E N Q U IRE  NOW

Mortgages are loans which are intended to help buyers purchase residential property. When you take out a loan, the lender charges interest: the same is true of a mortgage.

A mortgage is a ‘secured’ loan, which means that the loan is secured against the property being purchased until the mortgage is paid off. Sources of residential mortgages include high street banks, building societies and other types of less well known financial institutions.

Basic conditions

Mortgage providers follow a set of rules and procedures when deciding whether or not they will agree to provide a mortgage to purchase a residential property. Although different lenders apply different lending criteria, the amount a potential buyer can expect to borrow of a property’s purchase price is determined solely by the mortgage provider’s requirements.

Here are some of the factors lenders take into account when making their decision:

Affordability

At the moment it is easy to lull yourself into believing you can afford the mortgage you need - mortgage rates are at all-time lows and feel easily affordable. However, you need to ask yourself if you can afford your mortgage payments if interest rates rise and whether you can repay the capital if house prices fall.

Let’s say you manage to find a mortgage with an interest rate of three percent, fixed for three years. That’s a great rate. After three years you find interest rates have gone up and the best deal you can now get is six percent. That’s an increase of three percentage points but, more frighteningly, your interest rate has increased by 100%. Will your net take home pay have increased at the same rate?

You should budget on the assumption that interest rates will rise during the term of your loan. So be sure you can afford your mortgage repayments when that happens, not just now.

Deposit

Lenders are no longer happy to take all the risk of buying your new home, and so do not lend 100% of the value of the property. If you are unable, in the future, to pay your mortgage, the lender needs reassurance that it can take your home and cover the loan by selling it. Less risk taking means lower loan-to-value (LTV) ratios, and personal deposits need to be larger than in the recent past.

You will typically need at least 5% as a first time buyer and commonly up to 20% to access the most competitive interest rates on the market.

The source of the deposit may come from your current property, savings, inheritance or a gift.

Be aware that deposit loans from family and friends can still not be accepted as a source of deposit by some lenders, or can influence how much they may lend you.

Valuation and Survey Fees

Before a lender will grant you a mortgage it will insist on a valuation to prove the property is worth what you’re paying for it. The size of the valuation fee will vary by lender and property value.

The basic mortgage valuation is for the lender’s benefit so that it feels comfortable lending against the property. You may feel you want to add a survey to the valuation that gives you a report on the general condition of the property.

If you are buying an older property, or one in a general state of disrepair, you may choose a full structural survey. This is a thorough survey that examines the structural condition of the property and gives you advice on repairs. Depending on the property expect to pay between £500 and £1,000.

Obtaining comparable examples in the same area and for similar property will help you obtain a benchmark.

Property type

Some properties such as flats over commercial properties, studio flats and ex-local authority premises can be viewed as having reduced future attractiveness and as such some lenders may not operate in that market. This may restrict your lending options.

Listed buildings (e.g. Grade 1, Grade 2) may have restrictions on how you can maintain or alter the property as well as buildings near to it (e.g. garage). Some unlisted properties can also be subject to similar restrictions (e.g. in an area of outstanding natural beauty).

Time frame

Mortgage providers generally have a maximum number of years over which they lend and will set a date when the mortgage must be repaid in full.

H I D E
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Feefo Platinum Award

13th February 2020, Active Finance UK has won the Feefo Platinum Trusted Service award, an independent seal of excellence that recognises businesses for delivering exceptional experiences, as rated by real customers.

Created by Feefo, Trusted Service is awarded only to businesses that use Feefo to collect genuine reviews and insights. Businesses meeting the high standard, based on the number of reviews they have collected and their average rating, receive the award. A highly-valued badge of approval, this accreditation remains unique, as it is based purely on the interactions with real customers. As all reviews are verified as genuine, the accreditation is a true reflection of a business’s commitment to outstanding service.

Feefo have given Platinum Trusted Service awards to businesses who have achieved Gold standard for three consecutive years. The Feefo Gold Trusted Service award recognises those who have collected at least 50 Feefo reviews in a year, and have achieved a service rating of at least 4.5.

Russell Jenkins, Active Finance UK commented: “We’re very excited to receive this award from Feefo because it’s based on the feedback of real customers, who are the most important judges of all. It recognises how hard we work to give all our customers the best possible experience. Everyone at Active Finance UK is fully committed to the highest quality of service, so it’s important for us to listen, understand and respond to all our customers. The beauty of Feefo is that it enables us to consistently improve, so we’re looking forward to another successful year.”

Congratulating Active Finance UK on winning this year’s award, Steph Heasman, Director of Customer Success at Feefo, commented: “The Trusted Service award has always been about recognising companies that go way beyond the norm in customer experience and generate great feedback from happy customers.

“This year we’ve been delighted to see so many companies using Feefo to provide outstandingly high levels of all-round service – it’s what Feefo is all about. We help our clients give their customers the best experiences possible. I’m confident we’ll see more success from businesses partnering with us throughout 2020.

“Feefo is all about powering up customer experience, which is why we have introduced our new Platinum category. Clients told us they want recognition for achieving our demanding Gold award standard over a longer period. Our new Platinum award is earned by companies that achieve a Gold rating in three consecutive years. It’s a tough challenge and very-well deserved by those that earn it.

Feefo is a reviews and customer insights technology company that provides businesses with the tools to collect real, purchase-verified reviews and insights. Working with over 3,500 clients, Feefo ensures that all feedback is authentic, by matching it to a legitimate transaction, in order to increase consumer confidence and enable businesses to make smarter business decisions.

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