Share to Buy Expert Sessions: Your questions about mortgages
Shared Ownership Mortgages
Will I be able to get a Shared Ownership mortgage from any bank?arrow_downward
While not every lender will offer Shared Ownership mortgages, most will! This includes some of the biggest names such as Barclays, Nationwide and Leeds Building Society amongst other lenders.
How much do I need to earn to qualify for a mortgage?arrow_downward
There is no minimum income to qualify for a mortgage, however your income will need to be sufficient to show that you will will be able to maintain the costs of purchasing the property, based on an affordability calculation used by the mortgage lender. The calculations used by mortgage lenders are not all the same and therefore different lenders may offer different loan amounts based on the same salary.
Is there a minimum length of employment required for Shared Ownership mortgage?arrow_downward
Response from Censeo Financial – Different lenders have different rules. A very few will accept based on a signed contract, some will accept after you have started with your new employer (even if it is your first), some will want to wait until you have received your first pay slip and some will want to know you are out of probation.
What percentage of overtime is taken into consideration when applying for a mortgage?arrow_downward
Response from Censeo Financial – This will depend on how long you have been earning overtime income and what proportion of your income is made up of overtime. Different lenders have different rules on overtime and many may ask for up to a year’s proof.
How old do I need to be to take out a mortgage?arrow_downward
You must be at least 18 years old to be eligible to get a mortgage and buy a home.
What paperwork and documentation is required to apply for a mortgage?arrow_downward
To help the mortgage process go as quickly as possible, it’s a good idea to get your documentation ready in advance of your application. Generally, lenders will require supporting paperwork to support your mortgage application including proof of identity, address and salary.
Are there any examples of why a lender would reject a mortgage application?arrow_downward
Response from Censeo Financial – There’s lots of various criteria that could mean you would be rejected. It is your adviser’s job to look into your situation in enough detail to ensure that they place you with a lender that will accept your application.
Any unusual factors in your situation will most likely reduce the number of lenders that would accept your application, which may mean you don’t have access to the very best rate, but your adviser will let you know if this is the case. However, no matter how well the adviser has done their job, the most common stage that a lender will decline is when the credit score is completed.
What is a thought of as good credit score when trying to buy a home?arrow_downward
Response from Censeo Financial – That is almost impossible to answer as different credit score companies will give you a different score. Lenders do not take just the figure itself; they will look at many factors to score you, one of which will be the credit score value
If my partner has a good credit score but I have a bad credit score, will that affect our chance of buying a home?arrow_downward
Response from L&Q – We would recommend speaking to an independent mortgage advisor who can assess your case and inform you on what budget you are working with which can help you in your search for a home. Credit score is taken into consideration and you’ll get a better understanding of this during your assessment.
How important is stability of addresses when applying for a mortgage?arrow_downward
Response from Censeo Financial – It is not important in regards to whether you can get a mortgage, but could make a difference to the credit score. For that reason it is very important to make sure all your accounts and credit are in your current address, as well as your driving licence. You should also be on the electoral role at your current address and having your name on the council tax is also helpful.
I want to buy with my partner as a joint application - but can it just be my name on the mortgage?arrow_downward
Most mortgage lenders will accept a single mortgage applicant for a joint purchase. Lenders will require that the person not on the mortgage application signs an agreement that they will not oppose an application for repossession, should the mortgage fall in arrears.
In assessing affordability they will take no account of the joint purchaser’s income or any financial contribution that they may make. It is possible that the mortgage lender will reduce the amount of loan on the basis that the applicant for the mortgage is financially supporting the joint purchaser.
Is it necessary to have a mortgage on a Shared Ownership home? Could I just buy my share outright?arrow_downward
As Shared Ownership homes are usually grant funded, the relevant housing provider would need to be able to confirm that you meet the eligibility requirements and are unable to otherwise purchase a property on the open market. Therefore, they may require you to obtain a mortgage, albeit small, as proof of this.
When looking for a mortgage, should I go straight to my bank or use a mortgage broker?arrow_downward
To find out if you meet a lender’s affordability calculations and lending criteria, you can either contact the lender directly or discuss with a mortgage adviser. A mortgage adviser may charge a fee but will be able to assist you with finding a suitable mortgage, even if your first choice is not available, as well as arrange a mortgage agreement in principle.
I was told I should get a Mortgage in Principle before viewing houses - is this true for Shared Ownership?arrow_downward
Response from Censeo Financial – It is not essential to get a Mortgage in Principle before viewing a house, but it does make sense to do so. A Decision in Principle checks affordability but the really important part of the DIP is the credit score.
If there is anything in your recent financial past that would stop you being able to buy, then you would not find yourself having fallen in love with a property, and had an offer accepted, only to find that you cannot buy it. This is true regardless of whether is a Shared Ownership property or not.
How long does a Memorandum of Sale usually take to get?arrow_downward
This can vary considerably between housing associations and whether you are buying a new build property or a resale home. With a new property you would normally expect to receive the memorandum within 10 working days. Some mortgage lenders will not accept a mortgage application unless it the memorandum is submitted with the application, while other lenders will want a copy before issuing a mortgage offer.
Do I need a mortgage broker even though I am buying from a housing association?arrow_downward
You can choose to use the services of a mortgage broker when purchasing a Shared Ownership home but this is not a requirement.
Does the mortgage advisor have to be one affiliated to the seller or housing provider?arrow_downward
No. While most housing providers will have a panel of mortgage brokers that they can recommend to you, you do not have to use an advisor offered by the seller. However, we would suggest you appoint a specialist broker who has experience in Shared Ownership mortgages.
At what stage of the buying process should I start working with a solicitor?arrow_downward
You will need to appoint a solicitor or conveyancer as they handle all of the legal aspects of buying a property for you. Generally speaking, you should appoint a solicitor around the time that you’re going through your financial assessment and are starting to look at your mortgage options.
If I choose to find my mortgage through a broker, at what stage in the process should I contact them?arrow_downward
Once you’ve found a property that you’d like to buy, the housing association will invite you to attend a financial assessment; a calculator provided by the Homes and Communities Agency will be used to assess what share in the property you can afford to purchase.
Once completed, you’ll know the share that you’ll be buying and therefore the monthly rent payable at outset; you can now start thinking about your mortgage options. At this stage, you should contact your mortgage broker who will be able to assist you with finding a suitable mortgage.
What kind of fee would a mortgage broker charge to commit to a mortgage?arrow_downward
There can be a considerable variation in fees charged by mortgage brokers. Some do not charge a fee at all, others will charge for a percentage of the mortgage loan or a fixed amount. Mortgage brokers are required to let you know their fees in advance, so it is worth phoning a few for quotes.
What’s the difference between a mortgage broker and a financial advisor? Would I need both?arrow_downward
Response from L&Q – A qualified mortgage broker is essentially a financial advisor that specialises in mortgages only. They ensure you find the right mortgage with rates that suit your budget. Their expert knowledge of the housing market means they can identify the best lenders and mortgage deals out there. Mortgage brokers have a duty of care towards you, meaning they must be able to justify any recommendations they make.
Here are a few factors that are taken into consideration when recommending a suitable deal for you:
- The size of your deposit
- Your monthly repayment preferences
- Interest rates
- Personal information such as your credit history and outgoings
This information helps them to see what mortgage offers you’ll be eligible for and how much you’ll be able to borrow.
An Independent Financial Advisor (IFA) will recommend several products. They can access the whole of the financial market in order to match the best product to your individual situation. They will give you impartial, unrestricted advice that considers every financial product on the relevant market.
An IFA will have knowledge of all financial areas, including investments, savings, insurance, pensions, tax planning and family estate management.
An IFA will do much more than simply tell you where to put your money. The whole point of advice is to make your money work for you and help you achieve your goals in life. So, a good adviser will look at your circumstances, from your current situation to your medium and long-term future, to help you decide upon the best action to take.
Is it easier to obtain a mortgage with Shared Ownership or Help to Buy?arrow_downward
Response from Censeo Financial – If you are eligible and you have the affordability, then there is no difference in difficulty between obtaining a mortgage on a Shared Ownership home or a Help to Buy property
Can Stamp Duty be added to mortgage?arrow_downward
Response from Censeo Financial – No, the mortgage can only go towards the purchase of the property itself.
What is the minimum anyone thinking of buying a Shared Ownership should have in regards to deposit, salary, credit score etc?arrow_downward
Response from Censeo Financial – The minimum deposit is 5% of the share that you are purchasing, but reaching a 10% deposit significantly reduces the interest rate that you will be offered. On top of that you will need money for a solicitor (usually between £1,500-£2,000). There will most likely be fees for your mortgage adviser too (up to £500) and possibly for a valuation to be completed.