The Conveyancing Process Explained

When purchasing a property for the first time, you will quickly have to learn a new vocabulary. There are new terms and processes you need to understand to make sure your home purchase runs smoothly.

At the start of your mortgage application, you will primarily deal with your mortgage broker and your lender. Once the mortgage offer is confirmed, a conveyancer or solicitor will take over as your main point of contact. They will help to formalise the process of transferring ownership from one person to another, including preparing contracts and transferring funds.

Conveyancing can cost in the thousands, which leaves some home buyers wondering what exactly they are paying for. In this guide, we will look at some of the key roles of the conveyancing solicitor and how to ensure the solicitor you hire is up to the task. Remember that mistakes in conveyancing can cost a lot of money to rectify further down the line, so it makes sense to get this done right the first time.

How to choose the right conveyancing firm to represent you

You don’t have to use the conveyancing solicitor recommended by your broker, estate agent or lender. You are free to select your own solicitor, which gives you the option to shop around. Choosing the cheapest option isn’t always a wise choice, as mistakes in conveyancing can delay the process, or cause the entire deal to fall through.

The best piece of advice we can give you would be to check the fine print of any conveyancing quote. A cheap offer might turn out to be less lucrative than you first thought if the conveyancing solicitor also adds on hourly charges for tasks. Look for an all-inclusive quote so that you know exactly where you stand.

You should also choose a law firm that specialises in conveyancing. While any solicitor can handle the process, it can take longer if they are not familiar with the routines. A conveyancing specialist will have processes in place that ensure no steps are missed and things keep moving along.

Ask friends and family for personal recommendations, and always take online reviews with a pinch of salt. Individuals are far more likely to leave a review if they have had a bad experience.

If a customer is unhappy with the outcome of their conveyancing, they might want to “punish” the firm with multiple bad reviews. These can far outweigh the positive reviews. Look for a conveyancing solicitor that responds to reviews instead of simply trying to bury them, as this shows they are engaging with their customers.

Our recommendations for conveyancing

  • Choose a firm with a minimum of 3 practising partners and one that is on the Law Society Register. This will ensure the firm is large enough to give the lender some reassurance. And from a practical perspective, it also minimises the risk of holiday and illness slowing down your purchase.
  • Ask if the solicitor is on the lender’s panel. This means they can transact directly with the lender. Some law firms will say they have “agent permissions” and then subcontract the conveyancing to another solicitor. This can complicate the process as it means you might not be in direct contact with the person handling your purchase.
  • Ask for a fully itemised quote upfront. This should outline everything you are paying for and when payments are due. This will help you to factor conveyancing fees into your purchase.
  • Request a named point of contact. This will make it easier to follow up and ensure your property purchase doesn’t fall between the cracks.
  • Ask if they will accept broker ID verification. If the solicitor has good relationships with your broker, they may accept confirmation from the broker of your ID and proof of address. This can help to speed up the application process and save you from going through this step twice.
  • Ask if they will administer broker fee collection. This saves you the trouble of ensuring everyone is paid on completion. The solicitor will be authorised to make payments on your behalf so no bill is left unpaid.

What does the conveyancing fee cover?

The biggest expenses in conveyancing are drafting and exchanging the contracts, but there are other factors to consider. The amount due will depend on the value of the property and the complexity of the case. A good conveyancing solicitor will be able to anticipate the additional charges from the start so you will know exactly what you are paying for. Your final conveyancing bill will also include the following charges:

  • Searching The Land Registry, if the land is already registered.
  • Searching the Land Changes Department, if the land is unregistered
  • Searching local Land Charges Register.
  • Local authority searches.
  • Environmental searches.
  • Company Register searches.
  • Commons registration search.
  • Water drainage searches.
  • Bankruptcy searches.

What other legal fees should I expect?

In addition to conveyancing, you will also need to budget for the following fees:

  • Stamp Duty Land Tax. This is a tax set by the budget and paid when a property is transferred from one owner to another.
  • Telegraphic transfer fees. On the day the mortgage completes, the buyer’s solicitor transfers the balance to the seller’s solicitors. This is completed instantly by telegraphic transfer. The fee for this transfer is typically around £24-£40.
  • Title indemnity insurance. This type of insurance protects you from losing out if the conveyancing process throws up something that stops the transaction from going ahead. If you later discover that you are unable to purchase the property, title indemnity insurance will ensure you don’t lose out.

For help and advice on the conveyancing process, get in touch with Niche Mortgage Info today, or check out our mortgage advice blog.

Financing Property Development With Bridging Loans

Securing 100% of your development costs through a bridging loan is difficult but not impossible. If you’re looking to secure 100% of the build costs from day one, we can help. With Niche Mortgage Info, you can access:

  • A free quote
  • Find auction, bridging and development finance in the same place
  • Experienced brokers
  • Hand-picked panel of development finance lenders
  • Loans ranging from £50,000 to £20,000,000
  • Residential, buy to let and commercial financing available
  • First-time buyer auction financing
  • Flipping financing for “light” renovations
  • Bridge-to-let products designed for professional landlords
  • Complicated income structures considered
  • Lending on the end value

The world of property development finance is very complex and you might find that you have to raise the funds through multiple sources. You’ll also come up against confusing phrases such as “based on a 90-day valuation” or “lend against open market value”. The best way to navigate this complex field is by working with a specialist broker.

Lenders are known to set strict lending criteria and each one will have its own hoops to jump through. You might only be offered 65-70% of the potential value, which could leave you short. We can help you to approach the lenders most likely to connect with your vision.

How can I increase borrowing to develop a plot?

Often you need to be creative in your approach. This could mean raising funds across multiple sources to help raise enough capital to complete the project. Many traditional finance streams fall short because they simply cannot advance enough.

If you have purchased a plot for £100,000 and have planning permission to build 5 residential homes, you could be looking at a final value of over £850,000. When the cost of building the homes is £400,000, you’re looking to potentially pocket £350,000 in profit. But this profit will only be realised if you have access to £400,000.

A traditional mortgage and bridging finance would only lend a fraction of this value and would pay out in stages. This type of finance would also only consider the current value of the project.

So to return to the original example, if your plot and foundations are worth £150,000 and a lender agrees to advance 70% of this, you would only secure £105,000. This would not cover the costs of building work, so you would need to secure the other £295,000 elsewhere.

Our solution to an all-too-common problem

If you are struggling to secure finance, we recommend speaking to Niche Mortgage Info. We can connect you with lenders in the property development finance sector. These lenders can provide funding that will cover 100% of the building costs from day one. No more payouts in stages or current state valuations. Instead, you can fully finance your build and take much of the stress out of the process.

The fine print

This type of funding is only available for up to 6 hours or 4 flats per project. These are also typically restricted to London, the South East, West Midlands and South Wales. Each case will be taken on its own merit, but you can expect rates around 1.5% and a lender will typically charge 2% of the loan advance. You will also be required to pay legal and valuation fees.

Get in touch with Niche Mortgage Info to find out more about this type of property development finance.

What are gifted deposit and gifted equity mortgages?

Securing enough money for a mortgage deposit can be tough. With monthly expenses stretched to the limit, saving enough every month can be an uphill struggle. Reading up on mortgage advice, you might think that a gifted deposit is one way to solve your struggles. However, this type of deposit could spell trouble for your mortgage application further down the line.

In this guide, we will look at gifted deposit mortgages and gifted equity mortgages to help determine if this is a viable route for borrowers. We’ll also help you to understand how to make a gifted deposit work for you.

How gifted deposits work

A gifted deposit is when a direct family member gives you the money for your deposit. This could be a parent, a grandparent or a sibling. Many lenders will understand that deposits can be difficult to save and will therefore accept that some of your deposit may come as a gift from a family member.

The type of relative you can accept money from varies by lender. While some will accept a gift from a grandparent, others will not. Fewer still will accept a gifted deposit from a friend or other acquaintance.

The lender’s main concern is that the individual could make a claim towards the property at a later date. After all, they may have invested a significant sum in the property. And if your relationship changes, they may wish to get this money back. You can read more about gifted deposits here.

How gifted equity works

Gifted equity is a different matter entirely. In this situation, the gift is the difference between the value of the property and the mortgage secured on it. This could come from family members, home builders, property developers or even landlords. They offer to sell a property for lower than market value and retain the difference.

There are very few lenders that offer this type of mortgage. Lenders don’t want additional third parties involved as it can complicate the process if they need to repossess the property. If you are late with mortgage payments and the home is repossessed, the person with equity in your home will complicate the process.

Lenders don’t want properties on their books that they may not be able to easily sell at a later date. The motivation of the person offering the undervalued property would also be questioned. Lenders do everything they can to limit their risk, and gifted equity is an unnecessary risk for them to take.

If you are interested in exploring options for a gifted deposit or want to learn if you could take advantage of a gifted equity scheme, contact Niche Mortgage Info. We offer guides and support on all areas of mortgages, including first time buyers.

Product Transfer Service for Halifax and BM Solutions Customers

Since the Mortgage Market Review, many lenders have been reluctant to engage with existing customers as they are unable to offer advice. This has affected Halifax for Intermediaries and BM Solutions (formerly Birmingham Midshires) customers. This means that anyone using these services would have to change lenders if they want to make changes to their mortgage, rather than accessing different products from the same lender.

By working with an intermediary such as Niche Mortgage Info, we can provide access to these products for existing customers. This means that these customers can transfer their mortgage to a preferable product free of charge.

A product transfer can help you in the following ways:

  • Access better interest rates
  • Complete the process without status checks
  • No valuation fees are required
  • No charge for legal fees
  • Switch to fixed payments
  • Quick processing times

Why trust Niche Mortgage info with your transfer?

We offer access to the brokers that can get you the best possible deal. If your aim is to transfer your mortgage products without incurring any fees, we can help make this happen. Through our extensive network of whole-of-market brokers, we can help to match you with the right person for your situation.

Get in touch today to learn more about product transfers with Niche Mortgage Info.

How does remortgaging work?

If you already own a home, you may reach a point where you think about remortgaging. Securing your first mortgage allows you to move into the home, but remortgaging a home is essentially just moving borrowing to a different lender to secure a better deal.

Some lenders will allow you to use the opportunity to release some equity from your home. You might do this to carry out some home improvements, clear your debts or take an expensive holiday. Sometimes, remortgaging will allow you to secure a better deal on your mortgage. 

With more equity in your home, you will be in a better position than when you first bought your home and only had your deposit. This gives you some bargaining power and allows you to move to a different lender to get a better deal.

Lenders are keen to attract borrowers from their competitors. This means you can shop around for a better deal and adjust your mortgage to your current financial situation. While some people are happy to keep paying their mortgage for longer if they have smaller monthly payments, others will be keen to make overpayments and reduce the term – and overall cost – of their mortgage.

These are all achievable by remortgaging your property, but you will need to understand the process first. In some situations, you could be worse off by remortgaging, so it’s important to speak to the experts before making any big decisions.

How does remortgaging work?

Remortgaging is a lot like securing your first mortgage, but this time, you can also take into consideration the equity you have already built up in your home. This might allow you to secure a better deal.

Sometimes it pays to switch, and sometimes it doesn’t. You need to look at the size of the outstanding mortgage and then think about how much it will cost to switch. Many lenders will charge something known as an arrangement fee, which can wipe out your chances of making any savings.

You apply for remortgage in the same way you would apply for a first mortgage. Lenders will look at your financial situation, your recent financial behaviour, and your current employment. If your financial position has changed significantly, you might be unable to remortgage.

How does the value of your home impact the remortgage process?

The value of your home may have changed significantly since you first moved in. You may have renovated the property, or you may have moved into an up-and-coming area. Lenders will always want to check the value of the property hasn’t fallen since you purchased it, but an increase in value can work in your favour.

In the case of falling property prices, if you are left with negative equity, you will be unable to remortgage without investing more in the property. Some structural issues may also make it difficult to secure a remortgage.

In many cases, lenders will conduct a valuation from the curbside, so you will need to tell them about any changes made to the interior that will increase the value. If similar properties have sold in the area for significantly more, you can send details to the lender.

If the value of your home has increased, this can be good news for you as it means you are applying for a mortgage with a smaller LTV. If you remortgage and are unable to keep up with the repayments, the lender will be able to sell your home for a higher price. This gives them added security.

Remortgaging to lower your costs

If your fixed-rate mortgage has come to an end, you might be interested in remortgaging to help secure your finances. A variable rate mortgage might not be suitable for those who like to be able to budget. While the chance of lower interest rates may be tempting, a rise in the interest rates could make some lending products unaffordable.

Another way to make your mortgage more affordable in the short-term would be to remortgage for a similar term to your original mortgage. With more equity built up in your favour, you could spread out the payments over another 25 years, resulting in lower monthly payments. Remember that longer terms will increase the total amount of interest you will have to pay.

Try this Calculator

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You could save up to:
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per year on your mortgage.
Looks like your on a good deal.

This is based on a new 2-year fixed rate mortgage with an interest rate of 1.15%.

Remortgage Calculator Provided by Niche Mortgage Info.

Remortgaging for flexibility

Many people find they are in a better financial position a few years into their mortgage repayment schedule. This might be down to greater financial security, lower mortgage payments when compared to rental payments, or making career progress. When you are in a better financial position, you might find that you want to be able to make overpayments to clear your mortgage faster.

Not all mortgages allow you to do this, so you may wish to remortgage to be able to make overpayments. There are also options to use a savings account to temporarily freeze your interest payments. Provided you don’t touch the savings, you can offset the interest, but the savings will always be there if needed.

Remortgaging for stability

Some people will use remortgaging to release some equity from their home. By borrowing a little more than you need, you could clear your outstanding debts and start with a clean slate. This can be helpful, but you must pay close attention to the long-term cost.

While mortgages are offered at much better rates than overdrafts and credit cards, you could end up paying back a lot more over the term of the loan. Remortgaging to clear your debt should be a last resort, as it can put you in a worse financial position in the long-term.

What are the disadvantages of remortgaging?

There are a few disadvantages that you need to think about before moving forward.

  • If your financial position has changed for the worse, or if you have recently become self-employed, you might struggle to remortgage. This is why it is important to select a mortgage product that will always be affordable, as no one knows what the future holds.
  • By stretching your debts over a longer time frame, you are increasing the overall amount you pay for your home. While you might only be concerned about your monthly repayments, it’s important to think about the lifetime value of the loan.
  • Many remortgage products come with fees. This can cancel out any savings you could be making in the long and short term, so make sure you understand the full cost before moving forward.
  • By extending the term of your loan, you are extending the period that your home may be repossessed if you are unable to keep up with the payments. When the finish line is in sight, it makes sense to pay off the mortgage rather than remortgage for short-term gains.

What happens when you remortgage?

Remortgaging is simply moving your borrowing from one lender to another. You will continue to live in your home and will own the same amount of equity unless you decide to release some. As this is only a financial arrangement with your lender, you will not need to go through the process of conveyancing again. However, you may need to arrange a valuation of your home.

Working with a broker to remortgage

Understanding if you would be in a better or worse financial position after remortgaging can be difficult to get your head around. This is where working with a mortgage broker can help. Not only will they have access to all of the latest lending products, but they will also be able to guide you towards the lenders most likely to accept your application.

A mortgage broker can help you to navigate the best deals out there and determine which ones offer value for money. Start by being honest with your broker about what you are hoping to achieve. If you simply want to lower your monthly costs by any means necessary, they can help you achieve this. But if you are determined to pay back your loan as quickly as possible, they can help you find a lender that allows overpayment. If you don't know what ask, see our previous posts

Remortgaging to buy a second property

If you have built some equity in one property, it is not uncommon to use this to purchase another property. This is popular among property developers to help manage their finances. You might want a small property in a city where you work, or you might be looking for a holiday property in the countryside.

It’s important, to be honest with the lender about the purpose of the second property. If you are buying a holiday residence, they might scrutinise your finances more than if you are purchasing a second property as a buy-to-let investment. This is because the buy-to-let property will be expected to generate some income which will offset the mortgage payments.

Again, working with a mortgage broker will help you to determine the best course of action for your circumstances. Since you will be making a financial decision that could impact your life for the next 20 years, it makes sense to get some guidance and support along the way.

 

Mortgage for a sales role with low income but high commission

When submitting a mortgage application, you will be asked to outline your income. This can come from multiple sources, including your salary and bonuses. A common issue faced by those working in sales is that their basic salary may be low, but this is topped up with regular commission.

Some lenders will not count all of the commission towards your affordability calculations, which can leave you short of what you need to buy a home. This is relevant because lenders are not only tasked with considering the “here and now” of your mortgage, they also have to look to the future. So your mortgage might be affordable right now, but is it sustainable.

As with all directives, it is down to individual lenders to determine how they carry out these checks and what weight they assign to the outcome. This means that a more conservative lender might only consider a portion of your commission as regular income, but if you find the right lender, you could have all of your commission counted as regular income.

How do the high street lenders treat commission?

The majority of high street lenders will look at your track record as an indicator of future income potential. This means that a long work history with a regular and steady income will serve you well when it comes to applying for a mortgage. Lenders will want to see that you have been with the same company for a long time and will take your P60 as evidence of sustained income levels.

Another factor that lenders will look at is the “year to date” figure on each payslip. This is why a regular monthly commission is better than an end-of-year commission paid in one lump sum.

If there is any inconsistency in your earnings, you can expect them to take half of your annual commission and add this to your basic salary. This can be very disappointing as it will appear as if you are earning a lot less than you actually earn.

Our advice for low-income high commission earners

If you work in a sales role that allows you to build your earnings on commission, it is best to approach the right lender. You need to find a lender that works with applicants in your position and understands the nature of your income.

By working with Niche Mortgage Info, we can connect you with whole-of-market brokers that will give you the best chance of finding a lender that understands your situation.

We can not only help to connect you with a lender that will take your full income into consideration, we can also help to ensure you get the best possible deal. Remember that a small change in your interest rate can add up to tens of thousands in additional costs over the lifetime of a mortgage.

How we help secure mortgages for sales professionals

In general, we can help to secure the following mortgages for sales professionals working on commission:

If you’re on a low income and high commission salary structure and are looking to secure a high multiple mortgage, get in touch with Niche Mortgage Info today.

Gifting money for house deposit: What's the process?

Getting on the property ladder is hard work, and with property houses at an all-time high, first-time buyers need to save for a bigger deposit than ever before. Not everyone has the means to save for a deposit, which is why some people will choose to support their friends and family with a gifted house deposit.

What is a gifted house deposit?

When you are looking to get on the property ladder, you need a deposit to secure a mortgage. Lenders will typically want to see a deposit of between 5-25% of the value of the property. If you don’t have this kind of money saved up, you could ask a friend or family member for the money.

Parents, grandparents and even friends can offer some of all of the deposit to make it possible for their loved ones to get on the property ladder. But this is a very tricky area, and it could impact your eligibility for a mortgage.

What is a gifted deposit?

Under UK tax law, you can’t just give your money away. Family members are allowed to give you as much money as they like, but if they pass away within seven years of the gift, you will be subject to inheritance tax on the amount.

A gifted deposit should not be used in place of a loan. The giver should have no intention of getting the money back and it should be given freely. A gifted deposit is a large sum of money when you consider that the average house price is £237,963 and the average deposit amount is 10%. This means that you’ll need around £24,000 to secure a mortgage.

As part of the mortgage application process, you have to let your lender know where your money is coming from. This is part of their anti-laundering checks. While anyone can give you the money, lenders prefer it when it is a close relative. Some may even specify that it must be a parent.

Gifting money for house deposit: What's the process?

How do I prove that it is a gift?

If you aren’t sure if a relative is about to give you the money for your deposit, speak to a mortgage broker or your mortgage provider to find out more. The criteria will vary by lender, and each one will have their own procedures and requirements. Most lenders will ask for a declaration from the giver that the money is a gift. This will typically need to include:

  • Their name
  • Your name (or names, in the case of a joint mortgage)
  • The total amount gifted
  • A clear statement that it is a gift
  • A statement that the gift will not need to be repaid, has no commercial value, and will not afford the giver a financial stake in the property.
  • A statement confirming that the giver is in a position to give the money away.
  • Signed by a witness.

Your solicitor will help to ensure this letter is above board before you move forward with your application.

The person giving you the money will also need to provide proof of funds, usually in the form of bank statements. If the money has come from a deceased family member’s estate, you might need a copy of the will. And if the money has been saved over years, the giver might need to provide proof of deposits, to satisfy anti-laundering checks.

And finally, the person giving the money will need to provide photo-ID and two forms of proof of address.

What if the gift giver is overseas?

Accepting a large financial gift from someone overseas will be even more complicated. All documents will need to be translated and notarised, which can slow down the process. The anti-laundering checks will become much more stringent, so be prepared to provide proof of the origins of the funds.

If the gift giver passes away, will I pay inheritance tax?

For the purposes of anti-money laundering checks, a gifted deposit will be classed as a kind of “living inheritance”. This will be tax-free provided the gift giver is still alive, but if they pass away with seven years of giving you the money, this will be classed as an inheritance.

While there is a risk this could happen with anyone at any age, the risk increases when you accept a gift from an elderly relative. The standard inheritance tax rate is 40% which is only charged on the value of your inheritance over your tax-free threshold.

How else can parents help?

If your parents are unable to provide a lump sum, there are other ways they can help their children onto the property ladder. There are 100% deposits available for student properties, and these are secured against the parent’s property. This will allow the student to start paying towards a mortgage by letting out the property to their friends.

After graduation, they can keep the property and let it out to future students. The mortgage will switch to a traditional mortgage after three or five years, once the student graduates. After this time, the parent will no longer need to act as a guarantor.

This type of mortgage is not limited to students and you could act as a guarantor using your home or your savings as collateral. If you decide to become a guarantor, you will be responsible for mortgage payments if the homeowner cannot keep up with them, so it’s important to head into this type of arrangement with a plan. 

If the borrower cannot afford a full deposit, you could make it a condition of the guarantor arrangement that they save an emergency fund to cover mortgage payments for a fixed period.

As with all guarantors and gifted deposit mortgages, it’s important to remember that you don’t have any financial claim over the home. If your relationship sours, you will have no right to claim your money back or stop being the guarantor, so think carefully before entering into this type of arrangement. If your own home or life savings is on the line, think carefully about how you want to proceed.

If you need any further advice, please see free to contact Niche Mortgages.

Mortgages for self employed with 1 years accounts

Self-employed individuals often have far greater control over their income. If they have a quiet month, they can market their skills or increase their prices. Full-time employees, on the other hand, would have to request a pay rise, and this could take months or even years to be accepted. Despite this increased control over their income, the self-employed often have a much tougher time trying to get a mortgage.

While a full-time employee only needs to be working for a company for 3-6 months to be considered, the self-employed need at least one years accounts in order to apply for a mortgage. All mortgage providers are different, and some will require up to 3 years of accounts before they can go ahead with a mortgage application.

Ultimately, this is to protect the lender and the borrower. Lenders want to make sure that the borrower is going to be able to continue making payments further down the line. As of December 2017, the following applicants would be eligible for a mortgage, subject to status.

  • Limited company directors trading for 12 months
  • Sole traders trading for 12 months
  • Established businesses recently limited
  • Contractors working for at least 12 months
  • Self-employed for 12 months with poor credit
  • A buy-to-let mortgage with no income
  • Up to 95% mortgage amount with help to buy scheme

It’s a common misconception that you need years and years of trading history in order to get a mortgage. If you’ve been refused a mortgage because you are self-employed, a sole trader or the director of a limited company, this might have more to do with the mortgage provider and nothing to do with your financial circumstances.

If you are serious about getting a mortgage, read on to find out about the ins and outs of mortgages for the self-employed, even if you only have one year of accounts.

Frequently asked questions about mortgages for the self-employed

To help answer many of your pressing questions, we’ve compiled this guide covering some of the most commonly asked questions about self-employed mortgages with 1 year’s accounts. Get in touch if you have any questions which aren’t answered on this page, or if you would like more information about how we can help.

  • How long do I need to be self-employed to get a mortgage?
  • Can I apply for a mortgage before I have 12 months of accounts?
  • How to get a mortgage with under 2 year’s of trading history
  • How much can I borrow?
  • Which occupations are acceptable for lenders?
  • Why am I having trouble getting a self-employed mortgage?
  • Which figures are most important for my mortgage application?
  • Can I get a mortgage when self-employed and with bad credit?

How long do I need to be self-employed

How long do I need to be self-employed to get a mortgage?

The majority of lenders, including most high-street lenders, will ask to see 3 year’s of accounts before you are eligible for a mortgage. However, there are mortgage providers that specialise in mortgages for the self-employed. These will consider 2 year’s of accounts when making a lending decision. They will often consider the average of the last 2 year’s of your income, if one is higher, or consider the most recent year if your income remains the same. A small number of mortgage providers will accept applications from the self-employed with just 12 months of accounts. You will need to work with a niche mortgage advisor in order to find out which lenders are most likely to accept your application.

Mortgage before I have 12 months of accounts

Can I apply for a mortgage before I have 12 months of accounts?

If you haven’t filed your first tax return yet, then it is unlikely that you will find a mortgage provider that is willing to accept your application. This is because mortgage providers use the figures from your tax return to verify your income. You wouldn’t lie about how much money you have earned, because this would mean that you owe more tax and have broken the law. So, lenders use tax returns as a way to verify your income.

If you are nearing the end of your first year of trading, you could, in theory, apply for a mortgage in principle. This is a statement from a mortgage provider that outlines how much they would be willing to lend you. They are valid for 3 months and are used by many people to help them put in an offer on a property with confidence. Once an offer has been accepted, your application will then be processed.

Having a mortgage in principle can allow you to start your search for a new property before the end of your first full year of trading. By the time comes to do your actual mortgage application, it’s likely that you will have your full 12 months of accounts.

Under 2 year’s of trading history

How to get a mortgage with under 2 year’s of trading history

Most mortgage providers will ask to see 2 years of accounts, but an increasing number of lenders are waking up to the idea that more and more people are heading down the self-employed route. Many lenders will now simply ask to see as much of your trading history as possible. If you were previously employed in a similar industry and drawing a regular wage, you could also use this in support of your application. If you have 20 months of trading, for example, the lender might also choose to make a project for the full 2 years based on the information provided.

How much can I borrow?

How much can I borrow?

Once you have been accepted by a mortgage provider, you will be treated the same as any other applicant. This means that you will be able to borrow the same amount as any other employee. The actual amount that you can borrow will be based on your income. It will usually be around 4x to 5x your annual income. If you are on a higher income, it’s possible that you may be able to stretch this further, provided you can prove that you can afford it.

The more accounts you can provide, the better, but in general, lenders will be on the cautious side unless you can demonstrate why they should increase the amount. If you have incomplete accounts for your second or third year, you may be able to use projections to show why you should be able to borrow more.

For example, if you net profit for the tax year ending in 2017 was 22,000 and your net profit for the first 9 months of 2018 was 25,000, then an accountant might be able to demonstrate why your earnings are likely to be higher. At an average rate of £2,770 per month for 2018, the full 12 months could be as high as £33,300 for the whole year.

A lender offering 5x annual income would offer a £166,000 mortgage on the projected amount or just a £110,000 for the first year of trading. This is a huge difference, so it’s worth investigating if your mortgage provider will consider projected income estimates. Income isn’t the only thing that your mortgage provider will consider.

Which occupations are acceptable for lenders

Which occupations are acceptable for lenders?

Lenders aren’t so too concerned with your occupation, provided the work is legal and that you create a tax return every year. Lenders are very flexible about who they lend to and are more concerned with determining affordability. It’s common for taxi drivers, plumbers, electricians and tradespeople, musicians, landlords, retailers, those running online businesses, professionals and investors to all be able to secure a mortgage. If you’re not sure if your occupation will be accepted, it’s best to speak to a mortgage provider to get clear answers before proceeding. In general, however, your actual occupation won’t be contested by a mortgage provider.

Trouble getting a self-employed mortgage?

Why am I having trouble getting a self-employed mortgage?

Prior to 2011, the self-employed could take advantage of self-cert mortgages. These allowed the self-employed to tell lenders how much they earn without providing any evidence. This type of mortgage helped many self-employed people to get on the property ladder. Unfortunately, they soon became known as the liar’s mortgage, as so many people inflated their income to be able to borrow more money. These mortgages were ultimately not affordable and many people lost their homes as a result.

In 2011, this type of mortgage was banned during the Mortgage Market Review. As a result, it’s now a lot more difficult for the self-employed to get mortgages as lenders now have to take more steps to ensure they are lending responsibly. While it is harder to secure a mortgage when self-employed, it isn’t impossible. If you are rejected by one lender this doesn’t mean that you cannot get a mortgage.

Figures most important for my mortgage application?

Which figures are most important for my mortgage application?

The majority of lenders will want to see your net profit for the past 12 months to three years. Many people forget that turnover is not the same thing as net profit. This is why most lenders will ask to see your SA302 statement in order to calculate how much you can borrow. The SA302 statement is your end of year tax statement which shows your income and tax liability for the year.

Some providers will also ask to see detailed accounts showing where your money is coming from and how often you get paid. These will often need to be drawn up by a qualified and chartered accountant using professional accounting software. Even if your accounts are handled by an accountant, it’s important that you have a solid understanding of your finances. This can be helpful in explaining things like seasonal fluctuations or spikes in your income.

If you are hoping to use projected income figures as part of your application, then it’s important that you can explain why your income is likely to increase or remain steady in the next few months and years. If you have recently secured a large contract, for example, this would be helpful in securing a higher mortgage amount.

Can I get a mortgage when self-employed and with bad credit?

Many people assume that it’s the end of the road if you have poor credit, but this couldn't be further from the truth. Even with a CCJ, some mortgage providers will still consider your application and the occasional late payment isn’t enough to make you ineligible for a mortgage.

As a general rule, applicants with poor credit will need a higher deposit, usually around 15% of the property value. CCJs and defaults more than 2 years old will also be ignored, even if the CCJ isn’t settled. Even missed or late payments on your credit accounts in the last 12 months won’t rule you out for a mortgage. Many lenders also disregard any issues with mobile phone companies.

If you are concerned about your credit report getting in the way of securing a mortgage, the best thing you can do is ensure you have a complete picture. There are three different credit agencies in the UK and you can access your records for free by signing up for free trials with Experian, UK Credit Ratings and Check My File.

Once you have a complete view of your credit profile, you can correct any mistakes, close dormant accounts and ensure everything is up-to-date. If you aren’t sure if your credit report is going to be an obstacle to getting a mortgage, then speak to a mortgage advisor who will be able to read between the lines of your report and identify the aspects which lenders look out for.

bankrupts

How can I improve my credit report in the eyes of lenders?

The way lenders interpret your credit score is not an exact science and they don’t generally publicise their approach. Your credit report is one part of a wider picture and it is used to get an idea of your past financial behaviour in order to determine if you are a low-risk borrower. Mortgage providers want to see that you make payments on time, so the worst thing you can do is stop using your credit facilities. They can’t see that you have a track record of making credit payments on time if you never use your credit card.

It’s also important to check your credit file regularly so that you can spot problems as they arise. It’s not uncommon for people to move house, fail to close their phone account properly and then end up with an open account that they have no idea about. This can quickly turn into a CCJ if the phone provider can’t reach you. By checking your credit report quickly, you can respond to issues like this in a timely manner before they become problematic for your credit application.

Can I get a help-to-buy mortgage when newly self-employed?

The number of lenders offering the attractive help-to-buy mortgage scheme to the self-employed is low, but they are out there. The help-to-buy scheme allows people to apply for a 95% mortgage with just a 5% deposit. It is intended to help people get on the property ladder who might otherwise struggle to save up a large deposit.

There are restrictions on the help-to-buy scheme and lenders will make much stricter checks. For the self-employed, this means that you will need to jump through yet more hoops in order to prove your eligibility. For example, if you have a CCJ of over £500 registered in the past 3 years, you won’t be eligible for a help-to-buy mortgage. You also can’t use the help-to-buy scheme for a home you intend to rent out (buy-to-let) or for a holiday home.

Can I remortgage my property with just one year’s accounts?

Remortgaging is often a similar process to securing to main purchase mortgage. You will need to prove that the repayments will be affordable and you will need to provide at least one year’s accounts in support of this. If you are thinking about remortgaging, it’s often best to return to the bank that supplied your first mortgage. They have a pre-existing financial relationship with you and may look more favourably on your application than a new mortgage provider would.

How do I increase my chances of getting a mortgage while self-employed?

Lenders will always look at the bigger picture, which includes factors such as your past financial behaviour, your current circumstances and commitments and the general affordability of your loan.

The simplest way to increase your chances of getting a mortgage is to secure a large deposit, usually around 15%. This helps to bring down the amount that you are borrowing. The next step is to clear up your credit report and ensure your accounts are all up to date. And finally, you should get your accounts in order so that you can prove your income. If you have been trying to keep your income down through legal methods in order to limit your tax liability, it’s important that you stop this or you could end up being able to borrow much less.

Negotiating Guide: How to get a home seller to lower their price

When you’ve found your dream home, it can be difficult to accept if it is out of your price range. Or perhaps you’ve looked around the suspect that it might be a little overpriced. When there are things that need to be fixed in the property, you might be wondering if you can get the seller to knock a little bit off the asking price.

This is a fairly common tactic in the property market. But negotiating on the price of a property is delicate ground and needs to be approached with caution. Move in too aggressively, and you could annoy the seller and make them less inclined to accept your offer. But remember, most sellers will put their home on the market for a little more than they are hoping to acheive. This leaves some room for negotiations.

In this guide, we will look at some of the most popular ways to ask the seller to lower the price. We’ll explore how to establish the groundwork and what you need to do to close the sale. We’ll also look at how you can rescue a sale that has gone south due to poor negotiating. If you’re buying a home and want to secure a great deal, consider this essential reading!

Do your research

The first step to securing a better price is to do your research. You need to find out everything you can about the home, the seller and the circumstances of the sale. When you’re armed with all of the information, you can approach the seller with the right attitude and proposal.

Inspect the interior of the house thoroughly and identify any areas that will need to be fixed or renovated. If everything is in order, get picky. Have similarly priced houses in the area offering more living space? A landscaped garden? If this is the priciest home in the surrounding area, you could state your case that the price could be lower.

Look at the sale history

How long has the home been on the market, and has it been listed previously? This can give you clues about the mindset of the seller. If the home has been on the market for a while, it could be that they have priced it too high because they aren’t in a real rush to sell. When the right buyer comes along, they assume that they’ll be willing to pay the full asking price.

Keep your cool

If the seller and the agent know that you are utterly smitten with a property, they’ll know that you are willing to part with more money to secure it. Keep your emotions in check and don’t give anything away.

Take the time to point out the flaws in the property so that they both know you are taking your search seriously. When we act from an emotional position, we’re more likely to overlook things like an ageing boiler or uneven flooring. By showing that you’re actively looking for the flaws of the property, you can show the seller that you’re not letting your emotions cloud your judgement.

Remember the agent doesn’t work for you

The agent showing you the home doesn’t work for you so they might not have your best interests at heart. They might have multiple people looking at the property and more viewings lined up. So when you float the idea of a lower offer, they might use delay tactics to get more viewings arranged.

By law, the agent has to let the seller know about every offer made on the home, no matter how low it may be. To be sure that your offers get through, always follow up in writing and ask the agent to confirm receipt. If you are worried about managing the negotiating process, you can appoint a buyer’s agent to act on your behalf.

make an offer

Preparing to make an offer

When you’ve settled on a number, it’s time to kick off the negotiations. Let the selling agent know that you would like to put in an offer and then follow this up in writing. They will let the seller know where you would like to start the negotiations.

If the seller isn’t interested in negotiating the price, they will reject your offer. Repeat increases in your offer will simply let the seller know that you were always willing to pay the asking price. If another buyer comes along in the meantime, you could lose the property to a counter offer.

If the seller is interested, then the negotiations can begin. Think about the ways you can sweeten the deal to make the sales process easier. If you’re in no rush to move, this can take the pressure off the seller while they find another home. But some sellers appreciate a speedy transaction and sale so they can move on.

What will make a low bid more likely to be successful?

  • If the seller is in a hurry to move, they might be more willing to negotiate on the price.
  • If the home has been on the market for a long time, this could mean that the seller is getting tired of waiting and wants to get things moving.
  • Sellers know that there are some things that buyers want to see in a home, such as a new boiler. If they don’t want to invest any more money in a property, they might be willing to negotiate on price to avoid having to make any changes.
  • If you’re the only person who has expressed an interest in the property, and the seller is looking for a quick sale, they might offer some room for negotiation on the price.
  • If your funding is ready to go, the seller might be more inclined to offer some wiggle room on the price.
  • If you are not in a chain, this can reassure sellers that you won’t back out further down the line. 
  • If the seller has instructed multiple agents, the agent you are dealing with might encourage them to accept the lower price to secure the commission.
  • Likewise, if the agent is keen for a quick sale with minimum effort so they can collect their commission, they might encourage the seller to accept your price.

Bidding tactics for success

How you bid on the property will depend largely on the bidding process. It will either be an open bidding process or a sealed bidding process. 

An open bidding process takes place between the buyer, agent and seller. The buyer instructs the agent to tell the seller how much they are willing to pay. When multiple people are bidding, it is down to the agent to pass these across, but they might only share the highest bid.

With open bidding, you have a chance to sell yourself. The seller might feel better knowing that their home is going to a young family, for example. If another bid is higher than yours, the agent will typically let you know so that you can decide if you want to increase your bid. 

In a sealed bidding structure, the buyer writes down their bid and seals it in an envelope. The agent then delivers all bids to the seller without seeing them. The seller will then typically select the highest bid. This method is popular in high demand areas. 

With sealed bidding, you have to be careful not to go over your budget. You can still submit a low bid, but if the area is in high demand and lots of other people are bidding at the same time, you’re unlikely to be successful. In a sealed bid, always add a little extra to a round number, so if someone submits the same bid, yours will be a little higher. For example, instead of bidding £195,000 try bidding £195,050.

When your bid is accepted

Buying a property with a low bidding strategy leaves you at risk of something known as “gazumping”. This is when another buyer comes along later in the process and offers a higher price. This can cost you hundreds of pounds if you have already started the process of surveying the property.

Once a seller has accepted your bid, ask them to take it off the market. The majority will do this anyway, but if they are reluctant to do so, ask why they are still marketing the property. There is a chance they will allow the sale to go through, but only if a better deal doesn’t come along in the meantime. There isn’t much you can do about this, other than be prepared to outbid anyone who comes along at a later date.

A note on holding deposits

In some volatile housing markets such as London, buyers might ask you to hand over something known as a holding deposit. This is a sum of money that shows the seller you are serious about your bid. Some will be refundable if the seller pulls out of the sale, but others are not.

Agents will typically discourage buyers from asking for a holding deposit as it can delay the process. If the seller is insistent, make sure it is refundable if the seller pulls out and that it is paid into an escrow account rather than directly to the seller. This will prevent you from losing money unnecessarily.

Can You Get A Mortgage With A CCJ

Most people hoping to buy a home will need a mortgage. Unless you have a large sum of money available, the prospect of buying a home with cash is unlikely. Without rich relatives or a lottery win, most people will have to rely on a mortgage to help them buy their home.

A mortgage is a long-term loan used to buy a property. Once you buy a home with a mortgage, you are allowed to live in the house and make payments towards the mortgage every month. Most mortgages last around 25-30 years.

To make sure the mortgage is affordable, lenders will carry out stringent checks on borrowers. They will look into their past, present and future financial situation to determine if they are responsible with money and have a steady source of income. 

During these checks, lenders are looking for signs that you might struggle to repay your debts, and one of the key signals they look for is the presence of CCJs. Getting a mortgage with a CCJ can be more difficult, but not impossible. In this guide, we will look at some of the factors you will need to know about before applying for a mortgage with a CCJ.

What is a CCJ?

A CCJ is also known as a County Court Judgement. Your creditors can apply to the courts to force you to repay your debts if you are in arrears. This is typically the last step, as it can incur additional charges for both parties. If you have a CCJ, it will impact your credit score. The credit report will show the amount you owe, who you owe the money to, the date it was decided in court, and if the debt has been repaid. A CCJ will stay on your credit report for 6 years.

Do I have to disclose it on my application?

You don’t have to, because it will appear on your credit report. All lenders will look at your credit report before making a lending decision, so there is no way to conceal this or try to hide it from the lender. Your application might include a question about CCJs and bankruptcy, so it’s important to be honest.

Some people aren’t aware they have a CCJ and this can cause problems when they submit their mortgage application. The most common reason for having a CCJ without your knowledge is from an old debt that is registered to a previous property. If you have missed the letters, you could end up with a CCJ without your knowledge.

This highlights the importance of checking your credit score before you move forward with an application. A CCJ can cause a significant drop in your credit score, so it’s worth checking if one is present before you begin an application. The presence of a CCJ can also influence the type of lender you approach, as some will be more forgiving of these red flags than others.

Will a CCJ stop me getting a mortgage?

No, not always, but it can if you approach the wrong lender. Some lenders will fail to see past this red flag, so there is little point in submitting an application. Others will look at other factors that are on your application and make a more considered assessment. This can include:

  • Whether the CCJ is satisfied. This means that the debt has been paid and your credit report has been updated accordingly.
  • The time since the CCJ. A CCJ will stay on your record for 6 years, so if it has been 5 years and the debt has been paid, this will be less likely to impact your credit score than an unpaid CCJ from the past 6 months.
  • The amount owed. A debt of £10,000 will look more severe than a £400 debt. The amount will be taken into consideration as a sign of your financial responsibility.

How can I minimise the risk of rejection?

No one likes to think about rejection, but it can be even more stressful when your dream home is on the line. If you have a CCJ and you are worried about it having an impact on your application, the best thing you can do is to be prepared.

By approaching the right lender, you can minimise the risk of rejection. Navigating the mortgage market alone can be stressful, which is why we recommend embarking on this journey with the help of a mortgage broker. They will be able to help you identify the lenders most likely to say yes.

You can also neaten up other areas of your application to minimise the CCJ. Pay down your existing debts and keep your spending within 20-30% of your credit limit. You can also close old accounts, make sure you’re on the electoral roll at your current address, and boost your deposit amount by as much as possible. You should also avoid any credit applications before you submit your mortgage paperwork, as this will appear on your report.

A lender might be able to overlook a CCJ if the other areas of your application look strong. This includes your deposit, current financial conduct and your income.

Should I wait for the CCJ to end?

If your CCJ is coming to an end, you could be better off waiting until it has dropped from your credit report to make it easier to secure a mortgage. While a CCJ might not prevent you from securing a mortgage, it can make your interest rates higher, which means your mortgage will cost most in the long term. This is a common tactic employed by lenders to manage their risk.

If your CCJ is more recent, focus on getting it paid off and marked as satisfied on your credit report. This will often restore your credit score and help you to get your lending back on track. You can then approach a specialist mortgage broker to discuss your next steps, and if this should include a mortgage application or a little more waiting.