What do I need to apply for a mortgage?

The specifics vary from lender to lender, but in general, to apply for a mortgage, you will need to prove your identity, your income and your typical monthly expenditure. This is so the lender can assess how much you can afford to borrow.

How do I prove my income to a lender?

Most lenders will want to see three months of payslips and/or a P60 as evidence of your salary and typical bonuses, overtime and commission. If you are self-employed, expect to need to produce two years of evidence, including your SA302 self-assessed tax return forms.

What sources of income are relevant to a lender?

In addition to your income from employment or self-employment, don’t forget other sources like pensions, state benefits, tax credits or income from fostering. You can prove these with a recent letter from the pension provider or relevant government department.

How do I prove my expenditure to a lender?

Most lenders will want to see three months of bank statements to assess your expenses and spending.

Do I need to pay a fee to get a mortgage?

Some lenders will charge a fee to apply for a mortgage, whether you end up taking it out or not. Some will charge a fee when you take out the mortgage. You may also need to pay a fee to the broker who set up the mortgage, for a valuation survey, and for other administrative costs.

What does it mean to redeem a mortgage?

A mortgage is “redeemed” when it is fully paid off, either when you naturally reach the end of the loan term, when you sell the house and use the proceeds of the sale to pay off the remaining loan, or because you have decided to remortgage with a different lender.

Do I need to pay a fee to redeem my mortgage?

A lender may charge an exit fee when you redeem your mortgage, especially if you are repaying early because you are selling the property or remortgaging with another lender. The size of the fee is usually based on the amount of the loan outstanding when you redeem.

What is negative equity?

Negative equity is the situation where your property is worth less than the remaining amount of the mortgage. This can happen if the value of your property falls faster than the rate you are paying the mortgage off, and will make it difficult for you to sell the property or remortgage.

What is a buy-to-let mortgage?

When you want to buy a property to rent it out to someone else, rather than living in it yourself, you need a special type of mortgage called a buy-to-let mortgage.

A mortgage is a type of loan you can use to buy a home, without having all the cash upfront. The money will be loaned to you for a specified term (usually 25 years) and you will make a repayment each month. The loan is secured against the property, which means your can lose your home if you do not keep up repayments on the mortgage.

How much can I borrow?

The amount you can borrow depends on the amount you have saved for your deposit, your income and your spending. As a rule of thumb, lenders will allow you to borrow between 4 and 5 times your annual gross income, i.e. your total income before tax.

Can I borrow more if I apply with a partner?

If you apply for a joint mortgage, for example with your partner, the lender will take the sum of both of your incomes to make a decision on how much to lend. Generally this means you can borrow more than if either of you applied alone.

How much deposit do I need to save?

Each lender will specify their maximum loan-to-value ratio, or LTV, which is the maximum percentage of the property price they will lend. You need to pay the remainder as a cash deposit. So for example, if your lender’s maximum LTV is 90%, you need to save at least 10% of the property’s value, plus some extra to cover the costs associated with moving.

What is an agreement in principle?

An agreement in principle, sometimes called a mortgage promise or a decision in principle, gives you an indication of how much you could borrow before you apply for a mortgage. It’s not legally binding, and the amount offered could change following a detailed assessment of your income and spending, credit rating and other factors.

Why is an agreement in principle important?

Having an agreement in principle signals to estate agents and their sellers that you are a serious buyer.

What is the difference between fixed and variable interest rates?

When you agree a fixed interest rate with your mortgage lender, the interest rate (and thus the monthly payment) will stay the same for a period of time, regardless of what happens in the wider economy. Most variable rate mortgages track the Bank of England base rate, which means your interest rate and the amount you pay each month will change (up or down) if the base rate changes.

What is the difference between capital repayment and interest-only mortgages?

With a capital repayment mortgage, your monthly payments will pay off part of the loan each month as well as paying the interest, which means the mortgage will be fully repaid by the end of the term if you keep up your repayments. With an interest-only mortgage, your monthly payments only cover the interest on your loan, which means the loan itself isn’t repaid over time. You will need to find another way to repay the capital (the loan amount itself) in full by the end of the loan term.

What is conveyancing?

Conveyancing is the legal process of transferring ownership of a home from the seller to the buyer. The process starts when the buyer’s offer is accepted and finishes when they receive the keys. A solicitor (or conveyancer) is usually instructed to carry out the conveyancing process, although occasionally the home-mover may do it themselves.

How long does conveyancing take?

The average time taken for the conveyancing process is currently around 20 weeks, although this can vary according to various factors such as the length of the chain, the time it takes to receive local authority searches , whether the sale is through probate, and many other things.

What is the "Help to Buy" scheme?

“Help to Buy” is a government scheme that can help you to buy a new-build home without a large deposit. The government will loan you part of the deposit, and you take out a help-to-buy mortgage to cover the rest. The government loan is usually interest free for the first five years. This scheme came to an end on 31st March 2023.

What is a mortgage guarantor?

A guarantor is someone who agrees to cover your mortgage payments if you are unable to keep up with the payments yourself, but who will not own a share of the property. For example, this might allow your parents to help you buy a home, even if you have no deposit or if your financial circumstances would otherwise put lenders off.

What is the "Right to Buy" scheme?

The Right to Buy scheme offers council and housing association tenants a discount off the market price of their home, if they want to purchase the home from their landlord.

What schemes are available to make buying a home more affordable?

There are a range of government and private schemes available to make buying a home more affordable. Government schemes include the Mortgage Guarantee Scheme, Shared Ownership and First Homes. You can learn more about each one and which could be right for you here .

Why do I need buildings insurance?

Buildings insurance covers the cost to repair damage to the structure of your property. Most mortgage lenders will insist you have buildings insurance from the date of exchange of contracts until either you sell the property or repay the mortgage.

Why do I need contents insurance?

Contents insurance covers the cost of replacing household items if they’re stolen or damaged by an event like fire or flood. Since a contents policy covers your possessions, it is entirely your decision whether to take one out or not.

Why do I need life insurance?

Life insurance will pay out a sum of money if you die, and sometimes if you are seriously ill or injured. This can be used to pay off a debt like a mortgage, rather than leaving your dependents (children) to inherit the debt.

Do I need my own survey?

A lender’s valuation survey is not particularly comprehensive and will often not involve anyone visiting the property in person, so you should not rely on it for anything other than valuation.

Why does my lender need a survey?

When you apply for a mortgage, the lender will usually carry out a valuation survey to ensure it is worth the agreed price.

How do I find a property?

Most people start their property search on one of the popular online portals, such as Rightmove, Zoopla or OnTheMarket.

What are pre-contract enquiries?

Enquiries are questions about a property, raised by the buyer’s solicitor to the seller’s solicitor. They are an important part of legal due diligence to ensure that any potential issues are dealt with before contracts are exchanged.

What are pre-completion searches?

Pre-completion searches are requests made to the Land Registry, which prevent charges being registered against the property between exchange and completion .

What are property searches?

Searches are questions about a property, raised by the buyer’s solicitor to relevant authorities. They look into local planning proposals, flood risks, water supply and sewage, among other things, and depend on the area you’re buying in. They are an important part of legal due diligence to ensure that any potential issues are dealt with before contracts are exchanged.

Completion is the point at which ownership of the property is formally transferred from seller to buyer. The seller must vacate on or before this point, and the buyer may then have access.

What is exchange of contracts?

At exchange of contracts, buyer and seller exchange signed contract documents, which means both sides are then in a legally binding agreement to complete the deal, with a completion date fixed for moving. The buyer’s deposit is usually transferred to the seller at the same time. If you are in a chain of transactions, everyone in the chain normally exchanges contracts on the same day, which means the entire chain can be held up if one transaction is not ready to exchange.

What is a Structural Survey?

A Structural Survey is a survey produced by a qualified structural/civil engineer (with the relevant professional indemnity cover) which assesses and diagnoses structural defects in a property and recommends structural repair works. There are 2 types of Structural Survey, Basic and Full which offer differing levels of detail. Whilst a Basic Structural Survey is sufficient for most residential properties, a Full Structural Survey provides the most comprehensive analysis of a property’s structure and condition and is a good choice if you are buying a property over 50 years old, of unusual design, or in poor condition.

What is an RICS Home Survey?

In an RICS Home Survey, an RICS professional conducts a visual inspection of the property. Their report provides an account of the property’s condition and highlights any problems using a ‘traffic light’ rating. There are 3 levels of survey. A Home Survey level 1 is the most basic (and cheapest) type of survey aimed at modern properties in good condition. A Home Survey level 2 is the most common and suitable for conventional properties which are in reasonable condition. Level 3 is the most comprehensive survey suitable for large, older or run-down properties, which may be unusual or altered.

What is a restrictive covenant?

A restrictive covenant is a legal agreement, written into the title deed , that limits what you can do with your property. These might include things like preventing you from making certain alterations to the property.

Offers and negotiation

Making an offer

How do I make an offer?

If an estate agent is marketing the property on behalf of the seller, you must make your offer through the agent. You will tell the estate agent the price you are willing to pay, along with your “buying position”, i.e. whether you need to sell another property to buy this one. Further negotiations are also conducted via the agent.

Does an estate agent have to pass on my offer to the seller?

In short, yes. By law, estate agents have to pass on every reasonable offer they receive to the seller. The only exception would be if they know in advance that your offer is outside of the seller’s acceptable range, and therefore will be rejected anyway.

Can I change my offer?

If you make your offer “subject to contract”, you can renegotiate it at any point until exchange of contracts.

Can someone else make an offer after my offer has been accepted?

Yes, they can. The agreement to sell a property only becomes legally binding at exchange of contracts, which usually happens several weeks after the offer has been accepted. To reduce the risk of someone else making an offer, you can ask the seller to take their property off the market once they have accepted your offer.

What is a Reservation Agreement?

A Reservation Agreement is a legal agreement, implemented at the point an offer is agreed, that allows buyers and sellers to commit to each other and guarantee the sale. If either party pulls out of the transaction prior to exchange of contracts, they are required to pay a penalty to the other party, as per the terms of the agreement. EverKnock’s VIP pack has a Reservation Agreement built-in to give buyers and sellers complete peace of mind.

Gazumping

What is gazumping?

Gazumping is when someone else makes a higher offer on a property after an offer has been accepted, forcing the original proposer to either increase their offer or pull out of the sale.

Can I avoid being gazumped?

To avoid gazumping, buyer and seller can enter into a lock-out or reservation agreement, which is a contract giving the buyer an exclusive right to purchase the property within a specified timeframe. The seller would then have to pay a penalty if they pulled out of the sale. These agreements are built into EverKnock’s VIP packages to give buyers and sellers complete peace of mind.

Can I protect against being gazumped?

Buyers can purchase home buyers’ protection insurance, which allows you to claim back money you have spent on conveyancing fees, survey fees and other costs in the event of being gazumped and losing the property you are purchasing.

Is gazumping legal?

Yes: there is a strong argument that gazumping is unethical, but it is totally legal. A property sale only becomes legally binding at exchange of contracts, so it can be cancelled or renegotiated at any point before that.

Gazundering

What is gazundering?

Gazundering is when a buyer lowers their offer at the last moment before contracts are exchanged, hoping to force the seller to accept the lower price.

Is gazundering legal?

Yes: there is an argument that gazundering is unethical, but it is totally legal. If a buyer makes an offer “subject to contract”, the price can still be negotiated at any point until exchange of contracts. This is normally done to allow renegotiation if a survey finds a problem with the property, but it also enables gazundering.

Buying position

What does it mean to be in a chain?

When a home buyer must sell another property to finance the purchase, usually because they are moving house, the two property transactions become linked into a chain. If any one of the linked transactions is delayed or falls through, the entire chain is delayed or collapses.

What is a cash buyer?

A cash buyer is someone who can buy a property solely with cash, i.e. without any kind of mortgage or loan, and without depending on the funds from the sale of another property.

What is a chain-free buyer?

A chain-free buyer is someone who can buy a property without needing to sell another property to finance it. All first-time buyers are also chain-free buyers, because they don’t have another home to sell.

Offers and negotiation

Making an offer

Gazumping

Gazundering

Buying position

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