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No ERC mortgages have made a return to the product ranges of a few lenders. Most of these are variable or tracker rate mortgages but there are couple of mortgage lenders that have fixed rate mortgages with no early repayment charge. This tends to suit those clients that may have a more uncertain plan for the property and see a potential to carry out work with their own funds and remortgage on a new rate, with the higher property value, after the work has been done. The benefit of not being tied in to your mortgage, is that the client can look at all lending options when they have a clearer picture of what they will be doing.
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Each lender has a distinct affordability model and how they work out what they can lend to a client. In income multiple terms, this can mean anything from 4 times income to 5.5 times income. If clients' want the security of a longer
Offset Mortgages are a useful option to ensure the client has the liquidity they require for future plans. An offset mortgage works by having funds in a linked account to the mortgage. Whatever funds you have in the offset account can reduce the interest amount charged or the term of the mortgage. Most clients tend to reduce the interest cost if they know they are likely to use the funds at some point. When looking at an offset mortgage for a new purchase or current property, you can apply for more than you may need at application, in the knowledge that the unused funds will still be working for you while you have
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ith the current political and economic climate still uncertain, clients are telling me that they want the security of a longterm rate but the flexibility to be able to use the equity in their property, should the need arise. Most new buyers, or existing owners for that matter, want to put their personality on their home. Depending on the level of work that is required, this can mean a few thousand pounds to a few hundred thousand. With fixed rate mortgages being the more favoured option for clients, they are then “tied in� to the mortgage and, if they need to redeem to raise funds elsewhere, can face exit penalties of up to 5% with some lenders. This is not an ideal situation to be in and my role as an adviser is to try and help future-proof the mortgage. There are a few ways that this can be done.
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Capricorn Financial
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JAMES MUNCASTER
no need for them. There are lenders available that have fixed rate mortgages that also have an offset facility. As the client, you get the benefit of the rate security with the flexibility of the liquid funds be available as you need them.
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term fixed rate (say 5yrs or 10yrs) but know they want to raise further funds, before that, then being careful with the choice of lender is important. By applying to a lender that has a better income multiple, this can leave room for the clients' future plans. The lender would assess any lending for further funds on the total debt secured against the property. By leaving ample room on with a lender on income multiple would mean a better chance of securing the necessary funds. For the further advance it is likely that the rate will then be on the lenders current rates at that time.