Questions you may or may not be pondering about applying for a mortgage with the help of a broker
Why wouldn’t I go straight to my bank?
Your high street bank might offer exclusive rates to existing customers, which can seem tempting at first. The facts are: a) it’s still unlikely to be the very best rate out there for you and b) being an existing customer will have absolutely no bearing on whether they accept your mortgage application or not. You’ll still have to work with a broker, but instead of a broker with access to thousands of mortgage products, it’ll be one who is tied to a very limited pool.
Do I need a mortgage in principle (MIP)?
If you’re in the very early stages of looking for a new home, you may find that estate agents are asking you if you have one of these. A mortgage or agreement in principle is essentially a letter from a lender saying that, based on what they know, you’re likely to be accepted for a mortgage. It is not a legal requirement, but it can be one of a number of things that shows the seller you are a credible and serious buyer who is ready to buy. It’s not essential (and is often not worth the extra search on your credit report), but it can be useful for first-time buyers.
What does loan-to-value (LTV) mean?
It’s the mortgage amount divided by the property’s value. A lower LTV signals less risk to lenders. As a rule of thumb, 80% is good and 60% is excellent.
So, how much deposit do I need?
With most lenders, the minimum you need is 5% of the property’s value, with 10% being a more stable goal, and 25% likely to secure you some better rates. Over the last year, some lenders have started offering schemes to those with little to no deposit, though – these are likely to be a bit more expensive, with additional terms and conditions. We can talk more about this.
What if I need a specialist mortgage?
If your situation is unique or complex (for instance, if you’re in non-standard employment, or you’re a sportsperson, or you’re an expat or high net worth individual), it’s all the more important you find a good mortgage broker, who can work strategically through the process with you. It means none of the standard products are likely to work for you.
What’s the difference between a Standard Variable Rate (SVR) and a tracker rate?
A tracker rate precisely follows (i.e. tracks) the Bank of England base rate, whereas a Standard Variable Rate (which usually kicks in after a deal ends) is your lender’s default rate, so it’s usually higher, and can be changed by the lender at any time, making it unpredictable.
Do you charge a fee?
For our advice services, we charge a fee of between £0 – £795 depending on the complexity of your circumstances. A typical fee is £395. If you’re doing a simple, like-for-like remortgage then there is no fee. We’ll always discuss fees well in advance and there is certainly no charge for initial conversations.
When are fees payable?
Fees are payable once we have secured your mortgage offer, and not before. Again, we’ll always discuss these with you well in advance, so there are no surprises.
What qualifications do you have?
I (David Goodman) have a CII Level 3 Certificate in Mortgage Advice which means I’m entitled to use the designation Cert CII (MP). Pagoda Mortgage Services Ltd is an Appointed Representative of PRIMIS Mortgage Network, which is authorised and regulated by the Financial Conduct Authority.
How do I choose the best mortgage for me?
The million dollar question. Say we’ve narrowed it down to a couple of products, how will you choose? What will be important to you? Rates are important, of course, but what’s most important of all (and the reason every Pagoda customer receives a bespoke service) is your own personal circumstances. Together, we’ll also want to consider things like:
- Terms. If long term security is important to you, a fixed rate of five years or more will be appealing. But if you’re not sure you want to stay in a property for a long time and would like some flexibility, a shorter term fixed rate might be a good fit (or even a variable rate!).
- Product/ arrangement fees. A product with an arrangement fee (typically around £999 but can vary) will come with a cheaper interest rate, which sounds great in principle, but when you compare the cost over the fixed period it can end up costing more.
- Early repayment charges (ERC). If for some reason you need to switch products down the line, you don’t want to pay thousands of pounds for the privilege.
- Any cashback offers.
- How easy the lender is to work with and how speedy their service is.
- Schemes. Some lenders support government schemes that others don’t. Some lenders operate their own schemes, which might enhance lending for certain customers.
Of course, the only real way to choose the best mortgage for you is to work very closely with a mortgage broker who knows the range of products available inside out. Call Pagoda any time for no-obligation advice.