.

 

Meet Beth and Luke. Head over heels and newlywed after falling in love in the workplace and moving into rented accommodation 2 years ago. Well it just so happens, they loved their little starter home and were distraught at the thought of moving out when they learned their landlord decided to sell.

Step forward equity rich parents who wanted to help out. Unfortunately however, they didn’t have the £24,000 cash deposit required (well they do like a night out, or did pre-Covid !) for the usual Mortgage application. 

We managed to obtain for them 100% of the purchase price as a mortgage as they had good jobs, incomes and credit ratings, and the parents were willing to use the equity in their property to guarantee part of the mortgage without having to hand over any cash.

The win/win is they now have the house, with a mortgage payment lower than their monthly rent and no threat of a landlord asking them to leave at any point.

The only downside is their parents now seem a lot more interested in Beth and Luke’s` financial welfare when they drop-in, which is frequently! 

Obviously, there are lots of complex questions around affordability, responsibility and conditions with this product and should be only undertaken after a lengthy conversation with a qualified mortgage advisor who can give totally independent advice.   

Contact us to learn more about guarantor backed 100% mortgages to see if they are right for you.

 

 

Why Bridging Loans Are Good For Property Development

Bridging finance is a unique way for homeowners and business owners to embrace short term loans. Bridging loans act as a literal bridge between the times when funds are needed and when funds are going to be released from an asset, most commonly a property. Individuals, companies, and corporations use bridge loans to provide funds on short-notice notice for short periods.

They are perfect for property purchases and sales because funding is easily and quickly accessible. Most bridging loans have predictable costs when there is an exact repayment schedule, and so are a great fit for inclusion in property development projects.

Money Makes Money, Fast money makes money faster!

Refurbishment projects can require a lot of money, especially where the model is to buy a property, refurbish and then immediately sell it. Because of this, many property projects involve multiple partners; some that provide financial investment and others that manage the construction.

Some people prefer to fly solo, and some property companies would prefer not to bring any more partners than necessary. In any case, the property investment market is highly competitive and successful development projects require appropriate funds at speed.

The benefits of Bridging Loans

A bridging loan can be a great solution. Here are some reasons why:

Finance can be secured very quickly. Grabbing the right property at the right time and the right price is the difference between the success and failure of an investment project. Having the funds on hand is the key to doing that. You can put this in place ahead of time, making sure that you know exactly how and when your provider can get the funds to you.

Bridging loans can be great for grabbing great deals at property auctions, where deals are quickly snapped up, and easily accessible quick loans are invaluable. A bridge loan can also avoid a lot of the stress associated with property purchases. It is a great idea to build a good relationship with your lender so that you can continue to rely on them for funds to be delivered promptly.

Bridging loan lenders are more flexible when it comes to credentials and credit histories. They prefer to give a loan on the security of an existing property. Once the legitimacy and the value of the property have been approved, getting a bridge loan is quite simple.
Though a bridging loan needs to be repaid in a short period, e.g. likely within 12 months, providers are usually flexible as to the repayment schedule.

Friends Capital are brokers with access to lenders with the best bridging loan rates on the UK market, contact us for a free, no obligation bridging loan enquiry.

How To Choose The Right Broker For Your Bridging Loan

So, you need a bridging loan. You should be as well informed as possible. Try to work out precisely what timescale you’ll need the money for and when you reasonably think you’ll be able to pay it back. 

Don’t forget, the ideal situation for a bridging loan is where you are confident in knowing when you will have access to the funds to repay the loan eg. the future sale of a property. Your repayment plan is also known as your ‘exit strategy’ because its how you’ll complete the bridging loan. The more organised you are, the more likely it is that a potential lender will give you the loan that you want, as they will be confident that you will pay them back their money promptly. 

 

What are my options for a Bridging Loan?

When considering which option is right for you, think about the following questions.

What are the terms of the loan? Terms can seem pretty similar between lenders, but that is not necessarily true. Make sure you understand precisely how lenders will charge interest and if there are any penalties for early repayment.

What are the interest rates + fees? There are often lots of different costs involved, so it is vital to get expert advice. That way, you’ll be able to properly understand which offer is most attractive and find the best bridge loan rates

How long is the loan term? For bridging loans, this is usually up to 12 months, although lenders can offer bridging loans for longer at their own discretion.

What loan to value (LTV) are you borrowing at? You may be able to borrow up to 75% of the value of all property you can offer as security (this may allow you to borrow 100% of the purchase price of the new property).

Which lenders are right for your situation? Most lenders have a specialist area. For example, specific lenders have more experience with providing bridging loans for residential homes; others are adept at funding larger corporate projects.

 

Choosing the right provider 

The first place people may begin looking is online comparison sites. Not all providers are listed on price comparison websites and they may not cater for customers with tricky or complex situations. Bridging Finance is a specialist area and it is always best to take advice from an expert in this field. Friends Capital will consider all client’s situations, even if they have poor credit or need to borrow a higher loan to value.  

Comparison sites also remove the personal touch. If you are trying to get a loan for a home purchase, the process of deciding on and comparing bridging loans can feel very personal. Sometimes having direct contact with your bridging loan broker can be invaluable. Friends Capital will give you personal advice and tailor the terms of your loan specifically to you. 

Some people choose to make financial decisions on things like bridging loans by talking to friends or family members. It can be comforting to work with someone who is recommended, so don’t be afraid to seek recommendations from people you trust for expert financial support.

Contact us for answers to your bridging loan questions or to apply for a bridging loan quote today.

Bridging loan case studies 2020

Here you can find examples of how bridging loans have helped customers move into their dream home without having to reduce the value of their current property.

Bridging loan case Study 1

October 2020

Mr & Mrs H were both over 60 & retired. Due to their age & pension incomes, a traditional purchase mortgage wouldn’t be available.

Their house was on the market for £900k (with no mortgage outstanding) & had been for a couple of months. They saw the perfect downsizing property on the market for £600k and had savings of £100k to put towards the purchase.  We at Friends Capital,  agreed to a bridging loan of £500k to secure the purchase, thus avoiding the need to reduce the price to enable a quick sale.


Bridging loan case Study 2

November 2020

Mr N was due to move into a new-build property last week but his buyer`s chain fell through.

He was under pressure from the developers to complete the deal, as this was the second property chain-break and they had other interested buyers. With a new-build property price of £450k, his current house sale agreed at £300k (with a small balance left on his mortgage) and with savings to use we arranged a bridging loan quote for £200k within an hour & a decision in principle the same day, funds were released to complete the chain within 10 working days.


Bridging Loan Case Study 3

December 2020

Mr & Mrs M are both retired. They have been approached to buy a converted barn close to them by the current owner who wants a quick sale.

They approached us to arrange short term finance, as they did not qualify for a traditional residential mortgage and their current property was not yet on the market, we advised that a bridging loan would be the best way to raise monies quickly.

The purchase price was agreed at £450,000. We raised £200,000 for Mr & Mrs M to add to their savings to enable them to purchase the converted barn before they waited for their house to sell. They are now in a position where they can wait and command a fair price for their exiting property.


Bridging Loan Case Study 4

December 2020

Mr C , a part-time landlord and sole trader spotted an opportunity locally to buy a detached property below market value from a previous visit to the property.

Unfortunately the occupant had passed away & the executors of the estate wanted a quick sale for their benefactors. They agreed to sell to Mr C if he could complete within 28 days before the house was put on the market. They agreed a price of £300,000 , our client had a £450,000 property to sell that wasn’t on the market yet, we arranged a £200k Bridging Loan within 3 weeks to complete the purchase.

Contact us today to discover how our bridging loans can help you do the same.

Bridging Loan Application Form

Why A New-Build Mortgage Could Be For You

When looking for your first property, a new build home can seem like a natural fit. There are no reminders (good or otherwise) of the previous owners, and some developers even let you choose your furnishings. You get to start from scratch and make the place your own. 

Developers of new builds are known to work to strict deadlines, and will likely want to exchange within 30 days. They can sometimes be more organised than traditional property developers, which is compelling because buying a property can be stressful.

Suppose you get involved with a new build project early enough. In that case, there is the possibility of choosing your fixtures and fittings before you even move in. New build homes tend to be in better condition than older ones, naturally, because everything is new. You can move straight in without the fear of considerable upfront maintenance and repair costs. New build homes are often better insulated and energy-efficient, meaning that they cost less to heat and are less likely to bring unforeseen costs. 

There is no chain because you are buying it directly from the property developer. You are less likely to be disappointed by the common occurrence of breaks in the chain, leading to you losing out on a house you had set your heart on. 

The Help To Buy Scheme

The government’s Help To Buy scheme, exclusively for new-build homes, is designed to help first-time buyers get onto the property ladder. The scheme allows buyers to put down a lower deposit than generally required for a property. The government offers an ‘equity loan’, which will enable you to borrow 20% of the purchase price of a home under £600,000. 

The Rules of Help to Buy:

  1. You need a minimum deposit of 5% of the sale price of your new-build flat or house.
  2. The government lends you up to 20% of the sale price, or 40% if you live in London.
  3. You can borrow the rest, which is 55-75% depending on where you live, as is standard from a mortgage lender. 
  4. The loan is interest-free for five years. You pay a £1 monthly fee by direct debit. 
  5. The loan must be repaid after 25 years, or earlier if you sell the home. 

Drawbacks Of New-Build Mortgages

New-build properties are often much pricier than older homes in the same area. You are paying for all new appliances and property without many of the pitfalls that plague homeowners, like boiler issues and damp. Naturally, there is a premium for this peace of mind. 

If your new home is off-plan (not fully built yet), you are at risk of taking out a mortgage on a house that won’t be finished by your move-in date. Delays in building and construction are common, and your ‘dream home’ may be a building site for longer than promised.

Most mortgage offers from lenders only last for six months. Make sure that when you consider making an offer on a project that is under construction that you aren’t bidding on something that won’t be ready in time. If you run out of time, this can make your offer void, and you can lose out on your ideal home. 

Suppose you receive a mortgage offer while the project is still under construction, and your home falls in value for some reason. In that case, your mortgage offer will remain the same. To avoid overpaying would require re-applying and possibly losing the opportunity for the home you want. 

Securing a mortgage on a new-build is also not as straightforward as you might hope. Because property values of new-build homes can fall in the first few years, lenders often assign a higher interest rate for mortgages on new-build properties.

New-Build Final Thoughts

Knowing that you are the first person to live in your home is a great feeling. New-builds are built with the homeowner in mind and are often well-placed with modern fixtures and fitting. Buying from a property developer instead of an individual is usually smoother and better organised because they are handling many properties of the same kind. Leaving individuals out of the situations also means that you don’t have to worry about a chain, or someone changing their mind. The developers want to sell you the property and are more likely to make it easier for you. However, there are things to consider, like the high interest-rate put on new-build mortgages and the unpredictable factor of securing an off-plan home.

Friends Capital can help you get your first mortgage – contact us today.

Should I Overpay My Mortgage?

With savings at an all-time low, the natural choice is to pay off your mortgage early. For some, this is the right choice, with potential savings in the tens of thousands. However, it’s not exactly a no-brainer. There are plenty of things to consider, such as repayment penalties, paying off existing debts and holding on to your rainy day fund. 

Reasons To Overpay

The great thing about overpaying your mortgage is that it chips into the debt that you’ve built up as a result of interest. Every penny you pay back brings you closer to the day that you’re mortgage-free.

Because interest rates are so low at the moment, paying off your mortgage saves you more than you’d make putting the equivalent amount in a savings account. If you have a 3% mortgage, then you need your savings interest rate to be above 3% to make financial sense for you. By overpaying on your mortgage, you’ll reduce the amount of money that you can be charged interest on. 

Why Lenders Don’t Want You To Pay Off Your Mortgage Early

Seems strange right? Financial institutions love your money. The longer you take to pay it – the more money they make. Most lenders allow you to pay 10% of your mortgage balance per year if you’re still in your introductory (also known as fixed, track or discount) period. If you want to overpay during this period, there will likely be an Early Repayment Charge. There is a considerable variation in the flexibility of mortgage terms, so please check with your provider. 

In most cases, if you’re beyond your introductory period, then you can probably overpay by as much as you like, as long as you are at your lender’s standard variable rate (SVR). The SVR is the standard mortgage rate you’ll be charged at (as long as you don’t remortgage). 

However, some SVRs are expensive. It can change, and your monthly payment rate will be higher. And, you’ll be paying off more of the interest – not the capital of the mortgage. If your SVR increases then remortgaging could be a better option than overpaying.

Some lenders will serve a penalty if you try to overpay on your mortgage. The chance of a penalty can vary greatly depending on the terms of your mortgage. Some impose a flat-rate fee of 5% to all overpayments; others charge you more for a higher overpayment. The extra amount you’ll have to pay also depends on how many years there are outstanding on your loan.

These rules are in place to mitigate the loss of profit for your mortgage provider. Your mortgage was agreed based on the amount of interest that the bank or building society was likely to collect. By allowing you to overpay without a charge, your mortgage becomes less worthwhile for your mortgage provider. By regulating your ability to overpay, the mortgage provider can control their profits. This doesn’t contribute to making overpaying your mortgage a compelling prospect. 

First Pay The Debts That Keep You Up At Night

The golden rule of debt repayment is to pay your most expensive or highest-interest debts first. So, before getting too excited about pulling your home from the claws of the bank – start paying off your most pressing debts. The most notable of these are high-interest credit cards and personal loans

Save For A Rainy Day

For those with existing credit card or loan debts, all sources correctly point to paying those off as soon as possible. However, for those without financial strain, having an emergency fund is the next most crucial thing for financial security. A rainy day fund is a more practical option for when unexpected circumstances strike than overpaying on your mortgage. 

After all, if you are struggling in the future, your mortgage provider won’t be lenient just because you overpaid in the past. Especially taking into consideration the ways that mortgage providers put in provisions to ensure that you carry on paying interest. These are both predatory and irritating, but making early repayment unattractive in many ways. In the majority of cases, making a mortgage overpayment is not as wise a decision as having 3-6 months of money for the times when you most need it. 

If you’re otherwise debt-free, have a considerable emergency fund and have checked the penalties in your mortgage terms, then mortgage overpayment could be an option for you. The answer of whether overpaying your mortgage is worth it will depend on your mortgage and terms. Additionally, the real impacts of housing and mortgages as a result of COVID-19 are yet to be seen. 

Guide to Equity Release

Additional sources of income as you enter later life can be desirable or essential. One way to get some liquidity is to use your home’s value to release money that is locked up in brick and mortar, as you continue to live there.

This is a big financial decision to make. You should get unbiased financial advice before you decide if an equity release scheme is the right option for you.

Here we answer the questions people ask most often about equity release and discuss the advantages, disadvantages, and risks.

Equity release – what is it?

The equity of your home is its gross market value, less any mortgage that still remains. This calculation gives you the net amount that your residence would give you if you sold it for cash today.

However, suppose you do not want to sell your home or downsize to release capital. In that case, an equity release will allow you to access a significant portion of your home’s value. If your mortgage is paid off and you own the home outright, then you can apply for an equity release scheme.

An equity release scheme will allow you to access a significant amount of money and permit you to continue living in the property. It is a financial solution that many people choose in later life.

How equity release schemes work

When you opt for an equity release scheme, you will exchange a portion of your home’s value with an equity release provider. The equity release will give you a regular income, or it will provide you with a lump sum of money, as you prefer.

There are several mechanisms for achieving this, including selling a portion of your home to the equity release provider and the right to continue living there. The alternative option is a special kind of mortgage.

These products are called:

  • A home reversion
  • A lifetime mortgage
  • An enhanced lifetime mortgage

What is a home reversion equity release scheme?

A home reversion equity release scheme will allow you to sell part of your home and retain a legal right to continue living there. This right of occupation extends until you die or move into long-term care. The equity is paid as a regular salary or as a lump sum.

The later in life you are, the more money you can typically access. You may need to be aged 60 or over to access this type of equity release scheme. Furthermore, the state of your health (being in poor health) can help you leverage a larger share of the value of your property.

What is a lifetime mortgage equity release scheme?

More popular than a home reversion, a lifetime mortgage equity release scheme allows you to borrow a lump sum of money through a unique form of a mortgage. The mortgage is only repaid once you move into long-term care or when you pass away.

Typically you can borrow between 18% and 50% of the total property value. The later in life you are, the more equity you can release.

The debt continues to grow with the addition of interest. However, you can pay the interest as you go, to avoid compound interest. This type of mortgage is called an interest-paying mortgage. If you do not wish to pay the interest as it accrues, you will be taking out an interest roll-up mortgage.

You can find equity release schemes that offer a no-negative equity guarantee to give you peace of mind and ensure your debt never exceeds the property’s value. If your debt equals your home’s value, then its entire amount will be used to pay off the mortgage when you die or move into long-term care.

Enhanced lifetime mortgage

If you have a serious health condition, and in some cases, if you are a heavy smoker, you may have access to an enhanced lifetime mortgage equity release scheme. With this type of scheme, you pay a lower rate of interest, or you can borrow more money instead.

The advantages of equity release

The most significant advantage of equity release is that you will receive money that you can spend right now. You will be able to capitalise on the rise of your house price that has occurred over time.

You can enjoy the money or a portion of the money you have earned over your lifetime, rather than leaving it all to your relatives or beneficiaries. You can also use the equity to relieve your family’s burden of funding your long term care.

The disadvantages of equity release

The most significant disadvantage of equity release is that you cannot release your home’s full market value. You are only accessing a portion of the value of your home (usually between 18% and 50%). However, if you sold your home to turn its full value into cash, you would still need to find somewhere to live.

Another disadvantage is that your relatives or beneficiaries will receive a smaller inheritance. You may also have fewer rights to benefits if your bank account is full of cash.

A third disadvantage is that you will owe more than you borrowed, due to compound interest. At five percent interest, for example, the amount you owe could double in fifteen years. The effect of compound interest is a major reason why people opt for an interest-paying mortgage.

However, suppose you do not wish or can’t pay the interest as you go. In that case, you can reduce the effects of compound interest by taking several smaller releases of equity, and only when you need/want them.

Under the terms of home reversion equity release schemes, your home might need to be vacated quickly, following your passing, which can burden your relatives.

Contact Friends Capital

Friends Capital are experts in equity release and can advise you on the best option based on your circumstances. Contact Friends Capital today for help. 

Mortgage Agreement in Principle

If you are currently going through a mortgage process, you will have come across lots of different phrases and terminology. One of those phrases you will hear from lenders or mortgage advisors is a mortgage agreement in principle. A mortgage in principle gives you an indication of how much you can afford to borrow on a mortgage. It’s a useful tool to have when you are looking for a new home. Not only does it give you a budget for your new property, but it shows the estate agent that any offer you make is more likely to go through to completion.

Here Friends Capital explain further about a mortgage in principle and how you can use one when buying a new house.

A mortgage agreement in principle – what is it?

A mortgage in principle is sometimes called an agreement in principle (AIP) or decision in principle (DIP). If you go to a lender, they may offer you a mortgage in principle. It is a written estimate from a mortgage provider stating how much they may lend you. It’s not a guarantee that the lender will give you a mortgage, but it can be useful information. An agreement in principle gives you a good indication of what a financial institution is willing to lend you for a mortgage.

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Should I apply for a mortgage in principle?

The house buying process can feel confusing, and you may be wondering if you should apply for a mortgage in principle. The method of applying for a mortgage in principle is quicker and easier than a full mortgage application. You can usually get an answer quickly, from within an hour or a couple of days. Mortgage applications can take much longer to process. Getting a mortgage in principle amount allows you to narrow down the search for a new house and gives you a realistic budget.

You don’t have to get a mortgage in principle, but various reasons make it a good idea:

  1. You get a good idea of what you can afford to borrow. It helps to narrow down your house-hunting search ruling out properties above your budget or opening up homes you may have believed to be out of your price bracket.
  2. Estate agents and sellers will take your offer seriously. Sometimes you may not be offered a viewing unless you have a mortgage in principle.
  3. With a realistic idea of what a lender will give you on a mortgage, there is less risk of applying for a bigger mortgage that gets rejected. A mortgage rejection impacts your credit file negatively and can make it more challenging to get the mortgage you want.

When will I need to apply for a mortgage in principle?

If you have made the decision to move and you are serious about looking for a new home, apply for a mortgage in principle. Knowing what you can afford makes the task of finding and buying a new home much more straightforward. 

It can also be a big confidence boost to know which houses are in your budget. A mortgage in principle can also save you time in the buying completion process. It can help with getting your offer accepted and may even make the mortgage application process quicker.

Does a mortgage in principle affect my credit rating?

A mortgage in principle does require a credit check. The application process will involve either a soft or a hard search on your credit file. The type of search done during the application process will depend on the lender.

soft search checks your credit report without leaving a ‘footprint.’ It isn’t visible to other lenders, so it shouldn’t affect your credit file.

hard search does show on your file as a credit application. A hard search shouldn’t affect your overall credit rating. Still, if a lot of hard searches go through in a short space of time, lenders may reject any future credit applications. It is worth checking which type of search will be done by your chosen lender before completing the process.

Good news – FriendsCapital has partnered up with UK Credit Ratings, check your credit report here

How long is an offer valid?

A mortgage in principle may last between 60 and 90 days, depending on the lender. If you don’t find a property during that period, you may have to apply for another. Renewal should be straightforward unless circumstances have significantly changed.

You should note that if any of the details you give on your application change, such as a new job, you should check that your mortgage in principle is still valid. You may have to renew the application in certain circumstances.

How to apply for a mortgage in principle

To get a mortgage in principle, you can choose to go:

  • directly from a mortgage lender (bank or building society)
  • through a mortgage broker

As a rule, it’s usually better to use a mortgage broker. Brokers have access to a variety of mortgage options, many that you won’t be able to get through a high street bank. A mortgage broker also saves you time as they can identify which lenders are better for you based on your circumstances. You will be able to call the broker when an offer is accepted and complete the full application.

Guide to Shared Ownership

It can be frustrating if you cannot afford to buy a home outright, but there is a solution. You can buy a portion of your home and get your foot on the property ladder, through the Government’s Help to Buy: Shared Ownership Scheme. 

So, who can take advantage of shared ownership schemes and how do they work?

Who can apply for shared ownership?

You do not need to be a first-time buyer to be eligible for shared ownership. However, you must not still own property, meaning you would have to sell your existing home before you can apply. Also, your household must earn less than a combined £80,000 per year, or £90,000 per year in London.

What is shared ownership?

If you cannot get a mortgage for the full value/asking price of a property, then some homes are available as shared ownership. You buy part of the house, and you rent the remainder from the government. You can buy between 25% and 75%, and you will pay rent to the co-housing association for the rest,

A secondary benefit to shared ownership, which is particularly attractive to first-time buyers, is that you will only need to save a small deposit, typically around 5%.

There are advantages to buying a 40% share or more. When you do this, you have the right to staircase. Staircasing lets you buy more shares in your home at increments of 10% or buy the whole property at a later time.

Shared ownership schemes vary between England, Scotland, Wales, and Northern Ireland, so be sure to check the fine print. In England, shared ownership properties are leasehold. You only own your portion of the home for a fixed time, and you do not own the land.

Right to Shared Ownership

The government announced a new scheme in October 2019. Under this scheme, tenants of housing associations can buy 10% of the home they live in and pay a subsidised rent on the remainder. They can purchase further shares in increments of 1% or more, up to 100%.

Stamp Duty on shared ownership schemes

Stamp Duty Land Tax (SDLT) is a tax on homes costing more than £500,000. With an approved shared ownership scheme, you can pay this tax in instalments or as a one-off.

If you pay a one-off fee, this is based on a percentage of the property value at the time you buy. You will not pay more stamp duty, even if you staircase and buy all or a more significant share of the property.

If you pay in instalments, HMRC calculates your stamp duty as a premium on the amount you paid for the grant of the lease. You will spend less today, but you may have to make more payments if you staircase.

Selling a shared ownership property.

You can sell your shared ownership property at any time, although you must notify the housing association first. The housing association has a right to find a buyer before you go to the open market. Their exclusive period is for eight-weeks, and afterwards, you are free to sell your share of the property, if they have not secured a buyer.

The amount you receive is balanced on the share you own and the market value of the property.

Pros and cons to shared ownership

As with all things, there are cons to balance against the pros we have mentioned above. It would be best if you considered these before joining a shared ownership scheme.

MaintenanceIn addition to paying charges for ground rent, care-taking charges may be added for the maintenance of communal areas. The housing association pays for structural maintenance, but you may have to pay a share of major repair expenses. Before you enter shared ownership, check to see if any major works are planned.

SublettingSubletting is usually not allowed.

MortgagesNot all mortgage lenders will provide a loan for shared ownership properties.

AvailabilityYou will have a limited choice of properties.

It is essential to know that you may have to pay individual additional costs every time that you staircase. These can mount up, so if you are considering staircasing, you might want to consider only doing so when you can afford to purchase a significant share.

Staircasing fees might include:

  • Stamp duty
  • Valuation fee
  • Legal expenses
  • Mortgage arrangement fee
  • Any arrears

If you want to get on the property ladder, you should now be better prepared to decide whether shared ownership is right for you. For more information contact the Friends Capital team.

Ultimate Guide – First-Time Buyer Mortgages

The thought of buying your first home will probably have you feeling excited. However, you may feel overwhelmed or daunted by the prospect of the complexity of buying a house or flat.

Buying a home is likely the most expensive purchase you will make in your entire life. You will need to save a deposit, arrange a mortgage, and prepare for expenses that are often out-of-mind.

With our guide to first-time buyers, you can prepare for your search for a home and mortgage. You might even realise that it’s not as complicated or daunting as you first thought.

Saving a deposit

It can take years to save a deposit for a house, so it is best to plan well ahead and start saving as soon as possible. The best approach is to put money away each month. The larger the deposit you can save, the lower your monthly payments will be, and better interest rates may be available to you.

In general, a few mortgage lenders will accept a 5% deposit, but 10% is the standard. If you can put down a deposit of 25%, you will get access to the best deals and interest rates.

For more helpful advice, please read our guide to saving a deposit.

Arranging a mortgage

A mortgage is a loan from a bank, building society, or specialist lender, and you will pay back the loan and interest. In addition to paying back the mortgage, you may have to pay a valuation fee and arrangement fee.

You can speak to a mortgage broker to find the most competitive deals. There are whole of market mortgage brokers, as well as brokers that will only recommend mortgages from select lenders. An estate agent’s mortgage broker will give you restricted advice and a bank or building society mortgage advisor, will only recommend their products.

The amount you can borrow used to be based on a multiplication of your annual salary. However, since 2008, stringent affordability tests have been introduced to ensure you can afford the mortgage and the effects of changing interest rates.

To apply for a mortgage, you will need:

  • Proof of income (payslip)
  • Bank statements
  • Outgoings (household utility bills)

Although it isn’t a mortgage guarantee, an agreement in principle may be given by the lender, so that you have proof to estate agents and home sellers that you are serious.

You have a better chance of approval when you make a mortgage application if you:

  • Save a more significant deposit
  • Have a steady job
  • Register on the electoral roll
  • Build a good credit history
  • Close unused credit card accounts

If you are self-employed, you should prepare three years of accounts and have copies of your tax returns.

What are the different mortgage types

Below we discuss the various types of mortgages offered to first-time buyers:

Fixed-rate mortgage: Interest is fixed for a period of time, after which you will pay interest based on the lender’s standard variable rate (SVR). These mortgages are popular because you have the same monthly payment, which makes financial planning easier. Interest rate chargers by the Bank of England or your lender will not affect you, and your payments will stay the same.

Discount mortgage: These track the lender’s SVR but at a lower rate. The bigger the discount, the shorter the discount period will last.

Tracker mortgage: These track the Bank of England’s benchmark interest rate. Once the deal ends, you will typically move onto the lender’s SVR.

Offset mortgage: These link your savings and current accounts to your mortgage, so you only pay interest based on the net balance.

Standard variable rate mortgage: Payments can go up and down with these, and there are no particular benefits. Rates follow the Bank of England Bank Rate, but the lender can make changes to their SVR independently. As soon as you can, it would help if you looked to move to a better deal.

Guarantor mortgage: Help from parents or relatives, who take on the lending risks, can help you get a mortgage. However, they will have to cover payments if you can’t make them.

Questions to ask your lender include:

  • Can I overpay?
  • Can I borrow back if I overpay?
  • Are payment holidays available?
  • Can I move to a different lender once the mortgage deal ends?
  • What happens if I want to move house?

First-time buyer schemes

Government home ownership schemes are on offer in England, Wales, Scotland, and Northern Ireland, although they may vary across each.

Help to Buy: These help people buy a home when they only have a deposit of 5%. These apply to newly-built homes in England of up to £600,000. The equity loan from the government will be 20% or 40% if you are inside London.

Right to Buy: Council tenants in England, Wales, and Northern Ireland can buy their home at a discounted rate, as long as they have lived in the property for three years.

Shared ownership schemes: You can own part of the home, and usually, the housing association owns the other part. You will buy between 25% and 75% and pay rent on the part you don’t own. You can buy the remainder later if you can afford to. To be eligible, you must earn less than £80,000 per year or £90,000 in London. Please read our guide to shared ownership

Stamp duty

Stamp Duty Land Tax (SDLT) is a tax you must pay in England, Wales, and Northern Ireland when you buy a home or land over a specific value. First-time buyers pay no fee on the first £300,000, on homes worth up to £500,000.

You will pay a 5% tax on the portion of the home between £300,001 to £500,000.

Please read our guide to Stamp Duty for more advice.

Other mortgage expenses

Other expenses to remember include:

  • · Mortgage arrangement fee
  • · Valuation fee (an assessment of the property value)
  • · Survey fee (an evaluation of if the property is structurally sound)
  • · Property solicitor fees (conveyancer)

The property solicitor handles parts of the sale, such as the Land Registry fees, Stamp Duty charges, and contract creation. 

Making an offer 

Before making an offer, you should ask these questions to assess if the home is right for you:

  • Why are you selling?
  • How long has the house been on the market?
  • What does the sale include?
  • Have other offers been made?
  • Have you found a new property?

It would help if you made your offer through the estate agent. First-time buyers may be asked to show their mortgage agreement in principle.

Exchanging contracts and completion

To begin the buying process, you will instruct your solicitor to start the legal work. They will agree on the terms of the sale, the purchase price, and the date of completion. The mortgage lender will likely ask you to insure the property as part of the process.

 Your solicitor will transfer the money to the seller. On completion day, you can pick up your keys, once the money arrives in the seller’s bank account.

Top tips for first-time buyers

  • Start saving your deposit as soon as possible
  • Work out your budget, including income and outgoings
  • Get your paperwork ready, including identification, banks statements, and bills
  • Don’t take out cash on a credit card
  • Don’t make lots of credit applications in a short period
  • Speak to a mortgage broker
  • Research the area you want to live

 

Guide to self-employed mortgages

It can be more challenging to get a mortgage if you are self-employed, a freelancer, sole-trader, contractor, company director, or entrepreneur. If you are self-employed, your income might be considered less secure and less predictable. The security of your income can put lenders on the back foot because they want to know that you can make the long-term repayments of the mortgage they offer.

Good news – you can get a mortgage and Friends Capital can help you!

Before making a mortgage application, you should consider some careful planning, which will improve your chances of being approved. You will want to prove to a mortgage lender that you generate a regular income. Plan and speak to a financial adviser, a mortgage decline can damage your credit score.

What mortgages are available for the self-employed?

You may have heard about or previously had a self-certification mortgage, sometimes abbreviated to self-cert. For these mortgages, there was no need to provide evidence of how much you earn each year. However, these were banned in 2014 over fears that people were offered mortgages that could not afford.

Today, there are no mortgages designed for self-employed people. Instead, you have access to the same mortgages as everyone else. The lender will want to make more in-depth affordability checks, and they may offer you fewer mortgage options.

How to get a mortgage if you are self-employed

A mortgage lender will consider you as self-employed if you own 20% to 25% of a business or more, and this generates your primary income.

Before applying for a mortgage, you should prepare two years of certified accounts, and the most recent of these needs to be no more than 18-months old. It is a good idea to hire a qualified chartered accountant to prepare these for you, to ensure they meet lender requirements.

A qualified accountant will also help you understand your finances so that you can answer questions from the mortgage provider. If you do not know what a mortgage lender might ask, then mention this to your accountant, who will likely have experience in this.

Preparing supporting documentation should include requesting an SA302 form from HMRC. An SA302 form shows the income you have reported to HMRC and takes approximately two weeks to arrive. You should also prepare evidence to show retained profits or dividend payments and proof of upcoming contracts.

SA302 application: You can apply for your SA302 form from the HMRC here.

If you have been self-employed for one year or less, then it may be more challenging to get approved for a mortgage, but not impossible. In this case, it can help to provide proof of future commissions.

Further documentation that will help you get a self-employed mortgage include:

  • Driving license
  • Passport
  • Six months of bank statements
  • Council tax bill
  • Utility bills for the last three months

It would be best if you were prepared to answer questions on:

  • Car finance arrangements
  • Loan repayments
  • Store card and credit card repayments
  • The cost of your commute
  • Business-related travel costs
  • Childcare
  • Holidays

Tips for getting a mortgage if you are self-employed

Here we take a look at tips that will help you get a mortgage if you are self-employed.

Make your spouse the first name on the mortgage – This tactic can be beneficial, even if your spouse’s salary is less than the income you generate. Lenders are looking for a predictable and regular income, and this can be preferred over the amount of income earned.

Boost your income – You can opt to pay yourself a higher salary instead of keeping profits in the business. You can use this to boost your savings, and you can return to your regular salary arrangements after your mortgage gets approval.

Pay a more substantial deposit – You can reduce the monthly repayment from a mortgage lender by paying a larger deposit. With a lower regular repayment, your lending risks are reduced. You can also benefit from cheaper rates when your deposit exceeds 10 percent, 25 percent, and 40 percent of the property’s purchase price.

Check your credit rating – You can get your credit report for free and correct any errors that may appear. Mistakes can exist in your credit file, so you should not overlook this tip, even if you think you have not made credit-damaging mistakes in the past.

Postpone changes to your business – Mortgage lenders are looking at how predictable your salary is. Hence, it makes sense not to change the type of business you have or to switch from being a partnership to a limited company or sole trader.

Use a broker that is a self-employed mortgage specialist. A broker that specialises in and has experience in mortgages for self-employed people can be highly advantageous. A self-employed mortgage specialist can anticipate problems that you might incur and counter these before they become an issue. A specialist broker will also know the lenders who are most likely to lend to self-employed people.

Mortgage brokers that specialise in self-employed mortgages will know the different criteria that lenders favour. Some mortgage lenders prefer to see evidence of operating profit and retained profit. In contrast, other mortgage lenders prefer to see proof of salary and dividends. With access to this knowledge, you will increase the chance of being approved the first time.

Apply for a mortgage from a provider that is not a mainstream bank. When high-street banks refuse to lend to self-employed people, it is possible to turn to a specialist lender. Specialist lenders may lend to self-employed persons; however, a favourable mortgage decision may come at the cost of incurring a higher interest rate.

For more help and advice on applying for a self-employed mortgage, contact Friends Capital today.

Ultimate guide to conveyancing

One of the most important people you will require when selling or buying a property or when remortgaging is a conveyancer. The role of a conveyancer is to oversee the legal requirements and to make sure that the mortgage reaches completion. 

Here we take a look at what conveyancing is, their role, and conveyancing costs.

What is conveyancing

A conveyancer or a general solicitor conducts conveyancing. In the case of a solicitor carrying out these duties, they will have specialised in conveyancing legal work and property law.

The role of the conveyancer is to transfer ownership of land or property from one owner to another. Split into two parts; conveyancers arrange the exchange of contracts, which lays out the agreement and its details. The second part of the process is called completion, and this is when the legal titles get passed from one owner to the other.

Property surveys

It is possible to arrange a mortgage before making an offer, and your bank or mortgage provider will inform you of how much they are willing to lend. This offer is called an Offer in Principal.

Formal property surveys determine if the property is valued in line with the offer you make. A survey may also check the structural state of the property.

There are three types of property survey:

  • Valuation survey
  • Homebuyer’s report
  • Full structural survey

Valuation survey: This is a basic survey but useful for remortgages or new build purchases. This survey does not include a structural check.

Homebuyer’s report: This will check the condition of windows, roof, and general state of repair, including a check for subsidence.

Full structural survey: This is essential for renovation projects, and although it is more costly, it makes sense for renovations. 

Draft contracts, exchange of contracts, and completion

When an offer is made, a draft contract is drawn up by the seller. The draft contract states the purchase price, planning restrictions, and boundaries, as well as other details. The draft also stipulates the transaction completion date and includes the Energy Performance Certificate. You should take a close look at the contract, and if required, negotiate new terms with the guidance of the solicitor or conveyancer.

Once the draft contract has been agreed upon, the seller and buyer sign the contract. This exchange of contracts is legally binding, so it is vital to be sure of the purchase and its details. A deposit is typically paid at this point; the buyer becomes responsible for the new property and home insurance.

The completion day is the final step in the conveyancing process. While completion can occur within a few hours, most buyers wait between one and four weeks to allow the last checks to be completed.

The remaining payment is now made. The mortgage lender or bank will transfer the funds, and you must wait until this is completed before taking ownership of the property or land. Once paid, you can collect the keys and enter the property. The conveyancer’s final duties include registering the ownership of the property with the Land Registry and paying your stamp duty.

Conveyancing costs

The costs that the conveyancer issues are split into two distinct categories:

  • Disbursements – This covers work completed by third parties, who for example, conduct surveys and searches 
  • Legal fees – This includes the basic work of the conveyancer

Conveyancing costs and fees vary, and they are affected by the following:

  • Property value
  • Property tenure
  • Legal fees
  • Disbursements

Property value: Conveyancers often take property value into account with fees set as a percentage of the properties value.

Property Tenure: Freehold and leasehold properties have different legalities and associated paperwork, which effects the conveyancing fee.

Legal fees: These vary from case to case and depend upon whether you are selling, buying, or both.

Disbursements: Searches and surveys differ in each case.

Why you should use a conveyancer’s

You can do the duties of a conveyancer yourself, but this role takes a lot of time and is complicated. You can end up in serious trouble if something goes wrong. It would be best if you chose a licenced conveyancer because they are experts.

In England and Wales, conveyancers are regulated through the Council for Licensed Conveyancers or CLC. In Scotland, the selling and buying process differs, so it is advisable to use a local conveyancer.

How to choose a conveyancer

It makes a lot of sense to choose a conveyancer that is recommended to you and works in the local area of the property or land. You should check legal fees and what they include before instructing a conveyancer. You should also review if legal fees still apply if the sale falls through because these can run into hundreds of pounds.

Which mortgage type is right for you?

Unless you’re lucky enough to have the cash in the bank when you buy a property, you’ll need a mortgage. The type of mortgage you’ll need will depend on what you’re doing with the property.

Different types of mortgage include;

  • Repayment mortgages
  • Interest-only mortgages
  • Combined mortgages
  • Buy-to-let mortgages
  • Commercial mortgages

The majority of mortgages taken out in the UK are used to buy homes. Still, other mortgage types allow you to buy a property and rent it out or buy a business premise such as a shop or office.

I want to buy a home

Then you’ll need one of three types of mortgages

  1. Repayment mortgage
  2. Interest-only
  3. Combined rates

Read our guide to buying a property.

What is a repayment mortgage?

A repayment mortgage is a loan where the monthly payments will eventually pay the whole amount owed back. First-time buyer mortgages typically range from 25-35 years. 

What is an interest-only mortgage?

Usually a lower monthly payment than a repayment mortgage, an interest-only mortgage only pays the interest on the loan. At the end of the mortgage, you’ll still owe the same amount. 

What is a combined rates mortgage?

A blend of repayment and interest-only, so at the end of the mortgage term some of the loan will be paid off. 

I’m buying a property to rent it out

You need a buy-to-let mortgage if you plan to buy a property and rent it out to tenants. Most of the criteria for a buy-to-let is the same as a standard mortgage. 

I’m buying business premises

If you want to buy business premises, such as an office or a shop you’ll need a commercial mortgage. Commercial mortgages are available as both repayment or interest-only – your financial/mortgage advisor will be able to advise which is best for your business.

Why use a mortgage advisor?

The benefits of mortgages advisors, like Friends Capital, is that they are independent from individual lenders. Being independent means, they look at the whole marketplace to make sure you get the best deal based on your circumstances. 

The most significant benefit is that they put care and attention into every single mortgage application. The ensures it has the very best chance of being accepted by the lender. 

Friends Capital are unbiased mortgage advisors, contact them today for advice. 

 

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Guide to Credit Reference Agencies

When it comes to your credit score, three agencies in the UK hold your information. If you apply for a loan or mortgage, the lender will use this information to decide on lending you the money. A lender may use the credit report from one or more of those agencies when processing your application.

The three credit reference agencies (CRA’s) in the UK are: 

  • TransUnion
  • Experian
  • Equifax. 

Each of these companies creates a file for you. Within the file, they gather certain information, and this is used to calculate your credit score.

What information do CRAs hold?

Each of the credit reference agencies gathers information about your financial history and other details that create your credit report. The information in your credit report includes:

  • Credit commitments you have had in the past
  • Payment history
  • Previous addresses
  • Current loans and mortgages and how you are managing them
  • Electoral roll information

By taking into account all of this information, the credit reference agencies give you a credit score. Any new lender you approach for credit will look at your credit score to make a decision.

Why are there three Credit Agencies?

Lenders may only report to certain agencies so your credit score can be different across all three companies. Your previous mortgage lender may report information to two of the agencies. At the same time, a loan company gives information to all three.

Because of this, the scores held by different agencies can vary. A new lender may use one or more of these CRA’s to help them decide on lending you money. Each of the agencies has a different method of calculating your credit score. With Experian, your credit score is out of a maximum of 999, while TransUnion is 710, and Equifax is 700.

Should I check my credit report?

The credit report is used for any credit you want, including mortgages and loans. It is vital to check your credit report. As a general rule of thumb, you should request your credit report from each of the three agencies once a year.

There are ways you can access your credit reports for free. Some companies can help you fully understand the information on the report, and there may be a fee for this.

Good news – FriendsCapital has partnered up with UK Credit Ratings, check your credit report here.

Experian – you can sign up for a free 30-day trial with the Experian CreditExpert service. It allows you to access your report for free for one month, charged at £14.99 per month after that.

Equifax – ClearScore gives you access to your Equifax credit report free every month. Equifax also offers a free trial of their monitoring service so you can access your report. After the free trial, you pay £9.95 per month for access to all of your information.

TransUnion – you can access your TransUnion information for free through a service called Credit Karma (previously known as Noddle).

Fixing mistakes on your credit report

When you have your credit reports from across the three UK Credit Agencies, you will need to go through all of the information. If you see anything on the report that you don’t recognise and believe is a mistake, you will need to get it fixed.

A mistake on your credit report can be anything from errors in your bank details or incorrect address details. Any inconsistencies like this will deter banks and lending companies from giving you credit. If you spot a mistake, you can contact the credit agency and request that it is corrected. The agency has 28 days to respond to your request. 

Your credit report is a record of your financial history. Checking your credit report is an essential part of keeping your financial records healthy. Now you know your score you can work on improving your credit score and increase your chances of being accepted for credit in the future

Concerned you’ll be refused credit? Talk to Friends Capital.

Friends Capital help individuals with all types of credit score, if you need a bad credit mortgage or you’re looking into debt consolidation, we can help! 

Do I need A Solicitor To Remortgage?

Quick answer, not always. Whether you need a solicitor of not will largely depend on the complexity of the remortgage and whether you’re changing lenders or not. 

When don’t I need a solicitor for a remortgage?

You don’t need a solicitor to remortgage if you’re doing the following:

  • Getting an advance. If you’re borrowing more on your existing mortgage with your current lender, then no legal charges are involved in this type of arrangement. 
  • Product transfer. If you are staying with the same provider but moving to a new rate or a deal, it doesn’t require any additional legal work. 

When should I use a solicitor for a remortgage?

Here are a couple of situations when you’ll need a solicitor to be involved:

  • Add someone to a mortgage. If you’re adding a new person to your mortgage, e.g. a friend or partner you’ll need a solicitor to draw up paperwork to reflect a change in ownership. This process is referred to as a transfer of equity. 
  • You are removing someone from a mortgage – the reverse of the above. The ownership of the property is changing, and the documents need to reflect this. 

The majority of lenders will include free legal services when you remortgage (Friends Capital can advise on this). If your chosen lender doesn’t offer a free service then shop around.

Should I use the remortgage lenders’ solicitors?

If it’s free and part of the service then you won’t have much choice, however, if you’re paying for your own solicitor, you have the right to shop around. 

What does the remortgage solicitor do?

Remortgaging is undoubtedly less complicated than purchasing a home; the following is usually checked as part of the process. Some of this may not need to happen if you are staying with the same lender.  

  • ID checks – to protect against money laundering
  • Check your existing mortgage – they’ll check how much you owe and if there are any exit or early repayment fees
  • Valuation – your new lender will value the property and provide a mortgage offer to you.
  • The fine print – your solicitor will check over the terms of the mortgage offer and raise any issues with you.
  • Land registry – they’ll check the land registry records to make sure nothing has changed since the process began
  • Completion – your solicitor, will oversee the completion – paying off your old mortgage and any fees and send the remaining money to you. 
  • Update the land registry – once this has all happened, they’ll update the land registry with the new details.

Do you further questions?

Contact Friends Capital – we’re here to help. Our team has vast experience in the remortgage process and can help you find the best lender for your circumstances. 

How lenders decide to give you credit

When you are looking for credit, the lender will need to make a decision. They will look at various factors to decide to offer you a loan or any other form of credit. By looking at these factors they are able to determine the risk of lending to you. Based on the level of risk, your loan may be declined or approved. 

If you have bad credit, you may still be able to get a loan or mortgage. The lender may give you the credit with a higher rate of interest to offset the risk. Here we take a look at what lenders use to decide to give you credit.

What lenders look at before offering you credit

Any application for credit will need a credit check, but that is not all lenders will look at. Your credit score will be the main factor, but other things are taken into account too. Lenders will use the following to decide whether to give you a loan:

  • Credit score
  • Employment history
  • Income
  • Length of time at current address

Credit score – Your credit score uses various information to show an indication of the risk of lending money to you. Different credit agencies hold information about you. A lender may apply to one or more of these to assess your suitability for a loan or mortgage. Please read our 7 tips for improving your credit score.

Each lender or financial institution will usually have a minimum credit score they will accept. If your score is below this, the loan application may be refused. You may still be able to get a loan, but the bank may decide to offer you a lower amount.

When you apply for a loan, the bank won’t tell you your credit score, but you can ask which agency they use. You can request a credit report from the credit agency. 

Employment history – Your credit score is essential, but lenders are also starting to look at employment history. A proven track record with the same company for several years is more appealing to banks. It shows that you have a stable job and a reliable income. You will be able to make your payments each month and be more likely to keep up with loan commitments.

If you have a history of jumping from job to job, a lender may be less likely to offer you credit. It can cause concern to a mortgage company if you tend to move position regularly. You may not be able to get the loan you want. The lender may still offer you a loan but may offer a higher interest rate.

Income – Your income is just as relevant to a loan company because it shows what you can afford. A steady income indicates that you will be able to manage your money. Inconsistent earnings, such as commissions, etc. may not be taken into consideration. If you have a low income, there may not be enough money coming in to meet the debt repayment. 

Personal income is a big thing to a lender and will affect the loans and interest rates you can get. Bear this in mind when considering any loan amount you may want.

Length of time at current address – As with job stability, the length of time at your current address is also important. If you have been at your existing home for many years, it’s a good sign to lenders. It shows you can manage mortgage or rent payments. The bank will see that you can handle financial commitments over a period of time.

Information on your credit file

As your credit score is an integral part of a loan application, it is crucial to make sure the information is correct. Credit reference agencies keep information on your borrowing and payment history. Any application for credit allows the lender to check your credit reference file.

Credit reference agencies collect information from:

  • Electoral roll – addresses where you were registered to vote and the dates
  • Account information – your current loan commitments and bank account activity
  • Public records – they will see any bankruptcies, court judgments or debt relief orders
  • Linked people – anyone you may be linked with financially, such as a joint account or mortgage
  • Searches – details are kept about any credit searches over the last 12 months

There are three main credit reference agencies. A lender may use one or more of these when deciding on your loan. If you are refused credit, you can ask which agency was used. You will be able to apply to that agency and see your information. 

It is crucial to go through everything they have on your file. If there are errors, write to them and let them know. The errors may be affecting your overall credit rating. Getting the problems fixed can help improve your credit score.

What to do if you have a low credit score

If you have a low credit score, you can still get some forms of credit. Many banks have loans for low or bad credit scores. These types of loans often have higher interest rates than others. Because it is considered a higher risk, the bank raises the interest rate to offset the loan risk.

Alternatively, the bank may ask for a guarantor for the loan. A second person signs an agreement to repay the loan if you don’t. It can allow you to get the credit or loan you need. The bank has another person that will be liable for the loan, so they take less risk.

A guarantor will be on the hook for your loan if you don’t pay it. Make sure the person is aware of this before signing anything. The bank will also check the credit score of the guarantor so you will need someone with good credit.

If you are looking for mortgage deals or loans for people with bad credit, we can help. We work with a variety of banks and lenders. Our experts can find the right solution for your credit needs.

Remortgage with Bad Credit

If you have bad credit, you may think you are not able to remortgage, but it is possible. It may be easier for people with good credit to remortgage, but there are lenders out there that will work with you. People find themselves with bad credit for many reasons. It can affect the loans or remortgage deals you qualify for; however, there are options available.

Remortgaging with poor or bad credit

While many lenders will not be forthcoming with offers for remortgaging with bad credit, it doesn’t mean you won’t be able to get the loan you need. Bad credit is an issue for banks because bad credit makes you:

  • Seem a higher risk to lenders
  • More difficult to get loan approval
  • Additional work is required for bad credit remortgage offers

Although bad credit does make banks cautious, some financial institutions are willing to look past this. Bad credit history doesn’t always mean you can’t handle remortgage payments. Some lenders are able to consider these problems and still offer remortgaging services.

Independent financial advisors will be able to point you in the right direction. They will know which banks specialise in remortgages for people with bad credit.

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Should I remortgage if I have bad credit?

Taking out a remortgaging offer can be beneficial for many reasons. However, it depends on your financial situation and why you are looking to remortgage. The main reasons people look for a remortgage deal include:

  • Moving to a better mortgage rate
  • To raise capital 
  • Debt consolidation
  • Releasing equity

As mortgage deals change all the time, your current agreement may not have the best interest rate. Looking at remortgaging can help reduce the overall payment you will have to make. You may want to make a large purchase or have a big event coming up. A remortgage can give you the extra money you need for this.

Debt consolidation remortgages are a very popular solution. People with multiple loans and credit card debt can benefit from moving everything onto a remortgage. Lower interest rates and paying the deficit over the term of the mortgage help regain control of finances. 

You may have equity in your home but don’t want to sell it to release the capital. Remortgaging can release the equity in your home, giving you access to that cash, without moving.

How to remortgage with bad credit

Not everyone has the same credit problems so your situation will need to be considered when looking at remortgaging. There may be a simple solution to get you a good deal, or other action may be required. Here are some simple steps to get you started:

Your credit report

A first step to getting a bad credit remortgage deal is to check your credit report. Credit reference agencies hold information on your debts and payment histories. The bank will use this to consider whether you will qualify for a remortgage.

By looking at your credit file, you can see what issues are on there. It is also vital to check it thoroughly. If there are any items on there in error, you can inform the credit reference agency. Cleaning up any issues or clearing debts can improve your credit score. Check out our 7 tips to improving your credit score.

FriendsCapital has partnered up with UK Credit Ratings, check your credit report here.

Look at your options

While it may seem the best idea is to go to your current bank, this isn’t always advisable. High street banks and lenders tend to favour people with good credit. Remortgage applications with your bank may be more likely to be refused. There are several lenders and bad credit remortgage companies that will be more suitable for you. 

A bad credit loan is more of a specialist solution to debt management. Therefore you will want to use an expert advisor. They will have knowledge of the best lenders to approach and which application is more likely to be successful.

Know what you can afford

 It may seem obvious, but you will need to consider what you can afford. Depending on your income, your remortgage will have to be within your limits. Your financial situation should remain the same or get better with the new offer, so make sure you know what payments you can handle.

Lenders assess income differently, so a financial expert will be able to go through this with you. Generally, you will be able to get around 4x your income. Your fixed salary is usually only considered so overtime or bonus payments won’t form part of the calculation. Similarly, if you are self-employed, some lenders may not consider you for a remortgage. The advisor will be able to approach the right lender based on your situation.

Can I remortgage with a CCJ?

Yes, you can. If you have a CCJ, lenders will consider you to be an increased risk. A CCJ does not mean you will be refused a remortgage; however, it might mean you are not able to get the best rates. Friends Capital work with lenders who specialise in adverse credit; these lenders work with people who have a poor or bad credit history. Speaking to an independent advisor, like Friends Capital, is recommended.

Should I use my mortgage for debt consolidation?

If you have multiple debts and you’re struggling to manage them you might want to consider a debt consolidation mortgage. If you have different loans and credit cards, you will have different interest rates. Managing all of those individual payments can leave you feeling overwhelmed. Varying interest rates can make it feel like those debts never go down. 

As a homeowner, you do have some options when it comes to managing debt. You can choose to have a secured loan to have a single payment. If you have equity in your home, you can remortgage and consolidate your debts. Whichever you choose you will be securing the debt against your home. Because of this, you will have to keep up with payments, so your home is not at risk.

Mortgage for debt consolidation

You may have taken out loans or credit cards to clear debts in the past. While you may think that this is the right thing to do again, you do have other options. Interest rates on credit cards and loans tend to be higher than mortgage interest rates. The best interest rates are on secured loans or mortgages. Because of this, you can transfer debts with higher rates to a mortgage to save money.

The repayments of the debt consolidation are spread over the term of the mortgage. Typically, your debt consolidation mortgage payment is the same or lower than your old amount. It makes it much easier to pay and manage your money going forward.

How a debt consolidation remortgage works

A remortgage will provide you with a lump sum of money. It can be used to clear debts, so you only have a single payment. Not only does it save you money in the long term, but it also makes it more simple to stay organised with your finances.

When you are looking at debt consolidation mortgages, you should consider:

· How much you need to borrow

· The repayment terms

· Interest rates

· Loan fees

How much can I borrow on a remortgage?

The amount you can borrow with a debt consolidation mortgage depends on several things. The lender will want to check into several factors before loaning you money. The bank will look at:

· Your income

· Possible payments you can afford

· Value of your home

A mortgage lender will look at something called the loan-to-value ratio. The number is the amount you want to borrow in comparison to the value of your property. It is usually a percentage number and gives the bank an indication of the equity in your home. When looking at these factors, the bank will then calculate how much they are willing to lend you.

Debt consolidation mortgage repayment terms

The repayment terms of a debt consolidation mortgage will be explained when applying for the loan. A significant advantage of adding multiple debts to your mortgage is a single payment. By only having one payment rather than numerous different lenders to pay, your finances are easier to manage.

Repayment terms will give you one fixed amount to pay each month. The loan advisor will go through your finances with you to make sure payments are manageable. A remortgage may have a slightly lower payment than your current mortgage because of the equity in your house. All of this will form part of the calculations so you will see this before applying.

A financial advisor will look at the full picture of your finances. Using an impartial expert will make sure you get the best advice. Any new financial commitments will need to be affordable, and an advisor will help with this.

Interest rates on remortgages

While adding debts to your mortgage may seem like the right move, you will need to have the full picture. Always look into the interest rates on debt consolidation mortgages. Paying the debt off over a more extended period of time may mean you ultimately pay more. However, consolidating debt with a mortgage is the best thing if you are struggling.

A lower mortgage payment will give you breathing space. You will be able to manage your money and have all of your debts under one payment. Of course, the best course of action will depend on how much you owe. Taking financial advice from an expert will help you find the right type of loan.

Loan fees for debt consolidation

The interest rate and repayment terms are important, but you will also need to look at other costs. A debt consolidation remortgage may have loan fees. The cost of the fees will vary, so make sure you know the exact costs of any loan. It needs to make sense overall, so higher loan costs may not be suitable for your situation.

Make sure you are aware of all the cost and loan arrangement fees before you agree to the loan. The lender or financial advisor will give you all of this information.

How do I consolidate debt onto my mortgage?

When you are looking at remortgage offers, there are usually two options for debt consolidation:

· Moving the debt to a new lender

· Securing a loan to your current mortgage

If you choose to remortgage your total debt with a new lender, you can usually borrow a higher amount. It allows you to release more equity from your home for lower payments. However, if your current mortgage is on a good rate, it can change with the new mortgage. So, you will need to make sure it makes financial sense in the long term.

You can choose to secure a loan to your mortgage to take care of your debt. It can be a good option if you are not able to prove your income if you are self-employed, for example. Going this route allows you to keep a good mortgage deal if you currently have one. However, this type of loan usually has a higher interest rate than taking out a debt consolidation remortgage.

Is a debt consolidation remortgage right for me?

The suitability of a remortgage for consolidating debt will depend on your circumstances. It is typically helpful for homeowners that have a lot of credit card debt. As the interest rate on the remortgage is lower than credit card rates, it saves money. However, certain circumstances may make this type of loan unsuitable such as:

· The amount of equity you have in your home

· Does your current deal allow you to borrow more?

· Your mortgage term

The amount of equity you have in your house will be a factor in the remortgage deals you get. Your current mortgage may not allow further borrowing so you may need to move lender. If you have a fixed-term mortgage and that term hasn’t finished, you may have to wait. If you choose to move mortgage during the term, you may incur additional charges.

A financial advisor will be able to check all of these things for you. They will look at your financial commitments and current loans to see if a remortgage is the best option. 

Friends Capital can help you, talk to one of our advisors today!

Guide to saving a deposit

When you are applying for a first-time buyer mortgage, you will need a deposit. With the cost of rent almost as high as mortgage payments, saving can be tough. The cost of living can leave you with very little leftover. So, if you are hoping to get on the property ladder, we have some tips on saving for a mortgage deposit.

Work out what you need

first-time buyer mortgage can require up to a 20% deposit. Depending on the cost of your first home, it can mean you need a substantial amount. It can feel overwhelming if you require a large amount for a deposit. But, some things can help reduce the amount you need:

· Ask your parents for help

· Buy a home with friends or family

· Equity schemes

· Buy part of a property

Ask your parents for help – If a large deposit for your first home is what you need, you could turn to the bank of mum and dad. Your parents may be able to help with a cash gift or possibly be a guarantor. Bear in mind though they will be liable to pay the mortgage if you can’t if they act as guarantor.

Buy a home with friends or family – Other people you know maybe in a similar situation and not be able to get on the property ladder. If so, you can join together to buy your first house. Set out everything from the beginning. You will need to have a clear plan if someone wants to sell their share later.

Equity schemes – Renters of council or housing association properties can be eligible for shared ownership schemes. If you are renting one of these places, you can apply for an equity scheme. In these types of deals, you buy a portion of the house and pay rent on the rest. You will have a smaller mortgage and deposit but still, pay rent.

Buy part of a property – If you do not rent from a council, there are other types of equity schemes you can get. Help to Buy allows you to buy a new home with help from the government or the builder. Typically you will only have to give a 5% deposit with the scheme providing the rest. It is usually a free loan for so many years and will be paid back later. So, you will need to plan how you will pay it back.

How much can you afford to save each month

Once you know how much you need for a deposit, you can start saving. Look at your expenses every month and be realistic about how much you can put away. Regularly saving a little each month is a better strategy than relying on one-off bonuses.

Set up a savings account, you can easily do this online or pop into your bank. Once you have your savings account, set up a standing order for each month. Only set the amount at what you can comfortably afford. If you set it too high, you will find it difficult and may give up altogether.

Make sure you are budgeting wisely

When you look at your outgoings, make sure you are getting the best deal on everything. Look at your gas and electricity tariffs and compare mobile phone deals. You may be able to increase your savings by moving to better offers for your insurance as well.

You will also want to make sure you factor in unexpected costs too. Replacing a broken appliance or needing repairs on your cars will all need to be part of your budgeting. 

Make the most of your savings

The savings account you put your deposit money in can also help with building up funds. So, compare the best savings account rates for the best deals. If you can afford to save a set amount each month, then a regular savings account will work for you. The amount you save may change each month so you can choose an instant access account.

Banks have different offers when it comes to a savings account so do your research. Online accounts can sometimes offer higher rates, so make sure you look into these too.

Reduce your monthly costs

If you want to save for a mortgage deposit even faster, there are some steps you can take:

· Move back home with your parents

· Find a smaller property to rent

· Rent with someone else to share the costs

Finding the best first-time buyer mortgage

As a first time buyer, you will find lots of mortgage deals out there. It’s a big commitment so you will want to find the best deal possible. Many banks and lenders will offer a mortgage consultation service. You will want to use an impartial advisor. They will be able to compare the best first-time buyer mortgages for you.

An expert on first-time buyer mortgage deals will look at what you have in savings and what you can afford. The advisor will be able to show you which offers are most suitable for your situation. At Friends Capital, we offer a free mortgage review service. We have a specialist first-time buyer team that will be able to help you get the best mortgage for you.

Seven tips to improve your credit score

If you are considering applying for a loan or have previous credit commitments, your credit score comes into play. Maintaining good credit is essential so that you can get loans or mortgages when you want them. Your credit rating affects how much you can borrow, but it can also affect the deals you qualify for.

Your credit score

When you take out a loan, credit card, or another type of credit, your credit score is used to determine if you are eligible. The information held on your credit report will establish a credit score. Your credit rating is based on:

  • The information on your credit application 
  • Your credit file 
  • History with the lender you are asking for credit 

Data is held securely by credit agencies. It will contain all your history of utility company accounts, credit cards, loans, and any other type of credit. These agencies collect the information and provide it to the lender you are asking for a new loan.

The lender uses all of the data on your credit report to determine whether they are willing to give you a loan. The data helps them to assess the level of risk in loaning money. If your score is low, you may be refused the credit application. You may still be able to get a loan, but it will be at a higher rate of interest to protect the lender.

FriendsCapital has partnered up with UK Credit Ratings, check your credit report here.

7 tips to improve your credit score

There are some things you can do to improve your credit rating. You can take action today to help rebuild your credit score. Taking these steps helps to improve your overall score, and so will give you access to better credit deals.

1. Electoral roll register – If you are not on the electoral roll on your current address, then that can affect your credit score: register to vote, either online or by post. Registering to vote is a quick and easy first step to rebuilding your credit.

2. Manage your money properly – If you tend to pay bills late or wait for reminders, you need to stop doing this. Late payments or issues with paying bills is a big red flag to lenders. Make a plan and look at when your bills are due. Have your bills automatically pay by direct debit and make sure you have enough money in the bank to cover them. Consistently paying utility bills, internet, and phone bills prove you can take care of your money. Lenders will see this and be more inclined to offer credit to you.

3. Mistakes on your credit file – You can apply for a copy of your credit file from the agencies that have the information. When you receive your report, check it thoroughly. If there is any activity on there that you don’t recognise, report this immediately. Mistakes on credit files can happen, so check that everything on yours is as it should be.

4. Manage your debt – If you currently have a large amount of debt, you will have to reduce this if possible. A high amount of debt and loan commitments makes lenders less likely to give you more financing. Massive obligations make it more challenging to manage any new ones. Aim to pay off credit cards and other loans as quickly as possible.

5. Check if you are linked to someone else – Holding joint accounts with other people, such as a spouse or family member, can affect your credit. If that person has a bad score, it can change yours too. If possible, clear any joint accounts if you are linked to someone with bad credit.

6. Don’t move too often – If you have moved house regularly, it can affect your credit score. Staying at one address and building a good payment history for a few years will boost your credit. Previous addresses will have to be checked during a loan application, so multiple ones have an adverse effect.

7. Credit utilisation – Your credit utilisation is how much credit you have based on how much you are eligible to borrow. So, your credit score can give you a limit of £5000. If you have £2500 in debt, your credit utilisation is 50%. Using less of your available credit limit is usually seen favourably by banks. Aim to keep your credit commitments to between 25% – 50% of your total credit limit.

Other ways to improve

The above steps will make a significant impact on your credit and give you access to better deals. 

But you can also try other things to improve your credit rating. Having no history is just as harmful as a bad one. So, if you have had very little credit in the past, consider taking out a credit card. Credit cards for people with bad credit or no credit are available.

These credit-builder credit cards usually have a small limit. You can use the card to make purchases and pay off the balance each month. The interest rates on these cards are much higher. Because these cards are mainly for people with bad credit, the interest rate reflects this. So, make sure if you do use one of these, you clear the balance each month.

By managing a card like this and successfully clearing the balance, your overall score increases. Good payment history is an indication that you can achieve financial commitments. Lenders will see this and be willing to extend you the credit you need.

Friends Capital help people with all types of credit score

An independent financial provider will be able to give you impartial advice so you can build a good credit score. At Friend’s Capital, we work with all of the top lenders in the UK. If you have bad credit or want to consolidate your debts, we can help. Our experts will be able to find the right product for you. We work with banks that can give you bad credit loans or a debt consolidation loan. Contact Friends Capital today.

What is mortgage life insurance?

A mortgage will be one of your biggest outgoings each month. But how would your loved ones cope if they had to take over this after your death? 

If you have a mortgage, you should consider a mortgage life insurance policy. It will provide you with peace of mind that your outstanding debts and other responsibilities are taken care of properly. Mortgage life insurance, or mortgage protection, is linked to the debt on your property. If you die before you pay off the mortgage, this type of insurance covers the loan.

Types of mortgage insurance

When it comes to mortgage protection, there are two types to choose from:

  • Decreasing term cover
  • Level term mortgage cover

A decreasing term cover policy is a type of coverage that pays the outstanding balance on a mortgage. As you pay your instalments each month on a repayment mortgage, the principal debt decreases. A decreasing term cover policy runs alongside this. So, should you die before paying off the mortgage, this type of insurance pays off what is left owing to the bank.

Level term cover pays a fixed amount regardless of what is on the mortgage. As the amount of payout stays the same, the monthly instalments tend to be more expensive. You may have to choose this type of insurance if you have an endowment mortgage, for example.

Whichever type of mortgage you have, you need to have an insurance policy that provides enough cover. If you have a £250,000 mortgage over 25 years, your plan should cover this.

Choosing mortgage insurance

When you take out a new mortgage, you may have a policy from the lender. If so, the mortgage is covered in the event of your death. However, you may not be getting the best deal. Taking out the policy from the lender only gives you a choice of their cover.

Taking out a policy at the time of your mortgage gave you what was available then. There may be a better deal out there for you now. When looking to change your mortgage life insurance, you will need to make sure the policy:

  • Provides enough cover for the overall debt
  • Covers any new health conditions you may have

Using a professional company that works with multiple insurance companies will help you compare deals. If you took out your policy a long time ago, things might have changed. If you were a smoker before and now you are not, you could get cheaper insurance. An independent advisor will be able to give impartial advice on the best mortgage life insurance policies.

Do I need mortgage life insurance?

It is not a legal requirement to have mortgage life insurance, but you will want to have this if you have dependents. The main reason people have this type of cover is to protect their spouse and children after their death. How will your household cope if you are not there to contribute to the mortgage payments?

The insurance will cover the balance on the mortgage, so your loved ones don’t have extra stress. It is already a testing time when someone passes away, so this insurance gives people one less concern.

Single or joint life policy?

When you look at insurance to cover a mortgage as a couple, you can choose a single policy for each person or a joint policy. There are pros and cons to both, so you should consider this.

Some of the benefits of a joint policy include:

  • Cheaper than two single plans
  • Less hassle to set up if you have no dependents

While this type of mortgage life insurance can be less expensive than taking out two separate policies, you will only get one payout. The payout on a joint policy usually happens on the death of the first policyholder. If you split from your partner further down the line, you will need to find a new plan.

Benefits of two single policies include:

  • Each policy will pay so there are two payouts instead of one
  • You won’t have to find a new plan if you split up

Taking out two single policies tends to be better for couples with dependents. If you have no children, you only need the insurance plan to pay out once. If you do have children, single policies will payout on the death of each policyholder. It will make sure any remaining dependents do not have the responsibility of the mortgage.

Finding the right policy

Depending on your situation, you will need a specific type of insurance. Whether you have children, the value of the property and other debts will all be considerations when looking at insurance. 

Friends Capital works with the top insurance companies in the UK. By comparing the best mortgage life insurance deals on the market, we can find the right cover for you. Our expert advisors can provide you with impartial advice. You will receive all the information you need about insurance so you can make an informed choice. Contact us today.

Bad credit and bridging loans

Bridging loans are a desirable financial solution under many scenarios. Because of this, even people with bad credit may want to make use of a bridging loan.

Can I get a bridging loan with bad credit?

Yes/possibly – There may be times when you are unable to keep up with your financial responsibilities. You may be unable to make payments on loans and other debts for many reasons. You may have become ill or lost your job; not paying is not always intentional.

Whatever the circumstances, if you have had problems in the past, it can affect your credit history. If you have bad credit or poor credit history, it doesn’t necessarily mean you will be turned down for a bridging loan. It may be more challenging to get approval for some types of credit, but others may be possible.

Check your credit report

Make sure you actually have bad or poor credit – sometimes people miss a payment or two and assume they have poor credit this isn’t always the case. FriendsCapital has partnered up with UK Credit Ratings, check your credit report here.

What is a bridging loan?

A bridging loan is, as the name suggests, is a type of finance that bridges the gap. It is typically a finance option when buying a house. If you haven’t sold your home but want to complete on a new one, a bridging loan is an answer.

Read more on Bridging Finance here 

These types of short-term loans can be useful if you want to renovate your house before selling it. You may also want to have a bridging loan in place if you are buying property at auction. It is usually a short-term loan of 12 months or less. A bridging loan is paid off when you sell your house. When you take out this type of loan, it will need security, usually a property.

Applying for a bridging loan with bad credit

Even if you have bad credit, you can still get the loans you need. Many lenders are willing to work with you so you can find the right finance solution. Applying for a bad or poor credit bridging loan will require a specialist lender. An expert advisor will be able to look at suitable loan companies for you.

When applying for the bridging loan, you should:

  • Be honest about any issues with your past credit 
  • Provide all the necessary documentation
  • Have property for security

The financial expert will be able to explain all of the documents you will need to complete an application. Having an honest discussion about your previous credit problems is vital. It allows the advisor to choose the right financial lender. They will know which lenders specialise in providing financial products to people with bad credit.

You will have to think about when and how the loan is going to be repaid. If you are using your current house to satisfy the credit, then selling it at the right price will ensure a quicker sale. The bridging loan is either a closed or open loan. A closed bridging loan has a set completion date. An open-bridge loan won’t have a set date for you to pay it off. How you intend to complete the loan requirements will dictate the type of loan you get.

A bridging loan company may consider other assets if you have them. You may be able to use business equipment or items of high value. The advisor will be able to discuss any options for securing the loan with you.

Why a bridging loan is possible with bad credit

When you take a mortgage or other types of credit, your credit history is a vital source of information. The financial institution uses your credit history as an indication of possible payment issues. A mortgage lender needs to know you will pay for the whole term of the mortgage agreement. A bad credit report may give them cause for concern, and you may not get a mortgage.

A bridging loan focuses on the value of the security you are using. The bridging loan application process involves getting a valuation for the security property. As long as your property is valuable enough to cover the loan you are applying for, a lender may give you a bridging loan.

Because bridging loans are this way, the company tends to look more at the value of the property than the credit history. Some big banks or financial companies may not want to risk this type of loan if you have bad credit. It is essential to find the right company, and a financial expert will be able to do this.

Apply Now

If you think a bridging loan is what you need, we can help. We work with many different lenders and can find the right one for you. Specialist loan companies and banks will offer people with bad credit a loan. If you want to apply for a bad credit bridging loan, talk to Friends Capital today.

Becoming a UK landlord

At Friends Capital, we help UK landlords with buy-to-let mortgages every day. There are millions of privately rented houses in the UK, and with demand being higher than supply, more and more people are becoming landlords. With reduced savings rates, renting a property is seen by many as an excellent opportunity to create a passive income.

To become a residential landlord, you may be considering renting out your own home or buying a property to let. It is essential to understand the steps to becoming a landlord, and you should recognise that being a landlord is a business.

You will have money coming in and going out, with expenses and profit. Property has almost always been seen as an excellent long-term investment, but there are no guarantees of success. It is a good idea to speak to someone who is a landlord, to get a better idea of if becoming a UK landlord is for you.

Landlord expenses

Renting isn’t just a buy and forget type of investment. It will take your time, and you might need to deal with issues such as maintenance and repairs, rent arrears, and sub-letting.

You can use a high street or online letting agent, and these will take on the responsibility of some of these tasks. It’s a good idea to create an emergency fund to cover unforeseen expenses. This can cover costs such as a boiler breakdown or periods of vacancy where you might have to cover expenses such as council tax.

Further landlord expenses will include:

  • A landlord license
  • Gas safety checks
  • Energy Performance Certificates
  • Mortgage payments (buy-to-let mortgages)
  • Agency fees
  • Advertising and marketing
  • Professional photos (typically covered if you use a high street agent)
  • Solicitor fees for creating a tenancy contract

While most landlords avoid providing furnishings, most tenants expect you to provide white goods such as a cooker, fridge, freezer, and washing machine.

It is worth considering paying for a membership to a landlord association. The largest of these in the UK is the National Landlord Association. The perks are worth the fee and include:

  • Access to training events
  • Lawyer approved tenancy agreements
  • Discounted trade magazines
  • Advice from professionals
  • Access to networking events and online forums
  • Tenant referencing 

Tenant referencing with the National Landlord Association includes express and comprehensive tenant checks including previous evictions, current debts, credit history, criminal record, and a public record showing if tenants are being sued for unpaid rent or child support.

Do you need a buy-to-let mortgage?

If you have a residential mortgage for your property, then you need to check if you are permitted to rent? You will need to send a consent to rent application or change your mortgage to a suitable buy-to-let mortgage. Leasehold properties may not allow sub-letting, and this can be the case for properties purchased through a shared ownership scheme.

UK Landlord legal responsibilities

Your legal responsibilities as a landlord differ for properties in England, Scotland, Wales, and Northern Ireland. This is also the case for single-let properties and houses of multiple occupations.

Firstly, you should set yourself up as a business owner and register for a self-assessment with HMRC. You will need to apply for a landlord license and renew this every three or five years.

Your property needs to be fit for human habitation and might need renovating to lift it up to these standards. There are 29 hazards to consider, and these are laid out in the Housing, Health, and Safety Regulations 2005. Building stability, damp problems, ventilation, the amount of natural light, and electrical safety all fall within this legislation. You should also make sure that you fit a smoke and carbon monoxide alarm on every floor.

If you take a security deposit from your tenants, then these must be placed in a Tenancy Deposit Protection Scheme

As a landlord, it is your responsibility to ensure your tenant has a legal right to live and rent in the UK. EU citizens automatically have this right, although this may change after Brexit.

Landlords must conform to The Equality Act 2010, and this covers unlawful discrimination against race, religion, disability, sex, sexuality, and gender reassignment. You should also give 24 hours notice if you want to visit the property.

In summary

There is a clearly a checklist of tasks you must complete if you intend to become a landlord. However, the opportunity to create an additional income exists, and with a little preparedness, you can begin a successful venture as a UK landlord.

Guide to buying a property

Buying a property can be a painstaking and complicated process, especially if you’re a first-time buyer or inexperienced on the market. However, even for someone who’s been through the process of purchasing a property, it can be a stressful situation trying to get the best deal when buying.

Here, we’ll detail how you can get the best deal when you’re buying a property – covering everything from viewing, submitting an offer and moving in.

What to do before viewing a property?

Getting a good deal on a property comes down to every part of the buying process, even as early as when you are keeping an eye out for potential places of interest. Here’s how you can get yourself off on the best foot to get the best deal on a property.

Know your budget

Considering the cost of a prospective property against your budget is key. Understanding your limits can save you lots of time.

Often prospective buyers have a budget range, for example, £200’000 – £250’000, having this information is critical when it comes to negotiations.

Friends Capital tip “If you like the property, but the asking price is outside of your budget, it might be worth contacting the estate agent to see if there’s some ‘wiggle room’ with the price. If not, move on – don’t try and spend more than you can afford!” 

 

Know what you want

It seems obvious, but plenty of buyers don’t know what they want when looking for a property. Considering everything upfront can save you lots of time.

What is important to you in a property. Common requirements include;

  • A specific number of bedrooms
  • Good access to public transport
  • School catchment area
  • Off-road parking

A good tip is making a list of ‘must-haves’ and ‘would-likes’ when finding properties. Then compare the ones you’ve found to highlight the best-looking deals.

Get your mortgage in place

Perhaps the most important part of the process is getting your mortgage in-place, of course you won’t be ready to complete yet but you can get an AIP (agreement in principle). An AIP essentially means the lender has confirmed they are prepared to lend to you – so if you find the right property you go ahead!

Friends Capital can help you get an agreement in principle. We are independent and have access to the whole of the market. Contact us for more information. 

The role of an estate agent

You’ll almost certainly be dealing with an estate agent of some kind when buying a property, and it’s important to know that their role is one of a ‘middle man’.

Ultimately they want to a deal that is suitable for you and the seller but a higher buy price is always better – happier seller and happier estate agent, so be careful with what you say.

Personal circumstances are exactly that, personal. Sharing details such as “I need a quick completion” or “this house is the only one that has everything we need.” put the power in the hands of the seller, so be careful. 

Tips for viewing a property

Keep an eye out and ask questions

It can be very easy to get swept up in the process of buying a property, especially if you’re viewing a property you really like. Keep an eye out and ask any many questions as you want, at the end of the day that is the job or the expectation of the person showing you the property.

On the flip side of sharing your circumstances, knowing the seller’s reasons for selling the property can be very important. For instance, if the property is in a chain, then they may need a quick sale which can aid your negotiations. 

Keep your cool

It can be exciting when viewing a property you’ve fallen in love with, and of course, it’s perfectly normal to worry about someone else coming in and making an offer better than yours. But remember to keep calm when viewing a property to keep the estate agent or owner guessing about your thoughts.

If you come across too keen, then the agent or owner will feel that they can get a higher bid out of you. 

Knock on doors and do your research

Asking questions to the seller is essential, but remember they want a sale – so will paint everything in the best light possible when answering. 

Try knocking on doors nearby to get a gauge on the area and your potential neighbours. You might find out that there have been previous problems with the area or the property which the seller may not willingly reveal unless asked directly.

You can use any information you get to get the best deal when buying a property. 

How to negotiate the best deal when buying a property?

Set limits on bids

Getting the best deal on a property is heavily influenced by the bidding process.

It’s best to limit yourself to a maximum bid, after which you agree with yourself to walk away. You never know, if you hit this mark, the seller may only be playing hard-ball to try and get more money out of you.

If this happens, they could well get back in touch to re-negotiate, that puts you as a buyer in a powerful position as it shows their hand in trying to get a sale.

Prove your willingness to complete

You can often convince a seller to accept a slightly lower if you can show you’re willing to get the deal done quickly. You can do this by ensuring you’ve handled all the details and have all your paperwork sorted. What’s more, it doesn’t lessen your bargaining position either as these kinds of details aren’t relevant to a specific property, it just shows you could move for another property at a pace too. 

Your AIP is highly relevant at this stage as it shows you have an amount waiting with the bank and can proceed.

Make your first bid low

It goes without saying; you should never make your highest bid first.

Rarely will a low bid be so derisory that it puts the seller of you entirely – a seller often understands that you’ll be starting with a low offer first and that you’re likely to meet in the middle.

Of course, take care with offers and make sure they are reasonable. Offering £150,000 for a £200,000 property is unlikely to sit well with anyone involved.

Discuss any issues with your solicitor

If anything awry pops up with your solicitor’s checks on a property you’ve had an offer accepted for, be sure to discuss this at length with the parties involved.

If it’s a deal-breaking problem, always be willing to pull out to avoid future costs. But if it’s something less severe, you can use this to re-negotiate to a price which reflects the issue.

Problems can range massively, so be sure to get an expert legal opinion on anything which raises eyebrows.

Friends Capital are here to help! Our team has vast experience helping our clients buying a property – get in touch!

Good luck with your search and we hope you find your dream home. 

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