Mortgage in the UK – questions and answers (Part 3)

In this article, we answer your questions for the third time. The pool of the most common ones is slowly being depleted, which is the perfect opportunity to look at slightly less popular but equally important questions. Planning to take out a mortgage? Be sure to take a moment to read our post.

1. First time buyer status and property abroad

Many of our clients question whether their home ownership in Poland stands in the way of First time buyer scheme assistance. Unfortunately, despite the extremely rare factual verification, foreign property owners are not eligible for the First time buyer scheme. It is worth bearing in mind that, when using this scheme, you make an official declaration clearly stating that you do not own any property.

You can read more about this in our article on First time buyer scheme.

2. What is shared ownership?

In the simplest terms, shared ownership is where the borrower buys only part of the property and pays a monthly rent for the rest of the share. It is customary to purchase between 25% and 75% of a share of the property in this way, although in rare cases it is possible to purchase as small a share as 10%.

Shared ownership is particularly beneficial for people for whom a mortgage for the full amount needed to buy a property is unaffordable or almost unachievable. Joining the scheme is not available to all UK residents, but the terms and conditions are so affordable that it is definitely worth finding out more about it. To do this, simply use the government website or our article on shared ownership.

3. What is remortgage?

Remortgage is the process of taking out a mortgage to pay off an existing obligation. It also often involves changing lender. We use this option, for example, when a more favourable solution for us has appeared on the market that can save us some money on the repayment.

A remortgage is also worth thinking about if you have had your mortgage for a long time, as the banks’ offers depend on their share of the financing for the whole property. If your initial contribution was 10 per cent, the LTV (loan to value) is 90 per cent, so the bank has quite a high risk. When you repay, for example, 25% of the capital, the LTV decreases noticeably and with this the interest rate on the loans offered to you decreases. In other words - if you repay the capital regularly, many lenders will offer you their products on really good terms. Of course, as Extend Finance we are in the business of helping you with your remortgage.

4. Can a foreigner buy a house in England?

The answer is obvious: absolutely yes. Although the country you come from is not irrelevant, you can both buy property in the UK and take out a mortgage here. No visa or citizenship is required, but in practice, you must have resident status. Without it, your credit score will be very low, and many banks will not want to grant you a loan at all.

5. How to apply for a council house in the UK?

For those who are unable to buy or rent a property on standard terms, a council flat or house is an interesting option. To take advantage of this opportunity, an application must be made to the local council. Even though it is not imposed top-down, you usually have to wait for your allocation and there is still no guarantee that you will be able to get a property for yourself. Your chances increase if:

• You are a homeless person

• Your health has deteriorated noticeably due to poor housing conditions

• You have lived in a small flat or with a large number of flatmates for many years

You only need to use the government website to apply for a council house.

If your financial situation has improved and you are able to take out a mortgage, it is worth considering buying social housing and using the Right to Buy scheme. As well as the obvious benefit of owning a freehold property, you could save a really great deal of money compared to buying on the open market.

6. Where to get money for a deposit in the UK?

In the previous Q&A we already mentioned that the minimum deposit for buying a property is 5%. While this seems like a mere fraction compared to the total amount, in practice it is a really large amount, often in excess of £15,000, not even mentioning the additional costs of the purchase.

In some cases, it is possible to cover the down-payment with an unsecured loan or with funds that family, such as siblings, will lend. However, it is worth remembering that by far the safest way to raise this money is to simply save and the Help to Buy schemes we described in the article ‘The end of the Help to Buy scheme’.

mortgage in the UK- where to get money for a deposit?

7. How much does a solicitor cost when buying a house in the UK?

Buying a property is not just about the mortgage and the procedures involved - there are also a number of legal matters that are generally outsourced to specialists in this area. In the UK, these matters (conveyancing) are handled exclusively by solicitors. They deal with, for example:

• Determining the legal status of properties

• Checking local development plans

• Paying stamp duty land tax

• Paying Land Registry fees

In the vast majority of cases, you will pay between £1,000 and £1,800 for such services. Of course, this depends on the number of issues that need to be addressed or the location of the property. For more information, please see our article on the costs of buying property in the UK and visit the moneysavingexpert website.

8. At what age can you take out a mortgage in the UK?

As mortgages are long-term in nature, banks will not give a mortgage to someone of any age. The lower limit in the UK is quite low - you only need to be 18 to get a residential mortgage, while a buy-to-let mortgage can be taken out when you also turn 18. There is also an upper limit - most banks won’t lend you money if you’re 70 or over retirement age.

Of course, even if you are over 70, there is still a chance of getting a loan, although it will certainly be much more difficult due to the risk of death. In such situations, banks will only accept applications that are backed up by adequate collateral, such as a high pension. For those younger than 18, nothing can be done - this is due to UK regulations.

Source: Barclays.

What is the maximum mortgage sum in the UK?

There are no legal limits on the maximum mortgage amount; it is only regulated by lenders’ internal policies. However, one thing is certain: the amount you are likely to want to borrow will not be too high for your bank. While **HSBC is willing to lend you up to £2,000,000, Barclays **offers up to £5,000,000 . Such amounts are, of course, very rare, but a mortgage of $1,000,000 or $1,200,000 is perfectly normal, especially when it comes to premium properties located in London, for example.

Do certain professional groups find it easier to apply for a mortgage in the UK?

Although it is not common, some professionals can indeed count on different loan terms. Usually, special offers are targeted at people in professions that are widely recognized as well-paid, and sometimes even elite. Most often, these types of offers are aimed at actuaries, dentists, doctors, lawyers, architects, pilots, and soldiers.

Professional mortgages, as these products are called, usually have slightly lower interest rates, which can be significant in the case of large amounts. An additional advantage of such offers is the specialization of underwriters, who have a much better understanding of the specifics of certain professions. A lender specializing in serving lawyers or doctors will be more willing to take on your case if you are in such a profession and at the same time have a very complicated financial situation (many sources of income, variable remuneration).

If you are planning a mortgage, it is worth using an adviser no matter what. As a whole-of-market broker, we will help you choose the right product for you. We will tailor the terms and conditions of the offer to your personal needs and answer any burning questions that you have not been able to find the answers to on our blog. You are more than welcome to an initial consultation!