There are many different types of mortgages available, and most of them are entirely different. In this article, we will talk about the cashback mortgage and how it works.
Does it benefit you in the long term or short term? How does it compare to my other mortgage options in Sheffield? Let’s take a look and answer the most frequently asked questions regarding cashback mortgages.
Firstly, if you prefer to watch our moneymanTV video on cashback mortgages, feel free to watch it below. As a Mortgage Broker in Sheffield, we receive many questions about cashback mortgages, so mortgage advisor and our managing director Malcolm ‘the Moneyman’ decided to make a video to make cashback mortgages easier to understand:
Cashback mortgages are pretty self-explanatory. To put it simply, after paying off your mortgage or after finishing your mortgage term, you will get some money back.
The sum you get back gets based on a percentage of what you have borrowed. It usually’s something small like 1 or 2%. Some lenders like to have a fixed price in the contract. Even if you have a long mortgage term, this is a fixed amount, and it will not increase over time.
Cashback mortgages come with both advantages and disadvantages. For example, some Cashback Mortgages might come with a free property valuation or some fringe benefits.
Cashback Mortgages can be very attractive to customers that are borrowing lower mortgages. You will get some money back plus some benefits on the side. If you are offered a reasonable percentage on your Cashback Mortgage, you should consider taking it up as it may be worth it in the long term.
The only real disadvantage to a cashback mortgage is that they usually come with high-interest rates.
Compared to other mortgage options available, Cashback Mortgages are not the most popular. However, they are still worth considering. We still see customers at Sheffieldmoneyman looking for Cashback Mortgages, and they are a great backup option if you don’t qualify for your first choices.
If you want a more in-depth viewpoint, be sure to book your free mortgage appointment online or give us a call To speak with a Specialist Mortgage Advisor in Sheffield. Our team will be more than happy to explain the benefits of taking out a Cashback Mortgage and why they could be a suitable option for you.
At the start of your mortgage journey, you will come to realise there is a range of different types of mortgages.
Whether you are a First Time Buyer looking to get onto the property ladder, thinking of Moving Homes in Sheffield, or your term has ended, and you want to know your Remortgage options. Understanding the different types can help find you the most suitable choice that fits within your circumstances when living in Sheffield.
This article will feature a comprehensive list of the most popular mortgage types available to most customers when looking into their options along their mortgage journey.
For more information regarding these types, please book your free mortgage appointment online today to speak to one of our expert Mortgage Advisors in Sheffield. Our advisors are on hand seven days a week, ready and waiting to try their very best to help you with your mortgage scenario.
Something to contemplate when buying a property is the type of mortgage you take out. The most suitable mortgage for you will depend on your circumstances, plans, and whether you choose to live in or rent out the property. Feel free to use one of the jump links below to go to a specific spot in the article;
A fixed-rate mortgage is when your interest rates are on a fixed agreement between you and the lender. This fixed payment can span over a few years. Most buyers and owners usually opted-in between 2 to 5 years or longer.
Choosing this option will lead to your mortgage payment will stay the same throughout this period, even though any economic changes such as interest and inflation, so you can rest assured that you will have no differences with your payment.
Unlike a fixed-rate mortgage, a tracker mortgage doesn’t have a set rate between you and your lender. But instead, the interest rate will alter depending on the Bank of England’s base rate so that interest rates can fluctuate at any time.
For example, if you are repaying your mortgage, and the Bank of England base rate is 2%, while you are tracking a 2% above base rate, this means the overall rate you will pay back is 4%.
A repayment mortgage involves paying a combination of interest and capital each month. Over time, the property will eventually become yours if you keep up to date on the mortgage payments.
This method can be described as the most risk-free way to pay back your capital to the mortgage lender. At the start of your mortgage journey, interest becomes your principal payment. If you have taken out a much larger term like 25, 30 or 35 years, your balance will reduce slower.
Later on in your mortgage term, your payment methods will change to paying off more capital than interest, and your balance will lower at a quicker rate.
An interest-only mortgage is a payment method that involves you only paying the interest per month. Whilst that sounds ideal, this means that the borrowed amount has to be paid back in its entirety by the end of the term.
Many Buy to Let Mortgages are seen to be on an interest-only basis. However, getting a residential property on an interest-only basis is nearly unheard of these days due to the complicated criteria that need to be met.
There are circumstances where this may still apply, with reasons including; downsizing your property when you’re older or paying back capital through other investments.
Lenders can be strict when offering these products, and the loan to values is a lot lower than in previous years.
An offset mortgage is a blend of a conventional mortgage account with a savings account that runs alongside it. This mortgage type can allow you to be flexible by regularly paying in your offset account or withdrawing funds if needed.
This is seen as the more appealing type of mortgage as it allows you to have a savings account opened alongside your main account. An example of this is if someone took out a £100,000 mortgage, but in your savings, you have £20,000. You can put this into your new savings account and pay the interest on the remaining amount, which would be £80,000.
The potential option is to pay off your mortgage earlier if you keep your payments as expected.
A capped rate mortgage involves the customer making repayments each month with a maximum interest rate like fixed-rate mortgages. However, this type has a restricted percentage so that you won’t be paying any higher than the agreed percentage. For example, if you’re capped at 5%, your rate will never go above 5%.
This type can be beneficial if interest rates reduce, as your mortgage rate will follow this reduction. This should reflect in lower monthly mortgage payments.
This type of mortgage allows you to be flexible with your payments and either underpay or overpay any amount. You can only underpay if you have overpaid the first time and have agreed to do this with your lender.
Overpaying your mortgage can be helpful if you want to pay your mortgage off early and pay less interest.
First time buyers, home movers, landlords and the self employed will always ask the same question when it comes to applying for a mortgage – “how much can I borrow?”.
The answer varies depending on your individual situation. For example, how much you can borrow could change depending on your credit score, income, bank statements and your personal situation.
Let’s take a look into ‘how much you can borrow for a mortgage’ and how things have changed following the credit crunch.
Long before the credit crunch, credit scoring was non-existent and mortgages were manually assessed by your local building society manager. Then, during the 1990s, lenders started performing income assessments to provide a consistent approach across applicants.
Maximum lending caps were also introduced. This meant that customers couldn’t borrow more than three to four times their annual income. Scary to think that before people could!
Despite these lending caps in place, in the early 2000s, lender’s income multipliers grew more generous. This meant that more and more people were borrowing more than they can afford to pay back. Furthermore, some lenders were even allowing some of their customers to ‘self-certify’ their income with minimal/no background checks such as payslips.
Of course, all of this went very wrong. Lenders were lending to applicants that couldn’t afford to pay them back, therefore the market crashed and all of sudden, it became extremely hard to get a mortgage from 2008-2010. Lenders tightened their margins and created a cautious (over-corrected) lending environment.
In 2014, the Mortgage Market Review (MMR) was introduced. This initiative helped the market get back up on its feet; it brought a new set of guidelines for lenders to adhere to. The old income multiplier method was scrapped and replaced with new, more sophisticated affordability calculators.
These new affordability calculators provided a closer look into an applicant’s spending habits and net disposable income. This meant that the lender could have an in-depth look at your bank statements to ensure unaffordable mortgages were not granted as they were before the Mortgage Market Review.
There is still a “lending cap” in place at about 4.75 times your annual income but your expenditures are also analysed. For example, lenders seem to penalise low-earners and even things like gambling showing up on your bank statements can sometimes affect your chances of being accepted. Some take pension contributions as a fixed outgoing so would often lend, say a public sector worker with a big pension deduction less than a private sector and so on.
If you are currently trying to work out how much that you borrow, we would recommend trying our online free affordability calculator or speaking to us for a more accurate measure. A Mortgage Advisor in Sheffield will research the market on your behalf and try to find a lender that will lend you the amount you need.
Before you take out a mortgage you should sit down with a First Time Buyer Mortgage Advisor in Sheffield and work out your finances together to ensure that the repayments feel comfortable to you.
If you are considering buying a house, don’t be spontaneous. Taking out a mortgage requires careful planning and preparation over a long period.
That said, you will be surprised at the number of people we deal with regularly, who are more accustomed to their buying behaviour and have therefore neglected to prepare for a mortgage in advance.
Many reasons why a first time buyer in Sheffield like yourself jump into such a significant financial commitment on a whim. Some of the most common including;
Disadvantages include leaving buyers open to various potential issues with their mortgage. Some common mortgage hurdles we have faced with customers include:
Savings can be pretty tricky. Especially if you are renting at the moment, balancing a constant income and significant outgoings and essential purchases each month limit what you can save in-between.
The good news is that family members can help via the use of a Gifted Deposit. Some first time buyers in Sheffield ask family members to try and help whenever they can. If a family member is looking to help. We recommend it’s best to give them as much notice as possible to get their finances in order!
Getting an up to date credit report is not an incredibly difficult task. You may have seen TV adverts for various credit reference agencies, but we recommend Check My File, as they can collate the data from these sources into one for you to compare.
Once you have downloaded your credit report, you can send it across to a mortgage advisor in Sheffield, who will look at this for you. We see these reports daily, and we know what sort of things the lenders like to see and what they do not want to see.
When a lender looks at your bank statements, lenders would rather not see lots of unnecessary bank charges or gambling transactions on your bank statements. You will need to provide the lender with a reasonable explanation as to what has been happening on your account and how you plan to resolve this going forward if any issues arise.
For customers who are self employed in Sheffield, we understand that Accountants try to minimise the tax liability for their customers. That said, if your year-end has come around, then there is nothing to stop you from submitting another set of accounts earlier than you might typically do.
Especially if you think your business has grown in the last 12 months. Some lenders consider ignoring previous years’ figures if the latest ones are favourable.
No matter your circumstances! If you are still facing one of the problems above, it’s possible that we may be able to help you get in touch. Our team of expert mortgage advisors in Sheffield are here to try and help.
So, you are now ready to take a further step up the property ladder and further your mortgage goals. Whether you are a first time buyer in Sheffield, new to the experience or a home mover in Sheffield looking to sell your current home and live somewhere else, you will still need to start getting prepared for your mortgage.
Here are some expert tips from an open and honest mortgage broker in Sheffield:
As an experienced and well trusted mortgage broker in Sheffield, we always recommend taking advantage of mortgage advice as early on in the mortgage process as you can. This will allow you to get an idea of how much you could possibly borrow and what your estimated monthly costs may be.
You need to prioritise getting an up-to-date credit report, as you will need to know what your current credit score is and what you could potentially do to improve it, if necessary. The better your credit score is, the higher chance you have of your mortgage application being accepted.
There are a lot of different ways that you could potentially improve your credit score in Sheffield and to the surprise of many, it isn’t always too difficult to do so. In some cases, it is even possible to obtain a mortgage deal despite having a low credit score, though this ultimately depends on your lender and the way they look at your circumstances.
By ensuring you have both a mortgage advisor in Sheffield by your side and an up-to-date credit report to hand, you could increase your chances of being accepted for a mortgage in the future. A trusted mortgage advisor in Sheffield will be able to work through everything on your behalf, guiding you throughout the process.
Here at Sheffieldmoneyman, we have the ability to obtain a fully credit-checked agreement in principle for you, something we can turn around within 24 hours of your initial appointment.
A dedicated mortgage advisor in Sheffield will help you to get prepared for everything prior to submitting your mortgage application.
In doing this, your mortgage lender will want to see some proof of identification, so that you can prove you are who you say you are, along with where you are living and the amount that you earn from your job.
In knowing this, you can now prepare for all the necessary documents you’ll need. These are as follows;
In terms of proving who you are you’ll need to produce some photo ID. Acceptable types of ID include a driving license or valid passport.
In addition to the above, you’ll need to prove where you live. You’ll need to produce a utility bill or original bank statement dated within the last 3 months.
Lenders will always have a keen interest in what your spending habits are, compared to anything else.
They need to be absolutely sure that you will have the ability to regularly maintain your monthly mortgage payments on top of everything else you have going out. They will analyse your bank statements very carefully and take everything into consideration.
Lenders aren’t too fond of seeing gambling on your bank statements. It’s something we often see catching people out, as they haven’t realised that it can harm your chances of obtaining a mortgage down the line. They also don’t like seeing customers go over their overdraft limit, as this basically means your spending money that isn’t there.
It’s reasons like this why we always advise that you be careful and make sure that your statements are going to appeal to a mortgage lender, rather than put them off from lending to you.
You will have to prove you have the funds in place for the deposit and also be able to evidence this for anti-money laundering purposes. Try not to move money around your various accounts too much as it will make evidencing the audit trail a more complex process than it needs to be.
Lenders take a preference to applicants who are able to evidence that they have been saving for their deposit. It shows that you have a good understanding of how to put money aside every month and not spend money you don’t have. You’ll also need to factor in any large credits into your accounts.
Quite often we find that the money for a deposit has been gifted by family members. These funds will also need to be evidenced, with the “donor” being required to sign a letter for the lender. This will be to confirm that the funds are strictly a gift and not something they will be needing back from the mortgage applicant.
In terms of affordability, the most important thing is to be able to prove your income. If you are employed this tends to be done by providing the lender with your last 3 months’ payslips and most recent P60. Lenders often take into account regular overtime, commission, shift allowance and bonus.
Make sure that you do plenty of research ahead of time. Preparing for your mortgage and making a note of your anticipated outgoings after you move house puts you in a great position prior to starting the application process.
You can work out an estimate of how much the council tax and utility bills will be. In addition to that, you can also work out your regular expenditures, such as any food and drink you will be buying. This will demonstrate how much disposable income you have available to pay your mortgage from.
You need to accommodate lots of time to prepare for your mortgage application. It can sometimes be a lot quicker and much easier to approach a mortgage broker in Sheffield who can take the bulk of the process and do it on your behalf.
A mortgage advisor in Sheffield will be able to work out how much everything is potentially going to cost you and guide you through the entire mortgage process, doing their best to work hard and try to secure you a competitive mortgage deal.
Getting ahead and planning early will always impress your mortgage lender. Let an expert mortgage broker in Sheffield help you out. Get in touch to book your free mortgage appointment with a trusted mortgage advisor in Sheffield.
The higher that your credit score is, the higher the likelihood that your application will be accepted by the mortgage lender. This is different to the likelihood of someone with a poor credit score finding the same success. A mortgage lender will study your application carefully in order to make sure you can definitely afford their mortgage.
That being said, there are still no guarantees when it comes to mortgages, even if your credit score is pretty high. Each mortgage lender will have their own specific criteria that you need to match in order to obtain their deal, and it is unlikely that you will meet all of those.
Each lenders criteria could be vastly different to another and they have developed their own unique ways of figuring out whether you match what they’re looking for or not. In some cases, you might actually find yourself matching up with the majority of them and in some cases, maybe you only match up with a few of them.
It is the job of your dedicated mortgage advisor in Sheffield to work alongside you and find the right lender who is offering the best deal for your personal circumstances, with criteria that you can meet. Whether your advisor is from your bank, the lender or a trusted mortgage broker in Sheffield like us, they will match you up to your mortgage needs as best they can.
Getting in touch with a mortgage broker in Sheffield will be of a great benefit to you, as our experienced mortgage advisors will work their hardest to find you the best deal for your personal situation, always having your best interests at heart.
You will be updated on a regular basis with exactly what is going on, so you’re not left stressed and confused about the process. It’s one of our many aims during your mortgage journey to make sure everything goes as smoothly and stress-free as it possibly can.
Whether you are a First Time Buyer in Sheffield, planning on Moving Home in Sheffield or Self Employed, we will do our best to provide you with helpful tips and tricks to help you improve your credit score and eventually, secure an amazing mortgage that you’ll be thrilled to be walking away with.
There are a variety of different credit reference agencies in Sheffield you could go with, though the most popular ones are Experian and Equifax. Before you rush into anything, make sure that you do some research into each agency as it is possible that some of them may be holding incorrect data and it could help you identify any discrepancies.
We personally would suggest using a platform called Check My File, as this collates data from all the major ones like the aforementioned two, giving you a wider overview of how your credit file is looking. In signing up, you will receive a free 30-day trial, followed by a monthly fee of £14.99. Your account can be cancelled at any time prior to the end of the trial should you see fit.
There are lots of different things you can do to improve your credit score. Here we have some for you to have a look at:
You will find that having multiple credit searches taken out against you could actually end up having a negative effect on your credit score in the long run. Even the use of price comparison websites is a factor that could harm your credit score.
If you are planning to apply for a mortgage, we strongly suggest that you avoid applying for any other credit in the meantime. Paying your credit back is a good thing for your score in the long run, providing that you can show lenders that you are able to maintain your monthly repayments.
That being said, borrowing during a mortgage application is something that could make the lender think that you cannot afford the deposit and are relying on the credit to give you a financial boost.
A great yet very simple way for you to get a boost to your credit score, is to register yourself for the electoral roll. It can demonstrate stability and this is something that the lenders like to see. You must make sure that your name is spelled correctly, and you must include your current registered address, not your previous one.
If you are not registered on the voters’ roll, you should definitely sign up for it. It is very easy to do online and it is something that could contribute well to improving your credit score.
Maxing out your card each month is something else that can actually reduce your credit score. The lender will prefer to see that you are using a credit card and paying off the balance in full each month, as this will show that you are good with your money management.
If a lender sees that you are exceeding credit card limits or overdrafts,it might give them the impression that you don’t take your finances seriously. This once again could drastically harm your chances of getting accepted for a mortgage.
Sometimes, if you have forgotten to tell a previous credit provider that you’ve moved into a new property, it can come across like you are actually living in multiple properties at the same time. Lenders don’t like to see this so you must make sure that you are on top of your address history so that it displays correctly on your credit report.
If you have a family member or ex-partner financially linked to you, this could be affecting your score without you even being aware of it. If the account is still live, then you won’t be able to get the financial association removed. If you want to remove any of these links, you should absolutely get in touch with the credit reference agencies and make a request.
Applicants see credit scoring as an unfair way to assess a mortgage application. Your mortgage lender would disagree with that, as at the end of the day, they are in the business of making money and they need to be sure you will be able to keep up your payments. It’s also much cheaper for them to operate through a computer-generated credit scoring system, as this keeps the process consistent and efficient.
Send an up-to-date copy of your credit report to your dedicated mortgage advisor in Sheffield ahead of time to increase your chances of being accepted the first time. The more your in-the-know your advisor is regarding your finances, the better it will be.
Also, there are still some lenders that prefer to operate the way companies used to and will manually assess your application. They will still have rules that they stick by regarding the number of defaults and CCJs that they will allow customers to have.
Once you’ve had your offer accepted on a property, you are going to move onto the next stage of the mortgage process… getting the property surveyed.
A property survey is carried out to determine whether the true value of a home correlates to the amount that a buyer has offered for it. The survey will also show the overall condition of a property, highlighting defects and damages (if there is any).
There are lots of different types of property surveys, however, three stand out as the most popular amongst the crowd:
A property survey may be carried out free of charge depending on the lender that you use. If you are offered a free survey, you may be limited to what you can see on the report, or sometimes the lender may not give you a copy.
Each survey differs, some will provide great detail and tell you everything that you need to know about your property, whereas others will not. Usually, the more that you pay for a survey, the more in-depth the report will be.
If your survey shows something about the property that you weren’t told about, by law you are allowed to approach the seller and work out a price reduction is necessary.
A Mortgage Valuation is the simplest property survey and usually the cheapest. They are carried out to find out the true value of a property.
Before committing to lending to you, your lender will need to find out whether the property’s value matches how much you are set to borrow from them. If you put in an offer above the property’s value and it gets accepted by your seller, it’s good for them but not for your lender, therefore it’s unlikely that your lender will accept your application. This is because they will have to lend more than the property is actually worth; this is called a down valuation. If you can make up the difference between what you said you’d pay and the mortgage amount, you’ll be able to go ahead with your lender, although, if you can’t then the lender will pull out of the deal.
Unfortunately, a Mortgage Valuation survey will not point out minor damages or repairs, it will just show clear structural defects that will require attention as soon as possible. If you want a report that goes further in-depth, you will have to pay more to upgrade to a different survey.
A Homebuyers Report focuses on the safety of the property and how safe it is to live inside of it. The report will include problems such as mould, dampness or something that does not pass the current building laws.
This survey will be carried out by an expert. They will thoroughly examine the property from top to bottom so that they know exactly how safe it is to live in.
As a Mortgage Broker in Sheffield, we usually recommend a Full Structural Survey, especially to those who are purchasing an older building. You sometimes need to be aware of everything.
This survey is the most expensive of the three and usually them all. This is because your surveyor will look at the whole property, often spending a whole day to determine its worth and to find out what’s wrong with it.
If the purchase goes through and you now know everything about the property, you may have saved yourself a lot of money in the long run as if you didn’t know about the damages, you couldn’t act on them meaning that they could worsen overtime.
New builds usually requires a different type of survey called a snagging survey. This will highlight both minor and major issues. It could be from a missing door hinge to cracks in the ceiling.
If the new build has already been built, it would be wise to have a property survey carried out on it before you move into it. Just because the property is a new build doesn’t mean that there is nothing wrong with it. As a Mortgage Broker in Sheffield, we would always advise that you have some sort of survey carried out on a property.
Whether you are a first time buyer in Sheffield or moving home in Sheffield, if you are struggling to choose the right property survey or just need general mortgage advice, feel free to get in touch with our team. Sometimes, it can be difficult to get the ball rolling when it comes to moving home, so make sure to get in touch if you need any help!
You can obtain the services of a surveyor to carry out a Homebuyers report or building survey through the Royal Institution of Chartered Surveyors.
An Agreement in Principle (AIP) is a statement or certificate from a lender to say that, in principle, they would lend you a certain amount and proves a First-Time Buyer in Sheffield like yourself that you are credit-worthy.
If you are looking to get one, you need to get in touch and provide us with information about your mortgage needs and situation. Then, once we have processed your details, we can suggest how much you may be able to borrow.
As a devoted mortgage broker in Sheffield, we can usually turn around an agreement in principle for you within 24 hours of your enquiry. Your Agreement in Principle can last anywhere between 30 and 90 days, depending on the lender. If your Agreement in Principle expires before you use it, it can be easily refreshed by speaking to your mortgage advisor in Sheffield.
When applying for an Agreement in Principle, the lender will run a credit check to evaluate your eligibility. You will need to ask what level of credit survey they do. If the lender runs a hard credit search, it will leave a ‘footprint’ on your credit file visible to other lenders.
A search footprint is a record left by a credit reference agency every time your credit report gets searched, either by yourself or by others. If there are a high number of hard searches in a short period, it can harm your credit score as it could signal that you’re struggling to get accepted by other lenders.
However, if the lender has chosen to run a soft search, it won’t leave a footprint, and it won’t impact your credit score.
An AIP cannot guarantee that you will get a mortgage offer – you will still need to go through the entire mortgage application process when you find a property you want to buy, but this will help strengthen your chances.
An AIP usually is valid for up to 30 – 90 days, and our mortgage adviser in Sheffield will be able to use the information as part of your mortgage application process. However, they will want to make sure the details are still correct.
Some factors may affect the lender’s decision when making a complete application, such as their lending criteria or personal circumstances that have changed.
You may be a First Time Buyer in Sheffield, or you might be thinking of moving to the area and are looking for excellent mortgage advice. If this is your situation, we believe that you will benefit from our dedicated mortgage advice service in Sheffield.
We offer a free initial mortgage consultation with one of our expert mortgage advisors in Sheffield, so please get in touch today and let us get the ball rolling on your mortgage application so that we can secure you an agreement in principle.
Lenders will look at various aspects when it comes to your bank statements. Their main job is to decide whether or not you are the kind of person that they are going to want to lend to. They want an applicant who can manage their finances responsibly and is going to be able to keep up-to-date with their mortgage payments.
Regarding your bank statements and what lenders look for on them, let’s take a look at gambling transactions and how they can sometimes affect your ability to get a mortgage in Sheffield.
Whether it’s a once every couple of months or a regular occurrence, gambling in large amounts can often trip your mortgage application up. This also applies to you if you are frequently gambling. Whether you are losing money or not, you may be declined due to your gambling habits.
At the end of the day, no one can tell you how to live your life, although, it is always advised that you ‘gamble responsibly’. Remember that a lender needs an applicant that doesn’t oppose risk to them. They need someone who’s going to meet their mortgage payments month on end; they want no risk of repossession.
Put yourself in your lender’s shoes, would you lend money to someone who has the tendency to gamble frequently with large sums of money or someone who’s always on top of their payments and doesn’t gamble their money?
It is in no way illegal to gamble, therefore, the occasional gambling transaction on your bank statements will not mean that you’ll get automatically declined. They will assess the gambling transactions though, looking at whether they are reasonable and responsible. They will look at how frequent you gamble, the size of the transactions and how they relate to your income.
If you are infrequently gambling in small amounts, it should make no significant difference to whether you get accepted or not. Lenders may even just brush it under the rug. On the other hand, if you are a regular gambler, their viewpoint may be the opposite. You can’t be eating into your overdraft due to gambling either, it will reflect badly on your application.
Lenders will examine your bank statements carefully. They will be looking for lots of different things, but ultimately, they want to see your bank statements and get the confidence that you are a reliable applicant that they’d be willing to lend to.
If you are exceeding your overdraft limit month on month, your lender may begin to think that you struggle to take care of your finances. It’s likely that they’ll be okay with you doing so, however, we always advise that you be wary. They will also look for any other existing credit commitments that you have; it could be a credit card or a loan, etc. This is an important factor as you need to compensate a set amount each month to pay back the loan – the same as mortgage payments.
You should also look out for credit transactions from pay-day loan companies or otherwise known as “undisclosed” loan repayments. These can cause problems if you told them that you had no further loans to account for but then they appear on your bank statements. You need to be transparent with your lender and tell them everything prior to them viewing your bank statements.
As a mortgage broker in Sheffield, we will always say that the easiest way to improve things is to be sensible and if it’s possible, plan ahead.
Usually, your lender will ask for a minimum of three months bank statements. So, in theory, before you apply, you can get yourself prepared and maybe tone down on things such as gambling and dipping into your overdraft. All the little things can sometimes help.
If you use a mortgage broker in Sheffield like ourselves, they will help you with this whole process and recommend the option that will benefit you the most. There are some specialist lenders out there that will ask for fewer bank statements than others, a mortgage broker may be able to help you access one of these deals.
At the end of the day, the message to remember is to gamble responsibly and take care of your finances!
If you are a first-time buyer in Sheffield and this is your first hands-on experience with the mortgage world, you should definitely get specialist mortgage advice from a mortgage advisor in Sheffield. They will guide you throughout the whole mortgage process and help you with your application and get you on track.
We often hear from customer enquiring if it’s it possible to exchange ownership of your property from your name(s), into the name of your limited company?
First of all, it is essential to know how a mortgage lender will approach purchases from Limited Companies. There are not many lenders that will accept Ltd Company applications through anything other than an SPV (Special Purpose Vehicle) Company.
An example of this is a company set up expressly to invest in properties like this. When registering your company, your registration will include a SIC (Standard Industrial Classification) Code that maps out the types of business in which the company will participate. Mortgage lenders usually would not accept applications from general trading companies that can trade in other areas.
For example, if you have a plumbing and heating company, you will need to set up an entirely separate company to own the properties in your Buy to Let portfolio instead of buying them through your plumbing company. The SIC codes typically accepted are 68100, 68201, 68209, 68320, though this varies depending on the lender.
To find out more information about SIC Codes, consult the Government here.
There are both advantages and disadvantages to purchasing a Buy to Let in Sheffield under an Ltd Company. For example, you will find that not all mortgage lenders will consider applications from SPV’s. Instead, they prefer to limit their lending to lone applicants or couples applying in their name(s). As such, individuals will find themselves with a broader range of products than those using SPV’s.
When it comes to the lenders who would lend to an SPV, the mortgage rates would also typically be much higher than the rates offered to individual applicants. A positive take away though, is that the way rental income is taxed has been changed in recent years, meaning that many people prefer the advantages generated by SPV ownership (relating to how payment is taken and how that income is taxed) as they more than makeup for any extra interest charges or lack of product choice.
The first thing we always recommend customers look at when evaluating your options of buying your portfolio under an SPV is speaking with a specialist tax advisor for advice. They will assess factors such as external income sources and the rate of personal income tax you pay, seeing how they will affect your overall tax status. This will help decide whether or not individual or SPV ownership is the way forward for you.
As discussed, the main factor in your decision will be your tax position. This becomes a little more complex when you decide whether or not you want to transfer properties you already own from individual ownership to company ownership.
The problem here is that it isn’t just a simple transfer. This type of transaction is a change of legal ownership. Your Ltd Company is a separate corporate identity so that the transaction will be counted as a purchase from you as the individual to the SPV. Stamp duty charges, legal costs and new mortgage and valuation charges will be in full effect.
It’s important to remember that Limited Companies come with running expenses and legal obligations. That said, these may be offset by the possibility of tax-deductible costs or long-term tax benefits.
If a landlord is looking to increase their property portfolio, it would probably work better to keep the current property under their name and only use the SPV to buy any other properties. That way, you avoid any switching costs and unwanted legal fees for something you already own. That being said, each case is different, and you may find that the benefit of a switch far outweighs any of the downsides that come with it. It’s all depending on the circumstance.
As we’ve covered, this is a particular territory. If you are considering taking this route, please get in touch with an experienced and knowledgeable Buy to Let Mortgage Advisor in Sheffield.
Here at Sheffieldmoneyman, we have many Buy to Let experts on hand who provide top quality mortgage advice in Sheffield, backed up by introductions to appropriately experienced accountants and solicitors as and when you need them.
To speak with a Mortgage Advisor in Sheffield, please Get in Touch and we will see how we can help.