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What does 'Mortgage Term' mean?
Mortgage Term
This means the time you have to pay back the mortgage to the lender. It will be defined by the lender as the number of months or years. Most standard mortgages are for 25 years (the mortgage term is 25 years) but you can choose a shorter time-scale. Alternatively many lenders now offer longer terms.
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How to Really Buy a Property
Chapter 1:
The First Questions Are For You
"... is a simple example. A couple are renting for £1,500 per month in a property worth £250,000. They believe property prices will move down 10% over the next two years so they will wait until the value is £225,000. But in the meantime they will spend £36,000 on rent. A mortgage could have cost them about £12,000 over the same time..."
"... reality many people want to by a property because they want a home, and usually for the long term. A place to put down roots and possibly an asset to pass on to their children. The bricks and mortar are not a financial tool that they plan to use within their lifetime and when they come to retire the mortgage will be paid off and they will have somewhere safe, and free, to..."
"... property is a big step and making money from it is not always as straight forward as the media or some authors might sometimes suggest. Generally speaking almost any real estate investment makes money in the long term. If you buy somewhere that you can rent out and the tenants pay off your mortgage then after twenty years you will have a very nice nest egg. If you are hoping the flat you buy will go up one hundred percent in the next twelve months so you can quit your job - good luck - it does happen. Overall however the most sound piece of advice anyone can give you is to treat property as a ten year investment, not a get rich quick..."
Chapter 2:
The Media and Property Prices
"... few:
Land registry;
Asking prices (as reported by agents);
New applicants registering (as reported by agents);
mortgage application numbers (as reported by lenders);
Average incomes and so percentage of income used to pay mortgages (as reported by the Office of..."
"... (as reported by agents);
mortgage application numbers (as reported by lenders);
Average incomes and so percentage of income used to pay mortgages (as reported by the Office of Statistics);
Statements from people who should be in the know (such as economists).
All these..."
"... equity, when the price of someone's home becomes less than the value of the loan they took out to buy it, is ever popular. As we have already seen, at a local level, property prices rise and fall all the time. This means there are always people in negative equity. Those who take out 100%+ mortgages are immediately in negative equity but there is little talk of it in the press when the overall market is..."
"... thumb yesterday does this mean hammers have suddenly become dangerous or that more people than ever are hitting their thumbs?
- The Use and Abuse of mortgages -
Journalism is a difficult job. All too often the individual is working against tight deadlines and has already been briefed by..."
"... X, a 24 year old administrator from Liverpool, owes the Halifax £200,000 for a mortgage she secured against her house two years ago but now the bank might want it back. After loosing her job in December she has found it hard to find new employment despite applying for over fifty positions and her savings are starting to run out. If she cannot find work soon she will not be able to cover her mortgage payments and the bank could repossess her..."
"... the facts are true, no one can deny it, but some of them are missing. Furthermore the last sentence contains the dramatic concept of repossession although anyone who read or listened carefully would realise she could sell her house and repay the mortgage. This is not a mortgage story, it is an employment story dressed up to look like a mortgage..."
"... Y, a self employed tiler from London, decided to purchase a buy to let investment after reading about the successes others were having in local newspapers. He bought a two bedroom apartment eight miles from where he lived and rented it out to a local couple. Now they are refusing to pay the rent Mr Y needs to cover his mortgage payments and he is worried it won't be long before the bank will repossess the..."
"... always people in negative equity in good times or bad
There are always people who have bought problems on themselves
There are always people who will misuse mortgages and credit
The real question is how many people and is it actually a real problem. If for example there were 1,000 people in..."
"... real issue when people need to sell and for this several factors must come in to play:
The person needs to sell
It is not possible to rent the property out and cover the mortgage
There are not enough buyers on the market to achieve the price necessary to cover the repayment of the loan
For..."
Chapter 3:
Making House Price Predictions
"... in this chapter
Who makes house price predictions;
What is the track record of RICS, the Nationwide, the Halifax, the Council of mortgage Lenders, Hometrack, Capital Economics and many of the other 'experts' used by the media;
Who can make accurate forecasts;
Why organisations make..."
"... you do have a pretty good chance of hitting the target! In 2015 they went for 5% which was pretty close to the 4% reality.
- The Council of mortgage Lenders -
Like the Halifax and the Nationwide the CML has a close grip on the number of new mortgage applications being received across..."
"... Council of mortgage Lenders -
Like the Halifax and the Nationwide the CML has a close grip on the number of new mortgage applications being received across the industry and use this, in part, to predict if the market will be moving up or down in the future.
But as with the Halifax and the..."
"... 2013 they went for a no change prediction. Prices moved up 4%.
For 2014 the CML started to predict volumes of mortgage lending instead of house price moves and for 2015 limited their forecast to "more slowly".
- Housepricecrash.co.uk -
Set up to discuss the impending house crash..."
"... a hidden agenda.
The Nationwide, Halifax, Council of mortgage Lenders and other lenders want to be positive so people will borrow and they will profit. Even RICS could be accused of this. The more transactions there are in a market, the more work there is for their members.
Alternatively..."
Chapter 4:
Understanding the Property Market
"... is a rough outline and not to be taken in absolute terms. Sometimes, for example, there are more properties on the market than there are active applicants. The pattern in the graph also represents 'price agreed' - what is actually happening in real time. Experience teaches you the traditional cycle but there is no resource on the web or otherwise to tell if, for example, the market has reached the bottom of the summer slow down or the top of the spring rise. The figures that you see reported statistically are usually completions or mortgage applications and these can refer to sales which were agreed any time from one week to six months..."
Chapter 5:
Is the Property Market Overvalued?
"... put lenders and property sellers continue to find ways to ensure prices can continue to rise over the long term. In the 1960s this was the introduction of the mortgage. Highly unpopular at the time, when debt was frowned upon, they have now become a way of life and allowed property prices to rise faster than..."
"... than salaries.
In the 1990s it was 100% mortgages which rid the need for buyers to find a deposit. In the millennium it is shared ownership so the buyer only needs to find 50% of the property value or mortgages spread over more than the traditional twenty-five years.
Making predictions..."
"... - Buying for Business -
Many businesses who have staff that travel on a regular basis buy property to house them. Thus a bank might buy thirty apartments to be used by their staff rather than pay hotels or rental agencies. They don't take mortgages, they buy for cash.
- Buyers from Outside..."
"...Another favourite measure is to look at averages in historical data. For example taking the Nationwide's house price data from 1974 to 2010 the average rise per year is around 4.5%. Therefore we can conclude any annual rise above this is a sign of the market overheating. Or the long term average for mortgage debt is x% of GDP and so any figure above this must mean there are too many mortgages.
..."
"... can we tell if any particular property market is over-valued? Only if there are absolute crystal clear facts at our disposal. In the 2007 sub-prime mortgage market of North America it was obvious that most borrowers were not going to be able to pay back their loan when the initial promotional interest rate ended and the market was being supported by further such borrowers on further such unsustainable..."
Chapter 7:
Why Buy in a Falling Market?
"... that have retired are a good example. After years working in a major town or city a move to a rural location is popular. The mortgage is paid off and the price of out of town property is significantly lower. Now it would be prudent, if the property market was falling, to hold off until prices recover and so walk away with the maximum amount..."
Chapter 8:
Buying to Let / For an Investment
"... but a £4,000 annual service charge on the example above reduces its yield by nearly 2%!
When calculating yield remember to include all the costs that will need to be covered, not just the mortgage
Properties that tend to offer the best yields are those not popular with private buyers...."
"... a house where the mortgage payments will be £1,000 but the rental will be £1,700 and assume it will be tenanted for 11 months out of 12 every year. The profit is £8,400 per year. Now in year three the roof needs to be replaced at a cost of £25,000. This has instantly wiped out all the profit since the purchase. Period properties also need periodic work on the bricks, windows and possibly the damp proofing so it is extremely easy to start loosing money instead of making..."
"... you end up caught in this situation there will also be a second headache. Chances are you are not the only investor who cannot sell to recoup their funds, you are amoung a number of buyers who will be looking to rent out their apartments which temporarily floods the market, driving down the rental yield to a point where you may actually end up having to cover some of the mortgage payments or other costs from your own..."
"... you are buying off plan be sure to check property prices in the area and no matter how glossy the brochure and how glitzy the show flat is ask the cold hard question: Would I be better off buying something that has already been built? As a double back up make sure you can cover the mortgage for a few months should your purchase be impossible to sell or difficult to rent...."
"... large number of unsold properties also meant that the developer decided to rent out unsold properties as they were finished which lead to dozens of apartments being available at the same time. Private buyers found it difficult to find tenants who were prepared to pay the rent needed cover the buy-to-let mortgages. So extreme was the situation that several buyers seriously contemplated failing to complete and loosing their £30,000+ exchange deposits as a better alternative to completing and selling for far..."
"... and this short term comfort zone will have been factored in to the sale price.
Compare the mortgage deals offered with those from other brokers and lenders to ensure you really are getting the best deal.
In short do not believe for one moment what is presented before you or persuade..."
"... and why the capital gain would be excellent over the coming years.
They would organise the mortgage and even work with a local lettings agent to get the tenants in so Anthony would never have to leave his armchair.
This was property investment the way he wanted it - easy and seemingly..."
"... the event the values, both sale price and rental, were at the absolute top end of the market and the builders finish was poor which meant a number of items would need to be replaced in the near future. But Anthony had stretched himself financially and had no way to cover the mortgage payments as the properties lay vacant or to subsidise them when tenants moved..."
"... the end the properties, both still vacant, were repossessed by the bank and Anthony's great property investment had cost him over £120,000. £76,000 for the original the deposit, £18,000 for the property investment company's fee, £10,700 in stamp duty and £15,600 in mortgage repayments that he ultimately could not keep up..."
Chapter 9:
Getting on the Property Ladder
"... on the property ladder;
How to get someone else to pay your first deposit;
Why buying a less desirable property can help;
When 100%+ mortgages are not evil;
Working out if you are better off buying or renting, even in a falling market;
Why it's worth buying where you don't want to..."
"... the drain in rent. There are three ways round this:
Buy in a new development where the builder offers to pay your deposit
Get a mortgage for 100%+ of the property value
Buy somewhere that you don't want to live!
- Buying Property on a New Development -
Reading the papers and surfing..."
"... says the first property you buy has to be one you actually live in? You can, for example, buy a property anywhere you can afford it. Rent it and wait for it to rise in value. You can then sell it or re-mortgage it to provide the deposit and/or purchase price for the place you actually want. Remember a canny buy in a particular area means you could outpace the prices in the place you want to live. For example in the London postcode of E3 between 2000 and 2004 the average price of a flat rose from £108,952 to £178,411 or 64%. Over the same time a flat in SW1, a much more desirable area, moved from £338,632 to £444,654 or 31% ...."
"... out of town option has become more attractive because for Buy-to-Let mortgages you will need a 15%+ deposit and this is more affordable with cheaper properties in towns, rather than cities. The downside is that a property three hours drive away is difficult to manage or find tenants for and so you will probably have to pay agents to carry out most of the work for..."
"... away is difficult to manage or find tenants for and so you will probably have to pay agents to carry out most of the work for you.
- 100% mortgages -
If you shop around enough you will find 100% mortgages, even 125% mortgages. Although they have become much harder to find since the..."
"... most of the work for you.
- 100% mortgages -
If you shop around enough you will find 100% mortgages, even 125% mortgages. Although they have become much harder to find since the start of the Credit Crisis they will creep back.
These credit products are often frowned on as taking..."
"... better off today. Another way to look at it is this:
Scenario One:You spend three years saving up a deposit because you don't want a 100% mortgage and buy a flat for £200,000. Three years of renting could easily have cost you £36,000.
Scenario Two:You spend three years saving for a deposit..."
"... Four:You buy a flat for £200,000 with a 100% mortgage and three years later it has lost 10% of its value because the market has fallen, the total cost to you is £20,000 but you have a place of your own and you have already paid off some of the loan. Keep it for the long term and, as history has shown, your loss will have been temporary...."
"... 125% mortgages are also useful in that they provide you with extra capital to improve the property. Done properly this will secure your investment's value. Further it may help rid you of credit card debts and other high interest loans that were stopping you raising the deposit in the first place.
..."
"... mortgages are not the evil that they are painted with but the press does like to jump on stories of people who have used them and then run into financial problems. This is simply confusing very useful products with people who cannot manage their finances. Don't let yourself get confused as well. How the press can manipulate stories is covered in more detail in the chapter The Media and Property..."
"... - Summary -
The greatest hurdle to buying a property is often the deposit. Your salary might well show that you can afford the monthly payments of a mortgage but saving for the deposit (while your hard earnings are being syphoned off renting a place) can be near impossible.
There are a..."
Chapter 10:
Working with Estate Agents
"... Secondly if you are seriously thinking of buying you will have given some consideration to your budget and looked at various mortgage possibilities. Show these to the agent without hesitation as they prove you are a serious buyer, not someone with nothing to do on a Tuesday afternoon.
..."
"... Search -
You will gain a huge amount of respect from an agent if you can show that you have given some thought to:
Your finances - see Sorting Out Your mortgage
Your solicitor - see Choosing a Conveyancer or Solicitor
What you want and why you want it
The negotiator in a..."
"... Something like this:
What You Want
How Much You Want it
Why You Want it
2 double bedrooms
Essential
The rent will help pay your mortgage
Quiet road
Essential
You are a very light sleeper
Outside space
Preferrable
Nice for the..."
"... about security
Not x-council
Essential
Worried about security
Not above the 4th floor
Essential
Your mortgage deal does not allow it
10 mins. to the tube
Preferrable
Easier to sell?
£250,000 or less
Essential
Don't want to pay the stamp..."
"... Story - A Property on the Market for 14 MonthsA house had been on the market for fourteen months in Northchurch Terrace, N1. It was placed on the market at £650,000 but this proved too expensive at the beginning. The vendor was not interested in reducing the asking price as she had no mortgage on the property and no urgent need for the..."
Chapter 11:
Sorting Out Your Mortgage
"... will need for a loan and ensuring there are no skeletons in your credit cupboard. Why you should arrange a mortgage before making an offer;
Why you should talk to more than one financial adviser;
How the same mortgage from the same bank can be cheaper in two..."
"... should arrange a mortgage before making an offer;
Why you should talk to more than one financial adviser;
How the same mortgage from the same bank can be cheaper in two different places;
The difference between Agreements in Principle and Pre Arranged mortgages;
What could be in your history..."
"... than one financial adviser;
How the same mortgage from the same bank can be cheaper in two different places;
The difference between Agreements in Principle and Pre Arranged mortgages;
What could be in your history that will stop you getting a mortgage;
Why the best mortgage deal may not be..."
"... be cheaper in two different places;
The difference between Agreements in Principle and Pre Arranged mortgages;
What could be in your history that will stop you getting a mortgage;
Why the best mortgage deal may not be right for you;
How choosing the wrong lender can stop you buying;
Why you..."
"... Agreements in Principle and Pre Arranged mortgages;
What could be in your history that will stop you getting a mortgage;
Why the best mortgage deal may not be right for you;
How choosing the wrong lender can stop you buying;
Why you should avoid financial advisers who charge you a..."
"... insisted.
You suddenly see the right property but in order to move fast use the only quote you have got or rush around and only get a few more quotes. The panic means you miss the best deals on the market and pay hundreds of pounds more than you have to in mortgage payments.
Anyone of..."
"... by an Agent then as long as the adviser is qualified, don't shy away, welcome it! If you aren't offered, ask.
- Agreements in Principle (AIPs) and Pre Arranged mortgages (PAMs) -
- Agreements in Principle (AIP) -
Most buyers are now aware of the Agreement in Principles (AIPs). These are..."
"... Debts - if you are paying off a credit card or a small loan on a monthly basis, in the rush to apply for a mortgage you may forget about it. But the lender will find out and usually remove that amount from the mortgage application. In the worst case scenario they could refuse to lend to you because they are no longer confident you have told them the whole..."
"... Been in Debt - The one that catches so many people out. You can be very pleased with the sensible way you have handled money and never needed a loan. Or perhaps you have had Mum and Dad to help you out. From the mortgage lenders point of view, however, there is nothing to show you know how to handle debt and so you are more of a risk. This could affect how much they will want to lend..."
"... applied for credit - Every time you apply for credit your credit rating takes a hit, even if you ultimately don't take out the loan. The classic case is with store cards and goes a little like this. Mr X is out on a shopping spree and in several shops he is offered a discount on his purchases if he applies and pays for his purchase with the store's credit card. He has the money in the bank but he could make substantial savings so he takes the cards and pays them off within the month. But each card has represented an application for credit and so hit his rating. It will recover but if he applies for a mortgage in the near future he may be turned down as the lender is suspicous about the amount of credit he has been taking..."
"... if you have only arranged an Agreement in Principle there is still a great deal which could affect the bank's actual decision. The credit scoring they carry out may radically change what you can borrow. As such if you have found a really good loan or you expect to find a property quickly you should apply for the mortgage there and then even though you do not have a property in mind. Most financial advisers and lenders will try to resist this as it means more work without a full guarantee that they will get the business. Insist on it. This means you can be completely confident when you offer that you can afford it and the process will proceed smoothly and without..."
"... you can be completely confident when you offer that you can afford it and the process will proceed smoothly and without stress.
- Pre Arranged mortgages (PAM) -
This is offered by some financial advisers and allows you to be credit checked and ready to go without having to bully your bank..."
"... is offered by some financial advisers and allows you to be credit checked and ready to go without having to bully your bank to do it. The Sequence estate agency group are one such business that offer this service. The other advantage of a PAM is that because you have applied for the mortgage the interest rate and other features of that particular product are often held for up to three months, even if the lender removes that product from the market or increases their..."
"... rates!
As a word of caution only apply for the mortgage or mortgages you would definitely go for as each lender will carry out a credit check on you. As mentioned earlier too many checks on your credit history makes lenders suspicious that you are trying to apply for too much debt.
Finally..."
"... of bank statements is going to be of no interest to a vendor when you are in a contract race or competing in sealed bids.
- What Do You Need Your mortgage to do? -
This may sound like a bizarre question but many people loose the property they are trying to buy because they only consider a..."
"... You Need Your mortgage to do? -
This may sound like a bizarre question but many people loose the property they are trying to buy because they only consider a single aspect of the mortgage or loan product that they are choosing. You need it to do two things:
Be the best deal on the market..."
"... if the mortgage product that is right for you will take ten weeks to be issued there is a good chance the vendor will get bored, or suspicious, and go in search of another buyer who can get a loan faster. The vendor usually suspects there must be something wrong with the buyers credit if things are taking too long. From your perspective you loose the property, the survey fee, the arrangement fee, legal fees and..."
"... a fast lender is another good reason to use financial advisers, they will know who is fast and who is slow, and who is really, really slow. This varies from month to month as banks experience busy and quiet periods. If the mortgage product you want is from a really, really slow lender there is a way round it. Buy the property using a bank that is fast and choose a mortgage that has no redemption penalties. Three months after you move in re-mortgage to the product you actually wanted safe in the knowledge you have the property and it doesn't matter if the lender takes forever to process..."
"... there is no point getting a great deal if the lender uses a cheap surveyor to value your property. This is a little known point but cheap surveyors are often over cautious or from outside the area. Both are reasons why they may down value your property leaving you to pay their fee, the mortgage application fee, some legal fees and have nothing to show for..."
"...
- Summary -
The last thing any buyer wants to do is spend time with financial advisers, finding out about their own credit record or poking around the internet for mortgage deals when they could be out looking at potential new homes - much more exciting.
But this crucial step..."
Chapter 12:
Choosing a Conveyancer or Solicitor
"... be resolved quickly
He asks you for the funds to allow exchange and gets you to sign the contract, even before all enquires are back
The mortgage offer arrives
He calls you, informs you of any unusual circumstances, and confirms you are happy to exchange
In other words everything happens..."
"... works like this:
Receives contract and title deeds which he files
He waits to get the mortgage offer through (3-4 weeks). No point doing any work that will cost you money until the bank has given the green light.
He then starts the local searches (2-10 weeks). This was not done earlier..."
"... cost you money until the bank has given the green light.
He then starts the local searches (2-10 weeks). This was not done earlier as there is a fee involved and he didn't want to spend this until the mortgage offer was confirmed.
Once the local searches are back he then gathers all the..."
"... you to pay for a second solicitor -
Before we move onto how you can chose a good solicitor it is worth bearing in mind the following. No matter who you chose your lender, if you are taking out a mortgage, might end up forcing you to hire a second solicitor.
Lenders are risking their money on..."
"... end up forcing you to hire a second solicitor.
Lenders are risking their money on your property. If you stop paying your mortgage they will take the property and try to sell it in order to get their cash back. So far that seems obvious.
The surveyor will confirm the market value of the..."
Chapter 13:
Your Own Homework
"... your property purchase is going to involve borrowing money it is worth checking your current credit ratings. Many people who have lead a prudent life are often surprised to find they have a very poor rating. Others are also taken aback when a mortgage is rejected because of some event in the past that has long been cleared up but the settlement was never properly passed on to the credit rating..."
Chapter 14:
Viewing Properties and Making Offers
"... that could cause you offence;
The terminology used by agents;
The difference between Chain Free and Vacant Possession;
Why you can't get a mortgage on some properties;
The characteristics of a leasehold property;
What lease lengths affect a properties value;
How lease lengths can be..."
"... Bad Agents. For now its worth knowing the two documents that are requested the most:
An Agreement in Principle or Pre Arranged mortgage - see Sorting Out Your mortgage - to show you can afford the property
A copy of your bank statement to show you can afford the deposit
An Agreement in..."
"... you will need a mortgage to buy a property the lender will be able to supply you with an agreement in principle based on a few simple questions. They will generally want to know how much you earn every year and how much you pay in debts every month (say to credit cards or bank loans). They take one from the other and come up with a figure that they think you can afford to pay them every month. Calculating this backwards over the term of the mortgage (the time they will give you to pay it back, usually twenty-five years) gives the amount they are prepared to..."
"... an AIP is also a useful exercise in helping you consider your budget carefully. Not every lender will offer you three and a half times your salary (something that many first time buyers assume) as a mortgage. You will also start to get a feel of the various restrictions that certain mortgage products have. Some, for example, do not allow you to buy in blocks more than four stories high, others will only loan on properties with more than two bedrooms, and so..."
"... you to buy in blocks more than four stories high, others will only loan on properties with more than two bedrooms, and so on.
A Pre Arranged mortgage (PAM)
For information on PAMs and how they can speed up your purchase see Sorting Out Your mortgage
Bank Statements
If you are buying..."
"... only loan on properties with more than two bedrooms, and so on.
A Pre Arranged mortgage (PAM)
For information on PAMs and how they can speed up your purchase see Sorting Out Your mortgage
Bank Statements
If you are buying with cash or if a large part of your purchase will be cash it is..."
"...
- Cash Purchase Only -
These are few and far between and you rarely see them advertised as they are often snapped up by developers or sent to auction. They are properties that no lender will accept a mortgage application on and this might be because:
They are structurally unsound..."
"... -
Every so often someone does not keep up their payments on a debt secured on a property. The lenders' response is to take the property back to sell themselves. They do so in an attempt to recover the debt, usually the mortgage but it could be any debt that is secured on the property.
The..."
"... to 80 years: once again lenders do not feel this is uncomfortable. There will be only a small handful that will turn down such a mortgage application. Concern by potential buyers, especially if the lease is in the low seventies, over the difficulties to resell are much higher although they have little..."
"... the lease
50 to 60 years: It is still possible to raise a mortgage on such lease lengths although the perception of buyers is very different. A higher degree of concern over resale value or the costs of a lease extension will now start to have a substantial affect on the value
Less than 50..."
"... than 50 years: It can now be difficult, but not impossible, to find a mortgage. The lender is expecting you to pay the money back over twenty-five years so as long as there is time to do that and you are not borrowing a large percentage of the purchase price a fair few companies might be interested. For many buyers fear over the ability to sell will profoundly affect the..."
Chapter 15:
How to Really Make an Offer on a Property
"... confirm that I wish to offer £235,000 on 10 High Street, London, E6 2JN. The offer is to include the curtains, carpets and cooker. My offer is made up of a £200,000 mortgage from Barclays Bank and £25,000 in cash. I have nothing to sell and would want to exchange in four weeks time and complete four weeks after that. I attach my Agreement in Principle and a copy of a bank statement to confirm my finances. The solicitor I will be using is ... and their telephone number is..."
"... will want to deal with you only.
Show your serious intentions by attaching proof of your ability to proceed (an agreement in principle or pre arranged mortgage), the solicitor you have chosen and a bank statement or otherwise proving the cash element.
Things that will always act in your..."
"... the financial adviser recommended by the agent - there is absolutely no obligation to use this adviser but as discussed in Sorting Out Your mortgage the more options you look at, the better the financial deal. If you do have an appointment with a financial adviser suggested by the agent then when he puts your offer forward he can also say, "The buyer has been to see a financial adviser that I work with and he has confirmed the buyer is in a good financial position". This all works in your..."
Chapter 17:
The Property Buying Process in Theory
"... will need a solicitor to act on your behalf. This solicitor will need to do two things:
Check that the paperwork related to the property is satisfactory for the lender if you are applying for a mortgage
Check there is nothing unusual in the paperwork that should be drawn to your..."
"... deposit is seen as a way of tying the buyer in and insuring the vendor will have some compensation should you disappear. Zero percent deposits are therefore usually only acceptable if you are carrying out a simultaneous exchange and completion. This is often the case with one hundred percent mortgages or where the property is empty and the buyer wants to get in..."
"... is empty and the buyer wants to get in fast.
If you are raising the funds by applying for a mortgage you will need to find a lender that thinks it is a good idea to loan you the money. The lender is essentially interested in four things:
Are you a good borrower?
Is the property worth..."
"... system has some unwelcome side effects. If you apply for a few store cards in a month you may suddenly find it difficult to get a mortgage. This is because your credit history shows you are looking to borrow a lot of money and that might mean you are in financial difficulties. The result is that your credit score goes down and lenders don't want to go near..."
"...Ironically if you have not been in debt in the past you will also have a poor credit history and a low credit score. This is because there is no proof that you are any good at handling debt. It is the financial angels of life who have never had a credit card or taken a loan that can have the biggest problems securing a mortgage.
..."
"... your LTV is very low, say twenty percent, the lender may agree to secure a mortgage on the property without even looking at it. In their opinion most of the risk is with you and the chances of you paying so much for a property that it is not even worth twenty percent of what you lay out are extremely unlikely. If your LTV is high (usually more than fifty percent LTV) they will organise a..."
"... lender, to some extent, is not interested in this. They only want to know that, should you stop paying your mortgage, they can sell the property and recover the debt. They don't really care if every single window in the building needs replacing so long as, in its current condition, it will sell for the same or more than the amount they are lending..."
"... lender has a different set of things that they want to know. These requirements are collated by The Council of mortgage Lenders. The result is the CLM Handbook and every solicitor has access to a copy. When your solicitor knows who you are going to be borrowing from they open up the handbook and see what they need to find..."
"... mortgage application is sent to the lenders final underwriters. They will take one more look at the entire set of paperwork before issuing the offer. Every now and then they spot something that has been missed by the previous departments and what you thought was in the bag suddenly becomes dead in the..."
"... and what you thought was in the bag suddenly becomes dead in the water.
In short nothing is certain until the mortgage offer is in your hands. There are simply greater or lesser degrees of certainty!
What Can Go Wrong
As a cash buyer and the surveyor was instructed by you then..."
"... there is plenty that can be wrong in the report (See Chapter 20: What a Property Survey Really Means).
If you are applying for a mortgage there is a great deal more to go wrong.
You have a low credit score due to a lack of credit history or a default at some point in the past
Although..."
"... lender but forget to tell your solicitor who then collates the wrong information.
The lender's final underwriter spots an error in the paperwork which means that they refuse to issue you with a mortgage offer
- Organising Inspections of the Property -
As a buyer there are certain..."
"... a buyer there are certain inspections that you may want to carry out to make sure the property is in the condition that you believe it to be. The most basic and recognised is a survey. As a cash buyer you may simply want to carry out a valuation survey to get a second opinion of the price you think the property is worth. If you are applying for a mortgage the lender will have carried this out for their own records and will make you aware of the results (see..."
"... aware of the results (see above).
You can go into more detail by requesting a homebuyers survey or a structural survey. If you are applying for a mortgage it usually makes sense for the surveyor who is doing the valuation to also carry out the second survey.
A homebuyers survey is the usual..."
"... discussed in Specifying Exchange and Completion Dates (see above) your solicitor will usually need a cash deposit to give to the vendors' solicitor when exchanging contracts. The only exception is when you are using a one hundred percent mortgage or the vendor has agreed that you will provide a deposit of zero..."
"... the set of paperwork sent by the vendor's solicitor
Request any further enquiries from the vendor's solicitor
Apply for searches
Check your mortgage offer
Issue you with a report
Exchange Contracts
Complete
- Checking the Paperwork -
Your solicitor will receive a set of papers..."
"... Title Deeds - this document is only held by the person who owns the property. In most cases this is not actually the vendor but the lender that he has his mortgage with. The vendor's solicitor will ask the lender to send the title deeds to him. The lender can refuse or place conditions on the request if they are concerned the property will be sold for less than the current mortgage balance and the vendor cannot prove where the shortfall will come..."
"... Insurance - your solicitor will want to know that the property is either currently insured or that someone is prepared to insure it. The easiest way to confirm this is to find out who is covering the property at the moment. This is essential if you are applying for a mortgage because, should the structure burn to the ground the day after you move in, the lender will be able to recover the money you have borrowed. If you are purchasing for cash you will still want to have the same piece of..."
"... are a disaster compared to those that he has seen in the green and pleasant rural location where his practice is based
- Checking the mortgage Offer -
If you have applied for a mortgage in order to purchase the property then, all being well, the lender will issue you with an offer...."
"... you have applied for a mortgage in order to purchase the property then, all being well, the lender will issue you with an offer. Your solicitor will not want to exchange until you have this and he has a copy. To do so would mean that you would be liable to complete and pay the balance, without any guarantee that someone will lend you the cash...."
"... The most common is a mistake in either your details or the property details. They may have misspelled your name or got the postcode wrong. They could also have made a mistake with the term of the mortgage, expecting you to pay it back within ten years when you thought you had twenty-five!
..."
"... order to complete successfully your solicitor will need to have the cleared funds to do so. This may either be the cash from you or the loan from your lender. If the money is coming from you any cheque must have cleared by this day. If it is coming from your lender the solicitor traditionally has to give them five days notice. This is known as drawing down the mortgage...."
"... for funds in time for a cheque to clear or a bank transfer fails due to technical problems
Your solicitor forgets to draw down your mortgage (unusually common) so no funds are available for completion
Your solicitor is off ill on the day of completion and it is difficult to find someone else..."
"... some changes.
The Title Deeds: These will either come from the vendor or the lender (if there is currently a loan secured on the property). If it is the latter the solicitor will need the mortgage lender's name and account number as well as written permission to apply for them.
The Sellers..."
"... -
Once your solicitor has been through the first batch of paperwork sent by the vendor's solicitor he is likely to have some extra questions that are either required by the particular lender you are using (if you are applying for a mortgage) or because he believes you should know.
These..."
Chapter 18:
The Balance of Power
"... other potential buyers higher.
- How the Balance of Power Changes -
What weakens a vendors' power includes:
the property being vacant and mortgage payments are high
they have found a property they want to buy
the market is falling
they are in financial trouble
they are splitting..."
"... Story - Chipping the price at Swan YardMelissa had made an offer on a one bedroom flat within sixty seconds of an underground station. It was a safe location and the property had been decked out loft style. The owner had been renting the flat but the tenants were shortly due to move out. Concerned at the prospect of paying two mortgages he reduced the price from £220 to..."
Chapter 20:
What a Property Survey Really Means
"... is crucial as if the surveyor does not agree with your offer price the bank won't lend. It is also the most valuable type of survey and probably all you need for almost any purchase. Most people are not aware that the valuation survey will also report on anything crucial that should be investigated. If they believe there is a serious problem with, for example, damp they will hold back all or part of the mortgage until it is investigated (see below). It is much easier to read a two page report that is very specific about major issues that will affect value than a fifty page report telling you that the aerial may need re-fixing and one of the windows in the back bedroom needs to be repainted in the next twelve..."
"...It will probably come as a shock to find out how the surveyor actually works but it goes something like this. They visit the property and check for any really big problems that will affect value. They then look up and down the street for sold boards and 'phone up those agents to ask them what they have sold. In the modern world they can also check the history of sold properties in an area on the internet. If they find similar properties sold at similar prices they sign the valuation off and you get your mortgage.
..."
"... the surveyor, carrying out any of the above surveys, believes the property is worth the price you have agreed to pay for it all is fine. If, however, he sees a major problem such as damp around the windows he will suggest that the bank holds back a certain amount on the mortgage until it has been satisfactorily..."
"... in one direction.
If it is subsiding it will need to be underpinned. Its messy but not expensive as long as the property is covered by insurance and in almost all cases houses are because subsidence is a common phenomena and therefore mortgage lenders insist on it.
If you really like a..."
"... be aware that small companies tend to down value properties to protect themselves (it will also stop you getting the mortgage) and many buyers loose perfectly good properties in a rising market because of this. Further still a small surveying company may not be carrying out many valuations and so in a competitive rising market they may be out of date in their thinking and also down..."
Chapter 21:
Legal Matters in Property Purchases
"... have but are not always offered.
Your finance company who will provide the mortgage basically asks the question: "Are you, the buyer, a good bet to lend to and is the property you have offered on a good bet to secure that loan on should you ever default".
The solicitor also has a set of..."
"... to know that even if you think it is great news!
What the solicitor really needs to ascertain for the lender is laid out by the Council of mortgage Lender and you can see the list of questions that relate to your lender on the internet.
In summary what your solicitor needs to find out..."
"... internet.
In summary what your solicitor needs to find out falls into two parts:
What he must find out because the lender says he should before they will give you the loan or mortgage on the property
What he thinks he should find out on your behalf
In all conversations with your..."
Chapter 22:
Why Vendors are Poorly Prepared
"... far as legal paperwork goes you also should be aware that what exists from the last sale of the property (when the vendor bought) may not necessarily be adequate for what your solicitor needs now. This is because solicitors are far more frightened of being sued today than they were say a few years ago and what mortgage lenders require on their part is constantly changing and varies from company to company. As such if, once all the paperwork arrives, don't be surprised if your solicitor says he needs more information and don't always believe that the vendor is being awkward and holding back on you. They may just be puzzled because they have given you everything that they were told they needed in order to buy the property way back..."
"... told they needed in order to buy the property way back then.
The paperwork the vendor required in order to buy the property may be inadequate for your purchase because of changes in the law or the requirements of mortgage lenders.
The paperwork which should be coming through is as..."
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Further Enquiries
Repossession
Sold Subject to Survey
Surveyor
Tenanted Properties
Title Deeds
Building Insurance
Negative Equity
Equity
Down Valuation
Mortgage Term
Lifetime Mortgage
Vendor
Cash Buyer
Loan to Value
Survey Sent to Panel
Survey Requested
Survey Instructed
Survey Booked
Title
CLM
CLM Handbook
Council of Mortgage Lenders
PAM
Pre Arranged Mortgage
Financial Advisor
Independent Financial Advisor
Ghost gazumping
I'm Tim Hill, Author of How to Really Buy a Property. I'm a property buyer, seller, landlord, tenant and I've been an agent in hundreds of transactions. I own a property portfolio across Europe but that doesn't mean I think you should to!
This book is my collective knowledge and experience that I have gained working within the property market of England and Wales for over a decade. I've written it so that you can benefit from what I have learnt whether you are a first time buyer or a budding buy-to-let investor.
There are no gimmicks here and no get rich quick schemes - just practical no nonsense advice so you can buy the property you want at the best price with the least stress.
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