Mortgage Valuations - What's the Process?

If you are looking to purchase a property and need a mortgage to do so, your lender will require a lender’s valuation.

House buying has all sorts of jargon and terminology wrapped up in the processes, so it’s important to know what all of them are really about. Here’s what you need to know about your lender’s mortgage valuation, and how it affects you as a buyer.

What is a mortgage valuation report?

The mortgage valuation report gives your lender some independent confirmation of the value of your property, to ensure their investment is well placed.

The valuation will also tell the lender if there are any major problems with the property which could affect its value. It will check the prices of similar properties in the local area, and that your property is not one of a type which they will not lend against, such as those in a high flood risk area.

What happens during the mortgage valuation?

Your lender probably already has a relationship with a surveyor, and will contact them themselves to arrange a suitable date for the survey. In most cases, this will take place within two weeks of your mortgage application.

The valuation surveyor will visit your prospective property, and will inspect for condition and any major problems. This whole process will take only 15 – 30 minutes and will only usually pick up on obvious, visible problems. Their report back to your lender is short, just two or three pages usually, and although you may receive a copy of it, it’s not particularly beneficial to you.

What is the valuation fee on a mortgage?

Typically this will cost between £150 and £1,500 depending on the value of the property you are buying. Normally you, the buyer, will pay the fees for this valuation, this can be an upfront cost or added to the term of your mortgage. In some cases, lenders may waive these fees as part of a package of offers for you, but this varies from lender to lender. Check your mortgage terms and conditions early on, or ask your lender about survey fees, to make sure you know what you’re responsible for.

Don’t rely too much on a mortgage valuation

The mortgage valuation is commissioned by your lender, and is conducted for their benefit, not yours. The inspection is too brief and too standardised to really provide any insight into the condition or true value of the house. While you can certainly expect to receive a copy of the valuation report, or at least an excerpt of it, you should not rely on this to inform any offers you make or your purchasing decision.

In order to be fully informed about the condition of the property you’re considering purchasing, you will need to commission your own homebuyers survey. This is usually done through an RICS surveyor, who you can find on the RICS website.

What is in a homebuyers survey?

You have a choice of survey types available to you, to suit your needs as you see fit. These include:

• The RICS condition report: The most basic report available, this is a quick, easy way to ensure everything is OK. It’s most suitable for relatively new properties.

• The RCIS homebuyers report: A more detailed report, this will take around two to four hours to take place, and includes advice on any repairs or maintenance issues with the property.

• The SAVA Home Condition Survey: This covers pretty much all the things the RCIS homebuyers report would cover, but without any market valuation included.

• The RCIS building survey: This is the most thorough survey you can get, this is an ideal choice if you are buying a period property or something which needs a lot of work. It’s also a good choice for homes of a non-standard construction, and will generally take around a day to complete.

• New build snagging survey: in addition to these survey types, if you are looking to buy a brand-new property, you can have a quick and inexpensive ‘snagging survey’ done. This flags up any defects, cosmetic issues and other problems, so that your contractor can rectify these issues before you move in.

Whatever your property valuation has said, you should always instruct your own thorough survey in order to ensure you are not hit with any nasty surprises later down the line.

If you’re ready to explore different mortgages and find one that’s right for you, give me a call. I’d be delighted to talk you through your options. Call 01252 759233 or email richard@thesurreymortgagebroker.co.uk

Up or Down? What are Interest Rates like to do next?

At this time last year, the financial market was predicting fairly confidently that the interest rates would be rising by the start of this year. However, the reality has been something quite different. Numerous political, economic and global events have meant that what we actually saw was the Bank of England further slashing interest rates from 0.5 per cent to 0.25 per cent in August 2016.

So where will our interest rates go next? It seems almost impossible that they could be reduced any further, what with the current rate being the lowest ebb in history. But when should we expect them to rise, and how much? Let’s investigate.

What’s happening to affect the current interest rates?

We’ve been through an eventful year or two when it comes to major changes to the UK’s economic influences, for example:

• Economic concerns: In recent years, we’ve been suffering a period of negative inflation. Weak economic data coupled with concerns over a slowing global economy have led to much uncertainty over how and when things will change.

• Brexit: Prior to this, the Bank of England (BOE) had been discussing forthcoming rate rises. After the vote, and predicting an economic slump, Mark Carney announced the interest rate cut and a new bout of Quantitative Easing to try and stimulate growth.

• The fall of the pound: Since the Brexit vote, the value of the pound has fallen by around 20 per cent. This has caused inflation to spike, which tends to lead to an increase in interest rates, although the BOE’s predictions did not fit with this.

• Trump: Donald Trump’s victory across the pond has added some uncertainty to the future of interest rates. Because he is planning to spend, spend, spend on infrastructure and building in the US, inflation over there is anticipated to rise, which could have a knock-on effect here in the UK too.

These events are undoubtedly responsible for the unexpected rate cut we experienced in mid-2016, and for the continued uncertainty over the future of our interest rates.

Predictions for the future

We’ve seen some wild predictions about the future of interest rate rises. Here are some of the most commonly encountered predictions you might come across right now:

• Financial experts: The first interest rate rise will occur in late 2019, raising the rate to 0.75 per cent. Following this there will be a further 0.25 per cent increase at regular intervals, with the rate at the end of 2020 predicted to hit 1.25 per cent.

• Lenders: Mortgage rates are extremeley competitive and I’ve always said that the lenders pay economists to analyse the markets who are in a much better position than I to predict but take a look at what you can get on the market for a five year fixed rate. Less than 2% is readily available with a reasonable deposit, if the lenders are happy to lend at this rate then they don’t think rates are going up significantly.

• The Bank of England: BOE, at their last meeting of 2016, predicted that high inflation and slow wage growth would keep households financially squeezed into 2017. They voted to keep the rate at 0.25 per cent and, barring any major changes, are not likely to change this in the near future.

• Commentators: Larry Elliott, Economics Editor for the Guardian, predicted that although rates are going up in the US, they are going nowhere in the UK. However, the Telegraph’s specialist, Roger Bootle, predicted rates would hit three per cent within three years, and five per cent eventually. I heard Roger Bootle speak at a conference late last year, he was very interesting but I can’t agree with him that rates are going to be at 3% within three years.

• Howard Archer, chief UK economist at IHS Global Insight: “The Bank of England could become increasingly nervous about the inflation overshoot and feel compelled to raise interest rates – although we suspect that this would be more likely in 2018 than in 2017.”

Despite a range of opinions and predictions seen here, for the most part the outlook is very similar: Nothing will be happening in the very near future. Whether that holds to be true, only time will tell, although we can look to certain economic indicators to give us, at least a little, advanced warning.

Economic indicators for the BOE rate rise

Some key economic indicators will play an important part in whether interest rates rise, fall or stay the same. These factors include:

• Inflation: In April 2015, it was at -0.1 per cent. It’s currently at 1.8 per cent and the National Institute of Economic and Social Research estimates it could get as high as 4 per cent in 2017. If the rate suddenly spikes, the BOE could be forced to raise interest rates sooner than planned. Historically raising interest rates has been a way of calming inflation so if inflation gets out of control this could lead to a rise, however in more recent times the Bank of England have not used this tool in their armoury. They appear to have preferred the waiting game.

• MPC support: For years, some members of the Monetary Policy Committee (MPC) have argued for a rate rise, but since the Brexit vote, this has changed. For a while, the committee even argued for a lowering of the rate to 0 per cent, so it remains to be seen how this support will swing as 2017 plays out.

• Strength of economy: The BOE lowered the base rate in 2016 in anticipation of a weakening UK economy. However, this has not happened as predicted, which strengthens the case for a rate rise, rather than any further rate cut.

• Unemployment: Unemployment is still falling. In the three months to December, the number of people out of work fell to 1.6 million, an 11-year low. Despite this, the growth of wage values has become somewhat slow, all of which could impact the timing and level of rate change.

• Wage Inflation: As I’ve just noted wages have not been rising in line with inflation and this affects consumer spending. An economic tool the Bank of England to kurb spending is to raise interest rates, I just can’t see that happening whilst wages are not rising quickly. It is this indicator that I would suggest you focus on. When wages outpace inflation for a sustained period then interest rates will rise.

Predicting whether mortgage interest rates will rise or fall is a bit like consulting a crystal ball. Things happen which change even the strongest of predictions, so it’s hard to make any firm judgement on what will happen to our interest rates in the future. However, if you want an early indicator of potential rate changes, it’s a good idea to keep an eye on these indicators, as they could give an early warning of any forthcoming change.

Should you remortgage? If you would like to discuss your current mortgage arrangements and whether or not it would be sensible to remortgage and take advantage of our current low interest rates, please give me a call. 01252 759 233 or email richard@thesurreymortgagebroker.co.uk

Tips for Getting on the Property Ladder in Surrey

The Surrey property market is notoriously competitive and expensive, with prime property getting snapped up very fast. This makes it hard for both local Surrey residents and for anyone wanting to move to Surrey from elsewhere in the UK or overseas.

However, there are ways to increase your chances of finding the perfect home, and getting your offer accepted. Here I share my top tips.

Make Yourself Attractive To Sellers!

I don’t expect you to get a new haircut or a makeover – although if you turn up looking scruffy for a viewing it could count against you, as people do make assumptions about others based on their appearance. However there are other ways to make yourself more attractive to sellers that don’t involve your physical appearance.

Actually the first people you need to impress are the local estate agents. They’re the ones who have the ear of the Seller so if you can make a good impression with them, they’ll help you get taken seriously by sellers.

There are three key areas estate agents and sellers will be interested in:

1. Finances: can you afford the property and do you have the finances in place?

2. Circumstances: do you have a property to sell, are you constrained by any other factors?

3. Flexibility: are you prepared to compromise and be flexible? Whether that’s waiting until the Seller has found a property to buy as well, to compromising on completion dates etc.

So what will appeal to sellers and estate agents?

Cash is king so if you’re a cash buyer you stand a good chance of getting first pickings on any Surrey homes in your price range. Next up are those people who only require a small mortgage, for example investment buyers looking for a buy-to-let or property to do up and sell on.

If you do require a mortgage you probably won’t get through the door of most properties currently on the market without having a mortgage ‘agreement in principle’ (AIP). No one wants to waste time with buyers who haven’t tested whether they can get a mortgage. If you want to see if you can, contact me here to find out.

If you’re a first time buyer you’re very attractive as you won’t need to sell a property and any chain starts with you. If you do need to sell your current home, buyers who are prepared to sell and move into rental are also attractive as they have the potential to be the start of the chain too. Failing that, a buyer who already has accepted an offer on their property is the next best thing, although any chain your side could affect your desirability.

Feeling attractive?

When contacting estate agents it’s really important to make sure they can see your positives. Property experts like Kirsty Allsop even recommend outlining these qualities as bullet points on a record card and giving them to the agent.

Having demonstrated that you’re a great buyer, local estate agents should be getting you in to see lots of suitable properties shouldn’t they? Perhaps not. It’s a competitive market in Surrey and there are lots of other house hunters equally or more qualified than you looking for that elusive home. So don’t sit back and expect them to contact you.

Register on Rightmove, Onthemarket etc. to ensure that you get properties arriving in your inbox when they get added, register with individual estate agents, and be prepared to move fast when they have something to see.

Be open-minded too. If they send you details about a property that doesn’t meet your requirements, give them the benefit of the doubt. This is an opportunity to show your commitment to your search, so that hopefully when something more suitable does come up they will get you in quick. It’s also a chance to build relationships with local agents by chatting about your needs, and it will also help you get your ‘eye in’ when viewing future properties.

House hunting inevitably calls for compromises. By viewing plenty of properties you’ll get a better idea of what ‘must haves’ and ‘nice to haves’ are important to you, and where you’re prepared to compromise.

When you follow up with an estate agent after seeing somewhere you’re not interested in, it’s a good chance to highlight your requirements again and any changes. For example, if the house wasn’t right but the area was, make sure you say that you like the area and you’d be keen to see other properties in that neighbourhood. You may then be the first to know when a new property comes up in that part of Surrey.

Often compromises can turn to your advantage. Many towns and villages in Surrey are very affluent and house prices are high. But sometimes neighbouring towns and residential areas are not as pricey, and these can benefit from the ripple effect as wealth spreads to these areas too. While bargains may be hard to find in Surrey, you could still snap up a property that will see above average growth as the area becomes more desirable.

For more affordable places to buy in Surrey, read this blog.

Finally when you do find a property you want to offer on, make sure you highlight those attractive qualities again. If the Seller has more than one offer this is your chance to differentiate yourself from others. If you’re prepared to offer some flexibility on completion dates etc., now’s the time to make sure the agent conveys these positives to the Seller.

However flexibility is all very well, but money talks. The most important thing you need to do to help your offer get accepted is to make sure your finances add up. If you haven’t yet got a mortgage agreement in principle (AIP), now is the time to do it before starting your search.

To get started call me to chat through your attractiveness! If you need a mortgage to buy your Surrey home an AIP won’t cost you anything, but it’s essential if you want a chance at finding the right property.

Contact me today to get started; call 01252 759 233 or email info@thesurreymortgagebroker.co.uk

5 Common Mistakes to avoid if you are a First Time Buyer

Getting a mortgage when you’re a first time buyer is tough. Changes to the lending criteria following the economic crash in 2008 has made it hard for first time buyers to secure a mortgage, and has called upon them for very large deposits too.

Figures from Halifax suggest that the average deposit has now risen to around £33,000, 13 per cent higher than the average last year. The number of first time buyers has decreased slightly too, despite schemes like the governments ‘Help to Buy’ which specifically targets this group of buyers.

If you’re looking to get your foot on the first rung of the property ladder, you should make sure you’re well prepared for what’s to come. Here are some of the most common mistakes made by first time buyers, and what you can do to avoid them.

1. You didn’t check your credit report

Having a good credit score will open the door to many more mortgage offers and deals. Find yours out by getting a copy of your report, and ensuring everything on these is factually correct. More on credit scores here.

1. You’ve made an offer without an agreement in principle

You may well have found your dream home, but without an agreement in principle from your mortgage provider, there’s no point in making an offer. Get your mortgage sorted first, and ask your lender for an ‘agreement in principle’ which will give you the confidence and the backing to really leverage your offer.

1. You bought a flat with a short lease

If you’re buying a leasehold flat, you could be in trouble if the lease is shorter than 80 years. You may struggle to get a mortgage and, if you do get one, you may struggle to sell the property later on. Try and get the lease extended before purchase, and if you can’t or the seller won’t do this, negotiate your offer in lieu of the short lease.

1. You didn’t realise how expensive this would be

There are all sorts of costs, fees and charges associated with buying a house, so don’t assume that all you need to worry about is the deposit. From stamp duty to legal fees, it all adds up. Take some time to figure out all the associated costs of moving to get a clearer idea on what you need to pay.

1. You chose the wrong mortgage

With so many mortgages to choose from, it can be difficult to know if you’re getting the best deal or not. Often the variable rates seem cheaper on the surface than a fixed rate offer, but remember you’ll end up making much higher payments when interest rates rise again. Make sure you’ve compared all the offers available to you, and that you understand how different types of mortgages work. In short do your research and if you are unsure then take advice.

Getting a mortgage as a first-time buyer shouldn’t be a complete nightmare. With some forward planning and awareness of the pitfalls, you should be able to get a good deal.

However if you need some help speak to a mortgage broker or financial advisor. We can help you get in better financial shape to get the best deals, and also have access to mortgage products that are not easy to find on the high street or online.

Give me a call if you would like to chat about your options.

10 Questions to ask your Mortgage Adviser

Whether you’re buying your first property or your fifth, it’s a good idea to chat with a mortgage advisor about your situation and the best type of mortgage products for you.

Of course, you can search for a mortgage deal yourself, perhaps by visiting your own bank and or searching online. However this method may not get you the best mortgage deals as your bank will only recommend their own products, and online comparison sites don’t include every deal available.

An independent mortgage broker or mortgage advisor has access to both the high street banks and building societies, and less well-known mortgage lenders. They also have specialist expertise in this area and therefore can often save you money by getting the best deal for your individual circumstances.

If you’re thinking about engaging a mortgage broker to look after that aspect of your property purchase, here are 10 questions to ask them.

Mortgage Broker / Advisor FAQ

1.How do you charge for your services?

Mortgage brokers and advisors typically charge a fee, work on commission or a combination of both. Some mortgage advisors will charge a fee for arranging your first mortgage and then will arrange subsequent mortgages for free. Any money you do have to pay will be nominal when you consider how much you’ll save long term.

2. Are you able to cover the whole mortgage market?

Some mortgage advisors will, others only work with a select number of lenders. To get a good deal, you’re best choosing a mortgage advisor who covers all the major lenders as well as the smaller ones. If you’re still tempted to go it alone it’s worth noting that some lenders, such as The Mortgage Works, will only work with mortgage advisors and you won’t be able to get a deal direct.

3. Are you authorised by the FCA?

You want your chosen mortgage advisor to be suitably qualified and authorised by the Financial Conduct Authority. This is your protection from poor advice or mis-selling. To see if they are, you can search the financial services register >

4. What are the different types of mortgages available to me?

If you’ve never had a mortgage before, or have opted for the same type of mortgage time and time again, you may want your mortgage advisor to explain what the pros and cons of fixed rate, standard variable rate, tracker and the other types of mortgages are. They can advise which might be best for your particular circumstances but you’ll have to make the final decision.

5. Can you give advice about other things?

Mortgage brokers are financial advisors, so they are qualified to advise on related financial matters. Insurance is a key area that’s closely related to mortgages so if you need advice on life insurance, mortgage life insurance (find out the difference between these here), income protection and other insurance products, it’s worth speaking to your mortgage broker about these too.

6. How much of a deposit will I need?

The bigger your deposit, the better the deals your mortgage advisor will be able to find you. You need to know roughly how much you can put down as a deposit before your first meeting together. There’s little point telling your mortgage advisor that you can put down 40% of the purchase price only to backtrack later and admit you can only put down 20%.

7. How much can I/we borrow?

Your mortgage advisor will ask you a lot of questions and run through affordability checks before they tell you how much you could potentially borrow. It’s important that your credit score is good and it’s always advisable that you hold off from applying for any form of credit in the months leading up to your first meeting/applying for a mortgage.

If you aren’t able to borrow as much as you would like, you could choose to go away and save a bigger deposit or adjust your property search criteria accordingly. Remember, you can’t use a credit card or loan to cover your deposit, lenders simple won’t allow this, so savings and windfalls are the only way.

8. How much is the mortgage arrangement fee?

Lenders charge mortgage arrangement fees which can be up to £2000 but on average are £1000. You can choose to pay it straight away or add it onto your mortgage, the choice is yours. If you can afford to pay it straight away, you won’t end up paying interest on it. There are other costs too, such as mortgage valuation fees, surveys, and sometimes mortgage account fees and booking fees.

9. How much will I have to pay each month?

Depending on the type of mortgage you choose you might know exactly how much is going to come out each month (with a fixed mortgage) or it might vary depending on the interest rate and other factors. If you’re on a fixed deal for a set number of years, you need to be aware that the amount you pay is likely to go up once the deal ends, which is why many people decide to remortgage and find another deal when this happens.

10. How long should it take to arrange my mortgage?

This can vary considerably as it depends on how quickly you can get the documents needed, how quickly your mortgage broker does what’s required of them (super fast in my case!), and how long it takes your lender to approve you and the property you intend to buy.

If you’re wanting to put an offer on a house, your mortgage broker can give you a document stating that you’ve got an offer in principle from a lender, which shows estate agents that you’re a serious buyer.

Ready to take the next step and start looking for a mortgage? Contact me so you can quiz me on the above questions! Call 01252 759233 or email info@thesurreymortgagebroker.co.uk