This is a brief guide to some of the mortgage criteria for mortgages in the current market part 1 credit reports.

 

 

This is a brief guide to some of the mortgage criteria for mortgages in the current market part 1 credit reports.

Mostly all mortgage underwriting by a lender will be firstly guided by your credit profile, so the first step before approaching a Broker or mortgage lender directly is to apply for a full credit report.

You have many choices when applying for a credit report, there are 3 main credit score, report suppliers in the UK that are used by lenders.

Experian

Equifax

Tran’s union (formerly Call credit)

Credit reports: what information is included?

 

Some of the information held in your credit report will come from banks, building societies and credit card companies you have borrowed from in the past, or that you currently owe money to. Other facts on your credit file may come from publicly available sources (such as the electoral register) or be supplied by utility companies.

 

 

What's included?

 

Your name, address and date of birth

 

Whether you are on the electoral roll at your current address

 

How much you currently owe lenders

Any late payments on existing or past credit card or loan accounts

Any missed payments on existing or past accounts

Any County Court Judgments (CCJs) made against you

Whether your home has been repossessed or you have moved away owing money

Whether you have been declared bankrupt or entered into an Individual Voluntary Arrangement (IVA).

 What's not included?

The amount of money in your current account

your salary

Savings accounts

Student loans

Criminal record

Medical history

 

Parking or driving fines

Council tax arrears

It is possible to dispute anything that you do not agree with on the credit report, if you really believe is an error, E.G things like incorrect name spelling, incorrect address details, missed payments that you don’t agree with, an incorrect default on the report etc. You can write to the relevant agency to dispute the entry if it is disputing something that is negatively impacting your credit profile sending proof of why it’s wrong would be needed for your claim to be successful . They will have 28 Days from your request, to tell you it has removed the entry or not, the entry on your file will be marked as disputed and resolved or not.

If the credit reference agency does not amend the file. It is possible to add what’s known as a 'notice of correction' (up to 200 words) to your file. This can be used to explain why you think a particular piece of information is wrong or to highlight any mitigating circumstances – for example, a sudden bereavement that may have caused you to miss a credit card or loan repayment.

There are many places you can get your credit report from these 3 agencies , there are a fair few of them that offer free access to the full report , for example https://www.moneysavingexpert.com/creditclub/ from this link you can access the full credit report from Experian for free . So it’s worth doing some searching on Google to find one that offers a free or one that offers a free trial for the initial first month for the agency you need the report from.

 

 

 

What mortgage lenders are looking for?

It is a myth that, all lenders are just looking for a good score, lending is mainly based on factors that should reflect in your score but often do not.

1.      Voter’s role information, do you show at the address on the report as per what is required as a minimum address declaration which is 3 years for most lenders.

2.      Is the name and date of birth on the report matching the name and date of birth on your ID passport, driving licence etc? If it’s doesn’t match it could cause problems applying for the relevant mortgage unless it is corrected as mentioned above on how to get it corrected.

3.      The payment profiles the zero, and numbers that show how many payments late you are on a credit item, if it shows all zero’s then it means you haven’t missed any payments as far as the credit report is concerned. High street lenders usually have a cut off for how many credit accounts you can have with missed payments, with some lenders having a zero tolerance for any missed payments.

4.      Defaults, usually once a credit account reaches 8 missed payments, it will show as a default, if you have a current default this could mean you are not acceptable to a vast amount of lenders and could require you to approach a lender that accepts adverse credit. If a default has been paid off then it will show as paid off on the report and will be looked on more favourably by the potential lender.

5.      County court Judgments, this is when the credit item has reached default and no acceptable arrangement has been made with the credit item provider and they have taken this matter to court, the court has then made a judgment that will appear on your file in the credit providers favour , this will usually , include the amount owed plus fees for the court and interest , it will vastly reduce your choices of lenders if you have a county court judgement , the more recent it is the harder it makes applications for a mortgage . Subprime lenders do have written criteria on what they will accept; this is when it would be advisable to approach a knowledgeable mortgage broker who would know what lender to try for you. It will make a difference if the county court judgement has been satisfied by paying it off, the report will reflect the date that this has happened.

To be continued part 2 income multipliers used by mortgage lenders.

 

 

What would happen if a buyer cannot complete, before the current Coronavirus stamp duty deadline.

 

 

This year’s stamp duty holiday for purchase up to £500k, that was introduced by the Chancellor to help invigorate the housing market after the first UK lockdown has been a great success and has actually caused a mini property boom. The issue currently is that it is time limited currently until March 2021. When Chancellor Rishi Sunak announced in July that no stamp duty would be payable on property purchases up to 500k, people who were not thinking about moving immediately decided to make the move sooner as it’s an offer that is too good to miss . Property investors who were on hold since the introduction of the additional 3% second property duty, now had the chance to buy and only pay the 3% second property duty but not the stamp duty due on a standard purchase up to 500k added to it . People who wanted to transfer a property into another person’s name could now do this up to 500k value duty free. 

This has caused a massive movement in the property market, but not without issues, some of the issues are listed below.

 1. Properties being purchase with a mortgage are being in a lot of cases delayed due to an increased amount off applications going into the lenders in such a short space of time , so queue’s to underwriters are forming with as much as 10 to 14 working days for a case to be even looked at for initial assessment . Then if the Underwriter looks at the case but needs more information back it goes into the queue for possibly another 10 to 14 days. 

2. Properties bought with a mortgage, after the first lockdown lenders have severely toughened underwriting criteria, especially for self employed people and definitely for self employed or employed for that matter in the Hospitality sector of the UK.

 3. The increased hunger for property has increased prices immediately and people are fighting over the same property in many circumstances, so savings on stamp duty are being eroded by increased demand and people are not even considering this until it gets near to completion.

 4. In the South East, many councils are being swamped by requests for searches, many councils are still operating with reduced staff numbers due to Covid 19 and searches are backing up to as long as 2 or 3 months in some councils, if the property is being bought by a mortgage waiting for a search is mandatory, at some stage this will push some buyers past the stamp duty deadline. So what happens if the purchase goes past the March 31st current deadline, then currently under the rules even if the purchase started before this date the normal stamp duty rates will apply, this has caused a lot of anxiety and calls for the holiday to be extended later into 2021, there are rumours that this could happen and be announced early next year but so far they are only rumours plus watch this space .

Getting a mortgage in the pandemic

 

When the Lockdown in March 23rd came into effect, everything went into a pause, people were days away from completing their purchase and the lender put a stop on releasing funds, some were told that once lockdown was eased the funds would be made available to them again and the mortgage offer would be extended until that time, this was mostly the case with large high street lenders, Santander, Halifax etc. Some were told that their case would need to go through some light underwriting to enable the lender to extend the offer; this was to establish if the applicant’s circumstances would be adversely affected by the lockdown or if they would be left in the same financial position once lockdown was lifted. For some unlucky individuals who had self employed business’s that would struggle to re-open after lockdown or re-open with a vastly reduced cash flow the offer of a mortgage was terminated at that point. 

Some lenders suspended lending completely; with a notice they should or might resume lending after the lockdown was eased; some lender actually considered lending during the lockdown for possible completion once it was allowed if it was a purchase. The lending was significantly tougher with larger deposits needed or lower loan to values for remortgages. If a survey was needed to establish value then the case would be prepared ready for when govt guidelines would allow a surveyor to visit the property. Some lenders were offering desk top valuation if the mortgage deal warranted it. 

Once Lockdown was lifted, the landscape was still very much different to pre- Lockdown lending conditions, the worse effected were the lenders that operated in the Niche or adverse sector of mortgage lending; this was due to difficulty in securing funds from the London Money markets and fear that a large percentage of the potential applicants who were already classed as subprime would have even less ability to service a new mortgage. It has been the case that these lenders are gradually coming back into the market, but with less products, higher interest rates and reduced access through brokers (Together Mortgages for example have gone back to only allowing applicants to apply through a limited number of packagers). 

Prime lenders, who were offering 95% and 90% mortgages, are now only offering 90% mortgages or less, the 90% mortgages are offered on a first come first served basis, by releasing tranches of money in the morning of a given day. Most lending is limited to 85% or less, with tighter underwriting; they are also declining cases where the applicant has opted for a payment holiday on their mortgage or credit cards over the lockdown period. 

Furlough 

People that were on furlough were judged on a cases by cases basis , if it was deemed to be the case that their job looked set to return to normal after lockdown restrictions were removed they would accept them based on amount received from furlough or what their income will return to once normal work resumed . Sometimes this would involve a letter from the employer to confirm this they would return to work ETC on a set date to pre furlough pay. Some lenders would not look at applicants on furlough until they returned back to work. 

To be continued borrowing on commercial property in the Pandemic.

Coronavirus is it a good time to buy a property

 

 It’s a strange time, with so much uncertainty, not just in the property market but in life generally, with constantly changing rules that govt large parts of our lives , deciding if it is the right time to buy a property is daunting .

In March when the economy locked down the property market went on hold as moving was not advised by the UK govt due to the UK wide lockdown. In mid –May the property market came alive and property sales exploded to a level not seen for some time . On Zoopla & Right move they estimated there were £37 billion worth of transactions between July 12 and August 8th. 

Property sales have been increasing steadily in recent years, but currently they have gone up by 20% on the previous year, higher than the record set in March 2017. 

The current Mini boom has no sign of slowing down with weekly sales figures between August 5 and August 12 up by as much of 60% compared to the same period last year, some of this is due to the govt incentive for no stamp duty on properties across England up to £500,000, this is for first time buyers , home movers and second properties , although second properties do still attract the 3% stamp duty charge . This means that people have seen a window of opportunity they have some spare money not spent on a holiday and they have the opportunity to buy a property free off stamp duty or in the cases of second property reduced stamp duty. 

Stamp duty before the recent government incentive for COVID on a property worth 500k was £10000, now it is Zero .

Second property before the recent government incentive for COVID for a value of £500,000 was a massive £30,000, now you would pay £15,000 a whopping £15000 in savings. 

The issue due to all of the above is people are fighting over properties & pushing prices up slightly. There is also an issue with getting a mortgage due to increased and tougher levels of underwriting, some surveyors down valuing properties due to Coronavirus fear of a possible market crash. Its made it a difficult decision to if it is the right time to buy a property. 

If you are moving home then yes I think it’s a good time as increased property prices will be offset by the one you are selling, no stamp duty up to £500,000 if you can secure another property and a mortgage if necessary then to me it’s a good time to move .

For first time buyers who have had stamp duty incentives , before the pandemic it might be best to hold tight as the boom might come to an end with possible prices dropping when the economy goes in to post pandemic recession and the govt is promising more incentives for first time buyers in the coming years . 

Buy to lets, a lot of investors were expecting a significant price drop, but are seeing a boom in in the market so are torn between low stamp duties and increasing prices. 

So in summery it’s good for some but not for others to buy or move home.

The current situation with help to buy

 

 The current situation with help to buy  

The help to buy scheme was made available in April 2013, it was named as the flagship housing policy of the coalition administration, led by the then Prime Minister David Cameron along with former Chancellor George Osborne. 

When the Help to buy was set up it was due to expire in April 2021. With a new version of the scheme (for first time buyers only) that will run from April 2021 to March 2023. Under this plan , sales transactions would need to have been agreed by December 2020 so that you can take advantage of the scheme . 

What does this mean for buyers? 

To ease pressure on house builders, the government’s Help to buy lp to Buy building deadline has been pushed back by two months to help thousands of families move into their new homes despite interruptions in building these new homes because of the pandemic.

 The government says the deadline for the homes to be completed in order to comply with the equity loan scheme has been extended to ‘ensure customers do not miss out if there has been a delay in construction due to the pandemic’. 

Rather than the new homes needing to have been finished being built by the end of December – as was the original plan - the extension means the deadline will now move to 28 February 2021, ‘helping thousands of customers to get the keys to their new home’. 

However, the deadline for the legal completion of the sale will remain the same – namely March 31 2021. That said, the government has put in place an extra measure for those existing customers who have experienced severe delays as a consequence of Covid-19. 

Homes England, the non-departmental public body that is charged with funding new affordable housing in England, will work with those who had a reservation in place before 30 June to examine their situation and look to provide an extension where necessary. If this is needed, they will have until 31 May 2021 to legally complete. 

In its announcement, the government also confirmed that the new Help to Buy scheme, which will replace the current scheme, will still come into place from 1 April 2021 and run until March 2023 as planned. There are no proposals for further extensions. The new scheme, restricted to First Time Buyers only – to bat away the criticism from some that Help to Buy has been helping more buyers further up the ladder than was perhaps intended – will implement property price caps to support people into their first home.

5 Potential problems if you decide not to get a property survey

 

 5 Potential problems if you decide not to get a property survey 

In most cases if there is a problem with your property a survey should find it, the list below highlights 5 main ones. 

1. You will miss out on advice and recommendations from an expert 

For a lot of people, getting a survey on your property that you intend to buy getting a survey on the property will mean you will get the knowledge and expertise of a qualified professional with year of experience in the field of property surveys. You need to make sure you use a surveyor that is regulated by RICS (Royal Institution of Chartered Surveyors) you can utilise the advice given on the property to make a final decision on whether to progress with the transaction. 

Also in addition to their extensive experience in the industry as a whole securing the advice of a local property expert can be invaluable-by requesting a surveyor that operates within your region, you will be guaranteed that they will be able to draw upon a wealth of local expertise. Some properties will be affected by local environmental conditions , like risk of flooding , tree issues etc and the surveyor will be aware of these issues due to their local knowledge .

 2. You cannot guarantee an accurate valuation  

There is a difference between a valuation for mortgage purposes and a specific property valuation. People are often confused by the 2 types of valuation as both can be requested to establish a property’s value. The mortgage valuation is mostly for the lenders benefit, allowing them to know if the property is safe to lend its money on. In most circumstances this survey isn’t sent to you as it now goes directly to the lender and unless you request a copy (sometimes lender will still refuse to send it to you) . If you pay and request for a survey privately, the surveyor is working on your behalf and not the lender so they will report directly back to you . 

3. Renegotiations will be more difficult 

In the case that your survey does identify several issues regarding the condition of the property, the report can subsequently be used to effectively broker the price with the seller. This is especially true of Homebuyer Reports, which provide a detailed record of all the issues or defects identified, as well as one of three different condition ratings which is used to indicate the severity of these concerns and the immediacy in which they need to be dealt with. 

By citing the expert findings of your RICS accredited surveyor, you are far more likely to be successful in your renegotiations. More specifically, the seller will be more inclined to offer one of the two following options. They will either, propose a reduction in the asking price of the property that is roughly equal to the buildings estimated cost of repairs or they will agree to make the necessary renovations prior to your move in date. 

4. Future costs may be incurred 

In addition, once you have received the completed report, you should have a far greater understanding of what exactly the surveyor identified during their inspection. This includes any defects or shortcomings that would have otherwise continued to go unnoticed by the tenant or vendor. 

This is where a property survey could potentially save you thousands of pounds in future expenditure. 

By having a comprehensive inspection undertaken by a qualified expert, you may be alerted to any number of serious or costly defects that are not immediately obvious. When these kinds of issues are left unattended to, they not only incur significant expenditure later down the line, but also pose a tangible danger to any future occupants. It’s in your best interests to instruct a surveyor to identify these shortcomings early and deal with them accordingly. 

5. No peace of mind  

As we previously mentioned, buying or selling a home is undoubtedly one of the biggest decisions a person will ever make. That’s why, when you request a property survey, you can rest assured that the independent evaluation will guarantee that you’re making a confident and informed judgement, based on the advice of a qualified professional. Not to mention saving a homebuyer thousands of pounds in future costs through the potential to renegotiate the selling price based on issues identified in the report.

 Different types of survey click on names for more information

Home buyers report  

Condition report  

Condition Surveys 

lenders survey 

How do I take a name of a mortgage?

 

Question example: your Son wants to take his sisters name of a joint mortgage. How would I go about this and how much might the average solicitor charge. 

The answer to this is the person who wants to stay on the mortgage account must approach the current lender to get consent for the name to be removed. Sometimes a fact find will be carried out by the lender and the proposed remaining applicant will need to supply income documents and bank statements to prove to the lender that they can afford to service the mortgage on their own , meets current lending criteria and affordability under the current regulation if the property is where the person lives . 

If this is successful and the mortgage lender agrees the person can be removed from the mortgage account consent to transfer will be issued to the solicitor chosen by the applicant. The consent would contain legal requirements set by the lender as conditions that need to be satisfied by the chosen solicitor to enable the transaction to complete and name to be removed. 

Legal fees for this type of transaction are usually in the range of £250 to £350 range plus vat, if the lender required any additional things to be carried out like searches or land registry cost will be added as a disbursement to the quote. 

We would be able to provide a fixed fee quotation if you are able to contact us so that we may take full details for your case , please click on the logo to get the quote.