Mortgages

Overview of our Mortgages services

A mortgage is typically the most substantial financial commitment you’ll undertake in your lifetime, representing a significant long-term investment in your future. The mortgage market offers a diverse array of products, each with its own specific features, catering to different financial situations and preferences.

The variety of mortgages available includes fixed-rate mortgages, where the interest rate remains constant throughout a set period, and variable-rate mortgages, where the interest rate can fluctuate based on the market. Additionally, there are interest-only mortgages, where you only pay the interest each month and repay the principal at the end of the term, and repayment mortgages, where you pay both the interest and part of the principal in each installment.

Tailored guidance

This wide range ensures that there are options to suit different budgets, lifestyles, and future plans. For instance, some might prefer the predictability of fixed-rate mortgages for budgeting purposes, while others might opt for a variable rate with the possibility of lower payments.

Furthermore, the terms of these mortgages, including the length of the loan and the size of the down payment, can vary significantly, affecting the overall cost and affordability of the mortgage. It’s crucial to understand the implications of each type of mortgage and how it aligns with your financial goals and capabilities.

Given the complexity and variety of mortgage products, seeking advice from a financial advisor or a mortgage broker can be invaluable in navigating the mortgage landscape and choosing the best option for your unique circumstances.

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Bridging Finance

A bridging loan is taken out to ‘bridge’ the gap between the purchase of a new property and the sale of an existing one.

In detail…

Some bridging finance is not regulated by the financial conduct authority.

A bridging loan is taken out to ‘bridge’ the gap between the purchase of a new property and the sale of an existing one.

Loans are generally short-term and secured on the existing property, but repaid as soon as this is sold.

‘Bridges’ may help you secure your new property, but you should be aware that they can be expensive and if the sale of your existing property falls through, you will be left paying two loans at once.

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Buy to Let Mortgages

These types of mortgages are designed for property investors and private landlords, who do not intend to live in the purchased property but will let property to tenants.

In detail…

Mortgages of this nature are specifically tailored for property investors and private landlords, whose primary objective is not to reside in the purchased property themselves, but rather to rent it out to tenants. Known as buy-to-let mortgages, these financial products are an essential tool for individuals looking to invest in the property market, whether they’re expanding their portfolio or stepping into property investment for the first time.

Buy-to-let mortgages differ from standard residential mortgages in several key ways. Firstly, the eligibility criteria and affordability assessments are based primarily on the potential rental income from the property rather than the borrower’s personal income. This is because the rental income is expected to cover the mortgage repayments.

Additionally, these mortgages often require a higher deposit compared to standard mortgages, typically around 25% of the property’s value or more. Interest rates and fees may also be higher, reflecting the perceived higher risk associated with rental properties.

The appeal of buy-to-let mortgages lies in their ability to facilitate property investment, allowing landlords to leverage rental income for property acquisition and maintenance. They enable investors to generate income, benefit from any potential property value appreciation, and expand their property portfolio.

However, it’s important for potential borrowers to consider the various responsibilities and risks associated with being a landlord, including property maintenance, tenant management, and adherence to legal and regulatory obligations. Furthermore, market conditions, interest rate fluctuations, and changes in property demand can impact the profitability of rental properties.

Due to the complexities and financial implications of buy-to-let mortgages, seeking advice from financial advisors and mortgage experts can be invaluable in making informed decisions and understanding the long-term financial commitments and implications of such investments.

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Buying a Home

Before you choose a specific deal, you need to decide what type of mortgage is the most appropriate for your needs.

In detail…

Before selecting a specific mortgage deal, it’s crucial to determine which type of mortgage best aligns with your financial situation and future goals. This decision is a fundamental step in the home-buying process, as different types of mortgages cater to varying needs and circumstances.

The primary types of mortgages include fixed-rate mortgages, where the interest rate remains constant for a set period, providing predictability in your monthly payments; and variable-rate mortgages, where the interest rate can change, making your payments potentially fluctuate over time. Within variable-rate mortgages, there are further subdivisions, such as tracker mortgages, which follow an external interest rate (usually the Bank of England’s base rate), and standard variable rate (SVR) mortgages, where the rate is set by the lender.

Another consideration is whether to opt for an interest-only mortgage, where you only pay the interest each month and repay the principal at the end of the mortgage term, or a repayment mortgage, where you pay both interest and part of the principal throughout the term.

It’s also important to consider the mortgage term, which is the length of time you have to repay the loan. Longer terms can result in lower monthly payments but might increase the total amount of interest paid over the life of the mortgage. Conversely, shorter terms typically involve higher monthly payments but reduce the overall interest paid.

In addition, you should assess factors such as the size of your deposit, your credit history, and your long-term financial stability. These factors can influence the types of deals you’re eligible for and the rates you’ll receive.

Given the complexity and long-term commitment involved in choosing a mortgage, consulting with a financial advisor or mortgage broker can provide valuable insights. They can help you navigate the mortgage landscape, understand the pros and cons of different mortgage types, and find a deal that is tailored to your specific needs and financial situation.

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Equity Release

Equity release can help people release cash (equity) in their homes for a particular purpose, like supplementing retirement income.

In detail…

Equity release is a financial solution that allows homeowners to access the cash value (equity) tied up in their homes, typically to support specific financial needs such as enhancing retirement income. This option is especially useful for individuals who are asset-rich but cash-poor, meaning they own valuable property but don’t have much liquid capital.

There are primarily two types of equity release: lifetime mortgages and home reversion plans. In a lifetime mortgage, you borrow money against the value of your home, retaining ownership, and the loan along with the accumulated interest is repaid when you sell the property, move into long-term care, or pass away. On the other hand, home reversion plans involve selling a part or all of your home to a provider in exchange for a lump sum or regular payments, while continuing to live there rent-free.

Equity release can provide a substantial financial boost in retirement, offering an additional income stream or a lump sum to cover expenses such as home improvements, medical bills, or even to provide financial assistance to family members. It can also be a strategy for managing debts or improving the overall quality of life during retirement.

However, it’s important to consider the implications of equity release carefully. These schemes can reduce the value of your estate and may affect your eligibility for means-tested benefits. The interest on a lifetime mortgage, for example, can quickly grow over time, reducing the equity left in your home.

Given these complexities, seeking professional financial advice is crucial. A qualified advisor can help you understand the terms and risks, and whether equity release is the best option for your individual circumstances. They can also guide you through the range of products available, helping you to make an informed decision that aligns with your financial goals and needs in retirement

First Time Buyers

People buying their first home often have specific needs when it comes to finding a mortgage. A range of mortgages exists specifically for this market sector.

In detail…

Individuals venturing into homeownership for the first time typically encounter unique requirements and challenges in securing a mortgage. Recognising this, the financial market offers a diverse array of mortgage products specifically tailored to meet the needs of first-time homebuyers.

First-time buyers often require more guidance and support in navigating the mortgage process, as it can be complex and daunting. They might also be looking for mortgages that require a lower deposit, given that saving for a substantial down payment can be one of the biggest hurdles for new entrants in the property market. Additionally, first-time buyers may benefit from mortgages with more favourable terms, such as reduced fees or more flexible repayment options, to make homeownership more accessible and affordable.

There are several types of mortgages that cater to this market sector. For instance, some mortgages are designed for buyers with smaller deposits, offering higher loan-to-value ratios. Government-backed schemes, such as Help to Buy or Shared Ownership, can also be advantageous, providing additional support to those who may struggle to access traditional mortgage products.

Furthermore, certain lenders might offer incentives to first-time buyers, like cashback deals, free valuations, or contributions towards legal fees, which can make the initial stages of buying a home more manageable.

Given the range of options and the significance of the decision, first-time homebuyers are encouraged to seek comprehensive advice from mortgage advisors or financial experts. This guidance can help them understand the array of products available, assess their affordability, and choose a mortgage that aligns with their financial circumstances and homeownership goals. Professional advice can also assist in navigating the application process and understanding the long-term financial commitment they are undertaking.

Flexible Mortgages

With options for overpayment and payment ‘holidays’, a flexible mortgage can make the traditional 25-year British mortgage look rather old-fashioned.

In detail…

A flexible mortgage offers modern features such as the ability to make overpayments and take payment ‘holidays’, which can make the traditional 25-year British mortgage appear somewhat outdated. This type of mortgage is designed to adapt to the changing financial circumstances of the borrower, offering a level of control and adaptability that is not typically found in standard mortgage products.

With the option to overpay, borrowers can pay more than their regular mortgage payment when they have extra funds available. This flexibility can significantly reduce the overall interest paid over the life of the mortgage and potentially shorten the mortgage term. In times of financial surplus, such as receiving a bonus or inheritance, this feature can be particularly beneficial.

On the other hand, payment holidays allow borrowers to take a break from making mortgage payments during financially challenging periods, such as during a career change, parental leave, or short-term financial setbacks. However, it’s important to note that interest will continue to accrue during these breaks, which could increase the total amount payable over the term of the mortgage.

Furthermore, some flexible mortgages may offer other adaptable features, such as the ability to withdraw funds (borrow back) against overpayments made, which can be useful for unexpected expenses or opportunities.

Despite these advantages, it’s crucial for potential borrowers to carefully consider whether a flexible mortgage is right for their circumstances. While the additional features offer greater control over mortgage payments, they also require the borrower to manage their finances responsibly to benefit fully from the flexibility provided.

Due to the complexities and potential implications of choosing a flexible mortgage, seeking advice from a financial advisor or mortgage specialist is advisable. They can provide insights into how a flexible mortgage can fit into your overall financial plan and help you understand the terms and conditions associated with these more adaptable mortgage options.

Help to Buy and other government-backed schemes

The government has put in place a number of schemes to support house purchasers, such as Help to Buy.

In detail…

The government has implemented several initiatives aimed at assisting individuals in purchasing homes, with programs like Help to Buy being among the most notable. These schemes are designed to make homeownership more accessible, particularly for first-time buyers and those struggling to enter the housing market due to financial constraints.

Help to Buy, for instance, includes an equity loan option where the government lends buyers a portion of the home’s purchase price, reducing the required deposit and making mortgages more attainable. Additionally, there are versions of Help to Buy that offer shared ownership opportunities, allowing purchasers to buy a share of a property and pay rent on the remainder, which can be particularly helpful for those unable to afford the full purchase price.

Other government schemes include the Lifetime ISA, which helps individuals save for their first home by offering bonuses on the amounts saved, and the Right to Buy program, which enables eligible council and housing association tenants to purchase their homes at a discount.

Furthermore, the government has also introduced initiatives like the Stamp Duty Land Tax relief for first-time buyers, which reduces or eliminates the stamp duty payable, making the initial costs of buying a home more affordable.

These schemes reflect the government’s commitment to supporting homebuyers and addressing the challenges faced in the housing market. However, it’s important for potential buyers to thoroughly understand how these schemes work, their eligibility criteria, and the long-term financial implications of participating in them. Seeking advice from financial advisors or housing experts can provide valuable insights and guidance, helping buyers to make informed decisions and select the best option for their circumstances and homeownership goals.

New mortgage rules (NMR)

The financial services industry regulator, the Financial Conduct Authority (FCA), has set out a new set of rules for mortgage advisers, and lenders, to improve the process of getting a mortgage.

In detail…

The Financial Conduct Authority (FCA), serving as the regulatory body for the financial services industry, has recently introduced a new set of regulations aimed at mortgage advisers and lenders. These rules are designed to enhance the overall mortgage acquisition process, making it more efficient, transparent, and consumer-friendly.

This regulatory update focuses on ensuring that mortgage advisers and lenders adhere to higher standards of practice. The aim is to ensure that consumers are provided with advice that is not only accurate and reliable but also tailored to their financial situations and long-term needs. By implementing these rules, the FCA intends to foster a more responsible lending environment, where the risks and benefits of different mortgage products are communicated and understood.

The new regulations also seek to streamline the mortgage application process, reducing unnecessary delays and complexities. This includes improving the clarity of information provided to consumers and ensuring that mortgage products are suitable for their financial circumstances. Lenders are expected to conduct thorough affordability checks, ensuring that borrowers are not overstretched and can manage their repayments comfortably.

Furthermore, the FCA’s rules aim to encourage innovation and competition among lenders and advisers, potentially leading to more favourable mortgage terms and a wider range of products for consumers. This could result in better interest rates, more flexible repayment options, and products that cater to diverse needs, such as first-time buyers or those with irregular incomes.

These measures demonstrate the FCA’s commitment to protecting consumers in the mortgage market and enhancing the integrity of the financial services industry. For consumers, it’s important to be aware of these changes, as they can have significant implications for the mortgage application process and the types of products available. Engaging with FCA-regulated advisers and lenders ensures that consumers are working with professionals who are compliant with the latest standards and practices.

Offset Mortgages

An offset mortgage enables you to use your savings to reduce your mortgage balance and the interest you pay on it.

In detail…

An offset mortgage enables you to use your savings to reduce your mortgage balance and the interest you pay on it.

For example, if you borrowed £200,000, but had £20,000 in savings, you would only be paying interest on £180,000.

Offset mortgages are generally more expensive than standard deals, but can reduce your monthly payments, whilst still giving you access to savings.

Remortgaging

Remortgaging means switching your mortgage to another deal with another lender without moving property.

In detail…

Remortgaging refers to the process of transferring your existing mortgage to a new deal with a different lender, while continuing to reside in the same property. This financial strategy is often employed by homeowners who are looking to take advantage of more favourable mortgage terms than those offered in their current arrangement.

The decision to remortgage can be driven by various factors, such as the opportunity to secure a lower interest rate, thereby reducing monthly payments and potentially saving a significant amount of money over the long term. Additionally, remortgaging can be a strategic move to adjust the terms of a mortgage – for instance, switching from an adjustable rate to a fixed-rate mortgage for more predictable monthly payments, or altering the mortgage term to either pay off the loan sooner or reduce monthly outlays.

Remortgaging also provides an opportunity to release equity from your property, which can be beneficial for funding home improvements, consolidating debts, or investing in other ventures. As property values increase over time, homeowners might find themselves with substantial equity in their homes, which can be accessed through remortgaging.

However, it’s important to consider potential costs associated with a remortgage, such as exit fees from your current lender, arrangement fees for the new mortgage, and legal costs. These expenses can sometimes offset the financial benefits of a new mortgage deal.

Given the complexities involved, it is advisable to consult with a financial advisor or mortgage broker before deciding to remortgage. They can provide expert advice on the best mortgage options available based on your financial situation and future goals, ensuring that the decision to remortgage is both financially prudent and aligned with your long-term plans.

Second Charge Loans

Second charge loans can be secured against residential or Buy to Let properties.

In detail…

Second charge loans can be secured against residential or Buy to Let properties. They are provided by specialist lenders and are generally short-term loans secured against the property, but where the lender has second call on the property if the borrower defaults.

Second charges tend to be more expensive than ‘firsts’, but can still be the best option for people seeking to raise capital – but whose main lender is unwilling to provide further finance, or where expensive early redemption charges would be incurred.

Self Build Mortgages

These are mortgages suited to people building a new home. With a self build mortgage, money is released in stages as the build progresses.

In detail…

Self-build mortgages are specialised financial products specifically designed for individuals who are constructing their own homes. Unlike standard mortgages, where the total loan amount is typically released in a single lump sum upon completion of the property purchase, a self-build mortgage disburses funds in stages, aligned with the progress of the building project.

The phased release of funds in a self-build mortgage is a key feature that helps manage the financial demands of construction. Payments are typically made at significant stages of the build, such as laying the foundations, erecting the roof, and completing the internal and external works. This staged release helps to ensure that funds are available as needed for each phase of construction, reducing the financial burden on the builder and minimizing the risk for the lender.

Self-build mortgages are beneficial for those who wish to have a hands-on approach in creating their dream home from scratch or for those undertaking significant property renovations. They offer the flexibility to design and build a home according to personal specifications and preferences.

However, it’s important to note that self-build mortgages often require a larger deposit compared to standard mortgages, and the interest rates might be higher due to the perceived higher risk. Additionally, lenders may have specific requirements regarding planning permission, building regulations, and insurance for the project.

Given the complexity and unique nature of self-build projects, potential borrowers should carefully plan their construction budget and schedule. Seeking advice from a financial advisor or a specialist in self-build mortgages can provide valuable insights into the process, help navigate the various stages of loan release, and ensure that the mortgage aligns with the specific needs and timeline of the build.

Any more questions? Feel free to send us a message.

We advise in the following areas.

Mortgage Advice | Life Insurance/Protection | Investment Advice | Pensions and Retirement Planning | General Insurance

CONTACT US

Rodway Financial Services| Sarah Rodway | 11 Adams Way Berry Hill Coleford Glos. GL16 7RQ
Phone: 07557 306356 | Email: sarah@rodwayfs.co.uk

DISCLAIMER

Your home may be repossessed if you do not keep up repayments on your mortgage

The Financial Conduct Authority (FCA) does not regulate some forms of mortgage

Rodway Financial Services is a trading name of Cripps Financial Planning Limited which is authorised and regulated by the Financial Conduct Authority

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The information on this website is subject to the UK regulatory regime and is therefore targeted at consumers in the UK.