Tag Archives: mortgage advice

The mortgage process – what’s involved

Mortgage process

Sarah Logeswaran, a first-time buyer from London, recently sent Springtide Capital some positive feedback as follows:

“Springtide Capital’s extensive knowledge and experience, coupled with their approachable and friendly nature, really eased me through the process of purchasing my first home.”

We thrive on feedback at Springtide Capital, as it helps us to continually improve the service we offer.  We’re thrilled that Sarah was happy with the high level of service she received and it’s something we strive for with all our clients, as we know that getting a mortgage is one of the most stressful things you can go through. We’re proud of the service we give and that’s why we’d like to help new clients to understand what they can expect from us when purchasing their first property.

Henry Knight, Director of Springtide Capital has also provided his tips on key broker qualities.

  1. The initial meeting

A client’s perspective: The client initially approaches Springtide Capital to obtain a mortgage for a property they have set their sights on. Although the majority of clients are savvy with their finances, the mortgage market is baffling and clients often require guidance on what they can afford and the types of mortgages available. Non-advised sales of mortgages are now not available so a client must seek financial advice.

Moreover, clients usually prefer face-to-face meetings with a broker, rather than a call centre adviser, due to the private nature of the questions, which must be answered. It also provides the client with more options, as the broker isn’t tied to a specific lender, and gives them a point of contact to guide them through the mortgage process.

A face-to-face meeting is then arranged and our Mortgage Consultant will go through their client’s requirements, financial situation and explains the application process and the types of mortgages available.

Springtide Capital’s perspective: The mortgage industry is heavily regulated, and it’s vital that the Mortgage Consultant can demonstrate (document) that any recommended mortgage fits his/her client’s personal circumstances and is affordable in the event of rate rises – protecting the client.

Henry’s tip: “A mortgage consultant should take the time to understand a client’s circumstances on the first meeting. They must then clearly explain the process and then make sure the client understands the financial commitment they’re undertaking.”

  1. The key facts documents

A client’s perspective: The client will then receive a Key Facts Illustration (KFI) document, explaining, in detail, the type of mortgage recommended (including interest rate, the overall Annual Percentage Rate of Charge (APRC), the monthly payment and any fees), the total amount payable over the term of the mortgage and next steps they’ll go through if they wish to proceed.

Springtide Capital’s perspective: This is where our Mortgage Consultant’s experience really comes into play. Using all of their knowledge of the market, regulation and lender relationships they will have researched the deals available that best fits the client’s needs before issuing a KFI. They will also take into account any additional challenges that the client may face when applying for the mortgage e.g. any restrictions they might have that could make getting a mortgage difficult and place the business with lenders who specialise in such cases.

Henry’s tip:“A mortgage consultant should have an in-depth understanding of the mortgage market in order to find a mortgage which best fits the client’s circumstances. They also need to know how to structure a proposal to a mortgage lender especially where the client’s circumstances are outside of the standard criteria.“

  1. The Agreement In Principle (AIP)

A client’s perspective: The client is given an AIP by the lender and details are sent out to read and discuss with the Mortgage Consultant. The client can then place an offer on the property. Once the offer on the property is agreed, our Mortgage Consultant will then submit a formal application with full information to the lender.

Springtide Capital’s perspective: This is a crucial part of the process as an AIP is only based on information provided by the client. To obtain a mortgage the Mortgage Consultant must then evidence the facts provided by his/her client e.g. proof of income, bank statements etc. It’s then vital that everyone in the process is kept up to date with progress until exchange of contracts and money is transferred from the lender. This is often the most stressful part of the mortgage process and that’s where our Mortgage Consultants really come into their own. They will liaise with their client, the lender, solicitor and estate agent to ensure that all the documentation is received and will often be the first point of contact if things don’t go as smoothly as planned. They will work hard with all parties to make sure their client gets the resolution they need, with as little hassle as possible.

Henry’s tip:“A mortgage consultant should keep all parties updated with progress, whether they are the client, lender, estate agent or solicitor. They should be available throughout the process and proactively resolve any problems that crop up.”

 

If you would like to speak to a Springtide Capital mortgage broker please call

020 3040 4400.

Gross mortgage lending down 5% year-on-year

Henry Knight, Director, Springtide Capital

Henry Knight, Director, Springtide Capital

According to the latest Council of Mortgage Lender’s (CML) market commentary, gross mortgage lending reached £20.6 billion in October, which is a decrease of 5% year-on-year.

Report highlights also included:

  • Economy holding up better than expected
  • Monetary Policy Committee (MPC) left interest rates unchanged

THE ECONOMY

Economic data has now revealed that the UK’s post-referendum economic landscape is stronger than expected.

The Office for National Statistics (ONS) reported that the economy has grown by 0.5% compared to the three months to June. In addition, the ONS also reported that unemployment rate fell to 4.8% and that inflation has dipped to 0.9%. In response to this, the Bank’s November Inflation Report, expects inflation to reach 2.7% by the end of 2017.

The Monetary Policy Committee (MPC) voted to keep the interest rate at 0.25%.

HOUSING MARKETS

Gross mortgage lending in October totalled £20.6 billion and is 5% lower than October last year (£21.8 billion).Gross lending for the whole of 2016 will be between £240-245 billion, which would represent a 10-12% rise compared to 2015.

Better than expected, house purchase approvals reached nearly 63,000, prompting the Bank of England to revise up its forecast for approvals from 56,000 to 65,000.

Finally, tightened affordability criteria and recent stamp duty changes have meant softer buy-to-let activity overall. The mix of lending has slowly moved towards remortgage activity, accounting for 40% of lending against a third in recent years.

Henry Knight, Managing Director, Springtide Capital added: “It’s great to finally see data detailing that the UK’s economy is stronger than expected as this will perhaps allay fears of economic uncertainty in the market. However, the lack of available properties now seems to be compounded by subdued home-mover activity meaning demand continues to outstrip supply.”

Commenting on market conditions in this month’s market commentary, CML senior economist Mohammad Jamei said:

“The housing market has continued to fare better than many expected, with survey indicators still painting a relatively positive picture. The Royal Institution of Chartered Surveyors survey showed demand holding up well.

“The problem is that this demand is still not being met with a supply response. New instructions to sell have fallen, or been relatively flat for more than three years now. This has led to the average number of properties per surveyor falling to its lowest level for nearly 40 years.The impact of this is that it limits the number of potential transactions, as well as pushing up prices, as the relatively few properties up for sale are bid up by a growing number of buyers.”

If you would like to speak to a Springtide Capital mortgage broker please call 020 3040 4400.

 

Source: https://www.cml.org.uk/news/news-and-views/market-commentary-november-2016/

Mortgage lending hits £20.5 billion in September

 

According to the latest Council of Mortgage Lender’s (CML) market commentary, gross mortgage lending reached £20.5 billion in September, which is an increase of 2% in comparison to the same month last year.

Report highlights also included:

  • Lending figures bolstered by re-mortgage activity
  • Economic recovery
  • Interest rates may not be cut again soon

THE ECONOMY

The industry is waiting for hard data detailing the impact of the referendum and how the UK economy, in particular, gross domestic product, is fairing. The National Institute of Economic and Social Research’s estimate, which is due out soon, includes these figures and we’re eager to see if their estimate of 0.4% will be accurate and will signal an economic recovery.

As a depreciated sterling value has pushed up import prices, inflation has risen to 1% and will most likely hit the Bank of England’s 2% target by the end of 2017.

The CML reported that: ” It is not clear whether the Bank will move to cut rates as it comes down to whether the medium term outlook in November is judged to be broadly consistent with the August Inflation Report projections. While short-term indicators looks more positive, the Bank will be looking further down the line to make its decision.”

HOUSING MARKETS

The Royal Institution of Chartered Surveyors survey has recently reported an increase in new buyer enquiries for the first time since February this year. However, there continues to be a lack of properties for sale. The housing white paper (outlining housing plans until 2020) is due by the end of this year and will hopefully address this pressing issue.

House purchase approvals fell to a 21 month low, with just over 60,000 approvals in August, however, this is still more positive than the predicted 56,000.

Buy-to-let mortgage lenders have been tightening affordability criteria in anticipation of the forthcoming interest tax relief changes in April 2017 and the Prudential Regulation Authority’s stress tests, which come into effect in January 2017.

Henry Knight, Managing Director, Springtide Capital commented: “Gross mortgage lending is mainly bolstered by re-mortgage activity at present, most likely driven by extremely competitive mortgage rates. However, as advisers, we’d like to see house purchases moving in the right direction too, which means increasing the supply of affordable properties.

“We anticipate that buy-to-let landlords will take advantage of current regulation prior to changes in criteria in 2017, which may distort lending figures a little in coming months.”

Buy-to-let mortgage applications are changing

 

The mortgage industry is set to see another regulatory change in the new year, with a recent announcement detailing new rules that mortgage lenders will be required to adhere to when considering a buy-to-let application.

In view of the announcement, we’ve provided a summary of the changes, the exceptions and an opportunity for landlords to call on Springtide Capital’s expertise to take advantage of the current regulations.

THE REGULATORY ANNOUNCEMENT

The Prudential Regulatory Authority (PRA) has recently announced regulatory changes to the way that lenders assess buy-to-Let mortgage applications. These changes will be implemented by lenders before January 2017 and may affect your ability to obtain a buy-to-let mortgage, the amount that you can borrow and the information you will need to supply.

THE CHANGES

All buy-to-let lenders require that the rental income of a property covers the mortgage payment plus a margin to cover other costs. Calculated as a percentage, this is called the Interest Coverage Rate (ICR) and is the main focus of these latest changes:

  • Going forward, lenders will require a minimum ICR of 125% and will base their ‘stress test’ calculations on an interest rate of at least 5.5%, regardless of how low the interest rate you have secured actually is.
  • Additional costs such as agency fees and council tax etc. will be included in the ICR calculations, as well as changes to income tax liability due to the reductions in interest relief between 2017 to 2020.
  • There is an exception on 5yr+ fixed rate products as these can be stress tested at 125% of pay rate and the ICR can also be topped up using a personal income affordability test.

In addition to changes to the way that the ICR is used, lenders may subject landlords with four or more properties to a ‘specialist and proportionate’ underwriting approach.

THE EXCEPTIONS

Some individual circumstances fall outside of the new regulations, including:

  1. Remortgages of buy-to-lets with no additional borrowing (apart from any added lender or admin fees).
  2. Those with an income in excess of £300k income and/or £3,000,000 in net assets.

THE EXPERT VIEW

Henry Knight, Managing Director, Springtide Capital, commented:“We have seen in the past that when these kind of regulations are recommended, the majority of lenders will exceed the minimum requirements to ensure they are not seen to be too close to the “minimum” allowed.  We have already seen a number of lenders move their ICR to 145% with a 5.5% interest rate stress test and we envisage that a number of those still at 125% are likely to increase further.” 

ACT NOW TO TAKE ADVANTAGE OF THE CURRENT REGULATIONS

It is difficult to know exactly where the lenders will end up, however there is a window of opportunity to act now to review your portfolio growth strategy and ensure you can benefit from a more relaxed stance before the new rules have to be implemented. Our experienced advisers are available to discuss the above changes in more detail with you and provide advice to suit your individual circumstances.

To speak to one of our Mortgage Consultants today, call us on 020 3040 4400 or email info@springtidecapital.com

Five tips for applicants of £1m loans

Fast forward eight years and we find ourselves, if not in a financial crisis, certainly in times that are more cautious when it comes to lending people large amounts of money. In view of this, we’ve used our combined knowledge at Springtide Capital to put together five helpful tips to assist mortgage applicants.

A buoyant housing market

Home buyers are faced with a housing market which remains buoyant, despite Brexit, with only a marginal slowdown in housing price growth. That together with a lack of housing supply, means that an increasing number of mortgage applicants seek lending in excess of £1m.

Although banks still have the appetite to lend large amounts of money, they are understandably cautious, so it pays for applicants to be aware of the hoops they may be expected to jump through.

  1. Be prepared to prove your income

Those seeking large mortgages often derive their income from multiple sources, which is not as straightforward as those who only have a single income stream. This added complexity may mean that borrowers looking for larger loans will be required to provide additional paperwork to allow the lender to assess affordability.

Our mortgage consultants will help the applicant to find suitable mortgage lenders who are more likely to lend to those with complex income streams – saving time and disappointment.

Tip: allow extra time and have your paperwork in order.

  1. …and outgoings

Affordability is a key criteria for lenders irrespective of the size of loan. High outgoings or loan to value ratios can be concerning to some lenders and may result in a mortgage application being stopped in its tracks.

However, some lenders are more flexible and have specialist underwriting teams for larger mortgages. This means that they are in a better position to understand the complex situations of wealthy clients – and our team of mortgage consultants already have strong relationships with these lenders so know how to access the best solution for our clients.

Tip: carefully document all outgoings prior to making an application.

  1. Beware of arrangement fees

Some lenders charge much higher fees for arranging large loans. These fees can sometimes run into tens of thousands of pounds for arranging mortgages of £2million or more.

Tip: check the arrangement fees with our mortgage consultant.

  1. Consider private banks

Another option our mortgage consultants will consider is using private banks for large loans. They can sometimes offer the best interest rates for loans of £1m+ but they do often require the transfer of assets under management in order to secure those rates. (Sometimes this can be as much as 50 per cent of the loan value.)

Tip: increase chances of success by considering all lenders.

  1. Use a specialist mortgage broker

Using the services of a specialist mortgage broker can greatly ease the process of applying for a large mortgage. From the uncertainty of which lenders to consider, how to present income and outgoings, or eligibility for the best rates – a specialist mortgage broker can help.

A mortgage broker specialising in large loans will often have pre-existing relationships with both high street and private banks. This means that they know exactly what information lenders need when considering a mortgage application, but they can also negotiate on behalf of their clients to access deals that would otherwise be unavailable.

Tip: use the expert services of a mortgage broker.

If you’re looking for a mortgage of £1m plus get in touch with our mortgage consultants at Springtide Capital today to find out how we can help.