A guide to extending your home by remortgaging

Need to Remortgage To Extend House?

Homeowners, read on. Perhaps you start thinking about having a little more space, a more modern kitchen, or a luxury bathroom. Rather than go through the stress and upheaval of moving house, you could consider extending your current home to make it more suitable for your needs.

Converting a garage into a living space could make room for a home gym, and extending your home with a conservatory could give you extra living space to enjoy. Loft conversions, basement conversions and extensions to the front, back and side are all options to consider.

In this guide, we will look at how you can extend your current home to avoid having to move house. We’ll look at how to raise the funds, securing permissions, keeping within the relevant building regulations and finding a builder and/or architect.

Getting permission for your extension

Before you make any plans, you need to find out if your proposed changes are allowed. Planning permission is secured by the local council and ensures that changes to homes do not impact other properties around it.

You may be able to work around these guidelines by making small adjustments to your property. This type of change is known as a permitted development and does not require planning permission.

You don’t need planning permission if:

The extension isn’t higher than the highest part of your existing roof
The extension does not extend more than 3m from the original wall of the house, for a single-storey rear extension on a semi-detached or terraced house.
The extension does not extend more than 4m from the original wall of the house, for a single-storey rear extension on a detached house.
The extension does not extend more than 3m from the original wall of the house, for a double or more storey extension.
The extension is not more than 4m high for a single-storey rear extension.
The extension should not be more than half the width of the original house for a single-storey side extension.
The extension should be at least 7m from the rear boundary for a two-storey extension.
The materials used should match or be similar to the appearance of the house.
You cannot include a balcony or raised platform.

You may need to create a party wall agreement with close neighbours, as the work may affect them. And if you are planning to extend a new-build house, you’ll need permission from the developer, and they often charge a fee for this.

Planning permission and building regulations

If your ambitions sit outside of these dimensions, then you will need to seek planning permission for your development. You can explore the interactive house tool from the Planning Portal to help you decide if you need to seek permission for the changes to your home.

If you live in a conservation area, you may be subject to more restrictions on what you can do with your property. Even if your changes don’t require planning permission, you might still need to observe building regulations. This will ensure that your extension and adjustments are carried out correctly. Building regulations help to protect you from subpar work standards.

How much does a house extension cost?

This is determined by a number of factors, and there are steps you can take to keep costs down. As a general rule of thumb, you can expect to pay around £1,000 per square meter of single-storey extension. Extending your property with a 3x5m extension would cost around £15,000 for a single-storey, and significantly more for a two-storey extension.

Choosing premium finishes and working with an architect, builder and project manager will all add to the final cost. By choosing quality but cost-effective materials, and by project managing the build yourself, you could save a lot of money. And if you can find a builder with a talent for design, you can often save money here.

Finding an architect or builder for your project

Choosing the right architect and/or builder for your project will help to keep everything compliant and under control. You should look for someone skilled, experienced and trustworthy to complete the work. Choosing based on the cheapest quote isn’t always the best strategy, particularly when you are talking about structural changes to your home.

If you decide to work with an architect, look for someone who can understand and respond to your needs. They need to be able to take your requirements and create something that ticks all of the boxes. If they are only interested in their own vision, you might be sorely disappointed with the results.

Many architects have relationships with local builders and will be able to advise on someone who will be able to bring their vision to life. Remember you don’t have to choose the builder your architect recommends, but it can help to make the work run smoothly.

If you decide to only work with a builder, you will need to find one who also offers design services. This is a great way to keep costs down, but the end result might not be as inspiring as you might like. Don’t be nervous about asking multiple builders and architects for quotes; this is all part of the business and they won’t be offended if you don’t choose them.

How to fund your extension

Most people fund home extensions in one of two ways. You can either take out a loan for the extension or remortgage your property and release some equity. Using a mortgage for extension purposes is very common, but lenders may want to know your plans before they grant the additional funds.

With the first option, you might face higher interest rates, but you may be able to pay off the loan quickly by remortgaging the property once the extension is completed. You will pay for the building work from the loan, and then have your home valued with the extension in place. This figure will then be used to remortgage, and you can pay off the loan by releasing the additional equity from your home.

The other method is to remortgage your property and release equity and extend your mortgage term to keep your payments the same. As interest rates are so low at the moment, you could secure a great deal by switching your mortgage to a fixed-term rate. This will keep your mortgage payments predictable for the lifetime of the term. Once the term is up, you can remortgage again, using the new higher property value to secure a great deal.

If you need help remortgaging to pay for your home extension, speak to our team today. We can put you in touch with the ideal lenders for your circumstances.

Remortgage or product transfer? Which is right for me?

It’s common to feel confused by mortgage jargon. Not everyone is an expert in this highly specialised field, and most of the time you don’t need to be. You only need to know how to determine if a deal is right for you.

If your fixed term mortgage is coming to an end and you are wondering about the next steps, we can help to demystify the options available to you. If you’re considering a mortgage product transfer and want to know the next steps, read on to learn how we can help.

What is remortgaging?

Remortgaging is when you take out another mortgage on a property you already own and use this to repay your existing mortgage. You can move to a new lender, or stay with the same lender. This can allow you to switch lenders or products, or it can allow you to free up equity from your home.

Why would I need to remortgage my home?

Remortgaging is common when you come to the end of a fixed-term mortgage. Many fixed-term mortgages will last 2, 3 or 5 years. At the end of this period, lenders will switch your mortgage to a variable rate, which can mean that your monthly payments increase or decrease with interest rates. Remortgaging will help to fix your repayments again and offer some stability.

Remortgaging is also popular if you want to release some equity in your home. Rather than moving house, you could consider developing your home by releasing equity to pay for the renovations.

If you aren’t interested in releasing equity from your home and simply want to change your lending product, a product transfer might be more appropriate. This could save you a lot of time and money.

Advantages of remortgaging your property

With more equity in your home, this will reduce the LTV, which means you will have more choice when it comes to lenders and mortgage products. This could mean you secure a better deal on your mortgage with lower interest rates.
If you have been moved to your lender’s standard variable rate, remortgaging will help to bring some stability and predictability to your monthly payments.
You could release funds from your home to pay for renovations. This can be a better way to fund renovations, as you will secure a lower interest rate than you could secure with a personal loan. If the renovations increase the value of the property, this will make life easier if you sell or remortgage again in future.

Things to consider before remortgaging

Remortgaging requires a complete mortgage application, so anyone named on the mortgage will need to go through the process again. If there have been significant changes to your income, such as moving to part-time work, switching to self-employment or retiring, this can impact your ability to secure a mortgage.

You will need to show evidence of income, which can be more complicated if you are self-employed or retired. You can read more about the self-employed remortgage application process here.

You will need to secure a valuation for the mortgage application, which may be an additional expense. Some lenders will charge you for this, but others include this in their lending product.

You will need to pay a solicitor or conveyancer to ensure that the remortgage documents are processed correctly. Since you already own the property, you are simply transferring ownership from yourself to yourself, but you need to make sure this process is done correctly. Mistakes on your Title Deed can cost a lot of money to fix in the future.

These additional fees may be rolled into your remortgage product, but bear in mind that you’ll be paying interest on these additional amounts. This could add up over the years, so make sure the benefits outweigh the costs.

What Is A Mortgage Product Transfer and how is this different?

A product transfer can allow you to achieve the same thing, but it is a lot less complicated to arrange. If you are happy staying with the same lender and don’t want to access any additional funding, then a product transfer might be a better option.

Like switching your electricity to a new tariff without changing suppliers, a product transfer works in a similar way. You can transfer the remainder of your mortgage to a new product, usually with a lower rate This is less complicated than remortgaging and is typically very quick to arrange.

Advantages of product transfers

The application process is streamlined and simplified, and you won’t need to pass the financial checks as you would with a full remortgage. The application can usually be completed over the phone, and the entire process may be completed in as little as 10 days.
You don’t have to complete the same amount of paperwork as with a full remortgage.
You don’t have to have your property valued when applying for a product transfer. This means you don’t need a solicitor or conveyancer, which reduces the costs.

Things to consider before a product transfer

This option doesn’t allow you to release any equity from your home. You are simply moving your existing mortgage balance from one product to another.

You have to stay with your current lender, as mortgage transfers between lenders are not possible. This could mean you aren’t getting the best deal available, but if speed and ease of transfer are more important to you, this might be worthwhile.

You won’t be able to make any changes to the applicants, so if you’re hoping to add or remove a partner from your mortgage, this isn’t the right choice for you. Adding or removing someone from your mortgage requires you to remortgage and go through the appropriate legal steps.

Remember that any remortgage or product transfer may incur an early repayment fee, so consider this before moving forward as this can remove any potential savings.

If you’re thinking about remortgaging or securing a product transfer, we can help connect you with the right lenders.

When Should I Start Looking To Remortgage?

With interest rates at an all-time low, you might be wondering if you could get a better deal on your mortgage. The Bank of England base rate fell from 0.25% to 0.1%, so now could be a great time to remortgage to save money.

Many people wonder, should I remortgage or should I stay put with my current deal? There are advantages and disadvantages to both approaches, so let’s explore the topic in more detail.

These are some of the most common reasons you might consider remortgaging your property:

To secure a better rate
To avoid a standard variable rate
To move from interest-only to repayment
To be able to make overpayments
To borrow more money

Every situation is different and will need careful consideration. Since remortgaging carries a similar amount of paperwork as your original mortgage application, it isn’t a decision to be taken lightly. If you simply want to change your lending product and stay with the same lender, a product transfer might be more appropriate.

Your budget and needs might change over the lifetime of your mortgage. It’s rare to stay on the same mortgage for the full term, and shopping around for a better deal is very common.

When Should I Start Remortgage Process?

There are so many reasons to consider remortgaging, from releasing equity from your home to changing your monthly payments. These are some of the most common reasons we see customers looking for remortgage support:

Looking for a better rate

When interest rates fall, lenders often respond by offering mortgages with lower rates. These aren’t only available to new customers looking for a new mortgage, you could move your mortgage to a new lender and make the most of these offers. If you’re still in the middle of a fixed-term mortgage, you may have early repayment charges, so bear this in mind when you are calculating the potential savings. See these comparisons.

Your fixed-rate deal has come to an end

It’s common to sign up for a fixed-rate mortgage for 2, 3 or even 5 years. This helps to guarantee your mortgage payments every month to make it easier to budget. Once this term comes to an end, it makes sense to consider your options and see if you can find a better deal. At the end of your term, your lender will switch you on to a standard variable rate, which can go up or down every month. If you want the same mortgage payments every month, you should remortgage to a fixed-term deal.

You want to move to a repayment mortgage

If you decide you want to switch from an interest-only to a repayment mortgage, you may need to remortgage. This type of product change can often be handled as a product transfer if you stay with the same lender, but you can also shop around to try to find a better deal.

You want to make overpayments

Some lenders don’t allow overpayments, so you may need to switch if you find yourself in a position to make additional payments on your mortgage. Overpayments will help you to clear the balance earlier, and this will reduce the amount of interest you pay. Since this changes your interest liability, there may be an early repayment charge, but switching to a different mortgage can remove this.

You want to borrow more money

When you have built up equity in your home and the home increases in value, you can remortgage to borrow more money by remortgaging. Rather than move home and take on a new mortgage, you could stay put and make changes to your existing property to make it more suitable for your needs.

Releasing equity from your home could also be useful if you need to buy a partner out of your mortgage, if you need to pay off a large debt, or if you simply want to release some of the funds.

Remortgaging and borrowing more money will either increase the time it takes to repay your mortgage or make your monthly repayments higher. This method can also increase the amount of interest you pay. However, this method can be more effective than taking out a personal loan.

Bear in mind that the lender will want to know what you are using the money for, so be prepared for some additional questions.

Will I pay more if I remortgage?

This depends on the type of mortgage you switch to, if you are planning to increase your repayment term, and if you are planning to borrow more money. There are also costs associated with remortgaging that you need to take into consideration.

As you near the end of your mortgage term, your remortgage will require a much lower LTV, which can mean you can take advantage of the best rates available. By weighing up the cost of switching over the benefits of saving on interest payments, you could secure a great deal by remortgaging at the right time.

Do I have to remortgage?

You don’t have to move your mortgage if you don’t want to. If your finances are fairly secure, you could move to a standard variable rate and take advantage of the lower interest rates. Just remember that interest rates could go up at any time, and this could leave you with much higher payments.

Another option available to you is a product transfer. This will allow you to switch products with the same lender and avoid a lot of paperwork. Product transfers are ideal if you can find a good deal with the same lender, as they can be completed over the phone and finalised in as little as four weeks.

Need help navigating your remortgage? Get in touch with our remortgage team today. We can help you find the best possible deal, no matter your situation.

A brief guide to remortgaging

With interest rates at an all-time low, falling from 0.25% to 0.1%, you might be wondering if you could secure a better deal on your mortgage. It might not be a great time for saving your money, but it could be an excellent time for borrowing.

You may have heard of remortgaging before but never really delved into the details. Put simply, remortgaging is when you move your mortgage from one place to another. This could be with the same lender or with a different lender. Remortgaging allows you to change the terms, interest rate, repayment period and more.

Mortgages tend to be the biggest financial commitment you’ll ever make, so it makes sense to check you’re always on the best possible deal. Remortgaging comes with fees, so you won’t want to remortgage as often as you might change broadband packages. But it is certainly worth looking around to see what is available – particularly when interest rates are low.

Just because you already have a mortgage, it doesn’t mean you will be automatically accepted. You’ll need to consider your financial position and if changes to your mortgage could derail your repayments.

What is remortgaging?

Remortgaging is essentially applying for a new mortgage, paying off your existing mortgage with the new mortgage, and then continuing to make payments on the new mortgage. You might do this to secure a better deal, to release some equity from your home, or because a fixed-rate mortgage has come to an end.

Just as you would shop around for the best possible deal on your utility bills, you can also use remortgaging to secure a better deal on your monthly mortgage repayments. You could also pay back your mortgage sooner by switching to a lender that allows over-payment without a penalty.

If you’re considering a remortgage, speak to a specialist mortgage broker to find out how they can help you secure the best possible deal.

Things to consider before remortgaging

Remortgaging is not something you should do on a whim. You need to consider your financial situation and make sure you won’t be losing out as a result of the changes. If you do find a cheaper mortgage, consider the following before making the switch.

Find out if the lender is offering a fee-free mortgage. Many lenders will do this to tempt customers from other lenders to switch their mortgage to them. If there is a product fee, you could lose money by switching.
Check if your current lender charges early repayment fees. Since you will be closing your mortgage account early, there may be a fee attached that could make remortgaging more expensive. The early repayment fee might be a fixed fee or a percentage of the outstanding balance.
Calculate your current LTV as it will be different to when you first applied. The LTV is your outstanding mortgage divided by the value of the property. So if you have an outstanding mortgage of £100,000 and the property is worth £250,000 the LTV is 40%.
Make sure you are ready to apply for a mortgage. You’ll have to jump through the same hoops as the first time you applied for a mortgage. Check your credit score, pay down your debts, and keep your monthly spending in check as you prepare to apply.
Use a mortgage broker to find the best deal. You’ll save money in the long run if you seek professional advice. A broker might come with a fee, but when they can save you money in fees and interest, this will nearly always pay for itself.

When should you consider remortgaging?

Remortgaging isn’t as simple as switching your Sky package, so you should only consider doing it when it is of most benefit to you. This could include:

When interest rates fall
When your current mortgage product is up for renewal
When you want to switch from interest-only to repayment
When there is an opportunity to secure a better rate
When you want to be able to make overpayments
When you want to borrow money by releasing equity

The most common reason for remortgaging is when your fixed-rate mortgage comes to an end. The most common term is 2, 3 or 5 years. After this period, you will be moved to a standard variable rate.

With this type of mortgage, your payments could go down with interest rates, but they can also go up. If you want stability and some reassurance that your repayments will always be affordable, you can look for another fixed-rate mortgage.

Curious about remortgaging? We help homeowners navigate this complex area and secure the best possible deal. Find out more about remortgaging with Niche Mortgage Info here.

How much does it cost to remortgage?

The cost can vary depending on your home and current situation. Staying on the same mortgage product for the entire term of your mortgage would be incredibly rare, and most people will shop around to find a better deal once their fixed term comes to an end.

If your circumstances change at any point during your mortgage term, you might think about increasing or lowering your payments. Likewise, if you decide you want to release equity from your home for improvements or big expenses, you will need to remortgage. Before making any big financial commitments, you need to ask: how much does it cost to remortgage?

While you might save money on your monthly repayments, with fees and other expenses to consider, you might not be saving money in the long term. Read on to learn about the expenses associated with remortgaging

Remortgage fees

The first thing to consider is the cost of remortgaging. You might be drawn in with the temptation of lower interest rates, but if the fees are added to the final mortgage amount, this could lengthen the mortgage term, and increase the amount you pay overall.

These fees won’t apply to every application, as all lenders are different, but you can expect to face a few of these remortgage fees throughout the stages of the application. Remember that your time is also valuable. Remortgaging is an involved process that will require you to prepare financial information, just as you did for your initial mortgage application. Consider this in your affordability calculations.

The arrangement fee

The arrangement fee is paid to the lender to set up the new mortgage. You may also see it referred to as the product fee. The arrangement fee will vary by lender, but you can expect to pay a higher arrangement fee with a lower interest rate.

Lenders might charge this as a lump sum upfront, or they might add this to the mortgage. Paying upfront might be a bit of a shock to your finances, but the alternative is to pay it with your mortgage. This means there will be interest added to the payments. More info about this here.

Your legal fees

You already own the home, so you don’t need to go through the usual transfer of ownership. But you will need to legally change the details of the lender. This means you’ll need to instruct a solicitor or conveyancer to handle the paperwork on your behalf. If you were happy with your solicitor from your original mortgage application, they may offer a discount for handling your remortgage.

The valuation fee

Before you can remortgage your property, you will have to pay for a valuation. This will work to your advantage if you are hoping to release equity from your home. Some lenders include the valuation in their fees, but others will charge this as a separate fee. Make sure you check with the lender so you don’t get caught out with unexpected charges.

The early repayment charges (ERC)

When you pay off your mortgage early, some lenders will charge a fee. Check the fine print to find out if you will be subject to these additional charges. If you are remortgaging in the middle of a fixed-term deal, you will be subject to the early repayment charge. But once you move onto the standard variable rate, the ERC will no longer apply.

The broker fee

If you work with a mortgage broker to find the best possible deal on your remortgage, they will charge a lump sum fee. This might feel like an added expense you can do without, but choosing to work with a broker has its obvious advantages. When you go straight to your bank or other lenders, you might not be offered the best possible deal. A broker can help you find the best interest rates and lowest fees for your circumstances.

To find out more about remortgaging with Niche Mortgage Info, get in touch with our team today. We can help connect you with the right lender for your circumstances, no matter your situation.

What happens if I can’t pay my mortgage?

Mortgage Arrears and can’t pay my mortgage?

Circumstances can change without warning, leaving you unable to pay your mortgage on time, or at all. These situations are often out of our control, and not something you would ever plan for when you first take out a mortgage. If you find yourself in a situation where you are unable to pay your mortgage, there are steps you can take to help limit the damage. Ignoring the problem or avoiding dealing with it will only make the issue worse. Read on to learn what happens if you can't pay your mortgage.

First things first, speak to your lender

If you are worried you aren’t going to be able to make your mortgage payments for any reason, the first step is to speak to your lender. They have teams and procedures in place to help their borrowers when they are struggling financially. They may be able to come up with a payment plan to help you get back on track, or look at extending the term so you can lower your monthly payments.

Remember that the lender is on your side, and asking for help before things become more difficult is better than delaying this difficult conversation. Lenders don’t want to repossess homes, as it means they will have to sell them and could lose out on their investment. They want you to keep a roof over your head, so don’t be afraid to ask for help when you need it.

What if you have missed a payment?

When you miss a payment on your mortgage, this is reported as a late payment and marked on your credit report. You will now be categorised as “in mortgage arrears” by your lender. Late payments should be avoided at all costs, as these will stay on your credit score for around 5 years and can affect your ability to remortgage or secure further credit, even once your financial position is more secure.

Check if you have insurance

You may have taken out Mortgage Protection Payment Insurance to protect you in the event you are unable to work due to injury or redundancy. Now is the time to check if you have MPPI and to take advantage of it if you do.

MPPI will pay off your remaining repayments if you are made redundant or unable to work after an injury. However, this type of protection is not standard, and you may have other options such as a redundancy package or generous sick pay.

There are other types of insurance that may cover you in the event you are unable to make your mortgage repayments. Check with your lender to find out if you have any coverage that could help.

Check if the Government can help

It might not be the most obvious route, but there are schemes available to help some people manage their mortgage payments if they hit a rough patch. The Government offers a benefit called Support for Mortgage Interest, which will help with a portion of the payment. This can help to lessen the financial strain and allow you to get back on your feet faster. It’s worth checking if you are eligible for any other benefits, as this will all help to ensure you don’t fall behind with your mortgage.

Could you remortgage your home?

If you’re in a tight spot, remortgaging your home would allow you to restructure your payments and could even release some equity. Any time you make changes to your mortgage and release equity, this will lengthen the term of your mortgage and it will take longer and cost more to pay it off. But if this is the only option available to you, it could be preferable to losing your home.

If you are unable to remortgage your home due to your financial situation, you could sell your home (even with mortgage arrears) and downsize. You could also move into rented accommodation temporarily until your situation improves. If you are unable to remortgage, it may be difficult to secure a mortgage on a smaller property, even with a large deposit from the sale of your home.

What happens if my home is repossessed?

If you continue to miss mortgage payments, your lender will eventually take action. This is the last resort and the worst-case scenario for everyone involved, so lenders will always try to work with you to avoid this outcome.

Your home will be put up for auction to help secure a fast sale and this could mean that it sells below market value. The lender will use the proceeds of the sale to pay off the remainder of the mortgage, including any mortgage arrears. If your home doesn’t make enough to pay off the remainder of the mortgage, then you will still be liable for the rest of the balance.

Once your home is repossessed, your name will be added to a register permanently. This can make it more difficult to get a mortgage again. If you fear that your home may be repossessed, it can often be better to sell it yourself, as you are more likely to get a fair market price. This could leave you with some money left over to put towards a smaller property or getting back on your feet.

Tips to avoid mortgage arrears

You are likely to be familiar with budgeting tools if you saved your own mortgage deposit. If you are running into financial trouble every month, it might be time to tighten your belt. Look for ways to reduce your monthly expenses and start to build an emergency savings fund.
In an ideal world, you should try to save 6 months of expenses to help protect yourself in the event your financial situation changes. This will give you some breathing room to help get your finances back on track.
Avoid using credit to pay your mortgage. Getting into debt to pay off debt is never a good idea. This can quickly spiral out of control, so never use a credit card or take on additional loans to pay your mortgage.
Never sell your home without a backup plan. Try to line up somewhere to live before you sell your home. If you sell your property at a lower price to secure a quick sale, you could soon find yourself homeless.
Don’t walk away from the property. Returning the keys won’t make your problems go away, and it could leave you with even more debt. You’ll still be responsible for payments right up to the day it sells, so you won’t solve anything by walking away.

If you are worried about missing mortgage payments, always speak to your lender first. They have systems in place to help their customers through temporary rough patches and will be able to help you choose the best route forward.

What is a bridging loan and is it right for me?

Chains are a nightmare for sellers and buyers. If you have to wait for your home to sell before you can buy your dream home, you will be familiar with the stress of trying to make everything fall into place at once.

Perhaps you want to buy a property at auction but are concerned about getting the funds in place in time?

Or perhaps your buyers aren’t ready to complete, but you need to move forward with the purchase of your next home?

A bridging mortgage could be the answer. Here’s what you need to know before moving forward:

What is a bridging loan or bridging mortgage?

Bridging loans are short-term loans that are often used to purchase property. They can be helpful if you need to access cash quickly, but only for a short period of time.

This type of loan will bridge the gap between purchasing a new property and selling your current property. This type of loan could also be helpful in the following situations:

If you are buying a property that does not meet the requirements for most lenders, for example, no bathroom or kitchen. The loan would give you time to renovate and then apply for a traditional mortgage.
If you are buying a property at auction. You will need 10% of the property value on the day of the auction and then the rest is typically due within 28 days.
If you want to release equity from your mortgage, pay a tax bill or buy your partner out of your home after a divorce.
If the seller specifies cash buyers and wants a fast sale.

Bridging loans explained

There are two main types of bridging loans. These are:

Closed bridging loans. This type of loan will have a fixed repayment date. You would use this mortgage type if you have exchanged contracts with a seller but are waiting for the sale to finalise.
Open bridging loans. This type of loan would be used when you don’t have a fixed date, perhaps because you haven’t found a buyer for your existing home yet. This could also be used to “flip” a property by purchasing it cheap, renovating and then selling for a profit. This type of loan will typically have to be paid off within one year.

What is a short term bridge loan?

To put it simply it is a bridging loan. Either closed or open.

Should I choose a fixed or variable rate loan?

Just like a traditional mortgage, you will have a choice between fixed and variable rate loans. A fixed-rate loan will secure the interest rate for the lifetime of the loan, while a variable rate loan will be linked to the lender’s interest rates. This could mean you end up paying back much more – or much less. A variable rate loan will have additional risk attached.

How much can I borrow for a bridging loan?

This will vary between lenders. You could borrow anything between £30,000 and £50 million. The amount you can borrow will typically be linked to the value of the property, with lenders offering an LTV of 65-80%. You may be offered less in certain circumstances. If you can provide additional security, you may be able to secure a 100% LTV.

What is a first and second charge bridging loan?

First and second charge bridging loan determines which loan gets repaid first if you default. When you secure a bridging loan, a charge is placed on the property. If you have a mortgage on your home and you are unable to keep up with the repayments, your mortgage would be repaid first. This is riskier for lenders, as they might not recoup the full amount, so they typically don’t offer as much through this route.

If you own your home outright, you could take out a first charge bridging. This means if you are unable to keep up with the payments, your bridging loan would be paid off first. This gives lenders a little more reassurance, so a 100% LTV bridging loan is more likely.

When will I get the money?

Bridging loans are much faster than a traditional mortgage application. The decision will take between 1-2 days and then you should have your funds in around 2-4 weeks. This will vary by lender.

What else should I consider before taking out a bridging loan?

The most important thing to remember is that bridging loans are typically more expensive than a mortgage. This means higher fees and additional admin fees. By working with a specialist broker, you can explore all of the options available to you before moving forward.

Self Employed Remortgage

If your fixed-rate term is coming to an end, you might be thinking about remortgaging your property. When the fixed-rate term comes to an end, your lender may switch you to a standard variable rate mortgage. This means your mortgage repayments could go up or down every month. To avoid this, many people will remortgage and switch to another fixed rate term.

Self employed remortgage rules

If you are self-employed, remortgaging might not be as simple as for anyone else. To start with, self-employment comes in many different forms, and your employment status will impact the type of mortgage products you can access.

You could be the director of a company, own shares in a company, or you could be one of the many professionals that are classed as self-employed. Musicians, actors, freelancers and consultants are all classed as self-employed. If you aren’t sure, ask yourself this: do you fill in a self-assessment tax return? If you do, there is a good chance you will be classed as self-employed.

Anyone in this category will have to be aware of additional requirements when you begin a remortgage application. Even if you have only recently switched to self-employment, you will need to keep these things in mind before you can apply. As with anything in life, preparation is key. Here’s what you need to know to increase your chances of success with a self employed remortgage application.

Lenders are mainly concerned with affordability. They want to know that your monthly income is enough to cover your mortgage payments and additional expenses. For the self-employed, this can be more difficult to determine, as they don’t usually have a fixed salary.

Step one: prove your income

Most lenders will ask to see the last three years of financial accounts. Your end of year SA-302 forms are usually sufficient, but some lenders may ask to see a more detailed breakdown. You may wish to work with a chartered accountant to help you get this in order.

Step two: demonstrate future work

Past performance is not always a good indicator of future performance when it comes to freelance income. Lenders may ask to see evidence of future work contracts to prove that you have a steady stream of income.

Step three: work on your credit score

Lenders look at your credit score to determine if you have been good with money in the past. Pay down your debts, keep your credit usage under 25% of the total limit, and try to avoid missing any payments. You can read more about improving your credit score here.

Work with a mortgage broker

To increase your chances of success, always work with a mortgage broker to help you find and secure the best deal. They will know which lenders are most likely to accept your application, reducing the chance of your application being rejected.

Is it harder to remortgage when you are self-employed?

Being self-employed should not stop you from securing a mortgage. There might be a lot of horror stories about how difficult it is for the self-employed, but don’t let this hold you back.

If you have moved to self-employment since securing your mortgage, working with a specialist broker will help you to navigate this field.

If you were self-employed when you first secured your mortgage, the process of remortgaging will be very similar. Head to our self-employed hub to find out more.

How much deposit do you need for a mortgage?

Deposit. The first thing you need to consider before getting on the property ladder. The deposit is an essential part of the application process, and no lender will consider you without one.

In this article, we will look at the role of the deposit, how to maximise your deposit and schemes that can help those who might struggle to save a deposit. We’ll also share our top tips to help you save a deposit. So how much deposit do you need for a mortgage?

Why do I have to give a deposit for a house?

Not many people have enough money lying around to buy their home with cash. This means they will need to apply to a bank for the funding. When lending money, banks have to consider the risk that the money will not be paid back.

If a borrower can’t keep up with their payments, the bank must repossess and sell their property. Since banks often need to sell homes quickly, they will let the property go for below the market value. This means they could fail to get back their initial investment. This is where deposits come in.

A deposit reduces the amount of money that an applicant needs to borrow, but it also ensures they shoulder some of the risk. If you could just walk away from your home if you are unable to keep up with the repayments and start again, the housing market would be completely destabilised. But when you’ve paid a deposit, you risk losing your investment and any equity you have earned in repayments. So by paying a deposit, you’re sharing the risk with the lender.

What is the ideal deposit for a mortgage?

Any lender will say that the bigger the deposit, the better. The more deposit you can provide, the less you need to borrow. This means that your monthly repayments will be lower and you could save a lot of money in interest over the lifetime of the loan. You could also reduce the repayment terms to help you live mortgage free even faster.

A good deposit would be around 25% to 40% of the value of the property. This will give you access to a wide range of lending products and will ensure you can secure the best possible rates.

Can I get a mortgage with no deposit?

No, the days of zero deposit mortgages are now behind us. After the financial crash of 2008, the financial sector has undergone some significant changes. Eliminating 100% LTV mortgages is one of the biggest shakeups.

Lenders want to see that you are sharing some of the risk, so a minimum deposit of 5% will be required to purchase a property. By making the most of government lending schemes and savings incentives, even a modest deposit could allow you to secure a good deal on your mortgage.

Can you get a mortgage with a 5% deposit?

Many lenders stopped their 5% mortgages during 2020 due to the coronavirus pandemic. In 2021, the government then announced a government-backed scheme to encourage lenders to start offering this product again.

This 5% government-backed mortgage offers protection to the lender, but not the borrower. If you are unable to keep up with your repayments, the government will ensure the lender doesn’t lose out. But there is no additional protection for borrowers.

The government-backed scheme is not a guarantee that you will be accepted. You will still need to pass the affordability checks. However, if you are determined to get on the property ladder and only have a small deposit, there should now be more lenders willing to look at your application.

What credit score is needed for a mortgage?

Every lender will have its own criteria, so it’s difficult to say the exact score that is required to be accepted for a mortgage. Lenders will look at different credit scoring agencies and have their own rules for what is acceptable, what is cause for concern, and what will result in a rejected application.

In general, all lenders want to see a steady and reliable source of income. They also want to see a history of good financial behaviour. Lenders might consider an application even if you have adverse credit history such as missed payments, defaults and CCJs. Bear in mind that this type of lending is higher risk, so you can expect to be charged higher rates and be subject to higher fees.

Another factor that lenders consider is whether or not you are on the electoral roll. It might seem like a small factor to consider, but being on the electoral roll at your current address makes it easier for lenders to confirm your identity. This simple step could speed up your application and give your lender confidence.

What difference does the deposit have on a mortgage?

The amount of deposit you can offer has a significant impact on the mortgage you can acquire. In general, the bigger the deposit, the lower the rates and fees. This can have a significant impact on the lifetime cost of your home loan.

Another thing to consider is that you will have a larger pool of potential lenders to choose from when you have a bigger deposit. When you are working with a deposit between 5% and 9% of the property value, there will be fewer lending products available. By boosting your deposit to 10%, you’ll open more doors. It’s easier to shop around for the best deal when there are more deals available to you.

How can I boost my deposit amount?

If you have a small deposit and want to access more lending products, you will need to find a way to increase the deposit amount. The simplest way to do this is to set your sights on a cheaper property. £10,000 would be a 5% deposit for a £200,000 house, but it would be a 10% deposit for a £100,000 apartment. Consider if you can downside and compromise on the property to access better lending products.

You could also boost your deposit amount using a government-backed scheme. The most popular lending schemes are outlined below:

Lifetime ISA

The LISA is a savings account that can boost your savings by £1,000 every year. For every £100 that you put into the account, the government tops this up by £25 at the end of the year, up to £1,000. If you save £4,000 over the year, the government will add £1,000.

You can only use the money to purchase a home or for retirement
If you withdraw the money for another reason, you lose the government contributions
You have to open your account between the ages of 18 and 40
You have to make your first deposit by the age of 40
You can continue paying into the account and earning the bonus until the age of 50

Help To Buy Equity Loan

The government’s Help to Buy equity loan allows you to boost a 5% deposit with a 20% loan. This allows you to shop around for the best possible deal with a 25% deposit. You then pay back the equity loan alongside your mortgage.

You must be aged 18 or over
You have to be a first-time buyer
There are limits to the property value depending on where in the country you are buying
The loan must be used to purchase a new home

Shared ownership

If you have a smaller deposit, another option would be to choose a shared ownership scheme. This scheme allows you to purchase a percentage of a property and pay rent on the remaining percentage from a property developer or housing association. Over time, you can apply to increase your ownership until you have purchased it in full.

You can own between 10% and 75% of the property
Your household income must be below £80,000, or £90,000 in London
You must be a first-time buyer, have already owned a home but unable to afford a new one, or an existing share-holder looking to move

How to save a deposit

If you don’t have rich relatives willing to give you your deposit as a gift, you’re going to need to get thrifty with your income. Saving money is never easy, but if you dream of getting on the property ladder, it is an essential step.

You will need to be strict every month to keep your spending under control. You will also need to be disciplined to make sure you don’t dip into your savings. Follow these steps to maximise your savings every month.

Make a budget and stick to it

It sounds obvious, but many people fall at this hurdle. Saving requires discipline, but you can’t be disciplined if you don’t know what to expect in the month ahead.

Look at your income and outgoings for the past few months and identify how much you need for essentials like bills and food shopping. Add on travel and other essential expenses. Make sure you set aside something for treats.

Now you know what is left and what you can realistically afford to save. This should be your minimum, and any additional savings can easily be added if you find you can cut more corners throughout the month.

Save at the start of the month

It’s accepted that the best way to be disciplined with your savings is to set aside money at the start of the month. Once you know how much you can afford to save, take this out of your bank account as soon as your salary lands. This will remove the temptation to overspend throughout the month.

Review at the end of the month

If you are very disciplined, you might find you have money left at the end of the month, too. There’s no harm in topping up your savings further if you have been very good with money throughout the month. Just make sure you aren’t stretching yourself too thin.

Check your account regularly

Many of us are guilty of paying for subscriptions we don’t need because we forget to cancel them. Keep a close eye on your bank accounts and try setting up text alerts so you know what leaves your account and when. This is an excellent way to spot errors in your banking.

A forgotten gym membership could cost £40 a month, or £480 per year. Add this up over a few forgotten payments and you could be missing out on thousands in savings. Downgrading certain subscriptions, such as dropping the Movie option on your TV package is another way to save money.

Don’t be afraid to say no

We’re all guilty of folding under peer pressure and agreeing to do things with friends, even when we can’t afford it. When you’re saving for a deposit, every decision counts, so don’t be afraid to say no to plans if it would blow your budget for the month.

Plenty of people would destroy their savings goals and spend £1,000 on a hen party just to avoid saying no. But if you aren’t going to enjoy the weekend anyway, don’t be afraid to politely decline. Once you’re in your home you can make up for lost time with more confidence.

Keep an emergency fund

Before you start saving for a deposit, build an emergency fund. This should include around 2-3 months of expenses to help you manage any surprises. This is beneficial as it will prevent you from dipping into your house savings if you’re ever running short.

By using an emergency fund, you can also put your savings in an account that you are unable to withdraw from. This is common with savings accounts that offer a higher rate of interest.

Ready to find your mortgage?

If you’re hoping to get on the property ladder, we can connect you with mortgage brokers that can help find you the best possible deal. Working with a broker can help you to maximise a smaller deposit and secure the best possible deal for your situation.

When will 5% mortgages be back? How they work.

Many young people dream of getting on the property ladder. But with many mortgage companies asking for a minimum 10% deposit, and the price of houses spiralling out of control, this will remain nothing more than a dream for most.

Across the UK, the average deposit required to purchase a home is between £10,000 and £20,000. Unless you have rich parents willing to help you out, or you’ve managed to land a lucrative job from a young age and start saving, even this might be out of your reach.

In an effort to help more young people onto the property ladder, the government has announced a new mortgage guarantee scheme. This means that prospective homeowners could purchase a property with a small deposit of just 5%.

While this might sound like good news for those hoping to get on the property ladder, it’s important to consider the bigger picture. These mortgages certainly don’t come cheap, and might not be ideal for every borrower.

What is the 95% LTV mortgage scheme?

LTV means loan to value, and it shows how much loan is required as a percentage of the property value. A 95% LTV mortgage means that the borrower offers a deposit worth 5% of the value of the house. The mortgage provider offers the remaining 95%. Borrowing a higher amount can mean a longer repayment term, more interest and higher monthly repayments.

As a borrower, the mortgage scheme operates just like any other mortgage. There is no difference between 95% LTV mortgages under the government scheme and any other 95% LTV service.

The primary difference is in the way the lenders make their decision. With the government backed scheme, the government agrees to shoulder some of the cost if the borrower is unable to pay back the mortgage. This makes it possible for lenders to relax their lending criteria.

When will the 95% LTV mortgage scheme start?

This scheme opened on April 19th 2021 and will run until December 2022. This scheme is similar to one that operated between 2013 and 2017. This was called the 5% Help To Buy Government-backed mortgage scheme.

Not all lenders are signed up to the scheme, but if they do sign up, they have to agree to offer a 5-year fixed price mortgage as part of their selection of 95% LTV mortgage products. Fewer and fewer mortgage providers have offered mortgages with low deposits since the Coronavirus pandemic.

The introduction of this scheme is welcome news for those who have been unable to purchase a home as a result of strict lending criteria, spiralling house prices and an insecure job market.

Who can benefit from this scheme?

Not everyone is eligible for the scheme, so before you get your hopes up, consider the following. First and foremost, this scheme is not limited to first-time buyers. This is great news for anyone thinking about moving house and wanting to free up some equity.

The criteria for the 5% deposit mortgage scheme is as follows:

You have to be buying your main residential home. These mortgages cannot be used for second homes, holiday homes or buy to let properties.
The property cannot be worth more than £600,000. If you have your sights set on a high-value property, you’ll have to raise a bigger deposit.
The property cannot be a new-build. What qualifies as a new build will vary by lender, but they will typically be rejected for a 95% LTV mortgage. This is because new build properties often struggle to retain their value, so a mortgage provider could lose out if the borrower were to default on their mortgage payments. Since the government is offering a guarantee on the mortgage, they set the terms.
Your deposit must be between 5% and 9% of the property value. This means you are borrowing 95% to 91% of the property value.
You will need to pass the lender’s affordability checks. These will vary by lender and can cover everything from income to credit score.

Are 95% LTV mortgages a good thing?

While a government-backed mortgage sounds tempting, there is nothing special about this type of mortgage. The lenders might be hyping them up, but this isn’t for the borrower’s benefit. And while several major players might be taking part in the scheme, this might not be the best option for you.

If you are truly struggling to get on the property ladder, this can be used as a last resort, but prospective homeowners with a little more flexibility should widen their scope.

The only reason this type of mortgage has been introduced is to encourage lenders to start offering a lending product they had started to phase out. At the moment, the following lenders are signed up to the scheme:

Lloyds
Halifax
Bank of Scotland
Natwest
Santander
Barclays
HSBC

Remember that many of these were already offering 5% deposit mortgages before the pandemic, and the government-backed scheme is no different to their other products.

The government-backed mortgages are better for the lender, as they offer additional security. But they offer no additional benefits to the borrower. When shopping around for mortgages, remember that this scheme might not offer any additional benefits. You could be better off with a different mortgage type or saving a little longer to offer a bigger deposit.

An alternative to the 5% deposit mortgage

If you have a small deposit, a better option could be the Help To Buy Equity Loan. This will allow prospective borrowers with a 5% deposit to borrow up to 20% of the value of the property from the government.

This is an interest-free loan for the first five years and will enable buyers to increase their deposit amount from 5% up to 25%. However, these loans can only be used on new-build homes.

Experts are warning this scheme is expensive

Affordability should be your primary concern when securing a mortgage, and this type of mortgage might not offer the best value. If you are determined to get on the property ladder with a smaller deposit, be prepared for much higher rates and a more expensive mortgage in the long term.

The following table demonstrates how a bigger deposit will secure a cheaper mortgage, based on a £150,000 property.

	95% LTV	90% LTV	60% LTV
2 year fixed	3.69% + £594 fee Fees: £9,054	2.99% + £1007 fee Fees: £8,196	1.13% + £1001 fee Fees: £4,621
5 year fixed	3.45% + £35 fee Fees: £8,537	3.37% + £1,024 fee Fees: £8,220	1.28% + £1025 fee Fees: £4,354
2 year tracker	3.99% + £35 fee Fees: £9,034	3.59% + £999 fee Fees: £9,054	1.39% + £1016 fee Fees: £4,772

As you can see, a higher LTV will secure you a much better rate, which will reduce your expenditure and the lifetime costs of the mortgage. If you are able to stay put and keep saving, you could secure a much better deal.

How can I apply for a 95% LTV mortgage?

If you are still keen to go ahead with this mortgage type, you will need to apply as you would for any other mortgage. You can choose to go directly to a lender or work with a broker to shop around for the best possible deal.

If you are hoping to make this process as cheap as possible, working with a broker could help you to save money on your application. They will be able to help present you in the best possible light and minimise your risk of rejection.

While a broker does add additional fees, they also help to save you money in the long term by connecting you with the best possible lender. The lender they suggest might not be offering the government-backed scheme, but remember that the scheme offers no additional benefits to you.

Apply for a 90% LTV mortgage if you can

If you’re on the border with a 9% deposit, you might be better off waiting until you have saved a 10% deposit as this will open up far more lending opportunities.

If you aren’t already, using a Lifetime ISA account could help you to boost your savings. You can save up to £4000 per year and receive a government cash bonus of 25%. So after a year, you’d have an additional £1000 added to your savings.

LISA savings accounts can be used for retirement or purchasing a home, so you would be able to access the money without a penalty. You must be aged between 18 and 39 when you open your LISA account.

What happens if you default on a 95% LTV mortgage?

If you are unable to keep up with the payments on your mortgage, there is no additional help from the government. A government-backed loan does not benefit the borrower, rather, the lender enjoys some financial protection.

The government guarantees 95% of any losses above 80% LTV. So on a £200,000 property with a 95% mortgage, the lender would not guarantee losses on the first £160,000. They would guarantee 95% of the remaining £40,000.

If you miss your mortgage payments, your home could be repossessed and sold by the lender. They would look to recoup their original investment and any associated costs of selling your home. Since lenders typically sell repossessed properties below market value, you would likely lose your deposit.

This is why it is important to ensure your mortgage repayments are affordable now, but also if your circumstances were to change. Stress-test your finances to see what would happen if you or your partner were to lose their job.

The 95% LTV mortgage application

Although the government is backing this scheme and offering some protection to lenders, they are still required to carry out affordability checks to ensure you will be able to make repayments on time every month.

There are several stages to the mortgage application. Borrowers will typically apply for a mortgage in principle, which allows them to begin searching for a house with confidence. They can also put in an offer with a mortgage in principle, and then complete the application process once their offer has been accepted.

Lenders will want to see the following information as part of their affordability checks:

Proof of employment and income
Credit history
Bank statements for the past 3 months
Your deposit amount

Remember that all mortgage applications are simply an assessment of affordability and risk. Once a lender has determined you can afford the mortgage, they then decide how risky it would be to lend to you.

With a larger deposit, you are borrowing less money and shouldering more of the risk. So if you default on your mortgage payments, the lender has a better chance of recouping their investment.

With a 95% LTV mortgage, you expose the lender to greater risk, which means they will charge a higher interest rate. Prospective homeowners who are able to save more money or set their sights on a cheaper property might be better off in the long term by choosing a 90% LTV mortgage over a 95% LTV mortgage.

Rejection is still a possibility

The government guarantee does not extend to borrowers. This means that, although the risk is reduced for lenders, they still have an obligation to make sure they are lending responsibly. Rejection is possible, particularly if you have a small deposit, poor credit score and frequently run into financial problems, you might struggle to get accepted.

If you are rejected, we’ve provided a few recommendations to help get you back on track at the end of this article.

How to increase your chances of being accepted

If you are determined to go ahead with a 95% LTV mortgage, there are steps you can take to make your application look better to lenders. The following steps could help you to secure a better rate on your mortgage, or at the very least, reduce your chances of being rejected for a mortgage.

Improve your credit score

A higher credit score and spotless credit history will help to reassure lenders that you are responsible with money. If you have no credit history, this can reflect just as poorly as bad credit history. Try taking out a credit card with a low credit limit and using it little and often. Make sure you pay it off in full every month. You can also apply to have your rental payments included in your credit score.

Keep your spending under control

Lenders like to see that your expenses are what you say they are. So if you tell them in your application that you only spend £100 a month on takeaways, then you shouldn’t have £400 in UberEats charges every month. Keep your spending in check and make sure it matches your stated expenses. Make sure you end every month with a surplus in your account.

Get your deposit from savings

It’s common for parents to want to help their children onto the property ladder, but try to save your deposit if you can. This shows good financial responsibility and a monthly surplus in income. If you have to take your deposit from a family member, it isn’t the end of the world, but you could improve your position by adding this to your own savings.

Avoid end of the month transfers

When it reaches the end of the month, those who struggle to manage their money might ask for short-term loans from friends and family. Try to avoid this where possible. Mortgage underwriters will look at small loans from friends and family as a sign that you struggle to budget throughout the month. They might also interpret it as a sign that you are struggling to make your salary stretch to the end of the month.

Steer clear of betting websites

Betting is another kind of financial behaviour that lenders don’t like to see. The occasional flutter is fine, as long as you aren’t losing large amounts. But substantial or frequent transfers to betting websites can damage your chances of being accepted.

End each month with money leftover

Lenders want to see that you have a surplus of money by the end of the month. This shows that you have enough income, are in control of your finances, and can handle any unexpected blows. Working with a broker can help as they will tell you how many months of bank statements each lender will ask to see. This can help you to plan and make sure your finances are in order.

Pay down your debts

To boost your credit score, try to keep your credit usage under 40% of the total amount. Once credit cards are paid off in full and no longer required, consider closing them as this will give mortgage providers some reassurance that you won’t rack up additional debts.

Avoid large purchase

A common problem that mortgage brokers face is that borrowers have flawless finances when they complete their mortgage in principle application, but then things change when they complete the full application. It’s not uncommon for borrowers to purchase large items like cars on credit, which can drastically alter your credit score. Even if you have the funds for large purchases, wait until after your application has been accepted.

Steps to take if you are rejected

While the 95% mortgage might offer some guarantees for the lender, they are still required to make sure the mortgage is affordable. If the mortgage would put a big strain on your finances, your application could be rejected.

If your application is rejected, follow these steps to get back on track. You might lose out on a home you really like, but remember that new homes go on the market all the time, so there could be an even better home out there.

You should ideally wait a few months before submitting another application. This is because the application will show up on your credit report and this is a red flag to lenders.
Address the problems in your original application. For example, if your actual spending doesn’t match up to your budgeted spending in your application, this needs to be addressed.
Save more money. If you have to wait a few extra months, don’t be tempted to dip into your savings. Instead, focus on saving as much as possible. This could help to bump you up to the 90% LTV level, which will allow you access to more lending products.
Speak to a mortgage broker. Sometimes the reason for your application being rejected is nothing to do with your personal finances. Sometimes it’s an admin error or missing information. Work with a mortgage broker to ensure your application is in order and check if there are any areas that could be improved.
Stay positive. Being rejected for a mortgage application isn’t the end of the world. It might feel crushing at the time, but try to keep things in perspective. Waiting a little longer to get on the property ladder could allow you to save more money, access better lending products, and save money on your mortgage in the long term.

5% mortgage deposit summary

To sum up the points in this article:

The 5% mortgages guaranteed by the government offers protection to lenders, not borrowers.
If a borrower defaults on their mortgage, the government will cover any loss experienced by the lender.
You will need a deposit between 5% and 9% of the property value.
This type of mortgage is more expensive than other mortgage types.
A government-backed mortgage is no different to any other kind of 5% mortgage.
It is still possible to be rejected for a government-backed mortgage.
The same application rules apply, and you will need to pay close attention to your finances.
Saving a little extra money could give you access to a 90% LTV mortgage, which will offer much better rates.