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The Different Types of Mortgages Explained

The Different Types of Mortgage

Whether you are looking to buy a home as a first-time buyer in York, are moving home in York, or are ready to remortgage in York, you’ll quickly begin to realise there are a lot of options out there for you when it comes to taking out your mortgage.

In this article we have put together a comprehensive list of the most popular types of mortgages available to customers on the mortgage market.

If you have any questions regarding any of the mortgage options that we talk about below, then please do not hesitate to get in touch with a dedicated mortgage advisor for expert, open & honest mortgage advice in York & surrounding areas.

What is a Fixed-Rate Mortgage?

What is a Fixed-Rate mortgage? | MoneymanTV

A fixed-rate mortgage will mean that your monthly mortgage payments will remain unchanged for the duration of your mortgage term.

The length of which you want to fix your payments for is your choice, with typical choices being somewhere around 2, 3 or 5 years or longer.

No matter what happens with inflation, the interest rates or the nationwide economy, you know that your mortgage payment, which is usually a person’s single biggest outgoing, will always be routinely consistent.

What is a Tracker Mortgage?

What is a Tracker mortgage? | MoneymanTV

A tracker mortgage will serve the purpose of providing you with a mortgage interest rate that basically mimics the Bank of England’s base rate.

This means that neither yourself or the mortgage lender will set the rate and it will change as and when the base rate does. If the base rate goes up, your interest rate goes up. If it goes down, yours will go down too. Of course, this happening is beneficial to you.

You will be paying back at a percentage that is above the Bank of England base rate. If we use this in an example; Let’s say the base rate is 1% and you are tracking at 1% above base rate, that means you will be paying back your interest a rate of 2%.

What is a Repayment Mortgage?

What is a Repayment mortgage? | MoneymanTV

When you take out a repayment mortgage this means that each month you will be paying back a combination of both the interest and capital. This is the standard mortgage people think of when looking to buy a home.

Going off the basis that you are able to keep your payments going for the mortgage term duration, you will be guaranteed to have paid it off in full and own the home of your dreams by the end of it.

This is generally, across the industry and wider world, considered the most risk-free way to pay your capital back to the mortgage lender. Early on in your term, the amount you’ll be paying will be mostly the interest, with your balance reducing at a slower rate. This is especially the case if your term is 25, 30 or 35-years.

The process quickens up within the last ten years or so of your mortgage, where you will be paying back more capital than interest, with the balance reducing at a far quicker rate.

What is an Interest-Only Mortgage?

What is an Interest-Only mortgage? | MoneymanTV

Whilst we do still regularly encounter many buy-to-let mortgages being set up on an interest-only basis (this is an option that works out much better for many landlords), it is increasingly more difficult these days to get a residential property on an interest-only mortgage.

The reason for this is because once you reach the end of your term, you will still have the full mortgage amount to pay off all in one go, with no additional income to fund the amount you’re required to pay.

That being said, there are various unique circumstances where this can be a suitable option for customers, including downsizing when you are older or if you happen to have other investments you are able to use to pay back the capital.

Lenders are often incredibly strict when it comes to offering these products now and the loan to values tend to be much lower than they were in previous years.

What is an Offset Mortgage?

What is an Offset mortgage? | MoneymanTV

The way an offset mortgage works is that your mortgage lender will set you up a savings account that will work in tandem with your mortgage account.

To explain this using an example, let’s say that you have a mortgage balance of £100,000 and you deposit £20,000 is into your savings account, you will only be paying interest on the difference between those figures, which in this instance would work out at £80,000.

This can be a very efficient way of managing your finances, especially if you are wont to be paying higher rates of tax.

Rent vs Buy: The Benefits of Owning a Property in York

First Time Buyer Mortgage Advice in York

Why should I rent if a Mortgage is Cheaper? | MoneymanTV

Is renting a “wasted money?”

Such a controversial topic; some say renting your home is a waste of money and they have saved up for a housing deposit instead. In any case, not everyone has an equal chance to put their foot on the property ladder and become first time buyers in York; for some, it takes slightly longer. Here we will weigh the benefits of buying or renting a property in York. 

Discuss all possible eventualities

Speaking to one of our dedicated mortgage advisors in York before committing to purchase, they can not only find you a suitable mortgage but recommend mortgage protection insurance as well. That said, taking out a mortgage is a big commitment, and priority is finding you a fair deal to match your circumstances.

Will a mortgage be cheaper than renting?

We tend to find that for some, their mortgage payments are cheaper than the rent they were previously paying, depending on the area. Interest rates vary, which means your mortgage payments can go up and down unless you take out a fixed-rate mortgage, so your payments stay the same for a set period. On the other hand, if you are renting your landlord may choose to increase your monthly rental.

Being in control of your living arrangements

Some people enjoy the security of home ownership with no landlord telling them what they can and cannot do in the property. Whereas if you are renting, your landlord could choose to sell the property and you may have to move out.

However, in some cases, if your landlord does choose to sell the property you are renting they may offer you first refusal. As this will save time and some fees such as estate agents fees.

The Flexibility

Of course, renting is more flexible than purchasing a property. Nothing is stopping you from giving your Landlord notice to leave if you decide to move to another area.

Whereas if you own a property and decided to move you will usually have to arrange the sale, which can take time. Alternatively, you could look to rent out the property however, this will be subject to your financial position whether this is possible or not.

If you think you may not be around in an area for very long, you should consider whether it is worth buying. Buying somewhere should be viewed as a long-term investment whereas renting is a short-term investment.

Maintenance

As a tenant, your landlord should be responsible for any significant repairs. Some Letting Agents and Landlords are better than others when it comes to repairs; however, you might end up doing some minor maintenance of the property yourself, even if you are renting.

If you are a Homeowner, then all this is down to you, insuring the property will be a condition of any mortgage you take out.

How our Mortgage Advisors in York can help

Contrary to what some people might say, owning your own home is not for everyone. Suppose you are young and moving in with your partner for the first time. There’s nothing wrong with renting for a while. Unfortunately, things don’t always work out the way we plan, and it can be tough to get removed from a mortgage.

Buying a home is an enormous financial commitment, and everyone should consider all the options before diving in if you decide to rent though it may take you much longer to save up for a deposit.

Ultimately, most people decide they would prefer to buy over renting. Whether you are renting or paying a mortgage, you are making monthly payments to live somewhere, and most would rather see this go towards their benefit than someone else’s. It is sometimes just a case of getting your timing right and being in the correct financial position to proceed.

If you are looking to purchase a property in York, we are more than happy to help and offer our mortgage advice service in York.

Why are People not Overpaying Mortgages in York?

Overpaying, even by a small amount, can make such a difference to the amount on the interest you pay back during your mortgage. The sooner you start to do this, the sooner these extra payments can take effect.

Overpaying Mortgages

Most First-Time Buyers in York tend to be aware of the difference overpaying mortgages can have on the interest you end up paying back. Even if you do only overpay by small amounts. It’s also relatively well known that the earlier you start overpaying the better because the extra payments have a longer period to take effect.

Many homeowners cannot afford to make extra payments. However, it could be argued that the main reason that people end up not overpaying mortgages is that there’s always some more exciting thing you can be spending your money on!

So, if you would like to overpay what should you do?

A big part of the problem is remembering to overpay. It’s not something that’s particularly likely to cross your mind too often, except perhaps when your mortgage only has a few years left.

Therefore, we recommend setting up a standing order that’s payable to your lender each month. If you can organise that to go out on the same date as your regular mortgage repayment, the overpayments will quickly start to “feel” part of your mortgage.

A benefit of opting for a standing order is that, unlike a direct debit, you are in control, not the receiver. That means if you have a financial emergency you can quickly log into your online banking and cancel the standing order so that it doesn’t go out the next month. Whilst it’s not ideal to stop overpaying, at least you will have benefitted from the overpayments made up until that point.

Overpaying your mortgage is a great habit to get into, you don’t need to go overboard, but you’ll be pleased when you get to the end of your mortgage repayments and realise you’ve shaved off a year or two.

In some cases, lenders will let you make reduced mortgage repayments or take a payment holiday if you can demonstrate a history of overpaying. Before taking a payment break though, it’s important to check with your lender that you are eligible. Otherwise, you might end up with a negative mark on your credit report and this is something you should strive to avoid.

Mortgage Advice in York

What is a 95% Mortgage?

A 95% mortgage is as simple as the name would suggest; you are borrowing against 95% of the price of a property, and then you are covering the remaining 5% with your deposit. An example of this is if you looked at buying a property that was worth £150,000 with a 95% mortgage, you would be putting down £7,500 as your deposit and borrow the remaining £142,500 from the lender. 

95% Mortgage Advice in York

Off the back of the March 2021 Budget, Boris Johnson announced a Mortgage Guarantee Scheme for mortgage lenders, making 95% mortgages more readily available from the bigger high street banks.   

This is fantastic news for First-Time Buyers and Home Movers alike, as this scheme will continue running until December 2022. Certain terms and conditions will apply though, which is something your Mortgage Advisor in York will be able to look at, to see if you qualify.    

All our customers who opt to Get in Touch will receive a free, no-obligation mortgage consultation where one of our dedicated mortgage advisors will be able to make a recommendation on the best possible route for you to take.

Can I get a 95% mortgage?

95% mortgages are usually accessible by both First-Time Buyers in York & those who are Moving Home in York. Whilst saving for a 5% deposit sounds like a pretty straightforward concept, you’ll still need to have an acceptable credit score and prove that you are able to afford your monthly mortgage repayments, in order to access a 95% mortgage.

Improving your credit score

A good credit score is essential in the process of obtaining any mortgage, especially a 95% mortgage. Things like paying any current credit commitments on time, ensuring your addresses are updated and checking that you’re on the voters roll, can all help with your credit score.

Affordability 

Affordability is another one that is important to take note of. By giving the lender details of your income and monthly outgoings (things like your bank statements will be necessary for this) and any pre-existing credit commitments, your lender will be able to get a general overview of whether or not you are able to afford this type of mortgage.

Can my family help me get a 95% mortgage?

Nowadays we see lots of family members helping each other get onto the property ladder, especially parents looking to further their children’s lives. The way this usually happens is by gifting the person looking to find their home, the deposit required. Known through the industry as the “Bank of Mum & Dad, Gifted Deposits are only intended to be a gift, and not as a loan. The lender will need proof that this has been agreed, before it can be used towards your mortgage. 

How do I choose the right 95% mortgage?

When looking for a 95% mortgage, you want to make sure you have the right type of mortgage. Each mortgage type works differently, with that choice allowing you to find one that is most appropriate for your personal and financial situation. 

Some homeowners and home buyers prefer Fixed Rate or Tracker Mortgages, mortgage types which mean you either keep interest rates at a set amount for the term given or have your interest rates tracking the Bank of England base rates.

Alternatively, you might find that Interest-Only or a Repayment Mortgages are more your style. Interest-Only allows cheaper payments until you need to pay a lump sum at the end (mostly now used for Buy-to-Lets), whereas a Repayment mortgage (a normal mortgage if you’d like) means you’ll be paying interest and capital combined per month.

How can a bigger deposit help with my mortgage? 

Seeing as a mortgage is such a large financial outgoing, you need to be prepared and need to be aware. You might find things like higher interest rates, remortgaging difficulties due to less equity and then negative equity all cropping up if you’re not. 

There is no need to worry though, as all these can be avoided if you’re savvy enough with your process to begin with. The more deposit you put down for a property, the less risk the lender will see you as. 

A larger deposit, of say 10-15%, would not only reduce the rates of interest by a noticeable amount, but would also give the property more equity and reduce the risk of negative equity, thanks in part to you borrowing less against the property. 

So, whilst the risks may seem intimidating, planning ahead and saving for a bigger deposit to access something like a 90% or even an 85% mortgage will be a massive help in your mortgage journey and something you’ll be able to reap the rewards from in the future. 

How to Improve your Credit Score in York?

Way to improve your credit score | moneymanTV

When applying for a mortgage, having a high credit score improves your chances of being successful. But then, a high credit score alone doesn’t guarantee that the financial institution will approve your mortgage because different lenders have their internal grading system that determines the approval of mortgage applications.

Because each lender has its unique set of criteria for approving a mortgage, another could accept you if one lender rejects your application. This trial and error kind of occurrence is the reason why you need a Mortgage Advisor that can direct you to the right lender that will approve your application. A good mortgage advisor will also help you assess your chances with the different lenders and help you get the best deal.

If you want to get an explicit knowledge of your credit score, you can contact lots of credit reference agencies to know your credit scores. For people seeking mortgage advice in York, we always recommend consulting Equifax, Experian, and several other credit reporting agencies to get your credit report. It is necessary to consult more than one, just if any of these agencies make an error in your credit report.

To get a higher credit score, below are some recommendations we have for people seeking mortgage advice in York:  

Limit your Credit Search to a reasonable amount 

If you’re always searching for credit multiple times, you could ruin your credit score and chances of having your mortgage application approved. Instead of damaging your credit score with repeated searches, it is best to use approved price comparison websites to get the best prices and know what’s available for you.

The truth is, if you’d be applying for a mortgage soon, it may not be wise to do credit searches within that period. Although lenders know that you will repay your credit, they do not want you to have debts when applying for your mortgage.  

Ensure that you’re on the Voters’ Roll 

People on the voters’ roll are considered more stable and organized than people who are not, and it reflects positively on their credit score. To improve your credit score, you may need to update your current address and provide correctly every necessary information to enlist yourself on the electoral roll. This enlistment will improve your credit score, and lenders will rank you higher.

Don’t max out your credit 

Another way to improve your credit score is to know your maximum credit limit and make sure you don’t get there. Maxing out your credit limits your credit score and makes lenders regard you as one who can’t manage their resources. Lenders want only to do business with financially responsible people, so exceeding a card limit or overdraft is considered a red flag.  

Ensure to update your address history properly 

It is necessary to update your address history to ensure that your provider knows where exactly you live at a given time. Ensure that the details are correct, especially if you live in a flat- which could be quite tricky due to different address formatting.  

Terminate dormant credit accounts 

If you have old credit accounts that you no longer use, contact the providers to close the accounts. At first, lenders may be skeptical in the bid to determine if you requested for the termination or if the providers closed it themselves. However, it will be beneficial in the long run as it streamlines your credit score and protects you from fraud.  

End your financial Links to others  

If you have family, an ex-wife or husband, or any other person connected to the spending of your finances, you need to remove those links. The truth is, those links weaken your credit score without making it obvious. Reach out to reference agencies and request to terminate the connections between you and these persons. Doing this will surely improve your credit score.

Get in touch with a Mortgage Broker in York

Whether you’re a First-Time Buyer in York, looking to Remortgage in York, Moving House in York or any other kind of mortgage scenario, your credit score should always be one of your top priorities. Get in Touch with a Mortgage Broker in York and a dedicated advisor will talk you through any necessary steps for you to take.

Information on Agreements in Principle and Credit Searches

Mortgage Advice in York for First-Time Buyers

Nowadays, First-Time Buyers in York are becoming more attentive to their credit score than they used to be. The public seems to be more conscious of their credit score role in obtaining a mortgage, so most people who contact us for Mortgage Advice in York seem to have already checked their credit report.

Credit Reporting Agencies

Credit reporting agencies like Experian, Equifax, and many others have come in handy in helping people get their credit report. However, for first-time homeowners, we often recommend Check My File. They offer a 30-day free trial and monthly £14.99 subscription package, which you can cancel at any time. Check My File provides a detailed credit report arranged in color-codes for ease of reference and understanding.

When offering clients Mortgage advice in York, they always inquire to know if we will check their credit score. We understand that excessive credit search could reduce one’s credit score, so we do not do any search unless with their permission.  

What is Hard Credit Search?

A hard credit search entails detailed scrutiny of your credit report. Financial institutions should seek a client’s permission before conducting a hard credit search. Lenders always want to get a more exact and in-depth knowledge of your financial history to know if you meet their requirements.

Meeting their credit criteria after a hard credit search highly improves your chances of getting your credit approved. You need to ensure that you can provide evidentiary support of the satisfactory documentation and ensure that there is no falsification or error in the details contained therein.

The downside of hard search is that it will be indicated in your credit report, which would be evident whenever someone performs a credit search on your account in the future. This isn’t such a bad thing, but when lenders see that you have multiple credit searches on your report within a short time, they could misinterpret it to mean that you’re applying for different credits concurrently.

They may not inquire to know the circumstances that led to these hard credit searches. Instead, they may conclude that other lenders performed these searches, and after their investigations, they threw away your application, so you had to move on to other lenders.  

What is Soft Credit search?

Soft credit search only assesses your finances to know what you can afford with your available credit. It basically applies to price comparison websites and identity verification.

In recent times, some lenders prefer to conduct a soft credit search, although it doesn’t provide them as much information about a client’s financial history as a hard credit search does. However, obtaining an Agreement in Principle from the lenders is a strong pointer that your mortgage application will be approved.

The significant advantage of soft searches is that banks and other financial institutions will not see how many soft searches have been done on your account. However, the number of soft searches will be visible to only you- and you’d be amazed at how many have been carried out on your account. Since banks and lenders cannot see this information, you can apply for an Agreement in Principle for a mortgage- and it won’t damage your credit score irrespective of the outcome of the application.

Speak with a Mortgage Advisor in York

Every aspiring homeowner wants to present themselves as financially responsible individuals. Therefore, it is pertinent to explore all legal routes of improving your chances of getting the property you desire at the lowest possible price.

This is the reason why the bulk of our mortgage advice in York revolves around helping people increase their credit score and keep their record in good standing to make them attractive for lenders and other financial institutions.

Why Should I Use a Mortgage Broker in York?

Fast & Friendly Mortgage Advice in York

Why use a Mortgage Broker in York? | MoneymanTV

Your best interests at heart

First Time Buyers and Home movers in York use a Mortgage Broker to help purchase a property go as efficiently as possible. Buying a home can be a highly stressful experience, and our customers like to know they have got someone by their side, on hand to answer all their mortgage-related queries and questions. 

Our Mortgage Advisors in York will ensure you obtain the most affordable mortgage that suits your circumstances. We take complete responsibility for advising the most suitable mortgage for you and package your application to the Lender to provide you with the best chance of success. The same applies if you choose to come back to us when looking to Remortgage in Hull too, we like to know our customers are on the cheapest deal for the entire mortgage period. 

When to get Mortgage Advice in York?

We think talking to an experienced Mortgage Advisor in York early in the process is a great idea. We may help you work out what you could afford to pay and how much different Lenders will let you borrow. You would be amazed at the vast differences between each Mortgage Lenders to the maximum mortgage amount you are likely able to borrow.

Straightforward Mortgage Advice in York can play a large part. We keep all new and existing customers notified about their application’s progress by email. It’s good to know that we are also at the end of the phone when you need us, or something goes wrong during the process, our Mortgage Advisors in York can keep you updated on every step.

No Ties to Estate Agents, Banks, or Building Societies

Mortgage Brokers work for the customer, not the Lender. We are in your corner throughout your entire Mortgage journey, sometimes having to argue the strengths of an application to ensure it goes through. We understand our customers’ financial situation inside out. By requesting and checking your proof of income and bank statements well in advance of a Lender seeing them, we look to avoid any potential hurdles before we hit then carefully. 

We can also help you choose the right type of survey for your transaction and instruct a Solicitor on your behalf to carry out the legal aspects. We are experts in completing application forms on behalf of our clients to ensure accuracy and give your application the best chance of completion.  

Building Customer Relationships

Finally, a great Mortgage Advisor will love to build up an ongoing relationship with a client. It frequently starts with an affordability assessment and Agreement in Principle before even finding a house. Even after the purchase is complete, we keep regular contact via email and re-engage by phone in the six months running up to the initial mortgage product coming to its end. We then compare the market on your behalf once again to obtain the best remortgage deal available.  

Expert Mortgage Broker in York

Sales Tactics of Estate Agents & Builders

Regardless of whether you are a potential First-Time Buyer in York actively seeking out your first home or a Home Mover in York with your house on the property market, you may have noticed that some of the larger estate agents and builders would prefer that you use their in-house mortgage advisor and conveyancing services.

Estate Agent Sales Tactics For Pushing You To Take Their Mortgage Advice

We have spent many years working as a dedicated and individual mortgage broker in York. We don’t work with banks, building societies or estate agents, we work solely for the customer. As such, we do often find ourselves speaking with customers who have been pressured by some estate agents to use their own in-house financial services. Some of the stories we have heard include;

Refusal To Put Forward an Offer

Many estate agents out there have track records of refusing to put an offer forward if you choose to use a different mortgage advisor instead of their own. At times they have also refused to put offers forward to the vendor, because someone who has used their in-house mortgage advice service has also made an offer that they’d rather show favouritism towards, even if it’s lower.

Overpriced Service Costs

Another sales tactic we see often, is the estate agents quoting immensely overpriced conveyancing fees. In the past we have had clients who have unfortunately had this happen to them. One was quoted more than £1,500 for a regular purchase.

With our dedicated mortgage advisors helping out, we got this cost down. Following this, we suggested that the client use another conveyancer in the nearby area and were able to get this down to £750. That’s exactly half of the quoted price.

Demanding Information & Being Pushy

Once you’ve made an offer, you might then expect a phone call detailing whether or not you’ve been accepted. It seems like the next logical step right? However, what tends to happen with some cases, is the estate agent will call up and demand to know which conveyancer you have used.

What follows is the estate agent refusing to take the property off the market, unless you agree that you will use their own in-house service. As you might imagine, their quotations will be extortionately overpriced and completely unfair to the customers, but they will put you on the spot and make you feel like you have no choice to take enlist their services. This is something a mortgage broker in York can absolutely help you be prepared for. So the questions that need answering then are…

Are These Tactics Legal? Do I Have To Use My Estate Agents In-House Mortgage Advisor?

Absolutely not, they are highly illegal. You have the freedom to go wherever you wish when it comes to your mortgage process. You can use any broker, any conveyancing or any other financial service. It’s all down to what you would personally prefer. You are under no obligation to use the services on offer from the estate agent, as their job is simply to foresee the sale between yourself and the vendor.

Popular Estate Agent & Builder Sales Quotes Include:

  • “Keeping everything under one roof is easier with one point of contact”
  • “If you use our services it will give the vendor peace of mind that everything will go through smoothly”
  • “We will do all of the chasing of the solicitors for you and they’ll be more responsive to us due to the amount of work we send them”
  • “You need to come in and see our mortgage advisor for your offer to be qualified”
  • “Everything is likely to go through quicker if you use us”
  • “We’ll give you a free carpet/washing machine if you use our (extortionately priced) recommended conveyancing service”
  • “Your offer is more likely to be accepted if you use our mortgage advisor”
  • “We get better deals than most brokers”

Be Careful & Stand Your Ground

Always remember, when negotiating a purchase price… Is it really within your best interests for the person selling the property you’re interested in buying, to know your personal financial situation and potentially know how much you’re able to borrow in order to pay for that property? Something which they can then use against you to convince you to use their own financial services?

Stay vigilant and make sure that if you don’t want to use it, they know this and do not guilt you into a trap. It’s your mortgage, your offer, your potential home. Getting in touch with a trusted mortgage advisor in York will help you be as prepared as possible, in advance of encountering these tactics.

Why use a Mortgage Broker | MoneymanTV

Fast & Friendly Mortgage Advice in York

How Much Can I Borrow For A Mortgage in York?

How Much Can I Borrow For A Mortgage | MoneymanTV

Your income, expenditure and the lenders’ affordability calculations determine the amount you can borrow for a mortgage. Over the years, the amount that Banks have been prepared to lend for mortgages has ebbed and flowed. This can be linked to the market conditions and appetite for risk at that time.

There was a time in the mid-2000’s when more than seven times annual income may have been acceptable. However, it has also been as low as three times annual salary in the past.

Since the Mortgage Market Review of 2014, it is seldom that they apply this “multiple of salary” rule. The Lenders now look much more deeply into your personal finances before deciding how much you can borrow. Thus, the factors you need to consider are:

  • How much will the lender say I can borrow for my mortgage?
  • How do I know if it’s affordable?
  • What if interest rates go up in the future?

How much will the lender say I can borrow for my mortgage?

As mentioned above, the way lenders calculate your borrowing capacity (affordability) is now generally much more sophisticated. Lenders used to work off simple income multiples of, say three times your gross annual salary. However, nowadays they all have affordability calculators which are often quite different from lender to lender.

With increasing complexities in the way people are paid, there have been changes in what income lenders do and don’t accept. For example, if you’re in a job where you earn a lot of overtime or bonus or commission, some lenders will take much more of this into account than others; some lenders will take certain benefit income such as child tax or working tax credits into account where others won’t.

Similarly, if you’re Self-Employed in York or own a limited company, lenders will assess your income in different ways. This can result in the same customer being assessed to have widely varying affordability levels from different lenders.

Finally, factors such as the product that you want to take and the term of years you want to borrow the money over can all impact upon the overall affordability. Lenders will also deduct regular outgoings such as personal loan payments, maintenance payments or credit card bills from your salary. Thus, whilst many lenders or brokers will have a “rule of thumb” this is just a quick guideline. Therefore, you should always check with your mortgage broker for more accurate figures based on your specific circumstances.

How do I know if it’s affordable?

Lenders generally aren’t daft. They don’t want to be seen to be lending you more money than you can realistically afford which could put you under unnecessary financial strain. Therefore, if you pass a lender’s affordability calculator that’s a pretty good indicator that you should be OK.

That said, we’ve already seen that the assessment of affordability can vary significantly between lenders, so it’s always worth completing your own budget planner to ensure that you have the security of knowing that, whatever the lender may say, you’ve done your own assessment. Remember, owning your own home is not just about paying the mortgage.

Factor in associated costs such as council tax, utility bills and any other committed payments such as personal loans or insurance premiums and your regular food and drink bill at the supermarket. Be realistic and include everything that you’ll want to retain in order to maintain your chosen lifestyle.

Deduct your other outgoings from your monthly pay and, if what you have left is more than enough to meet your mortgage payments, then you should be OK. If it’s not, you have a choice; either make savings or sacrifices from your outgoings in order to help you buy the home you want, or look for something smaller!

What if interest rates go up in the future?

The UK has seen an unprecedented period of interest rate stability in recent times. It is over seven years since the Bank of England has amended its Base Rate but with recent events many people fear the uncertainty that may come with future rate increases. If you complete a budget planner, you should be able to gain some idea of how much you can afford and you could, therefore, factor in possible increases to ensure your mortgage will be affordable both now and in the future.

If you’re in any doubt, the key to future stability can be found in fixed-rate mortgages. As the name implies, the rate you pay, and thus your monthly repayment, is fixed for a defined period of time. Generally speaking, the longer you fix for, the higher the rate (and monthly repayment) is likely to be, but you might consider that to be a price worth paying for the peace of mind it brings.

What is a Gifted Deposit Mortgage in York?

When it comes to Gifted Deposits, we often find that we are asked lots of questions. Below we will answer these questions in the simplest way we can, so you’re more up to speed when it comes to the mortgage process.

What is a gifted deposit?

Your gifted deposit can be either the full amount or a portion of the deposit gifted by someone who is able to confirm, with an agreement that you do not need to pay the gifter back in the form of a loan.

How can gifted deposits help?

Gifted Deposits are incredibly useful when customers have enough money for their monthly repayments but can’t afford the initial deposit for their home. You may also open yourself up to better rates if you are able to put down more deposit.

A Gifted Deposit can also be really helpful if you’re on a lower salary and can afford the monthly mortgage repayments but are unable to save your deposit upfront.

Who can gift the deposit?

Generally speaking it is your parents who can gift you the deposit, though this can be extended beyond just birth parents, to adopted parents and legal guardians. You may see this mentioned online as the “bank of Mum & Dad”.

You do have the possibility of using other family members for a Gifted Deposit, though this completely depends on individual lenders, so would require care when trying to find the right mortgage lender.

Do your parents know you need help?

We commonly find that clients aren’t aware that their parents can help with their mortgage, or don’t feel like they can approach them and ask for help. In truth, most parents are extremely willing to help their children get onto the property ladder.

Statistically, taking out a mortgage works out better than renting, due to you being able to potentially pay less per month on a property. Gifted Deposit can often come from inheritance, although parents have been known to gift it earlier on in life if they have saved enough already or have released a certain amount of equity from their own home.

Gifted deposit vs loans

Most lenders won’t accept a loan as a method of paying for your deposit, as this is an additional credit commitment and leaves the lender with uncertainty that you’d have enough disposable income to pay back both the loan and the mortgage at the same time.

Is there a maximum or minimum gifted amount?

There is no maximum limit on the amount of gift you can receive, though there are lenders out there that will insist that you put in at least 5% deposit from your own savings.

Who can benefit from a gifted deposit?

The people who benefit the most from this tend to be First-Time Buyers in York and Home Movers in York. It can also be useful when in conjunction with the Help-to-Buy Scheme, as the required 5% deposit, depending on the lender, can be paid via a gifted deposit.

What proof is required?

The majority of lenders will require a gifted deposit form. Depending on the lender, you may be asked to provide additional proof and ID (things like donor ID or bank statements).

Yorkmoneyman.com & Yorkmoneyman are trading styles of UK Moneyman Limited, which is authorised and regulated by the Financial Conduct Authority.
UK Moneyman Limited is authorised and regulated by the Financial Conduct Authority.
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