They say moving house is one of the most stressful times in a person’s life. The reasons are quite evident. You have to open your home – a place you will likely have lovingly styled and improved over the years – to a very critical public. Then comes the negotiation process and the inherent stress of fielding low offers and negative comments about the place you have been living. Once a satisfactory result has been achieved you still have to go on to find your dream home. Perhaps you have already found it but haven’t sold yours; perhaps when you do find it you are up against first time buyers, or cash buyers who can complete much faster than you can. All the while you are in limbo and committed to fees with agents, solicitors and other parties, all with no guarantee of success.
If you require a mortgage you might not realise just how complex lending decisions have now become, or how crucial it is to understand the figures involved. This is why I think it is essential to consult with an experienced mortgage broker before you make the commitment to sell your property – they can provide clarity at a time when it is most needed. If all the information you need to make decisions regarding property is made accessible to you then you can focus in on making the decision that is right for you without spending your own time interpreting which parts of seemingly opaque and complicated pieces of legislation applies.
This blog post aims to make clear the specific ways in which a mortgage broker’s expertise can help you from start to finish of the moving process.
Every person has a maximum loan that the lender will feel they can afford. This is entirely separate to the deposit available or the price of the property, and there will be a relatively fixed link between what you sell for and what you can ultimately buy.
It should also be noted that what is commonly known as porting a mortgage is actually not as simple as its name suggests. Porting only refers to moving the product or rate that you have, and even then often only if you are within an initial two, three or five year period; if you are outside this on the lenders standard variable rate then you might not be able to port at all. When you port a mortgage you have to undergo a full new application which means your income, outgoings, credit score and other factors will be assessed under the tough new rules recently imposed by the FCA.
Choosing the price to sell your property is a tough decision, so it is essential when making it that at the very least you are equipped with accurate information. Caution should be exercised when consulting with estate agents because they are, first and foremost, sales people. They will give you a figure that they hope is sufficiently high that you want to instruct them over other less optimistic agents. They might even ask you what you hope to achieve and then miraculously value your home a little higher! Estate agents will have access to a suite of tools from Rightmove to Zoopla that can give you an idea of what others in your area have got for their properties. Beware an agent that can’t show you this evidence – it means they are simply guessing.
The price you sell for and your current mortgage balance will leave you the equity you have available, along with any savings, to spend on the new home. Understanding what your minimum figure might be will be essential to knowing what will be feasible. If you have a minimum you can accept and a maximum from the estate agents your broker can assess the numbers and advise how this affects your next purchase. Only then will you be able to make an effective decision about whether you will be able to get what you need to justify the many thousands it will cost to sell.
When you do receive an offer on your property, the buyer is going to be an unknown to you. Whilst the number on paper might look good there is always the possibility they may not be able to secure the necessary funds from a lender. It’s not uncommon for cash to become a mortgage later down the line once the buyers feel it’s too late for you to turn back. It is therefore essential to verify the source of funding, including for cash offers. Unfortunately, doing this is not standard practice for estate agents. This may sound perplexing until you consider the reality of the relationship between you and your estate agent. At the point at which an offer estate agents know will be appealing to you has been made, they have little to lose. They get paid when the sale completes and so unless there are multiple offers, they will want to press ahead with the sale.
Meanwhile, this is the most critical time for you. The key questions you should be asking are, have they seen a mortgage broker or are they going direct to their own bank? Have they got a decision in principle that can be verified? Have they shown they have the funds required for both the deposit and any expected fees?
All of these questions lead us back to our now well-worn theme: transparency. Are you being kept in the loop when it comes to the factors that directly impact the likely outcomes of decisions about your own money? If not, why not?
One of the things often seen advertised on properties close to the Stamp Duty Land Tax threshold is an offer for the vendor to pay this. This could easily be worth tens of thousands of pounds and can look very appealing – but there is a catch. Lenders will deduct the relief from the purchase price and then apply ‘loan to value’ (LTV) thresholds to this lower amount. So a £400k property being bought with an 85% LTV mortgage of £340k, with stamp duty relief of £12k, becomes a purchase of £388k. The mortgage will become £329,800 and the deposit required will be £70,200. This will be £10,200 more than originally required, virtually wiping out the advantage of the stamp duty having been paid for you. There are circumstances where this can work without affecting the loan amount, but only with certain combinations of purchase price and deposit.
Helping you to understanding exactly how these numbers work in order to ensure that you are getting the best deal is a service only provided by a mortgage broker.
Getting a successful offer on your own property is a huge relief, and allows you to get the fun part – viewing your new home! The tables are turned, and the focus should be on presenting the best possible front to property vendors. Having a recent decision in principle will show you have the funding in place to complete the purchase. It’s very wise to ensure this is in place before you agree to sell because if you discover a problem after you have agreed a sale many estate agents terms and conditions can include the requirement for payment to be made, even if you pull out of the sale!
Using an experienced and resourceful mortgage broker can help you navigate these difficult transactions. Here at AALTO Mortgage and Property Solutions we act as advisors throughout, giving you the benefit of our experience as both mortgage brokers and estate agents to ensure you know all the options and get the best results.