Types of Borrowers
Types of Borrowers
First Time Buyer (FTB’s)
Borrowers without previous mortgage experience. Before proceeding with a mortgage application, FTB's will need to carefully consider whether they are prepared to commit to a long-term financial arrangement and if they can afford regular mortgage payments.
A major consideration for any first time buyer is the amount of deposit they have available. Traditionally mortgage lenders require FTB’s to have a minimum of 5% of the agreed purchase price. However some lenders will now consider mortgage applications from buyers with a 3% deposit.
In recent years, as house prices in the UK have risen faster than average earnings and FTB’s have struggled to save for a deposit, some lenders have introduced mortgages between 100% to 125% Loan To Value, depending on your circumstances. However, these schemes usually cost more in the long run due to higher interest rates and charges.
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Remortgaging
As a homeowner, if you are either on the mortgage lenders Standard Variable Rate, or your initial benefit package (ie. Fixed or Tracker rate) is due to end in the next 3 to 6 months, it is imperative that you review your existing mortgage.
You should seek professional advice on remortgaging to reduce your monthly mortgage payments immediately.
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Home Movers
If you are on your mortgage lender's Standard Variable Rate it would be appropriate to review all lending possibilities within the market place.
If you are not on the SVR and have a beneficial package most mortgage lenders will allow you to transfer your mortgage package to your new property and may allow you to increase your borrowing (subject to meeting your mortgage lender's terms and conditions).
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Buy To Let (Investors)
Before entering into a Buy To Let mortgage you need to carefully consider the following:
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Any potential profit may be reduced as a result of costs associated with your buy to let increasing, e.g. you will incur maintenance costs and repairs to the property or there may be an increase in your mortgage payments.
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If house prices do not rise, or if they fall, your potential profit will reduce. You may even suffer a loss, or you may have insufficient funds to repay the mortgage upon sale of the property.
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If there is little or no demand for tenants, this may result in you having to rely on other resources to meet the regular mortgage payments and other associated costs. Tenants may cause damage to the property or fail to pay the rent on time. This may increase your costs and reduce your rental income and profits. In extreme circumstances, if you needed to evict your tenants you are likely to incur legal expenses.
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It is important to consider a contingency fund to cover property repairs, periods of non-tenancy (known as "voids") or falling house prices.