Which mortgage lender is right for me?
Everybody is different and everybody's circumstances are different so equally there are different lenders that are more suitable to certain people.
Because finding the right lender is as important as finding the right property the process of looking for property and the right lender should go hand in hand. By looking at your mortgage requirements first means that you will get a good idea as to the budget you have regarding your property and by completing a preliminary application form for your mortgage first will mean you can get an "in principle" agreement to the loan from your lender. The lender will carry out all the checks on your income, employment and financial background and tell you how much it is prepared to lend subject to the value of the property you want to buy. By having an offer in principle before making an offer for your property may give you an advantage over those without.
At one time building societies were the only providers of mortgages in the UK. But with banks and specialist providers entering this competitive market has meant that the building societies share is now just under 20% . Building societies are mutual, ie, they are owned by their savers and borrowers and so any profits made are ploughed back into the business since there are no shareholders. This should mean that rates offered by Building Societies should be lower since there is no pressure to perform for their shareholders and thus profitability is not their main issue.
Banks on the other hand have been increasing their share of the UK mortgage market in recent years, this in part due to some largeR building societies changing their status from mutuals into banks, for example Abbey National now known as Abbey and Halifax. Banks in the past have been conservative in their approach and more cautious in their lending practices than building societies, particularly in setting their interest rates, redemption periods and any penalties these may incur. Banks have seen the competition from Building Societies increase and have had to become more competitive to regain any lost business which they have managed to do and today they can offer some of the most competitive deals available.
There has been a recent increase in specialist lenders who focus on particular areas of the market. For example Kensington Mortgages and UCB Home Loans specialise in non-standard loans, providing mortgages specifically for the self-employed and those with poor / adverse credit histories. These lenders are often small enabling them to be flexible and quick to develop new products and services and they generally have very different lending criteria to leading banks and building societies. Each specialist mortgage is underwriten seperately and their interest rates are often higher than standard mortgages available in the high street.
Intermediaries include mortgage brokers and independent financial (IFAs) and are used to help find the right mortgage product for its customers. An Intermediary can be a great source of independent advice and impartial information and are able to discuss and offer more than one company's products. However not all intermediaries are independant and some only offer a particular company's mortgage and or life policy since thay are tied to a particular lender / insurance company. All intermediaries must be authorised by the FSA who regulates their activities.
What other charges will I have to pay?
There are a number of charges you can expect to pay when you buy a home. Here are the most common, although as just mentioned many lenders will now offer deals where charges are waived or at least minimised.
This is an administrative fee charged by the lender to cover the cost of setting up the mortgage. Some lenders are now waiving this fee as part of their incentive package and many brokers do not charge this fee anymore.
All lenders will require a valuation of the property you are looking to purchase. So a survey to verify what the property is worth is carried out by a qualified surveyor and is paid for by the borrower. The fee will vary depending on the price of the property and what type of survey you instruct.
Lenders will require a survey to be made on the house. There are different grades of surveys and your lender will expect the standard survey to be carried out. You may wish to take out a more in depth structural survey. It can save you money if you arrange for the valuation and survey to be carried out at the same time by the same surveyor and lenders do have special deals when using their surveyor.
The legal aspects of the buying/selling process must be undertaken by a solicitor or conveyancer. There are no set guidelines when it comes to fees for this work and it pays to shop around, there are now companies offering a nationwide service at competitive rates where you can track the process via the internet.
Searches are carried out by your solicitor or licensed conveyancer with regard to planning for the area. They should stop you having any surprises post sale, such as finding that a new ring road or hospital is about to be built close by.
Stamp duty is a tax paid on the purchase price of your new home. There are no stamp duty charges for properties under £120,000 or £150,000 in disadvantages areas, 1% is charged for properties over these figures and under £150,000, 3% for properties costing more than £250,000 and 4% for those valued at more than £500,000.
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