Mortgages and dreams

Mortgages and dreams

‘The future belongs to those who believe in the beauty of their dreams’ said Eleonor Roosevelt and we all sighed. It is a beautiful quote and far too romantic for a dry subject like mortgages.  Yet, those of us who lived a little know that money makes the world go around and if you have not got it, you need to borrow it. So, if you are day dreaming about building your own home, developing a property portfolio or living mortgage free, read on to see how the right mortgage deal can help you fulfill our dream:

Build your own home- Self-build mortgage: As the name suggests, a self-build mortgage is a home loan take out on a property which you are building yourself.

The biggest difference between self-build mortgages and standard residential mortgages is that the funds are given to you in stages rather than as a single lump sum. This is to reduce the lender’s risk and ensure that the money is spent as planned so you don’t run out when you are only halfway through the project.

Exactly when funds are released will depend on the lender but, as a general rule, you’ll get the first tranche when you buy the land, more when the foundations are laid and a further payment when the property is built up to eaves level.

The final payments will be made when the roof is watertight and then when the interior walls are plastered, and the last installment is paid on completion.

Live mortgage free- Offset Mortgages: An offset mortgage is a way of linking your mortgage with your savings to provide you with a way to use your savings to reduce the cost of your mortgage. Instead of earning interest on your savings, you will reduce the amount of interest charged on your mortgage. There are three ways that you can make an Offset Mortgage work for you:

  1. Pay your mortgage off sooner
  2. Reduce your monthly payments now
  3. Reduce your monthly payments in the future

The way offset mortgages work is simple. By moving some of your savings into a special Offset Savings Account linked to your Offset mortgage, the interest you are charged on your mortgage is determined by the difference between the amount in your savings and the amount in your mortgage.  So, the more you save, the less interest you’ll pay on your mortgage.

Build your property portfolio- Buy the let Mortgages: Buy-to-let (BTL) mortgages are for landlords who buy property to rent it out. The rules around buy-to-let mortgages are similar to those around regular mortgages, but there are some key differences.

  • The fees tend to be much higher
  • Interest rates on buy-to-let mortgages are usually higher
  • The minimum deposit for a buy-to-let mortgage is usually 25% of the property’s value (although it can vary between 20-40%)
  • Most BTL mortgages are interest-only. This means you don’t pay anything each month, but at the end of the mortgage term, you repay the capital in full.
  • Most BTL mortgage lending is not regulated by the Financial Conduct Authority (FCA). There are exceptions, for example, if you wish to let the property to a close family member (e.g. spouse, civil partner, child, grandparent, parent or sibling). These are often referred to as a consumer buy to let mortgages and are assessed according to the same strict affordability rules as a residential mortgage.

As it is nearly Christmas, we wish you a Merry Christmas and a Happy New 2018. If you have some time over the festive break to consider your future plans, be sure to give us a call in January and see how we might help.

 

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

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