Mortgage Dimensions: Personal Service - Professional Advice - No Fee

Your questions answered

How do I know which is the best mortgage for me?

If you are approaching lenders directly, this is a question that you will find hard to resolve. Information on mortgage products is readily available on the high street, in the press, and on the internet, so it's not hard to find out what's on offer direct to the public. But approaching a lender direct means you will be told only about that lender's own particular mortgage schemes. Equally, mortgage advisers or mortgage consultants in an estate agency may be able to tell you only about the mortgage products of a particular company or a limited number of lenders. You may therefore find you receive advice that is limited, biased, or contradictory.

The mortgage market is both complex and vast - with over 35,000 thousand mortgages and 400 lenders, so it can be very confusing. It is also extremely competitive and constantly changing, with new products being launched, existing ones changed or withdrawn, and rates and terms changing too. In this context, choosing the mortgage that meets your particular needs can take a huge amount of knowledge, time and research. In this context, it is worth considering the time, effort and, potentially, money that could be saved by seeking the professional advice of a mortgage broker.

Some brokers deal only with a restricted number of lenders and will therefore only be able to make a recommendation from a limited range of mortgage products. For a wider choice of options, and a better chance of finding one that's more appropriate to you, it is important to seek the services of a professional who is qualified to advise on the whole market.

A mortgage broker who has access to the full range of over 400 lenders and 35,000 mortgage products will use their expert knowledge of the wider mortgage market and specialist software to search for all those that match your requirements. They will then identify those most appropriate for your circumstances and make an objective recommendation, giving you the best chance of ending up with the mortgage that is right for you.

The provision of mortgage advice is regulated by the Financial Services Authority, and brokers have to be approved, professionally qualified, and operate within a strict code of conduct. They will use their specialist knowledge to recommend the mortgage or mortgages that they believe best meets your needs, and are required to demonstrate how their recommendation does so. They will therefore explain how and why they have selected a particular mortgage option or options, and give you all the information you need to help you make an informed choice.

back to top

How can you provide your service without charging a fee?

The increasing complexity and competitiveness of the mortgage market, means that fewer people are approaching lenders direct for a mortgage, and are turning to professional mortgage advisers instead. Lenders now receive a substantial proportion of their business through 'intermediaries' like mortgage brokers, who receive a fee from the lender for the introduction.

Unlike some brokers who charge a fee to clients in addition to receiving this 'introducer's fee', at Mortgage Dimensions we make no charge for our service. Instead we rely on the payment from the lender and the recommendation of satisfied clients to sustain our business. (The amount of fee received from the lender cannot influence the broker's recommendation in terms of mortgage lender or product, as they must be able to demonstrate to the Financial Services Authority that it was the most appropriate option based on their client's specific needs and circumstances.)

Can I get a mortgage agreed before I find a property?

You can obtain a 'mortgage in principle' before you start house-hunting to show estate agents and sellers you are a serious prospective buyer. By supplying your broker or lender with all the required information, you can receive what is effectively a conditional offer of the loan you have requested, based on the information you have supplied and your confirmed income. When you have found a property you can make a formal application, and once the valuation has been carried out you will receive a formal offer.

How do I prove my income?

If you are employed, most lenders will want to see your latest P60 and payslips covering the last three months, or they may write to your employers instead or in addition.

If you are self-employed, most lenders will ask for audited accounts covering the last three years trading. If you have not been in business that long or you do not have audited accounts, they may accept an accountant's certificate. Alternatively you could consider a self-certification mortgage, where you state your income but the lender will not ask for evidence.

Lenders differ in their requirements for income confirmation, and a mortgage adviser will be able to recommend those lenders and schemes that cater best for your individual circumstances.

What is a self-certification mortgage?

Self-certification mortgages are designed to cater for people who are self-employed, or employed on a fluctuating income, and have difficulty in proving that their earnings are enough to make the payments on the mortgage they are applying for. This could be because they have not been trading for long enough, they rely on more than one job, or they rely on bonuses, commission or overtime for a large part of their total pay.

There are an increasing number of specialist lenders who are prepared to offer innovative solutions like self-certification to people in these situations who require a more flexible approach. In certain circumstances, rather than requiring proof, lenders will rely on the applicant's own assessment of income, which must be stated in a signed declaration on the mortgage application form. This is known as 'self-certification'.

back to top

Are there any restrictions on who lenders will give a mortgage to?

As well as meeting lenders' requirements in terms of satisfactory credit history and sufficient income to make the monthly payments, there are some other criteria you will need to meet to be eligible for a mortgage. You must be at least 18 years old, and have the right to reside and work in the UK, at least for the duration of the mortgage. You will also need a satisfactory credit history as a credit check will be undertaken. Normally mortgage lenders recommend that the mortgage does not extend beyond your retirement, usually taken to be 65 if you are employed, and 70 if you are self-employed.

back to top

Will previous arrears, a County Court Judgement or bankruptcy mean I can't get a mortgage?

A poor credit history involving arrears, CCJs, bankruptcy or IVA, will limit the number of lenders willing to accept you, and the number of options available to you, but does not mean you will not be able to get a mortgage. A growing number of lenders will accept varying degrees of 'adverse' business on certain terms and will look at each individual case on merit. Your mortgage adviser will be able to recommend the most appropriate scheme for your particular circumstances.

back to top

What is a credit reference and credit scoring?

Although they are often confused, credit referencing and credit scoring are two different things.

Credit referencing is the process by which lenders will search the database of a credit reference agency, such as Equifax or Experian, to check whether there is any record of late payments, arrears or defaults (such as a County Court Judgement) against you. This may affect your mortgage application, especially if you have not declared them to your mortgage adviser or the lender. A poor credit history does not necessarily mean that you cannot get a mortgage, but it may restrict your choice of scheme or lender, so it is always worth being totally honest and open about your credit history when asked.

You can see your credit report at www.experian.co.uk/creditreport.

Credit scoring is a process used by some, but not all, lenders to assess your creditworthiness. It works by awarding 'points', depending on your answers to the questions on the application form. The questions are designed to help the lender to predict how big a risk it is taking by allowing you to borrow the amount you have requested. If your total score reaches a certain level, then you 'pass' the credit score, and your application can be accepted. If you don't score enough points, the lender may turn down your application, or may accept it only on certain terms.

back to top

What are the additional costs in taking out a mortgage?

Costs will vary depending on the particular mortgage product you select, but in general these are the costs you need to be prepared for:

  • Valuation fee - based on value/purchase price according to the lender's scale of fees, and payable on application.
  • Booking fee - depending on the type of deal, and payable on application.
  • Arrangement fee or administration fee - depending on the type of deal, and usually paid on completion or added to the loan.
  • Legal costs - solicitors fees, plus costs to cover legal searches and Land Registry fees.
  • Stamp Duty - a tax on the value of property, paid on the sale of properties over £120,000.
  • Higher Lending Charge - payable on loans over a certain percentage of value, depending on the mortgage product and lender, and usually added to the loan.
  • Mortgage broker's fee - charged by some intermediaries and payable on application. (Mortgage Dimensions does not charge a fee for their service.)

For a fuller explanation of what the costs are for, please refer to 'the costs involved'

These are the costs directly connected with the mortgage itself. In addition you will need to budget for buildings insurance, and for life assurance, contents insurance, and accident, sickness and unemployment insurance if any of these are taken. (Mortgage Dimensions can provide a personalised, no-obligation quotation on request - call 0845 021 0212)

back to top

What is an 'early repayment charge'?

Depending on the mortgage product you choose, if you terminate it before the terms of the particular deal would normally allow, it is normal for the lender to make an 'early repayment charge'. Equally, if you want to make a capital repayment before the terms of the deal allow, you may find you have to pay an 'early repayment charge'.

Early repayment charges are usually imposed on fixed rate mortgages or discounted rate mortgages that offer a relatively cheap rate for an initial period. They will also be found on cashback or capped rate mortgages. They usually run only until the end of the initial offer period. However, some mortgages impose 'extended' early redemption charges or 'tie ins' that continue even after the special rate has ended and you have moved back onto the lender's standard variable rate.

Avoiding a mortgage with an extended repayment charge or tie in allows you to keep your options open at the end of the special rate period and move to a more competitive deal without incurring an expensive penalty.

What is a Higher Lending Charge and do I have to pay it?

A Higher Lending Charge is a one-off charge payable when the loan you apply for exceeds a certain percentage of the purchase price or value, whichever is less. In these circumstances, the lender may take out an indemnity from an insurance company to protect them from the risks of lending a high percentage of the property's value. If your property has to be repossessed by the lender in the future and is sold for less than the amount you owe, the policy allows them to recover the shortfall from the insurer. The Higher Lending Charge covers the cost of this policy.

Some lenders will pay the premium themselves and not pass on the cost, but the majority will pass the cost on to the borrower on loans over 90% of value. Where they do charge, the cost can usually be added to the loan. However, there is a wide variation, with some lenders not charging it at all, while others may charge it on loans as low as 70% of value.

back to top

Why does the lender need a valuation of my property?

The lender will need a valuation of your property to ensure that it offers them adequate security for their loan. Their valuation is purely for mortgage purposes, and their valuation report does not make any warranties as to its condition, or that it is worth what you are paying for it.

back to top

What are the different types of survey?

There are basically two types of survey:

Homebuyers Survey - a fairly detailed report that includes information about the condition of a property that is visibly evident, together with any essential repairs, and highlights any urgent and important matters before you commit to buying it. The report is arranged through the lender and can be used by them for mortgage purposes as it will contain a mortgage valuation. The fee is payable with your mortgage application and is based on a sliding scale of charges relating to the property's purchase price or anticipated value. Although it costs substantially more than a basic lender's mortgage valuation, it is more informative and, as it includes a valuation for mortgage purposes, you do not have to pay for this separately.

Full structural survey - a more technical report commissioned by you for your own information and should detail all the obvious defects in a property and repairs required, as well as advising about likely repairs in the future. It contains a market valuation but not a mortgage valuation. As it is for your own purposes the lender will not be able to use it for mortgage purposes, and will instruct a mortgage valuation by their own valuer. You will have to pay for the cost of this, at the time of making your mortgage application, as well as for your structural survey.

The Royal Institution of Chartered Surveyors (RICS) provide more information about what to expect from a survey report at www.rics.org.

back to top

What is conveyancing?

Conveyancing is the legal work involved in buying and selling a property, and is carried out by a solicitor or legal conveyancer. It is important to have appointed a solicitor before your offer on a property is accepted by the seller, as the estate agent handling the sale will ask for their details at that stage.

Some solicitors will quote a fee in advance, whilst others will charge a standard fee, although they will have to charge more if the case is particularly complex. They will also add to their bill any other expenses such as stamp duty, land registry charge, and Local Authority search fees.

To assist you with buying or selling your property, Mortgage Dimensions can recommend a choice of reputable firms providing legal services.

back to top

What happens to my mortgage if I want to move?

When you are planning to move it is an ideal time to speak to a mortgage adviser about your new mortgage requirements and find out what is now available on the market. Your existing mortgage will need to be repaid and, depending on the scheme you are on and at what point in the mortgage term you are moving, you may have pay an 'early repayment charge'. If your new mortgage is to be with the same lender, they may waive some or all of this charge.

back to top

What if I want to pay off my mortgage early?

Depending on your particular mortgage scheme and lender, you may have to pay an 'early repayment charge' for paying off your mortgage early or to switch to another lender within a certain period. Where they do apply, these charges will be clearly set out in your formal mortgage offer. If you have a flexible mortgage, it will allow early repayment without penalty.

back to top

Can I make lump sum payments of capital to my mortgage?

Some mortgage schemes allow you to make a lump sum capital payment, but you should check with your lender or mortgage adviser, as with some mortgage products, particularly a fixed or discounted rate, you may have to pay an early repayment charge during the initial offer period, or possibly even longer.

back to top

What if I want to change my mortgage or something about it, after I've taken it out?

Generally speaking, lenders will normally let you change from interest only to capital and repayment and vice versa, or possibly the mortgage term, but you should always check. If your lender allows it, they may charge an administration fee for the work involved.

back to top

What if I can't afford to make my monthly payment?

If you are in financial difficulty, the first thing you should do is let your lender know. As long as they understand your situation and you are co-operative, they will do all they can to help you find a solution. If you keep them involved and informed, they will be able to work with you to develop a plan for dealing with the situation and for clearing any arrears that may have arisen. If you do nothing, your home could be at risk.

(If you have taken out a policy to cover your mortgage payments in the event of illness or redundancy, depending on the circumstances, you may be able to claim on the policy.)

back to top

Do I always need life assurance?

Some mortgage lenders may insist you take out some form of life assurance, or even offer you a life policy of their own. However, they cannot insist that you take theirs.

A life assurance policy may well be advisable in a number of cases, but we can offer an independent view and recommend suitable alternative insurance products and providers where appropriate. We can provide competitive quotations for you from a number of companies, and make the necessary arrangements to put your policy in force.

back to top

What outgoings do I need to include on my mortgage application?

You do not need to include normal outgoings such as utility bills and general household expenses. However, you do need to include any credit or loan commitments that will continue under the new loan, or maintenance payments to an ex-spouse or children. If these show up on a credit reference search and have not been disclosed it will cause delay while the lender queries it, so it as well to declare them at outset.

back to top

What does the lender need to confirm my identity?

The lender will require evidence of both your identity and your address. For a typical mortgage application the documents we might need include:

  • Your passport or UK driving licence - to confirm your identity
  • Your driving licence - to confirm your address (where it is not used to confirm your identity)
  • A recent utility bill at your address dated within the last 3 months - to confirm your address.

back to top

What are Shared Ownership and Shared Equity?

Shared Ownership

Shared Ownership schemes were originally designed to enable those who cannot afford to buy a property outright to get onto the property ladder. Although the schemes themselves now come under the umbrella of the Government's new HomeBuy initiative, the underlying principles of shared ownership have been transferred to the new schemes.

'Shared ownership' works by enabling you to buy a share in a property through a 'social landlord' (usually a housing association), whilst paying rent on the remaining share you do not own.

The amount of share you buy will depend on your savings and income and may vary between 25% and 75%, but is usually 50%. As your financial circumstances improve, you can buy more of the share if you want to (based on the current market value) and could eventually own the property outright. Even though you do not own the property outright at the outset, you do have the normal rights and responsibilities of a full owner-occupier.

The share you purchase is funded by a mortgage, and the remaining share is rented from the social landlord. Your monthly outgoings will therefore include repayments on any mortgage you take out, plus rent to the social landlord for the share of the property owned by them. The higher the share you purchase, the less rent you will have to pay.

The traditional shared ownership schemes are now replaced by a new range of low-cost homeownership products branded HomeBuy.

For more information and to find out if you are eligible contact your local Housing Association - go to www.housingcorp.gov.uk for a list. You can also find out more at www.direct.gov.uk and www.communities.gov.uk.

Shared equity

Shared Equity is another way of helping people afford a home of their own. The Housing Association assesses your overall level of affordability and sets you an upper purchase price limit. You are given an interest-free grant of 25% towards the purchase price and you raise the balance of 75% by way of a mortgage, or a mortgage plus savings. The 25% 'interest' in the property is retained by the Housing Association - with no payments to be made on it - until the property is sold, at which point they take back 25% of the sale price. This is known as an equity loan.

For more information and to find out if you are eligible contact your local Housing Association - go to www.housingcorp.gov.uk for a list. You can also find out more at www.direct.gov.uk and www.communities.gov.uk.

back to top

enquire online
0845 021 0212

help yourself to our mortgage tools