Why is Sarah Grace different?

Many of our clients have income that does not fit the majority of lenders standard approach, a bit like putting a square peg in a round hole.  We have had over 20 years of dealing with self employed/ complex income, we have come across most scenarios and can find the right solution for you.

We have set up our business and process to deal with clients the most efficient way possible, as we understand that this is a stressful time.  We can do everything remotely allowing you to get on with your day job with a little amount of disruption possible.

What types of mortgages are there?

Fixed rate The interest rate remains the same throughout the period of the deal. You are able to fix for a period of up to ten years. If you opt for a fixed-rate, you’ll have the security of knowing exactly how much your mortgage will cost you for a set period of time. However, if rates were to fall over this period your payments will not decrease in line with those rate changes. You are unable to redeem most fixed rate period without penalties, known as Early Repayment Charges.

Tracker The interest rate on a tracker mortgage is linked to the Bank of England base rate. So if the base rate increases or decreases, your mortgage rate will also change. Tracker mortgages are available over different terms, most often these are two and 5 year periods. With this type of tracker you would have Early Repayment Charges to redeem this mortgage within the deal period. You can also get lifetime, or term, trackers and these are often Early Repayment Charge free.

Standard Variable Rate A Standard Variable Rate is the lenders ‘default’ rate and is normally the rate which your mortgage will revert to after the initial deal period ends. This type of rate will last as long as your mortgage or until you take out another mortgage deal. This type of rate has no Early Repayment Charges so gives you freedom to overpay or redeem your mortgage at any time. It is a variable rate, but unlike a tracker mortgage it is not only based on the Bank of England base rate so could rise or fall at any time.

Discount A discounted rate provides a discount from the lender’s Standard Variable Rate for a certain length of time, typically for up to five years. This is a variable rate which means that if the lender increases or decreases their Standard Variable Rate then your payments will rise or fall.

Offset An offset mortgage can help reduce the amount of interest paid on your mortgage balance by linking it to your savings balance. Rather than receiving interest on the savings held in your offset account you will not pay interest on the equivalent part of your mortgage. This can be especially beneficial to self employed applicants who save for tax bills and often have a savings balance being built up over the year In addition to the type of rates available for the mortgage there are also different ways of repaying your mortgage.

Repayment A repayment mortgage is also known as a capital and interest mortgage. With this type of mortgage your monthly payment includes both the interest payable that month and small repayment of the balance owed. As the term progresses the amount of interest payable decreases and the amount paid off your capital increases. The means that at the end of the mortgage term the balance is repaid in full.

Interest only An interest only mortgage will generally result in lower premiums. With this type of mortgage you only pay the interest each month, the balance owed never decreases. This means that you will have to find the funds to pay the balance at the end of the term. Most lenders require you to have a repayment strategy in place to pay your mortgage off at the end of the term, such as a pension lump sum or an endowment. There are however, some lenders who will accept sale of the mortgaged property as a repayment vehicle, subject to criteria.

What fees will I pay?

Valuation fee

Lenders will require a standard valuation for mortgage purposes as a minimum. Some lenders will offer this as a free incentive, others pass the cost of this to you. The amount of this fee will vary from lender to lender and is normally higher, dependent on the property value. Standard Valuations are cheapest. You may choose to upgrade this to a Homebuyers Report to get a better idea of the properties condition. For some properties it will be necessary to instruct a full building survey.

Arrangement fee

An arrangement fee is a charge from the lender for the product chosen. Arrangement fees vary significantly but the average is around £1,000. You can usually choose between paying the arrangement fee upfront and adding it to the mortgage, however by adding it to the mortgage will cost more in the long term as you will pay interest on it. There are mortgage rates available without an arrangement fee, though typically they have a higher interest rate. We will provide a personalised recommendation on which options are the most cost effective for your circumstances and loan amount.

Broker fee

This is a fee payable to your broker for the work involved in finding you a mortgage and obtaining a mortgage on your behalf. At Sarah Grace, we typically charge £195 for research and assessment and £295 on completion for administering your mortgage.

Stamp Duty Land Tax

The stamp duty payable will depend on your circumstances and the property value.  For confirmation of how much you pay, please go to https://www.stampdutycalculator.org.uk/, if you are unsure, your solicitor will be able to advise on the amount payable.

Legal Costs

The legal costs are payable to your Legal Representative. For solicitors who offer a ‘No sale, no fee’ service there will normally be an upfront, non-refundable amount payable at outset which covers the searches and disbursements for the property you are buying. The remaining fee will be paid on completion which will cover their own costs for administering the change of ownership.

What insurances do I need to take?

Buildings Insurance

Lenders make it mandatory to have buildings insurance. This insures the property against damage and ensures that the lenders security is safe. If you are purchasing a leasehold property then your buildings insurance will normally form part of your annual or monthly service charge but if you purchase a freehold house you will normally be responsible for ensuring the property is fully insured. We can help you obtain the appropriate cover by taking into account the rebuild value of your home, whether it is close to a body of water, has 5 level mortice dead locks on doors, has window locks and whether it has any structural problems that need to be considered. It is possible to insure your property for accidental damage and the excess you will pay can also be personalised.

Contents insurance

This is not mandatory for the lender but is taken to cover your personal possessions within the home. You can normally keep costs down by combining this with buildings cover, as part of the same policy. It is also possible, within this policy to cover your valuables outside of the home, specify your expensive items to ensure that you have cover that would allow you to replace these items. We will help you cover expensive jewellery, watches, antique items, art or specialist items within and outside of your home.

There are also personal protection products such as Life Insurance, Critical Illness and Income protection. These products are not mandatory, but we will help you understand the importance of ensuring that you and your family are adequately protected.

I’ve just finished my FD1/FD2 (VT) in July and I am now self-employed. Can I get a mortgage without 1 year’s accounts history?

This is an area of expertise for us, we have helped many newly qualified dentists obtain mortgages without a full year’s figures. We have great contacts within the lenders and have actually educated lenders on this area of Dentistry income. We have lenders who are able to use your % of UDA value. We can evidence this by having a reference from your Principle. Contact us to discuss today.

 

I used to be a sole trader and have recently changed my business to a LTD company. Can I get a mortgage?

We have helped many clients in this position, we understand that quite often the business is the same, just a different trading style.  Not all lenders have underwriters who can understand accounts and the reasons for going Ltd.  These type of mortgages need manual underwriting rather than the computer decision many lenders use.  Usually the lenders willing to lend will want to see 1 year’s accounts for the new entity, however this is not always mandatory.  Contact us today with your scenario for further help.