Mortgages, especially if you are a first-time buyer can be a daunting experience and you probably have a million and one questions. We’ve put together a list of the things we’ve been asked the most often over the last 35 years as independent mortgage brokers.
If your question isn’t listed below, please get in touch. We would love to help.
Learn more about our mortgage broker services here.
What fees do you charge?
We charge no fees for arranging a mortgage as we are paid by the lender.
What is APRC?
APRC or the Annual Percentage Rate of Charge details the annual cost of your mortgage (assuming you keep it for the full term). This rate takes into account your initial rate, standard variable rate (SVR) and any other related mortgage costs including fees.
What Stamp Duty will I need to pay?
This will depend on the price of the property.
What is Libor?
The London Interbank Offered Rate is a benchmark rate that a number of banks charge each other for short-term loans. The majority of lenders will base some of their products on the 3-month Libor rate.
What is a Decision in Principle (AIP) or Agreement in Principle (AIP)?
A DIP or AIP are exactly the same and are regarded as the first stage of an application. The lender you choose for your mortgage will undertake a credit check and an affordability check to ensure the mortgage is viable. Estate agents often request these for their own peace of mind.
Will a DIP/AIP affect my credit score?
Most lenders will undertake a soft credit search which will register as a reference or enquiry, so won’t impact on your credit rating. Some lenders however perform hard credit checks which will register as a mortgage application. Too many of these over a short space of time will negatively impact your credit score, as it will be assumed that previous lenders have declined your application. As an independent mortgage broker, we will be able to advise which lenders perform which types of search.
What is the difference between leasehold & freehold?
With a leasehold property you own the dwelling but not the land it stands on. In this arrangement, you’re known as the ‘leaseholder’. When you buy a freehold property, you become the sole owner of both the building and the land.
In England and Wales, flats are most commonly owned on a leasehold basis while houses are normally sold as freehold properties – however there are exceptions.
With leasehold properties, the land is owned by the landlord or freeholder. Once the lease runs out, ownership of the entire property will revert back to them.
Leaseholders may have to get permission from the freeholder to make certain alterations to the property. They will also have to pay rent each year – known as ‘ground rent’ – and often also a service charge for the upkeep of common parts of the freehold
When you purchase a leasehold property, you will own the property for a maximum fixed term detailed in the lease. Short leases – less than 70 years – may not meet lenders criteria for mortgage purposes.
“I’m self-employed”, what income will you use for affordability?
This varies depending on the lender, but typically for limited companies lenders will use the director’s remuneration and dividends; for sole traders, they will use the net profit.
Most mortgage lenders will ask for the last two-three years’ accounts for the business and may use the average of them, but there are a few that do not use an average and/or will be happy with accounts covering just one full tax year.
Why is my first monthly payment higher on my mortgage?
As soon as you complete on your property, you will start to be charged interest by your mortgage lender. The interest for this ‘part-month’ will then be added to your first monthly mortgage payment resulting in a higher than normal payment.